Monarch Staffing/Inc · 10KSB · For 12/31/06

Filed On 3/30/07 6:39pm ET   ·   SEC File 0-49915   ·   Accession Number 1140377-7-54

Annual Report -- Small Business   ·   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB       Form 10KSB at December 31, 2006                      100±   351K 
 2: EX-21       Exhibit 21.1                                           1      4K 
 3: EX-31       Exhibit 31.1                                           2±     7K 
 4: EX-31       Exhibit 31.2                                           2±     7K 
 5: EX-32       Exhibit 32.1                                           1      5K 

10KSB   ·   Form 10KSB at December 31, 2006
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UNITED STATES     
SECURITIES AND EXCHANGE COMMISSION    
Washington, D.C. 20549    

FORM 10-KSB     
(Mark One)    

[X]  Annual report pursuant to Section 13 or 15(d) of the Securities  
Exchange Act of 1934                                        

For the period ended December 31, 2006    
OR    

[ ]  Transition report pursuant to Section 13 or 15(d) of the         
Securities Exchange Act of 1934                             

Commission file number: 0-49915     

MONARCH STAFFING, INC.    
--------------------------------------------------------    
(Exact name of registrant as specified in its charter)    

Nevada                                                 88-0477056     
---------------------------------              ----------------------------     
(State or other jurisdiction                        (I.R.S. Employer            
of incorporation or organization)                   Identification No.)       

30950 Rancho Viejo Rd #120    
San Juan Capistrano, CA  92675    
------------------------------------------------------------    
(Address of principal executive offices, including zip code)    

Registrant's Telephone No., including area code: (949)-260-0150     

Securities registered pursuant to Section 12(b) of the Act: None    

Securities registered pursuant to section 12(g) of the Act:     

Common Stock, par value $.001 per share     
--------------------------------------------    
(Title of Class)    

Check whether the issuer is not required to file reports pursuant to    
Section 13 or 15(d) of the Exchange Act. [ ]    

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 [ ]                   

Check if there is no disclosure of delinquent filers in response to Item        
405 of Regulation S-B is not contained in this form, and no disclosure will     
be contained, to the best of registrant's knowledge, in definitive proxy or     
information statements incorporated by reference in Part III of this Form       
10-KSB or any amendment to this Form 10-KSB. [ ]                                

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

The aggregate market value of the voting and non-voting common equity held      
by non-affiliates computed by reference to the price at which the common        
equity was sold as of March 22, 2007, was approximately $747,104 based on a     
price on such date.                                                             

The number of shares issued and outstanding of the Common Stock as of March     
22, 2007 was 9,961,384.                                                         

Documents incorporated by reference. There are no annual reports to             
security holders, proxy information statements, or any prospectus filed         
pursuant to Rule 424 of the Securities Act of 1933 incorporated herein by       
reference.                                                                      

Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [X]      

TABLE OF CONTENTS     

PART I     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4        

ITEM 1.   BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 4        

ITEM 2.   PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . .24        

ITEM 3.   LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . .24        

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . .24        

PART II    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25        

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                     
  STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . .25

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                     
  CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . .27

ITEM 7.   FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . .40        

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON                      
  ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . .78

ITEM 8A.  CONTROL AND PROCEDURES . . . . . . . . . . . . . . . . . . .79        

ITEM 8B.  OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . .80        

PART III   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80        

ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. . . . . . .80        

ITEM 10.  EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . .82        

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS                       
  AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . .84

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS . . . .85        

ITEM 13.  EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . .89        

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . .91        

  SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . .92

  CERTIFICATIONS . . . . . . . . . . . . . . . . . . . . . . .93

PART I    

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS     

Except for the historical information contained herein, the matters             
discussed in this Annual Report on Form 10-KSB, including discussions of        
our business strategies and market factors influencing our results, are         
forward-looking statements that involve certain risks and uncertainties.        
Actual results may differ materially from those anticipated by us as a          
result of various factors, both foreseen and unforeseen, including, but not     
limited to, our ability to continue to offer new services and increase          
sales in markets characterized by rapid technological evolution,                
consolidation within our target marketplace and among our competitors, and      
competition from larger, better capitalized competitors. Many other             
economic, competitive, governmental and technological factors could impact      
our ability to achieve our goals. Interested persons are urged to review        
the risks described under "Item 1. Business. Risk Factors" and in "Item 6.      
Management's Discussion and Analysis of Financial Condition and Results of      
Operations" as well as in the Company's other public disclosures and            
filings with the Securities and Exchange Commission ("SEC"). All forward-       
looking statements speak only as of the date of this report. We do not          
intend to publicly update or revise any forward-looking statements as a         
result of new information, future events or otherwise, except as required       
by law.                                                                         

ITEM 1. BUSINESS                                                                

COMPANY OVERVIEW                                                                

We provide healthcare staffing services to both commercial and government       
sector customers. We are focused on building a nationally recognized            
healthcare staffing company by growing our current customer bases,              
expanding our service offerings, and acquiring and growing profitable           
healthcare staffing services companies.                                         

We operate our healthcare staffing services business through our wholly         
owned subsidiary Drug Consultants, Inc. ("DCI"). DCI furnishes personnel to     
perform a range of pharmacy, nursing and other health care services in          
support of the operations of government and commercial facilities,              
including its largest client, the State of California Department of             
Corrections and Rehabilitation ("CDCR"). DCI was formed in 1977 and is          
located in San Juan Capistrano, California.                                     

DCI has experience in providing its services in rural areas of California       
where many state facilities are located and healthcare professionals are        
not readily available. This experience and DCI's database of healthcare         
professionals have allowed it to competitively price its services and           
expand its business to meet these unique requirements of the CDCR.              

DCI currently operates under three master contracts with the CDCR. The          
master contracts are for terms of three years and currently expire between      
September 30, 2007 and June 30, 2008.   DCI's contracts with the CDCR do        
not provide for a minimum purchase commitment of our services and can be        
terminated by the CDCR at any time on 30 days' notice.    In April 2006, a      
federal court-appointed receiver assumed total control over CDCR's              
healthcare delivery system to address the court's findings of substandard       
medical care.  Among the receiver's objectives is to reduce the CDCR's          
reliance on staffing service providers like DCI.  Since the receiver's          
appointment, DCI has experienced a loss of several of its healthcare            
professionals who have accepted positions with the CDCR.  We believe that       
the ongoing implications of the receiver's management of the CDCR's             
4     
healthcare delivery system include lower demand from the CDCR for DCI's         
services, higher attrition of our healthcare professionals, increased           
competition for recruiting healthcare professionals to fill positions with      
the CDCR and reduced margins for the services we provide CDCR.                  

GROWTH STRATEGY                                                                 

Our goal is to build a nationally recognized healthcare staffing company.       
The key components of our business strategy include:                            

-   INCREASE PENETRATION OF EXISTING CLIENT RELATIONSHIPS. We have built    
strong relationships with our existing clients, particularly the    
State of California. We will seek to increase the penetration of our
services to agencies of the State which we do not currently serve.  

-   LEVERAGE PROCESSES AND EXPERIENCE TO ENTER NEW MARKETS. We have         
experience in meeting the staffing needs of government entities,    
particularly in rural areas. We will seek to leverage our experience
and associated processes and contacts to provide similar services to
government entities in other high-growth states such as Arizona,    
Nevada, Oregon and Utah.                                            

-   EXPAND SERVICE OFFERINGS THROUGH NEW STAFFING SOLUTIONS. In order to    
enhance the growth in our business and improve our competitive      
position, we continue to explore new service offerings. As our      
clients' needs change, we will explore what additional services we  
can provide to better serve our clients.                            

-   EXPAND OUR CUSTOMER BASE. We have experience in servicing the needs     
of government entities that we will transfer to the commercial      
client market.                                                      

-   CAPITALIZE ON ACQUISITION OPPORTUNITIES. The markets we serve are       
highly fragmented. In order to enhance our competitive position, we 
intend to aggregate multiple smaller staffing service providers. Our
general criteria for acquisition targets are: companies who provide 
similar services to our own in other geographic areas, companies who
have strong client relationships, companies who offer vertical      
services that complement our own, and companies that generate       
positive cash flow and have the prospect for year-over-year revenue 
growth.                                                             

-   BUILD OUR MANAGEMENT TEAM AND CORE BACK-OFFICE FUNCTIONS. We intend     
to expand our executive, sales and operations management teams to   
support the growth of our business. In addition, we plan to build   
centralized administrative support systems to support our business  
model across business units.                                        

COMPANY BACKGROUND                                                              

Prior to August 2003, we were a development stage company. Although we were     
incorporated only six years ago, we have undergone a number of changes in       
our business strategy and organization.                                         

The Company was originally incorporated in Nevada under the name                
JavaJuice.net on September 13, 2000. The Company's business plan was to         
engage in the operation of an Internet Cafe, in Reno, Nevada. On August 8,      
2003, the Company acquired M.T. Marketing Int. Corp "(MTM") and control of      
the Company shifted to the former MTM shareholders. MTM operated a payroll      
nurse staffing and homecare business. JavaJuice was considered a "shell" at     
the time of the acquisition; therefore, the transaction was treated as a        
reverse merger. As a result of a change in business focus due to the            
acquisition, the Company changed its name to MT Ultimate Healthcare Corp.       
5     

The Company expanded its operations through the acquisition of B.P. Senior      
Care, Inc. ("BP"), a provider of healthcare services to senior citizens in      
New Jersey), the operation of which was terminated in June 2005, and            
Abundant Healthcare, Inc. ("Abundant"), a provider of medical staffing          
services in Pennsylvania). All of the business and operations of MTM and        
Abundant have been discontinued and disposed of by the Company in               
connection with the disposition of Marathon Healthcare Corporation              
described below.                                                                

On August 31, 2004, the Company entered into a securities purchase              
agreement with four accredited investors for the sale of secured                
convertible notes having an aggregate principal amount of $700,000, a 10%       
annual interest rate (payable quarterly), and a term of two years. We also      
agreed to sell warrants to purchase up to an aggregate of 7,777 shares of       
our Common Stock at $40.50 per share. We only sold $500,000 principal           
amount of secured convertible notes under the 2004 agreement. As a result,      
we sold to the investors warrants to purchase up to an aggregate of 5,556       
shares of our Common Stock at $40.50 per share. The investors have agreed       
to purchase the remaining $200,000 commitment under the terms of our 2005       
securities purchase agreement with the investors.                               

On November 4, 2005, we entered into an additional securities purchase          
agreement with the same accredited investors, for the sale of secured           
convertible notes having an aggregate principal amount of $3,000,000, an 8%     
annual interest rate (payable quarterly), and a term of three years. We         
also agreed to sell warrants to purchase up to an aggregate of 166,667          
shares of our Common Stock at $9.00 per share.                                  

On March 29, 2007, the Company obtained an amendment to the 2005 securities     
purchase agreement whereby interest payments are payable at the same time       
the corresponding principal balance is due and payable, whether at maturity     
or upon acceleration or by prepayment.                                          
As of December 31, 2006, we had issued under the two securities purchase        
agreements dated August 31, 2004 and November 4, 2005:                          

-   $3,075,000 aggregate principal amount of secured convertible notes,     
-   Warrants to purchase 5,556 shares of our Common Stock at $40.50 per     
shares, and                                                         
-   Warrants to purchase 143,056 shares of our Common Stock at $9.00 per    
share, and                                                          
-   Warrants to purchase 166,667 shares of our Common Stock at $4.50 per    
share.                                                              

As mentioned above, the investors are required to purchase an additional        
$625,000 principal amount of secured convertible notes and warrants to          
purchase 2,222 shares of our Common Stock at $40.50 per share and warrants      
to purchase 23,611 shares of our Common Stock at $9.00 per share five days      
following the date that a registration statement for the resale of the          
shares of common stock issuable upon conversion of the secured convertible      
notes and exercise of the warrants is declared effective by the Securities      
and Exchange Commission and if other conditions are satisfied.                  

On November 4, 2005, we acquired 100% of the issued and outstanding shares      
of Drug Consultants International, Inc.('DCII"), formerly known as              
iTechexpress, Inc., a provider of technical staffing services, in exchange      
for 9,203,704 newly issued shares of our Common Stock.                          

On November 7, 2005, DCII purchased all of the outstanding shares of Drug       
Consultants, Inc. for a purchase price of $1,800,000, of which $1,600,000       
was paid at closing and $200,000 shall be paid pursuant to a secured            
promissory note, which was subsequently paid in January 2006.                   

6     

As part of our focus on growing profitable operations, we decided to            
discontinue and dispose of certain operations which we determined did not       
demonstrate suitable growth or profitability prospects. On December 15,         
2005, we completed the disposition of all of the outstanding capital stock      
of Marathon Healthcare Corporation ("Marathon"), a newly formed holding         
company, to Macdonald Tudeme and Marguerite Tudeme, the former controlling      
shareholders of the Company. At the time of the disposition, Marathon's         
assets included substantially all of the corporate names, business,             
operations, assets, properties, intellectual properties, trademarks,            
service marks, trade names, uniform resource locators, telephone numbers,       
and goodwill of the Company and its subsidiaries (other than DCII and DCI).     
These assets included all of the operations of the Company's former             
operating subsidiaries MTM and Abundant. In exchange for all of the             
outstanding capital stock of Marathon and payments to the Tudemes of            
$80,441, the Company received from the Tudemes 396,569 shares of the            
Company's Common Stock. In connection with the disposition of Marathon, we      
also (a) assumed and released the Tudemes from certain liabilities and (b)      
pledged to Marathon 222,222 shares of our Common Stock as collateral to         
secure the performance and payment of a promissory note payable to Lisa         
Stern originally entered into as part of the Company's purchase of              
Abundant. If we fail to pay any principal of or interest on the note when       
due, we will be in default of our obligations and Marathon will be able to      
retain and sell the pledged Common Stock to satisfy our obligations.            

On March 31, 2006, we completed the following corporate actions: (a) we         
changed our corporate name to "Monarch Staffing, Inc." from "MT Ultimate        
Healthcare Corp.", (b) we effected a one-for-ninety reverse stock split of      
our Common Stock, (c) we re-authorized for issuance 400,000,000 shares of       
Common Stock, par value $.001 per share, after giving effect to the reverse     
stock split and (d) we authorized 5,000,000 shares of "blank check"             
preferred stock.                                                                

INDUSTRY AND MARKET OVERVIEW                                                    

Temporary healthcare staffing industry revenues are expected to grow at a       
compound annual growth rate of approximately 8% from 1997 through 2008,         
according to industry estimates. The industry has grown each year except        
2003 and 2004, in which it declined on an annual basis primarily due to         
economic conditions and resulting pressures on healthcare facilities to         
reduce outsourced staffing solutions. Industry revenues for 2007 are            
expected to grow by 7% to $11.4 billion as compared to 2006.                    

COMPETITION AND COMPETITIVE STRATEGY                                            

The healthcare staffing industry is both highly fragmented and highly           
competitive. There are a large number of firms engaged in the provision of      
healthcare personnel. A significant number of these companies are very          
small competitors operating on a localized basis. There are however, a few      
larger companies that operate on a national basis. Some of our larger           
competitors in the temporary healthcare staffing sector include AMN             
Healthcare Services, Cross Country Healthcare, InteliStaf Healthcare, CHG       
Healthcare Services, Inc., Medical Staffing Network and On Assignment.          

We compete in the healthcare staffing industry based primarily on our long-     
standing customer relationships, experience in meeting the needs of             
government entities, particularly with rural facilities, as well as with        
superior client service.                                                        

7     

OUR BUSINESS MODEL                                                              

Recruitment                                                                     
-----------                                                                     
Our recruitment methods include recruiting trained, experienced healthcare      
staff from schools and universities. Some of our temporary healthcare           
professionals are independent contractors due to their requirement to hold      
specialized licenses. Additionally, because they require specialized            
licenses, they are in high demand and often work with more than one agency.     

Screening and Quality Management                                                
--------------------------------                                                
We screen all candidates prior to placement, and we continue to evaluate        
our temporary healthcare professionals after they are placed to provide         
adequate performance and manage risk, as well as to determine feasibility       
for future placements. Our internal processes are designed to determine         
whether our temporary healthcare professionals have the appropriate             
experience, credentials and skills for the assignments that they accept.        
Our screening and quality management process includes three principal           
stages:                                                                         

INITIAL SCREENING. Each new temporary healthcare professional candidate who     
submits an application with us must meet certain criteria, including            
appropriate prior work experience and proper educational and licensing          
credentials. We independently verify each applicant's work history and          
references in an effort to improve the ability of our clients to depend on      
our temporary healthcare professionals for competency and personal              
reliability.                                                                    

ASSIGNMENT SPECIFIC SCREENING. Once an assignment is accepted by a              
temporary healthcare professional, we track the necessary documentation and     
license verification required for the temporary healthcare professional to      
meet the requirements set forth by us, the client and, when required, the       
applicable state licensing authorities. Additionally, where state and           
federal laws apply with regard to the employment of healthcare workers, we      
believe we have in place the necessary procedures to comply with material       
requirements. These requirements may include obtaining copies of specific       
health records, drug screening, criminal background checks and certain          
certifications or continuing education courses.                                 

ONGOING EVALUATION. We evaluate our temporary healthcare professionals'         
performance through a verbal and written evaluation process. We receive         
these evaluations directly from our clients, and use the feedback to            
determine appropriate future assignments.                                       

Account Management and Placement                                                
--------------------------------                                                
Our account managers are responsible for soliciting and receiving orders        
from our clients and working with our recruiters to fill those orders with      
qualified temporary healthcare professionals and technicians. As an             
example, we operate under master contracts with the State of California to      
provide temporary health professionals. We receive requests or "orders"         
from specific state healthcare facilities for temporary healthcare              
professionals to fill assignments. Depending upon their size and specific       
needs, one healthcare facility client may have from one to over fifty open      
orders at one time. Because clients often list their orders with multiple       
service providers, open orders may also be listed with our competitors. An      
order will generally be filled by the company that provides a suitable          
candidate first, highlighting the need for a large network of temporary         
healthcare professionals and technicians and responsive client service          

8     

Billing and Payroll                                                             
-------------------                                                             
Our staffing services are generally provided on a time-and-materials basis,     
meaning that we bill our clients for the number of hours worked in              
providing services to the client. Hourly bill rates are typically               
determined based on contractual rates or the level of skill and experience      
of the temporary healthcare professional assigned and the supply and demand     
in the current market for those qualifications. Alternatively, the bill         
rates for some assignments are based on a mark-up over compensation and         
other direct and indirect costs.                                                

We maintain a variable cost model in which we compensate most of our            
temporary healthcare professionals only for those hours that we bill to our     
clients. The temporary healthcare professionals who perform services for        
our clients consist of our employees as well as independent contractors and     
subcontractors. With respect to those temporary healthcare professionals        
who are employees, we are responsible for all employment-related costs,         
including medical and health care costs, workers' compensation and federal      
social security and state unemployment taxes                                    

GOVERNMENT REGULATION                                                           

The healthcare industry is subject to extensive and complex federal and         
state laws and regulations related to professional licensure, conduct of        
operations, payment for services and payment for referrals. Our business,       
however, is not directly impacted by or subject to the extensive and            
complex laws and regulations that generally govern the healthcare industry.     
The laws and regulations that are applicable to our hospital and healthcare     
facility clients could indirectly impact our business to a certain extent,      
but because we provide services on a contract basis and are paid directly       
by our hospital and healthcare facility clients, we do not have any direct      
Medicare or managed care reimbursement risk.                                    

Most of our temporary healthcare professionals are required to be               
individually licensed or certified under applicable state laws. We take         
prudent steps to ensure that they possess all necessary licenses and            
certifications in all material respects.                                        

EMPLOYEES                                                                       

The Company employs approximately 27 total employees, with 24 of those          
full-time and 3 part-time.                                                      

None of our employees are covered by collective bargaining agreements, and      
management believes that its relationships with its employees are good.         

RISK FACTORS                                                                    

The more prominent risks and uncertainties inherent in our business are         
described below. However, additional risks and uncertainties may also           
impair our business operations. If any of the following risks actually          
occur, our business, financial condition or results of operations will          
likely suffer. Any of these or other factors could harm our business and        
future results of operations and may cause you to lose all or part of your      
investment.                                                                     

9     

RISKS RELATING TO OUR BUSINESS                                                  

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WE MAY CONTINUE TO BE UNPROFITABLE AND MAY NOT GENERATE PROFITS TO CONTINUE     
OUR BUSINESS PLAN.                                                              
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We have historically lost money. As of December 31, 2006, we had $617,812       
in accumulated deficit. There is a risk that our healthcare staffing            
services business will fail. If our business plan is not successful, we         
will likely be forced to curtail or abandon our business plan. If this          
happens, investors could lose their entire investment in our Common Stock.      

---------------------------------------------------------------------------     
WE DO NOT HAVE SUFFICIENT CASH ON HAND AND CASH FLOW FROM OPERATIONS TO         
MEET OUR LIQUIDITY REQUIREMENTS, AND WILL REQUIRE ADDITIONAL NEAR-TERM          
FINANCING TO CONTINUE OUR BUSINESS OPERATIONS AND PURSUE OUR GROWTH             
STRATEGY.                                                                       
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We project that our cash on hand and cash flow generated from operations        
will not be sufficient to fund operational liquidity requirements.  As a        
result, our ability to continue our operations and growth strategy depends      
on our ability to access the capital markets in the near term.                  

Our secured convertible note investors are required to purchase an              
additional $625,000 principal amount of secured convertible notes and           
related warrants five days following the date that a registration statement     
for the resale of the shares of common stock issuable upon conversion of        
the secured convertible notes and exercise of the warrants is declared          
effective by the Securities and Exchange Commission and if other conditions     
are satisfied.  There can be no assurance that we will satisfy the              
conditions to funding or, if we do, that we will do so on a timetable that      
meets our operational liquidity needs                                           

There also can be no assurance that capital from other outside sources will     
be available, or if such financing is available, that it will be on terms       
that management deems sufficiently favorable. If we are unable to obtain        
additional financing upon terms that management deems sufficiently              
favorable, or at all, we could be forced to restructure or to default on        
our obligations or to curtail or abandon our business plan, any of which        
may devalue or make worthless an investment in the Company.                     

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OUR AUDITORS HAVE EXPRESSED AN OPINION THAT THERE IS SUBSTANTIAL DOUBT          
ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.                               
---------------------------------------------------------------------------     

Our auditors have expressed an opinion that there is substantial doubt          
about our ability to continue as a going concern primarily because we have      
yet to generate sufficient working capital to support our operations and        
our ability to pay outstanding employment taxes. Our most recent financial      
statements have been prepared assuming that we will continue as a going         
concern. The financial statements do not include any adjustments that might     
result from our inability to continue as a going concern. If we are unable      
to continue as a going concern, investors will lose their entire investment     
in our Common Stock.                                                            

10    

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OUR OPERATIONS ARE RECENTLY ACQUIRED WHICH MEANS THAT WE HAVE A LIMITED         
OPERATING HISTORY UPON WHICH YOU CAN BASE YOUR INVESTMENT DECISION.             
---------------------------------------------------------------------------     

Prior to August 2003, we were a development stage company. Although we were     
incorporated only six years ago, we have undergone a number of changes in       
our business strategy and organization. In August 2003, we entered the          
payroll nurse staffing and homecare business. We adjusted our business          
strategy again in November 2005 by broadening our service offerings and to      
focus our activities on growing profitable operations. We have begun to         
implement this strategy by acquiring DCII and DCI.                              

The operations of DCII and DCI, which will represent our entire business        
for the foreseeable future, were acquired in November 2005. Accordingly, we     
have a limited operating history upon which an evaluation of our prospects      
can be made. Our strategy is unproven and the revenue and income potential      
from our strategy is unproven.  Our business strategy may not be successful     
and we may not be able to successfully address these risks. If we are           
unsuccessful in the execution of our current strategic plan, we could be        
forced to reduce or cease our operations. If this happens, investors could      
lose their entire investment in our Common Stock.                               

---------------------------------------------------------------------------     
WE WILL REQUIRE SIGNIFICANT ADDITIONAL CAPITAL TO REPAY MONIES BORROWED BY      
US, CONTINUE OUR BUSINESS OPERATIONS AND PURSUE OUR GROWTH STRATEGY.            
---------------------------------------------------------------------------     

We have sold $3,075,000 in secured convertible notes and have agreed to         
sell an additional $625,000 of secured convertible notes to the note            
investors. We do not currently have enough capital to repay any of these        
amounts and we may never generate enough revenue to repay the amounts owed.     
As a result, we could be forced to curtail or abandon our business plan,        
making any investment in our Common Stock worthless.                            

Our continued operations and growth strategy depend on our ability to           
access the capital markets. There can be no assurance that capital from         
outside sources will be available, or if such financing is available, that      
it will be on terms that management deems sufficiently favorable. If we are     
unable to obtain additional financing upon terms that management deems          
sufficiently favorable, or at all, it would have a material adverse impact      
upon our ability to continue our business operations and pursue our growth      
strategy. In the event we do not raise additional capital, it is likely         
that our growth will be restricted and that we may be forced to scale back      
or curtail implementing our business plan. If this happens, investors would     
likely experience a devaluing of our Common Stock.                              

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WE MAY BE FORCED TO SELL SHARES OF COMMON STOCK AND/OR ENTER INTO               
ADDITIONAL CONVERTIBLE NOTE FINANCING AGREEMENTS IN ORDER TO REPAY AMOUNTS      
OWED AND CONTINUE OUR BUSINESS PLAN.                                            
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Assuming the sale of all of our secured convertible notes, we will owe          
approximately $3,700,000 to the holders of the notes (not including any         
accrued interest).  We do not currently have enough capital to repay any of     
these amounts and we may never generate enough revenue to repay the amounts     
owed. We may be forced to raise additional funds to repay these amounts         
through the issuance of equity, equity-related or convertible debt              
securities. The issuance of additional common stock dilutes existing            
stockholdings. Additionally, in furtherance of our convertible secured note     

11    

transaction, we may issue additional shares of common stock throughout the      
term, and accordingly, our stockholders may experience significant              
dilution. Further procurement of additional financing through the issuance      
of equity, equity-related or convertible debt securities or preferred stock     
may further dilute existing stock. The perceived risk of dilution may cause     
the holders of our secured convertible notes, as well as other holders, to      
sell their shares, which would contribute to downward movement in the price     
of your shares. Additionally, if such additional shares are issued,             
investors would likely experience a devaluing of our Common Stock.              

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WE HAVE PLEDGED ALL OF OUR ASSETS TO EXISTING CREDITORS.                        
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Our secured convertible notes are secured by a lien on substantially all of     
our assets, including our equipment, inventory, contract rights,                
receivables, general intangibles, and intellectual property. A default by       
us under the secured convertible notes would enable the holders of the          
notes to take control of substantially all of our assets. The holders of        
the secured convertible notes have no operating experience in our industry      
and if we were to default and the note holders were to take over control of     
our Company, they could force us to substantially curtail or cease our          
operations. If this happens, investors could lose their entire investment       
in our Common Stock.                                                            

DCII and DCI, our principal operating subsidiaries, have pledged                
substantially all of their accounts receivable to secure the payment of         
accounts receivable sold under a factoring agreement with Systran Financial     
Services Corporation ("Systran").  If Systran is unable to collect our          
accounts receivable purchased from us, they could take control of all of        
our accounts receivable, which would substantially reduce our working           
capital and could force us to curtail or abandon our business plan. If this     
happens, investors could lose their entire investment in our Common Stock.      

In addition, the existence of these asset pledges to the holders of the         
secured convertible notes and to Systran will make it more difficult for us     
to obtain additional financing required to repay monies borrowed by us,         
continue our business operations and pursue our growth strategy.                

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THE SECURED CONVERTIBLE NOTES BECOME IMMEDIATELY DUE AND PAYABLE UPON           
DEFAULT AND WE MAY BE REQUIRED TO PAY AN AMOUNT IN EXCESS OF THE                
OUTSTANDING AMOUNT DUE UNDER OF THE SECURED CONVERTIBLE NOTES, AND WE MAY       
BE FORCED TO SELL ALL OF OUR ASSETS.                                            
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The secured convertible notes become immediately due and payable upon an        
event of default including:                                                     

-   failure to obtain effectiveness of the registration statement           
covering the resale of the shares of our Commons Stock issuable upon
conversion of the secured convertible notes and exercise of the     
warrants on or before October 31, 2007 (or November 25, 2007) if the
Company is making good faith efforts to respond to Securities and   
Exchange Commission comments with respect to the registration       
statement);                                                         
-   failure to pay interest and principal payments when due;                
-   a breach by us of any material covenant or term or condition of the     
secure convertible notes or any agreement made in connection        
therewith;                                                          

12    

-   a breach by us of any material representation or warranty made in       
the 2005 securities purchase agreement or in any agreement made in  
connection therewith;                                               
-   we make an assignment for the benefit of our creditors, or a            
receiver or trustee is appointed for us;                            
-   the entering of any money judgment, writ or similar process against     
us or any of our subsidiaries or any of our property or other assets
for more than $50,000;                                              
-   any form of bankruptcy or insolvency proceeding is instituted by or     
against us; and                                                     
-   our failure to timely deliver shares of Common Stock when due upon      
conversions of the secured convertible notes.                       

If we default on the secured convertible notes and the holders demand all       
payments due and payable, we will be required to pay the holders of the         
secured convertible notes an amount equal to the greater of (x) 130% times      
the sum of the outstanding amount of the secured convertible notes per          
month plus accrued and unpaid interest on the secured convertible notes         
plus additional amounts owed to the holders of the notes under the 2004         
securities purchase agreement and the 2005 securities purchase agreement        
and related documents or (y) the value of the highest number of shares of       
Common Stock issuable upon conversion of or otherwise pursuant to the           
amount calculated under clause (x) determined based on the highest closing      
price of the Common Stock during the period beginning on the date of            
default and ending on the date of the payment described herein. We do not       
currently have the cash on hand to repay this amount. If we are unable to       
raise enough money to cover this amount we may be forced to restructure,        
file for bankruptcy, sell assets or cease operations. If any of these           
events happen, investor could lose their entire investment in our Common        
Stock.                                                                          

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WE MAY BE SUBJECT TO LIQUIDATED DAMAGES IN THE AMOUNT OF 3% OF THE              
OUTSTANDING AMOUNT OF THE SECURED CONVERTIBLE NOTES PER MONTH PLUS ACCRUED      
AND UNPAID INTEREST ON THE SECURED CONVERTIBLE NOTES FOR BREACHES BY US OF      
OUR REPRESENTATIONS AND WARRANTIES AND CERTAIN COVENANTS UNDER THE 2005         
SECURITIES PURCHASE AGREEMENT.                                                  
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In the 2005 securities purchase agreement relating to our secured               
convertible notes, we made certain representations and warranties and           
agreed to certain covenants that are customary for securities purchase          
agreements. In the event that we breach those representations, warranties       
or covenants, we will be subject to liquidated damages in the amount of 3%      
of the outstanding amount of the secured convertible notes, per month, plus     
accrued and unpaid interest on the notes for such breaches. As of the March     
21, 2007, the outstanding amount of the secured convertible notes was           
$3,075,000. We have not previously been required to pay any liquidated          
damages, however if we do breach the representations, warranties or             
covenants, we will be forced to pay liquidated damages to the note holders.     
If we do not have enough cash on hand to cover the amount of the liquidated     
damages, we could be forced to sell part or all of our assets, which could      
force us to scale back our business operations. If this happens, investors      
would likely experience a devaluing of our Common Stock.                        

13    

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WE ARE HEAVILY DEPENDENT ON THE OPERATIONS OF DCI FOR OUR REVENUES, WHICH       
ITSELF IS HIGHLY DEPENDENT ON THE STATE OF CALIFORNIA DEPARTMENT OF             
CORRECTIONS AND REHABILITATION AS ITS MAJOR CUSTOMER.                           
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We anticipate approximately 95% of our revenues for the foreseeable future      
will come from the operations of DCI. Approximately 95% of DCI's revenue        
comes from the CDCR. DCI's agreements with the CDCR do not provide for a        
minimum purchase commitment of our services and can be terminated by the        
CDCR at any time on 30 days' notice. Our dependence on the CDCR as our          
major customer subjects us to significant financial risks in the operation      
of our business if the CDCR were to terminate or materially reduce, for any     
reason, its business relationship with us.                                      

We recently have experienced a decrease in revenues from our services           
provided to the CDCR (as well as the loss of several of our healthcare          
professionals who have accepted positions with the CDCR) due to a federal       
court-appointed receiver's management of the CDCR healthcare delivery           
system. See "THE COURT-APPOINTED RECEIVER MANAGING THE CDCR'S HEALTHCARE        
DELIVERY SYSTEM INTENDS TO REDUCE THE CDCR'S UNTILIZATION OF STAFFING           
SERVICE PROVIDERS LIKE DCI" below.                                              

Further, the CDCR is subject to unique political and budgetary constraints      
and has special contracting requirements that may affect our ability to         
obtain additional contacts or business. In addition, future sales to the        
CDCR and other governmental agencies, if any, will depend on our ability to     
meet government contracting requirements, certain of which may be onerous       
or impossible to meet, resulting in our inability to obtain a particular        
contract. Common requirements in government contracts include bonding;          
provisions permitting the purchasing agency to modify or terminate, at          
will, the contract without penalty; and provisions permitting the agency to     
perform investigations or audits of our business practices. If we are           
unable to maintain our contracts in the CDCR and/or gain new contracts in       
California and elsewhere, we could be forced to curtail or abandon our          
business plan. If this happens, investors could lose their entire               
investment in our Common Stock.                                                 

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THE COURT-APPOINTED RECEIVER MANAGING THE CDCR'S HEALTHCARE DELIVERY SYSTEM     
INTENDS TO REDUCE UTILIZATION OF STAFFING SERVICE PROVIDERS LIKE DCI.           
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In April 2006, a federal court-appointed receiver assumed total control         
over CDCR's healthcare delivery system to address the court's findings of       
substandard medical care.  Among the receiver's objectives is to reduce the     
CDCR's reliance on staffing service providers like DCI.  Since the              
receiver's appointment, DCI has experienced a loss of several of its            
healthcare professionals who have accepted positions with the CDCR.  We         
believe that the ongoing implications of the receiver's management of the       
CDCR's healthcare delivery system include lower demand from the CDCR for        
DCI's services, higher attrition of our healthcare professionals, increased     
competition for recruiting healthcare professionals to fill positions with      
the CDCR and reduced margins for the services we provide the CDCR.  These       
factors will have a material adverse impact on our results of operations,       
and could have an adverse effect on the value of our Common Stock, unless       
we can successfully reduce our dependence on the CDCR and obtain higher         
margin contracts with other customers.                                          

14    

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WE HAVE BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE THAT OUR TEMPORARY        
HEALTHCARE PROFESSIONALS SHOULD BE CLASSIFIED AS EMPLOYEES AND NOT              
INDEPENDENT CONTRACTORS.                                                        
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We have received notice from the Internal Revenue Service (the "IRS") that      
the IRS had concluded that our subsidiary DCI was a third-party payer to        
and thus employer of a pharmacist who provided services to DCI's client,        
the California Department of Corrections. Although the IRS notice applies       
only to the case of the individual pharmacist, if unchanged, it could           
require DCI to classify other pharmacists and nurses in its registry who        
provide services to DCI's clients as employees of DCI. Accordingly,             
compensation payable to such pharmacists and nurses would be subject to         
federal income tax withholding, Federal Insurance Contributions Act (FICA)      
tax, and Federal Unemployment Tax Act (FUTA) tax. This result would have a      
material adverse effect on our business, financial condition and results of     
operations. The Company is evaluating its response to the IRS notice.           

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WE FACE SIGNIFICANT COMPETITION FOR OUR SERVICES AND AS A RESULT, WE MAY BE     
UNABLE TO COMPETE IN THE HEALTHCARE STAFFING INDUSTRY.                          
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We face significant competition for our staffing services. The markets for      
our services are intensely competitive and we face significant competition      
from a number of different sources. Several of our competitors have             
significantly greater name recognition as well as substantially greater         
financial, technical, service offerings, product development and marketing      
resources than we do. Additionally, competitive pressures and other factors     
may result in price or market share erosion that could have a material          
adverse effect on our business, results of operations and financial             
condition.                                                                      

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THERE IS A SHORTAGE OF WORKERS IN THE HEALTHCARE INDUSTRY THAT MAY IMPEDE       
OUR ABILITY TO ACQUIRE QUALIFIED HEALTHCARE PROFESSIONALS FOR OUR CONTINUED     
GROWTH.                                                                         
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Presently, the healthcare industry is experiencing a growing shortage of        
healthcare professionals. As the operations of DCI are in part based on the     
placement of healthcare professionals, there can be no assurance that we        
will be able to acquire qualified healthcare professionals to meet our          
growing needs. Any shortage in the number of professionals in the               
healthcare industry could impede the Company's ability to place such            
healthcare professionals into jobs and/or impede our growth rate. If we are     
unable to find qualified healthcare professionals to place in jobs, it          
would prevent us from continuing our current business strategy. If this         
happens, investors would likely experience a devaluing of our Common Stock.     

15    

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WE ARE ACTIVELY SEEKING TO ACQUIRE COMPANIES RELATED TO OUR BUSINESS            
OPERATIONS, BUT OUR EFFORTS MAY NOT MATERIALIZE INTO DEFINITIVE AGREEMENTS.     
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Our business model is dependent upon growth through acquisition of other        
staffing service providers. We completed the acquisition of DCI in November     
2005. Although we currently have no commitments with respect to any other       
acquisitions, we expect to continue making acquisitions that will enable us     
to expand our staffing services and build our customer base. There can be       
no assurance that we will be successful in identifying suitable acquisition     
candidates or in coming to definitive terms with respect to any                 
negotiations which we may enter into, or, assuming that we reach definitive     
agreements, that we will close the acquisitions. In the event that we do        
not reach any additional definitive agreements or close any additional          
acquisitions, our expansion strategy will not proceed as intended which         
will have a material adverse effect on our growth.                              

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OUR FUTURE ACQUISITIONS, IF ANY, MAY BE COSTLY AND MAY NOT REALIZE THE          
BENEFITS ANTICIPATED BY US.                                                     
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We may engage in future acquisitions, which may be expensive and time-          
consuming and from which we may not realize anticipated benefits. We may        
acquire additional businesses, technologies, products and services if we        
determine that these additional businesses, technologies, products and          
services are likely to serve our strategic goals. We currently have no          
commitments or agreements with respect to any acquisitions. The specific        
risks we may encounter in these types of transactions include the               
following:                                                                      

-   Potentially dilutive issuances of our securities, the incurrence of     
debt and contingent liabilities and amortization expenses related to
intangible assets, which could adversely affect our results of      
operations and financial conditions;                                
-   The possible adverse impact of such acquisitions on existing            
relationships with third-party partners and suppliers of services;  
-   The possibility that staff or customers of the acquired company         
might not accept new ownership and may transition to different      
technologies or attempt to renegotiate contract terms or            
relationships;                                                      
-   The possibility that the due diligence process in any such              
acquisition may not completely identify material issues associated  
with product quality, intellectual property issues, key personnel   
issues or legal and financial contingencies; and                    
-   Difficulty in integrating acquired operations due to geographical       
distance, and language and cultural differences.                    

A failure to successfully integrate acquired businesses for any of these        
reasons could have a material adverse effect on our results of operations.      

16    

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WE MAY BE UNABLE TO MANAGE OUR GROWTH.                                          
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Any growth that we experience is expected to place a significant strain on      
our managerial and administrative resources. We have limited employees who      
perform management or administrative functions. Further, if our business        
grows, we will be required to manage multiple relationships with various        
clients, healthcare professionals and third parties. These requirements         
will be exacerbated in the event of further growth. There can be no             
assurance that our other resources such as our systems, procedures or           
controls will be adequate to support our growing operations or that we will     
be able to achieve the rapid execution necessary to successfully offer our      
services and implement our business plan. Assuming that our business grows,     
our future success will depend on our ability to add additional management      
and administrative personnel to help compliment our current employees as        
well as other resources. If we are unable to add additional managerial and      
administrative resources, it will prevent us from continuing our business       
plan, which calls for expanding our operations, and could have an adverse       
effect on the value of our Common Stock.                                        

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WE HEAVILY DEPEND ON OUR CHIEF EXECUTIVE OFFICER, JOEL WILLIAMS, AND OUR        
CHAIRMAN, DAVID WALTERS.                                                        
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The success of the Company heavily depends upon the personal efforts and        
abilities of Joel Williams and David Walters. Mr. Williams serves as the        
Company's Chief Executive Officer and Mr. Walters serves as our Chairman        
and together they are primarily responsible for the operation of the            
Company's wholly owned subsidiaries DCII and DCI.  If either were to leave      
unexpectedly; we may not be able to execute our business plan. Our future       
performance depends in significant part upon the continued service of Mr.       
Williams and Mr. Walters as they have acquired specialized knowledge and        
skills with respect to our business. Additionally, because we have a            
relatively small number of employees when compared to other leading             
companies in the same industry, our dependence on maintaining our               
relationship with Mr. Williams and Mr. Walters is particularly significant.     
We cannot be certain that we will be able to retain Mr. Williams or Mr.         
Walters in the future. The loss of Mr. Williams or Mr. Walters could have a     
material adverse effect on our business and operations and cause us to          
expend significant resources in finding a replacement, which could cause        
the value of our Common Stock to decline or become worthless.                   

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DAVID WALTERS AND KEITH MOORE CAN VOTE AN AGGREGATE OF 83.9% OF OUR COMMON      
STOCK AND CAN EXERCISE CONTROL OVER CORPORATE DECISIONS INCLUDING THE           
APPOINTMENT OF NEW DIRECTORS.                                                   
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David Walters and Keith Moore can vote an aggregate of 8,283,334 shares (or     
83.9%) of our outstanding Common Stock. Accordingly, Mr. Walters and Mr.        
Moore will exercise control in determining the outcome of all corporate         
transactions or other matters, including the election of directors,             
mergers, consolidations, the sale of all or substantially all of our            
assets, and also the power to prevent or cause a change in control. All of      
our other stockholders are minority stockholders and as such will have          
little to no say in the direction of the Company and the election of            
Directors. Additionally, it will be difficult if not impossible for             
stockholders to remove Mr. Walters and Mr. Moore as Directors of the            
Company, which will mean they will remain in control of who serves as           
officers of the Company as well as whether any changes are made in the          
Board of Directors.                                                             
17    

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OUR RESULTS OF OPERATIONS HAVE FLUCTUATED IN THE PAST AND AS A RESULT, THE      
RESULTS OF ONE QUARTER MAY NOT BE INDICATIVE OF OUR YEARLY RESULTS, MAKING      
ANY INVESTMENT IN US SPECULATIVE.                                               
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Our quarterly operating results and revenue has historically fluctuated in      
the past and may do so in the future from quarter to quarter and period to      
period, as a result of a number of factors including, without limitation:       
-   the size and timing of orders from clients;                             
-   changes in pricing policies or price reductions by us or our            
competitors;                                                        
-   changes in revenue recognition or other accounting guidelines           
employed by us and/or established by the Financial Accounting       
Standards Board or other rule-making bodies;                        
-   our success in expanding our sales and marketing programs;              
-   execution of or changes to Company strategy;                            
-   personnel changes; and                                                  
-   general market/economic factors.                                        
-   Due to all of the foregoing factors, it is possible that our            
operating results may be below the expectations of public market    
analysts and investors. In such event, the price of our Common Stock
would likely decline and any investment in us could become          
worthless.                                                          

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WE FACE POTENTIAL LIABILITY FOR SECURITY BREACHES RELATING TO OUR               
TECHNOLOGY.                                                                     
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We face the possibility of damages resulting from internal and external         
security breaches, and viruses. The systems with which we may interface,        
such as the Internet and related systems may be vulnerable to security          
breaches, viruses, programming errors, or similar disruptive problems. The      
effect of these security breaches and related issues could reduce demand        
for our services. Accordingly, we believe that it is critical that these        
facilities and related infrastructures not only be secure, but also be          
viewed by our customers as free from potential breach. Maintaining such         
standards, protecting against breaches and curing security flaws, may           
require us to expend significant capital.                                       

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RISKS RELATING TO OUR CURRENT FINANCING ARRANGEMENT                             
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IF THE REGISTRATION STATEMENT COVERING THE RESALE OF THE SHARES OF OUR          
COMMON STOCK ISSUABLE UPON CONVERSION OF THE SECURED CONVERTIBLE NOTES AND      
EXERCISE OF THE WARRANTS IS NO DECLARED EFFECTIVE BEFORE OCTOBER 31, 2007,      
WE MAY BE FORCED TO INCUR SUBSTANTIAL PENALTIES.                                
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The Company is subject to a $53,000 per month penalty payable to the            
secured convertible note holders, if the registration statement fails to        
become effective on or before October 31, 2007 (or November 25, 2007 if the     
Company is making good faith efforts to respond to Securities and Exchange      
Commission comments with respect to the registration statement). If this        
penalty becomes payable, the Company will likely be forced to pay this          
amount out of the proceeds of the sale of the secured convertible notes.        
This will likely have a materially adverse affect on the Company's              
financial condition, and could force the Company to curtail its business        
plan.                                                                           

18    

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THE ISSUANCE AND SALE OF COMMON STOCK UNDERLYING THE SECURED CONVERTIBLE        
NOTES AND THE WARRANTS MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.        
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As of March 22, 2007, we had 9,961,384 shares of Common Stock issued and        
outstanding. We plan to register the shares of Common Stock issuable upon       
conversion of $3,700,000 of secured convertible notes and related warrants      
(341,112 shares as of March 22, 2007). As sequential conversions and sales      
take place, the price of our Common Stock may decline, and as a result, the     
holders of the secured convertible notes could be entitled to receive an        
increasing number of shares, which could then be sold, triggering further       
price declines and conversions for even larger numbers of shares, to the        
detriment of the investors in this Offering. All of the shares issuable         
upon conversion of the secured convertible notes and upon exercise of the       
warrants, may be sold without restriction. The sale of these shares may         
adversely affect the market price of our Common Stock.                          

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THE ISSUANCE AND SALE OF COMMON STOCK UNDERLYING THE SECURED CONVERTIBLE        
NOTES AND THE WARRANTS REPRESENT OVERHANG.                                      
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In addition, the Common Stock issuable upon conversion of the secured           
convertible notes and exercise of the warrants may represent overhang that      
may also adversely affect the market price of our Common Stock. Overhang        
occurs when there is a greater supply of a company's stock in the market        
than there is demand for that stock. When this happens the price of the         
company's Common Stock will decrease, and any additional shares which           
shareholders attempt to sell in the market will only decrease the share         
price even more. The secured convertible notes may be converted at a            
conversion price of $0.01 per share, as of March 22, 2007. Warrants to          
purchase 5,556 shares of our Common Stock may be exercised at a price of        
$40.50 per share, warrants to purchase 143,056 shares of our Common Stock       
may be exercised at a price of $9.00 per share, and warrants to purchase        
166,667 shares of our Common Stock may be exercised at $4,50 per share. As      
of March 22, 2007, the market price for one share of our Common Stock was       
$0.075. Therefore, the secured convertible notes and warrants may be            
converted into Common Stock at a discount to the market price, providing        
holders with the ability to sell their Common Stock at or below market and      
still make a profit. In the event of such overhang, holders will have an        
incentive to sell their Common Stock as quickly as possible. If the share       
volume of the Company's Common Stock cannot absorb the discounted shares,       
the market price per share of our Common Stock will likely decrease.            

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THE ISSUANCE OF COMMON STOCK UNDERLYING THE SECURED CONVERTIBLE NOTES AND       
THE WARRANTS WILL CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION.                     
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The issuance of Common Stock upon conversion of the secured convertible         
notes and exercise of the warrants by the holders of the notes and warrants     
will result in immediate and substantial dilution to the interests of other     
stockholders since the note holders may ultimately receive and sell the         
full amount issuable on conversion or exercise. Although the note holders       
may not convert their secured convertible notes and/or exercise their           
warrants if such conversion or exercise would cause them to own more than       
4.9% of our outstanding Common Stock, this restriction does not prevent the     
note holders from converting and/or exercising some of their holdings,          
selling those shares, and then converting the rest of their holdings, while     
still staying below the 4.9% limit. In this way, the note holders could         
sell more than this limit while never actually holding more shares than         
this limit allows. If the note holders choose to do this it will cause          
substantial dilution to the holders of our Common Stock.                        
19    

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THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR SECURED             
CONVERTIBLE NOTES COULD REQUIRE US TO ISSUE A SUBSTANTIALLY GREATER NUMBER      
OF SHARES, WHICH MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK      
AND CAUSE DILUTION TO OUR EXISTING STOCKHOLDERS.                                
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Our existing stockholders will experience substantial dilution of their         
investment upon conversion of the secured convertible notes and exercise of     
the warrants by the holders thereof. The secured convertible notes are          
convertible into shares of our Common Stock at the lesser of $0.90 or 50%       
of the average of the three lowest trading prices of our Common Stock           
during the 20 trading day period ending one trading day before the date         
that a holder sends us a notice of conversion. If converted on March 22,        
2007, the secured convertible notes would be convertible into approximately     
394,889,600 shares of Common Stock based upon a conversion price of $0.01.      
The number of shares issuable could prove to be significantly greater in        
the event of a decrease in the trading price of our Common Stock that would     
cause dilution to our existing stockholders. The sale of shares of Common       
Stock issuable upon conversion of the secured convertible notes and             
exercise of the warrants may adversely affect the market price of our           
Common Stock. As sequential conversions and sales take place, the price of      
our Common Stock may decline and if so, the holders of secured convertible      
notes would be entitled to receive an increasing number of shares, which        
could then be sold, triggering further price declines and conversions for       
even larger numbers of shares, which would cause additional dilution to our     
existing stockholders. Additionally, there are no provisions in the 2005        
securities purchase agreement, the secured convertible notes, the warrants,     
or any other document which restrict the holders' ability to sell short our     
Common Stock, which they could do to decrease the price of our Common Stock     
and increase the number of shares they would receive upon conversion and        
thereby further dilute other stockholders.                                      

The following is an example of the amount of shares of our Common Stock         
that are issuable upon conversion of the secured convertible notes based on     
conversion prices that are 25%, 50% and 75% below the conversion price as       
of March 22, 2007 of $0.01.                                                     

Percentage Below Conversion Price as of March 22, 2007 Estimated                

                                                                [Download Table]

Percentage Below       Estimated     Approximate          % of              
Conversion Price       Conversion    Number of            Outstanding       
As of March 22, 2007   Price         Shares Issuable (1)  Common Stock (1,2)
--------------------   -----------   -------------------  ------------------
                                                                            
25%                    $0.008        526,519,467          98.14%            
50%                    $0.005        789,779,200          98.75%            
75%                    $0.003        1,579,558,400        99.37%            

(1) Includes shares of Common Stock issuable upon conversion of the secured     
convertible notes. Does not include 341,112 shares of Common Stock issuable     
upon exercise of outstanding warrants.                                          
(2) As of March 22, 2007, we had 9,961,384 shares of Common Stock issued        
and outstanding.                                                                

As illustrated, the number of shares of Common Stock issuable upon              
conversion of the secured convertible notes will increase if the conversion     
price of our Common Stock declines, which will cause dilution to our            
existing stockholders.                                                          

20    

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THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF THE SECURED             
CONVERTIBLE NOTES MAY ENCOURAGE INVESTORS, INCLUDING THE NOTE HOLDERS, TO       
SELL SHORT OUR COMMON STOCK, WHICH COULD HAVE A DEPRESSIVE EFFECT ON THE        
PRICE OF OUR COMMON STOCK.                                                      
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The secured convertible notes are convertible into shares of our Common         
Stock at the lesser of $0.90 or 50% of the average of the three lowest          
trading prices of our Common Stock during the 20 trading day period ending      
one trading day before the date that a holder sends us notice of                
conversion. The significant downward pressure on the price of our Common        
Stock as the note holders convert and sell material amounts of our Common       
Stock could encourage investors, including the selling stockholders, to         
short sell our Common Stock. This could place further downward pressure on      
the price of our Common Stock. In addition, not only the sale of shares         
issued upon conversion of the secured convertible notes or exercise of the      
warrants, but also the mere perception that these sales could occur, may        
adversely affect the market price of our Common Stock.                          

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WE MUST SATISFY CERTAIN CONDITIONS BEFORE THE INVESTORS ARE OBLIGATED TO        
PURCHASE THE REMAINING SECURED CONVERTIBLE NOTES AND WARRANTS.                  
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As of March 22, 2007, we had issued to the secured convertible note             
investors $3,075,000 aggregate principal amount of secured convertible          
notes, warrants to purchase 5,556 shares of our Common Stock at $40.50 per      
share, warrants to purchase 143,056 shares of our Common Stock at $9.00 per     
share, and warrants to purchase 166,667 shares of our Common Stock at $4.50     
per share. The investors are required to purchase an additional $625,000        
principal amount of secured convertible notes and warrants to purchase          
2,222 shares of our Common Stock at $40.50 per share and warrants to            
purchase 23,611 shares of Common Stock at $9.00 per share five days             
following the date that the registration statement for the resale of the        
shares of common stock issuable upon conversion of the secured convertible      
notes and exercise of the warrants is declared effective by the Securities      
and Exchange Commission and conditioned upon certain other conditions,          
including: (i) the Company's representations and warranties contained in        
the 2005 securities purchase agreement being true and correct in all            
material respects on the date when made and as of the date of such              
purchase; (ii) the Company having performed, satisfied and complied in all      
material respects with the covenants, agreements and conditions required by     
the 2005 agreement; (iii) there being no litigation, statute, rule,             
regulation, executive order, decree, ruling or injunction that has been         
enacted, entered, promulgated or endorsed by or in any court or government      
authority of competent jurisdiction or any self-regulatory organization         
having requisite authority which prohibits the transactions contemplated by     
the 2005 agreement; (iv) no event having occurred which could reasonably be     
expected to have a material adverse effect on the Company; and (v) the          
shares of Common Stock issuable upon conversion of the secured convertible      
notes and exercise of the warrants having been authorized for quotation on      
the OTC Bulletin Board and trading in our Common Stock on the OTC Bulletin      
Board having not been suspended by the Securities and Commission or the OTC     
Bulletin Board.                                                                 

If the registration statement is not declared effective within the agreed-      
upon time frame or we fail to satisfy these additional conditions, the          
investors have no obligation to purchase the remaining secured convertible      
notes and warrants. If the investors do not purchase the remaining secured      
convertible notes and warrants, the Company may be required to curtail or       
abandon its business plan, which would decrease the value of our Common         
Stock.                                                                          
21    

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THE NOTE HOLDERS MAY EXPLOIT A MAJOR ANNOUNCEMENT MADE BY THE COMPANY TO        
CONVERT THE SECURED CONVERTIBLE NOTES AT A PRICE SUBSTANTIALLY LOWER THEN       
THE CONVERSION PRICE WOULD BE OTHERWISE.                                        
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Under the terms of the secured convertible notes, the conversion price          
which the note holders must pay is changed after major announcements by the     
Company, discussed below. In the event the Company makes a major                
announcement, the conversion price of the secured convertible notes is          
equal to the lower of the conversion price that would be in effect on the       
date the announcement is made or the current conversion price at the time       
the note holders wish to convert. Therefore, if the Company's stock price       
was to increase substantially after a major announcement the note holders       
could still convert the secured convertible notes the lower price which         
applied before the announcement. In this way, the note holders could hold       
shares of Common Stock worth much more then the note holders originally         
paid for them. Therefore, the note holders could sell the shares at a price     
lower then the current market prices, still making a profit on their            
investment which would drive down the price of the Common Stock.                

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IF THE COMPANY WISHES TO MERGE OR CONSOLIDATE ITS ASSETS WITH ANOTHER           
COMPANY PRIOR TO FULLY PAYING BACK THE SECURED CONVERTIBLE NOTES, IT COULD      
LEAD TO A DEFAULT UNDER THE NOTES, MAKING THEM IMMEDIATELY DUE.                 
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Under the terms of the secured convertible notes, any sale, conveyance or       
disposition of all or substantially all of the assets of the Company in         
which more than 50% of the voting power of the Company is disposed of, or       
the consolidation, merger or other business combination of the Company with     
or into any other entity when the Company is not the survivor shall either:     
(i) be deemed to be an event of default under the notes which could cause       
the Company to pay substantial penalties, or (ii) require the Company to        
get written approval by the successor entity that such successor entity         
assumes the obligations of the secured convertible notes. Additionally, if      
the Company makes any issuance of shares of Common Stock, options for           
shares of Common Stock, or issuances any additional convertible notes for       
consideration less than the conversion price then in effect, the conversion     
price of the secured convertible notes will become the price the shares or      
options were issued for or the price the additional convertible notes will      
be convertible for. If the Company is forced to pay penalties under the         
secured convertible notes or the conversion price of the notes is decreased     
substantially, the Company could be forced to curtail its business              
operations or issue more shares of Common Stock, which would have a             
dilutive effect on then shareholders.                                           

RISKS RELATING TO OUR COMMON STOCK                                              

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THE MARKET PRICE OF OUR COMMON STOCK HISTORICALLY HAS BEEN VOLATILE.            
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The market price of our Common Stock historically has fluctuated                
significantly based on, but not limited to, such factors as: general stock      
market trends, announcements of developments related to our business,           
actual or anticipated variations in our operating results, our ability or       
inability to generate new revenues, conditions and trends in the healthcare     
industry and in the industries in which our customers are engaged.              

22    

Our Common Stock is traded on the OTC Bulletin Board. In recent years the       
stock market in general has experienced extreme price fluctuations that         
have oftentimes have been unrelated to the operating performance of the         
affected companies. Similarly, the market price of our Common Stock may         
fluctuate significantly based upon factors unrelated or disproportionate to     
our operating performance. These market fluctuations, as well as general        
economic, political and market conditions, such as recessions, interest         
rates or international currency fluctuations may adversely affect the           
market price of our Common Stock.                                               

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OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE COMMISSION        
WHICH LIMITS THE TRADING MARKET IN OUR COMMON STOCK, MAKES TRANSACTIONS IN      
OUR COMMON STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN        
OUR COMMON STOCK.                                                               
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Our Common Stock is considered a "penny stock" as defined in Rule 3a51-1        
promulgated by Commission under the Securities Exchange Act of 1934. In         
general, a security which is not quoted on NASDAQ or has a market price of      
less than $5 per share where the issuer does not have in excess of              
$2,000,000 in net tangible assets (none of which conditions the Company         
meets) is considered a penny stock. The Commission's Rule 15g-9 regarding       
penny stocks impose additional sales practice requirements on broker-           
dealers who sell such securities to persons other than established              
customers and accredited investors (generally persons with net worth in         
excess of $1,000,000 or an annual income exceeding $200,000 or $300,000         
jointly with their spouse). For transactions covered by the rules, the          
broker-dealer must make a special suitability determination for the             
purchaser and receive the purchaser's written agreement to the transaction      
prior to the sale. Thus, the rules affect the ability of broker-dealers to      
sell our Common Stock should they wish to do so, because of the adverse         
effect that the rules have upon liquidity of penny stocks. Unless the           
transaction is exempt under the rules, under the Securities Enforcement         
Remedies and Penny Stock Reform Act of 1990, broker-dealers effecting           
customer transactions in penny stocks are required to provide their             
customers with (i) a risk disclosure document; (ii) disclosure of current       
bid and ask quotations if any; (iii) disclosure of the compensation of the      
broker-dealer and its sales personnel in the transaction; and (iv) monthly      
account statements showing the market value of each penny stock held in the     
customer's account. As a result of the "penny stock" rules, the market          
liquidity for our Common Stock may be adversely affected by limiting the        
ability of broker-dealers to sell our Common Stock and the ability of           
purchasers to resell our Common Stock. Additionally, the value of the           
Company's securities may be adversely affected by the "penny stock" rules,      
because of the additional disclosures required by broker-dealers, which         
take additional time and effort from broker-dealers, decreasing the             
likelihood that broker-dealers will sell the Company's Common Stock. This       
may in turn have an adverse effect on the liquidity of the Company's            
securities which in turn could adversely affect the price of the Company's      
securities.                                                                     

In addition, various state securities laws impose restrictions on               
transferring "penny stocks" and as a result, investors in the Common Stock      
may have their ability to sell their shares of the Common Stock impaired.       

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THE COMPANY HAS NOT PAID ANY CASH DIVIDENDS.                                    
---------------------------------------------------------------------------     

The Company has paid no cash dividends on its Common Stock to date and it       
is not anticipated that any cash dividends will be paid to holders of the       
Company's Common Stock in the foreseeable future. While the Company's           
dividend policy will be based on the operating results and capital needs of     
the business, it is anticipated that any earnings will be retained to           
finance the future expansion of the Company.                                    
23    

ITEM 2. PROPERTY                                                                

The Company's executive offices are located in San Juan Capistrano,             
California in a shared office space with Monarch Bay Management Company.        
To date, the Company has not been assessed any rental charges for the use       
of this space.  The Company also leases 385 square feet of office space in      
Moreno Valley California.  This lease requires monthly payments of $539 and     
expires November 30, 2007.                                                      

We also have personnel who provide services to us from their home offices.      
We do not subsidize home office expenses.                                       

We believe that our current facilities are adequate for its current level       
of operations and that suitable additional or alternative space will be         
available as needed.                                                            

We own a variety of computers and other computer equipment for our              
operational needs. We believe that our equipment is suited for our present      
needs and that additional or alternative computer equipment will be             
available as needed.                                                            

ITEM 3. LEGAL PROCEEDINGS                                                       

On January 19, 2006, Community Capital Bank filed a complaint in the            
Supreme Court of the State of New York (Kings County) against the Company,      
Macdonald S. Tudeme (our former CEO) and Marguerite Tudeme (our former          
Secretary). The complaint seeks payment of three loans made by Community        
Capital Bank having a total outstanding principal amount of $202,527.67         
plus unpaid interest. The Company believes that the Community Capital Bank      
loans were made to MTM, a former subsidiary that was disposed of on             
December 15, 2005 as part of the disposition of Marathon (as described in       
Note 1), and are guaranteed by the Tudemes. As a result, the Company does       
not believe it is obligated to repay any amounts due under the Community        
Capital Bank loans.                                                             

On January 25, 2006, the Company received notice from the Internal Revenue      
Service (the "IRS") that the IRS had concluded that the Company's               
subsidiary (DCI) was a third-party payer to and thus employer of a              
pharmacist who provided services to DCI's client, the California Department     
of Corrections.  Although the IRS notice applies only to the case of the        
individual pharmacist, if unchanged, it could require DCI to classify other     
pharmacists and nurses in its registry who provide services to DCI's            
clients as employees of DCI.  Accordingly, compensation payable to such         
pharmacists and nurses would be subject to federal income tax withholding,      
Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment        
Tax Act (FUTA) tax.   This result would have a material adverse effect on       
the Company's business, financial condition and results of operations.  The     
Company disagrees with the conclusion of the IRS notice, believes that the      
pharmacist in question was properly classified as an independent contractor     
and is in the process of contesting the conclusion of the IRS.                  

On June 5, 2006, Phillip Evans, a former contractor of DCI, filed a             
complaint in the Superior Court of California (Riverside County) against        
DCI.  The complaint alleges, among other things, libel and unfair business      
practices, and seeks general special and punitive damages of $2,170,000.        
The Company believes the claims are without merit and is contesting the         
suit.                                                                           

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

There were no matters submitted to a vote of the shareholders during the        
fourth quarter of the year covered by this report by a solicitation of          
proxies or otherwise.                                                           
24    

PART II.    

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER           
MATTERS.                                                                        

Our common stock currently trades on the OTC Bulletin Board under the           
trading symbol "MSTF".                                                          

The high and low trading prices, on the OTC Bulletin Board, recorded for        
our common stock, for each quarter during the last two fiscal years is set      
forth below:                                                                    

                                                                [Download Table]

                                     Fiscal Year Ended           
                    December 31, 2006        December 31, 2005   
                 ----------------------   ---------------------- 
                    High          Low        High          Low   
                 ----------   ----------  ----------   ----------
                                                                 
Quarter 1          $  0.45      $  0.09    $  15.30     $   0.90 
Quarter 2          $  1.00      $  0.20    $   5.40     $   0.27 
Quarter 3          $  0.29      $  0.07    $   3.60     $   0.45 
Quarter 4          $  0.20      $  0.03    $   2.70     $   0.45 

The market for our common stock has been limited and the prices for our         
common stock quoted by brokers are not necessarily a reliable indication of     
the value of our common stock.                                                  

There are approximately 27 holders of our common stock in certificate form      
according to our stockholder list and over 452 holders in street name.          

There have been no cash dividends declared on our common stock since our        
inception. Dividends will be declared at the sole discretion of our Board       
of Directors, provided that so long as our convertible secured notes remain     
outstanding, we cannot, without the prior written consent of the holders of     
the notes, directly or indirectly declare or pay any dividends, other than      
dividends paid to us or any of our wholly-owned subsidiaries.                   

Securities Offered for Issuance Under Equity Incentive Plans                    

Our 2005 Stock Incentive Plan (the "2005 Plan") was adopted by our Board of     
Directors on December 1, 2005 and approved by the our stockholders on March     
27, 2006. The 2005 Plan reserves 1,111,111 shares of the Company's common       
stock for grant under the plan to directors, key employees and independent      
contractors who provide services to the Company. The 2005 Plan is               
administered by the Board of Directors. Our Board of Directors, in its sole     
discretion, will determine the exercise price of any options granted under      
the 2005 Plan. The exercise price of an incentive stock option cannot be        
less than (i) 100% of the fair market value of the common stock on the date     
of grant or (ii) in the case of an incentive stock option granted to an         
individual who owns (or is deemed to own pursuant to Section 424(d) of the      
Internal Revenue Code), at the time of grant, stock possessing more than        
10% of the total combined voting power of all classes of our stock (a "10%      
Stockholder"), 110% of the fair market value of the common stock on the         
date of grant. The exercise price of a nonqualified stock option may be         
less than 100% of the fair market value of the common stock on the date of      
grant; provided, however, that the exercise price of each nonqualified          
stock option granted under the 2005 Plan cannot in any event be less than       
the par value per share of our Common Stock.                                    

25    

Our Board of Directors, in its sole discretion, will determine the              
expiration date of any options granted under the 2005 Plan; provided that       
with respect to an incentive stock option the expiration date must be           
within (i) ten years from the date of grant, or such shorter period as may      
be specified by our board of directors, or (ii) in the case of a 10%            
Stockholder, five years from the date of grant.                                 

The following schedule provides additional information on our equity            
incentive plans:                                                                

                                                                [Download Table]

Plan Category                  Number of   Weighted-average   Number of securities
                              Securities     exercise price    remaining available
                            to be issued     of outstanding    for future issuance
                           upon exercise  options, warrants           under equity
                          of outstanding         and rights           compensation
                       options, warrants                          plans (excluding
                          and rights (a)                      securities reflected
                                                                     in column (a)
                       -----------------  -----------------  ---------------------
                                                                                  
Equity compensation                                                               
plans approved by                                                                 
security holders                931,589              $0.63                179,522 

Equity compensation                                                               
plans not approved by                                                             
security holders                      0                 NA                      0 
                       -----------------  -----------------  ---------------------
     Total                      931,589              $0.63                179,522 

Penny Stock                                                                     

Our common stock is subject to the provisions of Section 15(g) and Rule         
15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange         
Act"), commonly referred to as the "penny stock rule." Section 15(g) sets       
forth certain requirements for transactions in penny stocks, and Rule           
15g-9(d) (1) incorporates the definition of "penny stock" that is found in      
Rule 3a51-1 of the Exchange Act. The SEC generally defines "penny stock" to     
be any equity security that has a market price less than $5.00 per share,       
subject to certain exceptions. If our common stock is deemed to be a penny      
stock, trading in the shares will be subject to additional sales practice       
requirements on broker-dealers who sell penny stocks to persons other than      
established customers and accredited investors. "Accredited investors" are      
persons with assets in excess of $1,000,000 or annual income exceeding          
$200,000, or $300,000 together with their spouse. For transactions covered      
by these rules, broker-dealers must make a special suitability                  
determination for the purchase of such security and must have the               
purchaser's written consent to the transaction prior to the purchase.           
Additionally, for any transaction involving a penny stock, unless exempt,       
the rules require the delivery, prior to the first transaction, of a risk       
disclosure document, prepared by the SEC, relating to the penny stock           
market. A broker-dealer also must disclose the commissions payable to both      
the broker-dealer and the registered representative, and current quotations     
for the securities. Finally, monthly statements must be sent disclosing         
recent price information for the penny stocks held in an account and            
information on the limited market in penny stocks. Consequently, these          
rules may restrict the ability of broker-dealers to trade and/or maintain a     
market in our common stock and may affect the ability of our shareholders       
to sell their shares.                                                           

26    

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND         
RESULTS OF OPERATIONS                                                           

The discussion should be read in conjunction with our consolidated              
financial statements and related notes and the other financial information      
included elsewhere in this report.                                              

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS                                

Except for the historical information and discussions contained herein,         
statements contained in this Form 10-KSB may constitute forward-looking         
statements within the meaning of the Private Securities Litigation Reform       
Act of 1995.                                                                    

The forward-looking statements generally include our management's plans and     
objectives for future operations, including plans, objectives and               
expectations relating to our future economic performance, business              
prospects, revenues, working capital, liquidity, ability to obtain              
financing, generation of income and actions of secured parties not to           
foreclose on our assets. The forward-looking statements may also relate to      
our current beliefs regarding revenues we might earn if we are successful       
in implementing our business strategies. The forward-looking statements         
generally can be identified by the use of the words "believe," "intend,"        
"plan," "expect," "forecast," "project," "may," "should," "could," "seek,"      
"pro forma," "estimate," "continue," "anticipate" and similar words. The        
forward-looking statements and associated risks may include, relate to, or      
be qualified by other important factors, including, without limitation:         

-   anticipated trends in our financial condition and results of            
operations (including expected changes in our gross margin and      
general, administrative and selling expenses);                      
-   our ability to finance our working capital and other cash               
requirements;                                                       
-   our business strategy for expanding our presence in the information     
security products and services markets; and                         
-   our ability to distinguish ourselves from our current and future        
competitors.                                                        

We do not undertake to update, revise or correct any forward-looking            
statements. The forward-looking statements are based largely on our current     
expectations and are subject to a number of risks and uncertainties. Actual     
results could differ materially from these forward-looking statements.          

Important factors to consider in evaluating forward-looking statements          
include:                                                                        
-   changes in external competitive market factors or in our internal       
budgeting process that might impact trends in our results of        
operations;                                                         
-   changes in our business strategy or an inability to execute our         
strategy due to unanticipated changes in the markets; and           
-   various other factors that may prevent us from competing                
successfully in the marketplace.                                    

OVERVIEW                                                                        

We provide healthcare staffing services to both commercial and government       
sector customers. We are focused on building a nationally recognized            
healthcare staffing company by growing our current customer bases,              
expanding our service offerings, and acquiring and growing profitable           
staffing services companies.                                                    

27    

We operate our healthcare staffing services business through our wholly         
owned subsidiary Drug Consultants, Inc. DCI furnishes personnel to perform      
a range of pharmacy technician, nursing and other health care services in       
support of the operations of government and commercial facilities,              
including its largest client, the State of California Depart of Corrections     
and Rehabilitation (which accounted for approximately 99% of DCI's 2006         
revenue). DCI currently operates under three master contracts with the          
CDCR. The master contracts are for terms of three years and currently           
expire between September 30, 2007 and June 30, 2008. Historically, DCI has      
been able to obtain replacement contracts for its services to the CDCR upon     
expiration of its master contracts. DCI's contracts with the CDCR do not        
provide for a minimum purchase commitment of our services and can be            
terminated by the CDCR at any time on 30 days' notice.                          

In April 2006, a federal court-appointed receiver assumed total control         
over CDCR's healthcare delivery system to address the court's findings of       
substandard medical care.  Among the receiver's objectives is to reduce the     
CDCR's reliance on staffing service providers like DCI.  Since the              
receiver's appointment, DCI has experienced a loss of several of its            
healthcare professionals who have accepted positions with the CDCR.  We         
believe that the ongoing implications of the receiver's management of the       
CDCR's healthcare delivery system include lower demand from the CDCR for        
DCI's services, higher attrition of our healthcare professionals, increased     
competition for recruiting healthcare professionals to fill positions with      
the CDCR and reduced margins for the services we provide the CDCR.              

Our revenues generally consist of fees received from clients to whom we         
provide temporary healthcare professionals.                                     

Our costs of revenue generally consist of amounts paid to the temporary         
healthcare professionals who provide services to our clients.                   

On November 4, 2005, we acquired 100% of the issued and outstanding shares      
of DCII (formerly, iTechexpress, Inc.) in exchange for shares of our Common     
Stock representing approximately 93% of our outstanding Common Stock after      
issuance. As a result, we have accounted for the DCII acquisition as a          
reverse takeover of the Company by the shareholders of DCII and a               
recapitalization of DCII. Accordingly, our consolidated financial               
statements represent a continuation of DCII and the discussion below            
relates to the financial results of DCII.                                       

COMPARISON OF OPERATING RESULTS                                                 

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006 COMPARED TO THE      
YEAR ENDED DECEMBER 31, 2005                                                    

Revenues for the year ended December 31, 2006 totaled $7,727,646 compared       
to $1,851,148 for the year ended December 31, 2005.  This is an increase of     
$5,876,498 or 317% and is attributable to the acquisition of DCI in             
November 2005 and the inclusion of 12 months of operations in our 2006          
revenues.                                                                       

Cost of revenues for the year ended December 31, 2006 totaled $6,597,677        
compared to $1,154,862 for the year ended December 31, 2005.  This is an        
increase of $5,442,815 or 471% and is attributable to the acquisition of        
DCI in November 2005 and the inclusion of 12 months of operations in our        
2006 cost of revenues.                                                          

28    

Operating expenses for the year ended December 31, 2006 totaled $1,355,933      
compared to $1,273,817 for the year ended December 31, 2005.  This is an        
increase of $82,116 or 6% and is attributable to the acquisition of DCI in      
November 2005 and the inclusion of 12 months of operating expenses in our       
2006 operating expenses.  These increases were partially offset by the          
acquisition costs of DCII and DCI which were included in our 2005 operating     
expenses and not in 2006.                                                       

Other income (expense) for the year ended December 31, 2006 totaled             
$640,487 in expense compared to other income of $876,762 for the year ended     
December 31, 2005.  The increase in expense can be primarily attributed to      
an increase in interest expense of $907,588 due to additional borrowings        
under our secured convertible notes as well as the fact that 2005 interest      
expense reflected approximately two months of expense from the November         
2005 financing versus a full year in 2006.  A decrease in the gain on           
derivative valuation can also be attributed to the overall increase in          
other expense compared to the prior year.   These factors were partially        
offset by the loss on disposition of subsidiary and loss on discontinued        
operations which were included in the 2005 results of operations.               

LIQUIDITY AND CAPITAL RESOURCES                                                 

As of December 31, 2006, we had negative net working capital of $546,798.       
Our current assets of $1,300,061 consisted of cash and cash equivalents of      
$1 and accounts receivable, net of $1,300,060. Our current liabilities of       
$1,846,859 consisted of accounts payable and accrued expenses of $910,841;      
a factoring liability of $579,780; accrued interest of $266,670; notes          
payable, current of $59,401; and, accounts payable related parties of           
$30,167.                                                                        

As of December 31, 2006, we had long-term debt of $1,842,971, consisting of     
$175,046 in derivatives, $1,547,648 outstanding under our convertible           
secured notes and $120,277 in notes payable.                                    

Net cash used in operating activities for the year ended December 31, 2006      
was $1,360,683, compared to net cash provided by operating activities of        
$243,190 for the year ended December 31, 2005. Our increase of net cash         
used in operating activities in 2006 is primarily attributable to an            
increase in accounts receivables and a decrease in accounts payable             
compared to the prior year.                                                     

There was no cash provided by or used in investing activities during the        
year ended December 31, 2006.  Net cash used in investing activities for        
the year ended December 31, 2005 was $1,600,000 and reflects the purchase       
of DCI in November 2005.                                                        

Net cash provided by financing activities for the year ended December 31,       
2006 was $319,251 compared with net cash provided by financing activities       
of $2,361,078 for the year ended December 31, 2005. Net cash provided by        
financing activities in 2006 includes $425,000 of proceeds from our             
issuance of convertible secured notes compared with $2,150,000 of proceeds      
in 2005.  Payments made on notes payable totaled $350,396 for the year          
ended December 31, 2006 compared with payments of $124,054 in 2005.             

Our consolidated financial statements are prepared using the accrual method     
of accounting in accordance with GAAP, and have been prepared on a going        
concern basis, which contemplates the realization of assets and the             
settlement of liabilities in the normal course of business. We had $617,812     
in accumulated deficit at December 31, 2006. Our management has taken           
various steps to revise its operating and financial requirements, which it      
believes will be sufficient to provide the Company with the ability to          
continue its operations for the next twelve months.                             

29    

In view of our net working capital deficit, operating cash flow deficit,        
long-term debt and the other matters described above, recoverability of a       
major portion of the recorded asset amounts shown in our consolidated           
balance sheet is dependent upon continued operations of the Company, which      
in turn is dependent upon our ability to raise additional capital, obtain       
financing and to succeed in our future operations. The financial statements     
do not include any adjustments relating to the recoverability and               
classification of recorded asset amounts and classification of liabilities      
that might be necessary should the Company be unable to continue as a going     
concern.  We project that our cash on hand and cash flow generated from         
operations will not be sufficient to fund operational liquidity                 
requirements.  As a result, our ability to continue our operations and          
growth strategy depends on our ability to access the capital markets in the     
near term.                                                                      

Our secured convertible note investors are required to purchase an              
additional $625,000 principal amount of secured convertible notes and           
related warrants five days following the date that a registration statement     
for the resale of the shares of common stock issuable upon conversion of        
the secured convertible notes and exercise of the warrants is declared          
effective by the Securities and Exchange Commission and if other conditions     
are satisfied.  There can be no assurance that we will satisfy the              
conditions to funding or, if we do, that we will do so on a timetable that      
meets our operational liquidity needs                                           

There also can be no assurance that capital from other outside sources will     
be available, or if such financing is available, that it will be on terms       
that management deems sufficiently favorable. If we are unable to obtain        
additional financing upon terms that management deems sufficiently              
favorable, or at all, we could be forced to restructure or to default on        
our obligations or to curtail or abandon our business plan, any of which        
may devalue or make worthless an investment in the Company.                     

The operations of DCII and DCI, which will represent our entire business        
for the foreseeable future, were acquired in November 2005. Accordingly, we     
have a limited operating history upon which an evaluation of our prospects      
can be made. Our strategy is unproven and the revenue and income potential      
from our strategy is unproven. It is difficult for us to predict future         
liquidity requirements with certainty and our forecast is based upon            
certain assumptions, which may differ from actual future outcomes. Over the     
longer term, we must successfully execute our plans to increase revenue and     
income streams that will generate significant positive cash flow if we are      
to sustain adequate liquidity without impairing growth or requiring the         
infusion of additional funds from external sources.                             

We had an operating cash flow deficit in 2006. We do not currently have         
enough capital to repay our outstanding convertible secured notes and other     
liabilities and we may never generate enough revenue to repay the amounts       
owed. In addition, execution of our acquisition-based growth strategy will      
likely acquire significant additional capital.                                  

30    

As a result, our continued operations, ability to repay outstanding             
liabilities and growth strategy all depend on our ability to access the         
capital markets. We do not have any commitments or identified sources of        
additional capital from third parties, other than the commitment from the       
convertible secure note investors and Systran mentioned above, or from its      
officers, directors or majority shareholders. There can be no assurance         
that capital from outside sources will be available, or if such financing       
is available, that it will be on terms that management deems sufficiently       
favorable. If we are unable to obtain additional financing upon terms that      
management deems sufficiently favorable, or at all, it would have a             
material adverse impact upon our ability to continue our business               
operations and pursue our growth strategy. In the event we do not raise         
additional capital, it is likely that our growth will be restricted and         
that we may be forced to scale back or curtail implementing our business        
plan.                                                                           

RECEIVABLES FACTORING FACILITY                                                  

On November 8, 2005, DCII and DCI entered into a Factoring and Security         
Agreement to sell accounts receivables to Systran Financial Services            
Corporation.  The purchase price for each invoice sold is the face amount       
of the invoice less a discount of 1.5%.                                         

On July 24, 2006, the Factoring Agreement was amended and under the terms       
of the amendment a fee equal to prime plus 1.50% shall be charged on a          
daily basis based upon total of invoices purchased by Systran that remain       
unpaid and outstanding, less the deposit held by Systran.   Further, the        
purchase price for each invoice sold was amended to be the face amount of       
the invoice less a discount of 0.65%.  Additionally, a one time fee of          
0.50% on all invoices that remain unpaid from the date sold shall be            
incurred on the 91st day from the date sold.                                    

All accounts sold are with recourse by Systran.  Systran may defer making       
payment to DCII of a portion of the purchase price payable for all accounts     
purchased which have not been paid up to 10.0% of such accounts (reserve).      

All of DCII's and DCI's accounts receivable are pledged as collateral under     
the agreement.  The initial term is for thirty-six months and will              
automatically renew for an additional twelve months at the end of the term,     
unless the Company gives thirty days written notice of its intention to         
terminate the factoring agreement.                                              

CONVERTIBLE SECURED NOTES                                                       

On August 31, 2004, the Company entered into a securities purchase              
agreement with four accredited investors for the sale of secured                
convertible notes having an aggregate principal amount of $700,000, a 10%       
annual interest rate payable quarterly, and a term of two years. We also        
agreed to sell warrants to purchase up to an aggregate of 7,777 shares of       
our Common Stock at $40.50 per share. We only sold $500,000 principal           
amount of secured convertible notes under the 2004 agreement. As a result,      
we sold to the investors warrants to purchase up to an aggregate of 5,556       
shares of our Common Stock at $40.50 per share. The investors have agreed       
to purchase the remaining $200,000 commitment under the terms of our 2005       
securities purchase agreement with the investors.                               

On November 4, 2005, we entered into an additional securities purchase          
agreement with the same accredited investors, for the sale of secured           
convertible notes having an aggregate principal amount of $3,000,000, an 8%     
annual interest rate (payable quarterly), and a term of three years. We         
also agreed to sell warrants to purchase up to an aggregate of 166,667          
shares of our Common Stock at $9.00 per share.                                  

31    

On March 29, 2007, the Company obtained an amendment to the 2005 securities     
purchase agreement whereby interest payments are payable at the same time       
the corresponding principal balance is due and payable, whether at maturity     
or upon acceleration or by prepayment.                                          

As of March 22, 2007, we had issued under the two securities purchase           
agreements:                                                                     

-   $3,075,000 aggregate principal amount of secured convertible notes,     
-   Warrants to purchase 5,556 shares of our Common Stock at $40.50 per     
shares,                                                             
-   Warrants to purchase 143,056 shares of our Common Stock at $9.00 per    
share, and                                                          
-   Warrants to purchase 166,667 shares of our Common Stock at $4.50 per    
share.                                                              

The investors are required to purchase an additional $625,000 principal         
amount of secured convertible notes and warrants to purchase 2,222 shares       
of our Common Stock at $40.50 per share and warrants to purchase 23,611         
shares of our Common Stock at $9.00 per share five days following the date      
that the registration statement for the resale of the shares of common          
stock issuable upon conversion of the secured convertible notes and             
exercise of the warrants is declared effective by the Securities and            
Exchange Commission and if other conditions are satisfied, including: (i)       
the Company's representations and warranties contained in the 2005              
securities purchase agreement being true and correct in all material            
respects on the date when made and as of the date of such purchase; (ii)        
the Company having performed, satisfied and complied in all material            
respects with the covenants, agreements and conditions required by the 2005     
agreement; (iii) there being no litigation, statute, rule, regulation,          
executive order, decree, ruling or injunction that has been enacted,            
entered, promulgated or endorsed by or in any court or government authority     
of competent jurisdiction or any self-regulatory organization having            
requisite authority which prohibits the transactions contemplated by the        
2005 agreement; (iv) no event having occurred which could reasonably be         
expected to have a material adverse effect on the Company; and (v) the          
shares of Common Stock issuable upon conversion of the secured convertible      
notes and exercise of the warrants having been authorized for quotation on      
the OTC Bulletin Board and trading in our Common Stock on the OTC Bulletin      
Board having not been suspended by the Securities and Exchange Commission       
or the OTC Bulletin Board.                                                      

On November 1, 2006, we obtained an amendment to the 2005 securities            
purchase agreement extending the date by which the Company must obtain the      
effectiveness of the registration statement covering the resale of the          
shares of our Commons Stock issuable upon conversion of the secured             
convertible notes and the exercise of the warrants to April 30, 2007 (or        
May  25, 2007 if the Company is making a good faith effort to respond to        
the Securities and Exchange Commission's comments) in exchange for issuing      
warrants to purchase 166,667 shares of our Common Stock at $4.50 per share      
to the holders of the secured convertible notes.                                

On March 29, 2007, we obtained an amendment extending the date by which the     
Company must obtain the effectiveness of the registration statement             
covering the resale of the shares of our Commons Stock issuable upon            
conversion of the secured convertible notes and the exercise of the             
warrants to October 31, 2007 (or November 25, 2007 if the Company is making     
a good faith effort to respond to the Securities and Exchange Commission's      
comments).                                                                      

32    

In connection with the 2005 securities purchase agreement, we entered into      
a security agreement, whereby we granted the investors a continuing, first      
priority security interest in the Company's general assets including all of     
the Company's:                                                                  
-   Goods, including without limitations, all machinery, equipment,         
computers, motor vehicles, trucks, tanks, boats, ships, appliances, 
furniture, special and general tools, fixtures, test and quality    
control devices and other equipment of every kind and nature and    
wherever situated;                                                  
-   Inventory (except that the proceeds of inventory and accounts           
receivable;                                                         
-   Contract rights and general intangibles, including, without             
limitation, all partnership interests, stock or other securities,   
licenses, distribution and other agreements, computer software      
development rights, leases, franchises, customer lists, quality     
control procedures, grants and rights, goodwill, trademarks, service
marks, trade styles, trade names, patents, patent applications,     
copyrights, deposit accounts, and income tax refunds;               
-   Receivables including all insurance proceeds, and rights to refunds     
or indemnification whatsoever owing, together with all instruments, 
all documents of title representing any of the foregoing, all rights
in any merchandising, goods, equipment, motor vehicles and trucks   
which any of the same may represent, and all right, title, security 
and guaranties with respect to each receivable, including any right 
of stoppage in transit; and documents, instruments and chattel      
paper, files, records, books of account, business papers, computer  
programs and the products and proceeds of all of the foregoing and  
the Company's intellectual property.                                

Additionally, we entered into an intellectual property security agreement       
with the investors, whereby we granted them a security interest in all of       
the Company's software programs, including source code and data files, then     
owned or thereafter acquired, all computers and electronic processing           
hardware, all related documentation, and all rights with respect to any         
copyrights, copyright licenses, intellectual property, patents, patent          
licenses, trademarks, trademark licenses or trade secrets.                      

Additional material terms of the 2005 securities purchase agreement, the        
secured convertible notes and the warrants are described below:                 

Conversion and Conversion Price                                                 
-------------------------------                                                 
The secured convertible notes are convertible into our Common Stock, at the     
investors' option, at the lower of (i) $0.90 or (ii) 50% of the average of      
the three lowest intraday trading prices for the Common Stock on a              
principal market for the 20 trading days before but not including the           
conversion date. Accordingly, there is in fact no limit on the number of        
shares into which the notes may be converted.                                   

The conversion price is adjusted after major announcements by the Company.      
In the event the Company makes a public announcement that the Company           
intends to consolidate or merge with any other corporation (other than a        
merger in which the Company is the surviving or continuing corporation and      
its capital stock is unchanged) or sell or transfer all or substantially        
all of the assets of the Company or any person, group or entity (including      
the Company) publicly announces a tender offer to purchase 50% or more of       
the Company's Common Stock (or any other takeover scheme) then the              
conversion price will be equal to the lower of the conversion price that        
would be effect on the date the announcement is made or the current             
conversion price at the time the secured convertible note holders wish to       
convert.                                                                        
33    

The secured convertible notes also provide anti-dilution rights, whereby        
the conversion price shall be adjusted in the event that the Company issues     
or sells any shares of Common Stock for no consideration or consideration       
less than the average of the last reported sale prices for the shares of        
the Common Stock on the OTC Bulletin Board for the five trading days            
immediately preceding such date of issuance or sale. The conversion price       
is also proportionately increased or decreased in the event of a reverse        
stock split or forward stock split, respectively. The conversion price is       
also adjusted in the event the Company effects a consolidation, merger or       
sale of substantially all its assets (which may also be treated as an event     
of default) or if the Company declares or makes any distribution of its         
assets (including cash) to holders of its Common Stock, as provided in the      
secured convertible notes.                                                      

If a note holder gives the Company a notice of conversion relating to the       
secured convertible notes and the Company is unable to issue such note          
holder the shares of Common Stock underlying the secured convertible note       
within five days from the date of receipt of such notice, the Company is        
obligated to pay the note holder $2,000 for each day that the Company is        
unable to deliver such Common Stock underlying the secured convertible          
note.                                                                           

The secured convertible notes contain a provision whereby no note holder is     
able to convert any part of the notes into shares of the Company's Common       
Stock, if such conversion would result in beneficial ownership by the note      
holder and its affiliates of more than 4.99% of the Company's then              
outstanding shares of Common Stock.                                             

In addition, we have the right under certain circumstances described below      
under "Company Call Option and Prepayment Rights" to prevent the note           
holders from exercising their conversion rights during any month after a        
month in which we have exercised certain prepayment rights.                     

Company Call Option and Prepayment Rights                                       
-----------------------------------------                                       
Each secured convertible note contains a call option in favor of the            
Company, whereby as long as no event of default under the note has              
occurred, the Company has a sufficient number of authorized shares reserved     
for issuance upon full conversion of the secured convertible notes and our      
Common Stock is trading at or below $0.90 per share (subject to adjustment      
in the secured convertible note), the Company has the right to prepay all       
or a portion of the note. The prepayment amount is equal to the total           
amount of principal and accrued interest outstanding under the note, and        
any other amounts which may be due to the note holders, multiplied by 130%.     

In the event that the average daily trading price of our Common Stock for       
each day of any month is below $0.90, the Company may at its option prepay      
a portion of the outstanding principal amount of the secured convertible        
notes equal to 104% of the principal amount thereof divided by thirty-six       
plus one month's interest on the secured convertible notes, or the amount       
of the remaining principal and interest, whichever is less. No note holder      
is entitled to convert any portion of the secured convertible notes during      
any month after the month on which the Company exercises this prepayment        
option.                                                                         

34    

Events of Default                                                               
-----------------                                                               
Upon an event of default under the secured convertible notes, and in the        
event the note holders give the Company a written notice of default, an         
amount equal to 130% of the amount of the outstanding secured convertible       
notes and interest thereon shall become immediately due and payable or          
another amount as otherwise provided in the notes. Events of default under      
the secured convertible notes include the following:                            
-   failure to pay any amount of principal or interest on the notes;        
failure to issue shares to the selling stockholders upon conversion 
of the notes, and such failure continues for ten days after         
notification by the note holders;                                   
-   failure to obtain effectiveness of the registration statement           
covering the resale of the shares of our Commons Stock issuable upon
conversion of the secured convertible notes and the exercise of the 
warrants on or before October 31, 2007 (or November 25, 2007 if the 
Company is making a good faith effort to respond to the Securities  
and Exchange Commission's comments), or an effective registration   
statement covering such shares ceases to be effective for any ten   
consecutive days or any twenty days in any twelve month period;     
-   breaches by the Company of any of the convents contained in the         
notes;                                                              
-   breaches by the Company of any representations and warranties made      
in the 2005 securities purchase agreement or any related document;  
-   appointment by the Company of a receiver or trustee or makes an         
assignment for the benefit of creditors;                            
-   filing of any judgment against the Company for more than $50,000;       
-   bringing of bankruptcy proceedings against the Company and such         
proceedings are not stayed within sixty days of such proceedings    
being brought; or                                                   
-   delisting of the Common Stock from the OTC Bulletin Board or            
equivalent replacement exchange.                                    

Stock Purchase Warrants                                                         
-----------------------                                                         
The warrants expire five years from their date of issuance. The warrants        
include anti-dilution rights, whereby the exercise price of the warrants        
shall be adjusted in the event that the Company issues or sells any shares      
of the Company's Common Stock for no consideration or consideration less        
than the average of the last reported sale prices for the shares of the         
Company's Common Stock on the OTC Bulletin Board for the five trading days      
immediately preceding such date of issuance or sale. The exercise price of      
the warrants are also proportionately increased or decreased in the event       
of a reverse stock split or forward stock split, respectively. The exercise     
price is also adjusted pursuant to the warrants in the event the Company        
effects a consolidation, merger or sale of substantially all of its assets      
and/or if the Company declares or makes any distribution of its assets          
(including cash) to holders of its common stock as a partial liquidating        
dividend, as provided in the warrants.                                          

35    

The warrants also contain a cashless exercise, whereby after February 2,        
2006, and if a registration statement covering the warrants is not              
effective, the warrant holders may convert the warrants into shares of the      
Company's restricted Common Stock. In the event of a cashless exercise          
under the warrants, in lieu of paying the exercise price in cash, the           
selling stockholders can surrender the warrant for the number of shares of      
Common Stock determined by multiplying the number of warrant shares to          
which it would otherwise be entitled by a fraction, the numerator of which      
is the difference between (i) the average of the last reported sale prices      
for the Company's Common Stock on the OTC Bulletin Board for the five           
trading days preceding such date of exercise and (ii) the exercise price,       
and the denominator of which is the average of the last reported sale           
prices for the Company's Common Stock on the OTC Bulletin Board for the         
five trading days preceding such date of exercise. For example, if the          
selling stockholder is exercising 100,000 warrants with a per warrant           
exercise price of $0.75 per share through a cashless exercise when the          
average of the last reported sale prices for the Company's Common Stock on      
the OTC Bulletin Board for the five trading days preceding such date of         
exercise is $2.00 per share, then upon such cashless exercise the warrant       
holder will receive 62,500 shares of the Company's Common Stock.                

Registration Rights Agreement                                                   
-----------------------------                                                   
We also entered into a registration rights agreement with the investors         
that grants the investors demand registration rights with respect to 200%       
of the Common Stock underlying the secured convertible notes and 200% of        
the Common Stock underlying the warrants. The Company will be subject to        
the payment of certain damages in the event that it does not satisfy its        
obligations including its obligation to have a registration statement with      
respect to the Common Stock underlying the secured convertible notes and        
warrants declared effective by the Securities and Exchange Commission on or     
prior to October 31, 2007; in the event that after the registration             
statement is declared effective, sales of the Company's securities cannot       
be made pursuant to the registration statement; and in the event that the       
Company's Common Stock is not listed on the OTC Bulletin Board or the           
NASDAQ, New York or American stock exchanges. The damages are equal to 0.02     
times the number of months (prorated for partial months) that any such          
event occurs (subject to adjustment as provided in the registration rights      
agreement).                                                                     

Side Letter Agreement                                                           
---------------------                                                           
We entered into a aide letter agreement with the investors on November 10,      
2005. The Side Letter Agreement provided that in consideration for the          
November 2005 sale of the secured convertible notes, the investors agreed       
that the face amount of the $500,000 of secured convertible notes issued to     
the investors in August 2004 and the $200,000 in secured convertible notes      
which remained to be issued under the 2004 securities purchase agreement        
upon the effectiveness of a registration statement covering such secured        
convertible notes shall be included in the amount advanced to the Company       
under the November 2005 secured convertible notes. The side letter              
agreement also provided that the terms of the 2005 securities purchase          
agreement shall supercede the prior 2004 securities purchase agreement and      
that all interest, penalties, fees, charges or other obligations accrued or     
owed by the Company to the investors pursuant to the 2004 securities            
purchase agreement are waived, provided that in the event of any material       
breach of the 2005 securities purchase agreement by the Company, which          
breach is not cured within five days of receipt by the Company of written       
notice of such breach, the novation of the 2004 securities purchase             
agreement and the waiver of the prior obligations thereunder shall be           
revocable by the selling stockholders and all such prior obligations shall      
be owed as if the 2004 securities purchase agreement was never superceded.      
36    

CRITICAL ACCOUNTING POLICIES AND ESTIMATES                                      

Critical Accounting Policies                                                    
----------------------------                                                    
We prepare our consolidated financial statements in conformity with GAAP.       
As such, we are required to make certain estimates, judgments and               
assumptions that we believe are reasonable based upon the information           
available. These estimates and assumptions affect the reported amounts of       
assets and liabilities at the date of the financial statements and the          
reported amounts of revenues and expenses during the periods presented. The     
significant accounting policies which we believe are the most critical to       
aid in fully understanding and evaluating our reported financial results        
include the following:                                                          

Principles of Consolidation                                                     
---------------------------                                                     
The consolidated financial statements include the accounts of Monarch           
Staffing, Inc. (formerly MT Ultimate Healthcare Corp.) (Monarch), and its       
wholly-owned subsidiaries, Drug Consultants International, Inc., formerly       
known as  iTechexpress, Inc., (DCII) and Drug Consultants, Inc. (DCI), and      
DCII's wholly-owned subsidiary, Success Development Group, Inc. (SDG). All      
significant intercompany balances and transactions have been eliminated in      
the consolidation.                                                              

Use of Estimates                                                                
----------------                                                                
The preparation of financial statements in conformity with accounting           
principles generally accepted in the United States of America requires          
management to make a number of estimates and assumptions relating to the        
reporting of assets and liabilities and the disclosure of contingent assets     
and liabilities at the dates of the financial statements and the reported       
amounts of revenue and expenses during the reporting periods.  Actual           
results could differ from those estimates.                                      

Accounts Receivable and Allowance for Doubtful Accounts                         
-------------------------------------------------------                         
Accounts receivable consists of amounts billed to customers upon                
performance of service.  The Company performs ongoing credit evaluations of     
customers and adjusts credit limits based upon payment history and the          
customer current creditworthiness, as determined by its review of their         
current credit information.  The Company continuously monitors collections      
and payments from its customers and maintains a provision for estimated         
credit losses based upon its historical experience and any                      
customer-specific collection issues that it has identified.  Accounts           
receivable are shown net of an allowance for doubtful accounts of $0 at         
December 31, 2006 and 2005, respectively. An allowance is established           
whenever receivables are over 90 days old and the customer has not              
responded to efforts to reconcile differences. Such receivables are deemed      
to be uncollectible after 180 days. There were no such receivables for the      
current year or prior year.                                                     

Cash                                                                            
----                                                                            
Cash equivalents include short-term, highly liquid investments with             
maturities of three months or less at the time of acquisition.                  

37    

Long-Lived Assets                                                               
-----------------                                                               
The Company accounts for its long-lived assets in accordance with SFAS No.      
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS     
No. 144 requires that long-lived assets be reviewed for impairment whenever     
events or changes in circumstances indicate that the historical cost            
carrying value of an asset may no longer be appropriate. The Company            
assesses recoverability of the carrying value of an asset by estimating the     
future net cash flows expected to result from the asset, including eventual     
disposition. If the future net cash flows are less than the carrying value      
of the asset, an impairment loss is recorded equal to the difference            
between the asset's carrying value and fair value or disposable value.          

Goodwill                                                                        
--------                                                                        
The excess of purchase price and related costs over the fair value of net       
assets of entities acquired is recorded as goodwill. In accordance with         
SFAS No. 142, Goodwill and Other Intangible Assets , the Company evaluates      
goodwill annually for impairment at the reporting unit level and whenever       
circumstances occur indicating that goodwill might be impaired. The             
performance of the test involves a two-step process. The first step of the      
impairment test involves comparing the fair value of the Company's              
reporting units with the reporting unit's carrying amount, including            
goodwill. The Company generally determines the fair value of its reporting      
units using the expected present value of future cash flows, giving             
consideration to the market valuation approach. If the carrying amount of       
the Company's reporting units exceeds the reporting unit's fair value, the      
Company performs the second step of the goodwill impairment test to             
determine the amount of impairment loss. The second step of the goodwill        
impairment test involves comparing the implied fair value of the Company's      
reporting unit's goodwill with the carrying amount of that goodwill. At         
December 31, 2006 and 2005, the Company performed the annual impairment         
test and determined there was no impairment of goodwill.                        

Beneficial Conversion Feature                                                   
-----------------------------                                                   
From time to time, the Company has debt with conversion options that            
provide for a rate of conversion that is below market value. This feature       
is normally characterized as a beneficial conversion feature ("BCF"), which     
is recorded by the Company pursuant to Emerging Issues Task Forces ("EITF")     
Issue No. 98-5 ("EITF 98-05"), "Accounting for Convertible Securities with      
Beneficial Conversion Features or Contingently Adjustable Conversion            
Ratios," and EITF Issue No. 00-27, "Application of EITF Issue No. 98-5 to       
Certain Convertible Instruments."                                               

If a BCF exists, the Company records it as a debt discount and amortizes it     
to interest expense over the life of the debt on a straight-line basis,         
which approximates the effective interest method.                               

38    

Derivative Financial Instruments                                                
--------------------------------                                                
The Company's derivative financial instruments consist of embedded              
derivatives related to the convertible notes, since the notes are not           
conventional convertible debt. These embedded derivatives include certain       
conversion features, monthly payment options, variable interest features,       
call options, liquidated damages clauses in the registration rights             
agreement and certain default provisions.  The accounting treatment of          
derivative financial instruments requires that we record the derivatives        
and related warrants at their fair values as of the inception date of the       
agreement and at fair value as of each subsequent balance sheet date.           

Any change in fair value of these instruments will be recorded as non-          
operating, non-cash income or expense at each reporting date. If the fair       
value of the derivatives is higher at the subsequent balance sheet date, we     
will record a non-operating, non-cash charge. If the fair value of the          
derivatives is lower at the subsequent balance sheet date, we will record       
non-operating, non-cash income. The derivative and warrant liabilities are      
recorded as long-term liabilities in the consolidated balance sheet.            

Revenue Recognition                                                             
-------------------                                                             
Revenues and costs of revenues from services are recognized during the          
period in which the services are provided.  The Company applies the             
provisions of SEC Staff Accounting Bulletin ("SAB") No. 104, Revenue            
Recognition in Financial Statements ("SAB 104"), which provides guidance on     
the recognition, presentation, and disclosure of revenue in financial           
statements filed with the SEC. SAB 104 outlines the basic criteria that         
must be met to recognize revenue and provides guidance for disclosure           
related to revenue recognition policies. In general, the Company recognizes     
revenue related to monthly contracted amounts for services provided when        
(i) persuasive evidence of an arrangement exists, (ii) delivery has             
occurred or services have been rendered, (iii) the fee is fixed or              
determinable, and (iv) collectibility is reasonably assured.                    

The Company has contracts with various governments and governmental             
agencies. Government contracts are subject to audit by the applicable           
governmental agency. Such audits could lead to inquiries from the               
government regarding the allowability of costs under applicable government      
regulations and potential adjustments of contract revenues. To date, the        
Company has not been involved in any such audits.                               

Income Taxes                                                                    
------------                                                                    
The Company accounts for income taxes under the provisions of SFAS No. 109,     
"Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and      
liabilities are recognized for future tax benefits or consequences              
attributable to temporary differences between the financial statement           
carrying amounts of existing assets and liabilities and their respective        
tax bases. Deferred tax assets and liabilities are measured using enacted       
tax rates expected to apply to taxable income in the years in which those       
temporary differences are expected to be recovered or settled. A valuation      
allowance is provided for significant deferred tax assets when it is more       
likely than not that such assets will not be realized through future            
operations. We currently have recorded a valuation allowance against all of     
our deferred tax assets. We have considered future taxable income and           
ongoing tax planning strategies in assessing the amount of the valuation        
allowance. If actual results differ favorably from these estimates, we may      
be able to realize some or all of the deferred tax assets, which could          
favorably impact our operating results.                                         

39    

Issuance of Shares for Non-Cash Consideration                                   
---------------------------------------------                                   
The Company accounts for the issuance of equity instruments to acquire          
goods and/or services based on the fair value of the goods and services or      
the fair value of the equity instrument at the time of issuance, whichever      
is more reliably determinable. The majority of equity instruments have been     
valued at the market value of the shares on the date issued.                    

The Company's accounting policy for equity instruments issued to                
consultants and vendors in exchange for goods and services follows the          
provisions of EITF 96-18, "Accounting for Equity Instruments That are           
Issued to Other Than Employees for Acquiring, or in Conjunction with            
Selling, Goods or Services" and EITF 00-18, "Accounting Recognition for         
Certain Transactions Involving Equity Instruments Granted to Other Than         
Employees." The measurement date for the fair value of the equity               
instruments issued is determined at the earlier of (i) the date at which a      
commitment for performance by the consultant or vendor is reached or (ii)       
the date at which the consultant or vendor's performance is complete. In        
the case of equity instruments issued to consultants, the fair value of the     
equity instrument is recognized over the term of the consulting agreement.      
In accordance to EITF 00-18, an asset acquired in exchange for the issuance     
of fully vested, nonforfeitable equity instruments should not be presented      
or classified as an offset to equity on the grantor's balance sheet once        
the equity instrument is granted for accounting purposes.                       

ITEM 7. FINANCIAL STATEMENTS                                                    

The Reports of Independent Registered Public Accounting Firms and the           
consolidated financial statements of the Company and the notes thereto          
appear on the following pages.                                                  

40    

CONTENTS    

Report of Independent Registered Public Accounting Firm. . . . . . . . .3       

Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . .4       

Consolidated Statements of Operations. . . . . . . . . . . . . . . . . .5       

Consolidated Statements of Stockholders' Equity (Deficit). . . . . . . .6       

Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . .7       

Notes to the Consolidated Financial Statements . . . . . . . . . . . . .8       

/Letterhead/                                                                    

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         
The Board of Directors and Shareholders                                         
Monarch Staffing, Inc. and Subsidiaries                                         
(formerly MT Ultimate Healthcare Corp.)                                         
San Juan Capistrano, California                                                 

We have audited the accompanying consolidated balance sheet of Monarch          
Staffing, Inc. and Subsidiaries (formerly MT Ultimate Healthcare Corp.) as      
of December 31, 2006 and 2005, and the related consolidated statements of       
operations, stockholders' equity (deficit), and cash flows for the years        
then ended. These consolidated financial statements are the responsibility      
of the Company's management. Our responsibility is to express an opinion on     
these consolidated financial statements based on our audits.                    

We conducted our audits in accordance with the standards of the PCAOB           
(United States). Those standards require that we plan and perform the           
audits to obtain reasonable assurance about whether the consolidated            
financial statements are free of material misstatement. The Company is not      
required to have, nor were we engaged to perform an audit of its internal       
control over financial reporting. Our audits included consideration of          
internal controls over financial reporting as a basis for designing audit       
procedures that are appropriate in the circumstances, but not for the           
purpose of expressing an opinion on the effectiveness of the Company's          
internal controls over financial reporting. Accordingly, we express no such     
opinion. An audit also includes examining, on a test basis, evidence            
supporting the amounts and disclosures in the consolidated financial            
statements, assessing the accounting principles used and significant            
estimates made by management, as well as evaluating the overall                 
consolidated financial statement presentation. We believe that our audit        
provides a reasonable basis for our opinion.                                    

In our opinion, the consolidated financial statements referred to above         
present fairly, in all material respects, the consolidated financial            
position of Monarch Staffing, Inc. and Subsidiaries (formerly MT Ultimate       
Healthcare Corp.) as of December 31, 2006 and 2005, and the consolidated        
results of their operations and their cash flows for the years then ended,      
in conformity with accounting principles generally accepted in the United       
States of America.                                                              

The accompanying consolidated financial statements have been prepared           
assuming the Company will continue as a going concern. As discussed in Note     
2 to the consolidated financial statements, the Company has a stockholders'     
deficiency and has suffered significant losses to date, which raises            
substantial doubt about its ability to continue as a going concern.             
Management's plans in regard to these matters are also described in Note 2.     
The consolidated financial statements do not include any adjustments that       
might result from the outcome of these uncertainties.                           

/S/ Chisholm, Bierwolf & Nilson, LLC                                            

Chisholm Bierwolf & Nilson, LLC                                                 
Bountiful, Utah                                                                 
March 1, 2007                                                                   

F-3   

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MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     
Consolidated Balance Sheet    
ASSETS    
-------     

                                                        [Enlarge/Download Table]

                                                           December 31,  December 31,
                                                               2006          2005    
                                                           ------------  ------------
                                                                                     
CURRENT ASSETS                                                                       
  Cash and cash equivalents (Note 1)                       $         1   $ 1,041,433 
  Accounts receivable, net (Note 1)                          1,300,060       736,547 
                                                           ------------  ------------
   Total Current Assets                                      1,300,061     1,777,980 
                                                           ------------  ------------
OTHER ASSETS                                                                         
  Other receivable                                              75,006           -   
  Goodwill (Note 1)                                          1,245,481     1,245,481 
                                                           ------------  ------------
   Total Other Assets                                        1,320,487     1,245,481 
                                                           ------------  ------------
   TOTAL ASSETS                                            $ 2,620,548   $ 3,023,461 
                                                           ============  ============
                    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                   
                    ----------------------------------------------                   
CURRENT LIABILITIES                                                                  
  Accounts payable                                         $   491,990   $   886,125 
  Accounts payable - related party (Note 3)                     30,167        52,967 
  Accrued expenses                                             418,851       527,882 
  Accrued interest                                             266,670           -   
  Factoring liability (Note 6)                                 579,780       335,132 
  Notes payable - current portion (Note 4)                      59,401       350,394 
                                                           ------------  ------------
   Total Current Liabilities                                 1,846,859     2,152,500 
                                                           ------------  ------------
LONG-TERM DEBT                                                                       
  Derivatives                                                  175,046       603,401 
  Notes payable (Note 4)                                       120,277       179,680 
  Callable secured convertible notes payable                                         
   (net of debt discount of $1,527,352 and $2,237,070                                
   at December 31, 2006 and 2005, respectively)              1,547,648       412,930 
                                                           ------------  ------------
   Total Long-Term Debt                                      1,842,971     1,196,011 
                                                           ------------  ------------
   Total Liabilities                                         3,689,830     3,348,510 
                                                           ------------  ------------
COMMITMENTS AND CONTINGENCIES (Note 8)                             -             -   

STOCKHOLDERS' EQUITY (DEFICIT)                                                       
  Common stock, $.001 par value; 400,000,000 shares                                  
   authorized; 9,862,691 outstanding at December 31,                                 
   2006 and 2005, respectively                                   9,863         9,863 
  Additional paid-in capital                                  (461,333)     (583,553)
  Retained Earnings (Accumulated deficit)                     (617,812)      248,640 
                                                           ------------  ------------
   Total Stockholders' Equity (Deficit)                     (1,069,281)     (325,050)
                                                           ------------  ------------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)    $ 2,620,548   $ 3,023,461 
                                                           ============  ============

The accompanying notes are an integral part of      
these consolidated financial statements     
F-4   

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     
Consolidated Statement of Operations    

                                                        [Enlarge/Download Table]

                                                              For the Years Ended    
                                                                   December 31,      
                                                           --------------------------
                                                               2006          2005    
                                                           ------------  ------------
                                                                                     
NET REVENUES                                               $ 7,727,646   $ 1,851,148 

COST OF REVENUES                                             6,597,677     1,154,862 
                                                           ------------  ------------
GROSS PROFIT                                               $ 1,129,969   $   696,286 
                                                           ------------  ------------
OPERATING EXPENSES                                                                   
  Salaries and wages (including stock compensation expense)    390,067       399,368 
  Consulting                                                   313,474       110,500 
  Professional fees                                            303,512       246,309 
  General and administrative                                   345,395       494,466 
  Bad debt expense                                               3,485        23,174 
                                                           ------------  ------------
   Total Operating Expenses                                  1,355,933     1,273,817 
                                                           ------------  ------------
INCOME (LOSS) FROM OPERATIONS                                 (225,964)     (577,531)
                                                           ------------  ------------
OTHER INCOME (EXPENSE)                                                               
  Interest income                                                1,672           196 
  Loss on discontinued operations (Note 7)                         -         (15,825)
  Loss on disposition of subsidiary (Note 7)                       -        (699,616)
  Gain (loss) on disposition of asset                              -          (1,062)
  Gain (loss) on derivative valuation                          540,578     1,868,218 
  Interest expense                                          (1,182,737)     (275,149)
                                                           ------------  ------------
   Total Other Income (Expense)                               (640,487)      876,762 
                                                           ------------  ------------
INCOME (LOSS) BEFORE INCOME TAXES                             (866,452)      299,231 

  Provision for income taxes                                       -             -   
                                                           ------------  ------------
NET INCOME (LOSS)                                          $  (866,452)  $   299,231 
                                                           ============  ============
BASIC INCOME (LOSS) PER SHARE                              $     (0.09)  $      0.03 
                                                           ============  ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING         9,862,691     9,862,691 
                                                           ============  ============

The accompanying notes are an integral part of      
these consolidated financial statements     
F-5   

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     
Consolidated Statements of Stockholders' Equity (Deficit)     
Years Ended December 31, 2006 and 2005    

                                                                [Download Table]

                                                                          Retained  
                                       Common Stock         Additional    Earnings  
                                -------------------------    Paid-in    (Accumulated
                                   Shares      Amount        Capital       Deficit) 
                                ------------ -----------  ------------  ------------
                                                                                    
Balance, January 1, 2005          9,203,704  $    9,204   $  (582,894)  $   (50,591)

Common stock issued to acquire                                                      
DCII (Note 1)                     1,055,556       1,056        (1,056)          -   

Common stock cancelled through                                                      
spinoff of subsidiary (Note 1)     (396,569)       (397)          397           -   

Net income for the year ended                                                       
December 31, 2005                       -           -             -         299,231 
                                ------------ -----------  ------------  ------------
Balance, December 31, 2005        9,862,691  $    9,863   $  (583,553)  $   248,640 
                                ------------ -----------  ------------  ------------
Valuation of stock options              -           -         122,220           -   

Net loss for the year ended                                                         
December 31, 2006                       -           -             -        (866,452)
                                ------------ -----------  ------------  ------------
Balance, December 31, 2006        9,862,691  $    9,863   $  (461,333)  $  (617,812)
                                ============ ===========  ============  ============


The accompanying notes are an integral part of      
these financial statements    
F-6   

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     
Consolidated Statements of Cash Flows     

                                                                [Download Table]

                                                            For the Years Ended   
                                                               December 31,       
                                                         -------------------------
                                                            2006          2005    
                                                        ------------  ------------
                                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES:                                             

Net income (loss)                                       $  (866,452)  $   299,231 
Adjustments to reconcile net income (loss) to net cash                            
 provided by (used in) operating activities:                                      
  Depreciation                                                  -           1,649 
  Amortization of debt discount                             821,942       108,480 
  Loss on disposition of subsidiary                             -         699,616 
  Loss on disposition of asset                                  -           1,062 
  Change in fair value of derivative liabilities           (540,578)   (1,742,150)
  Bad debt expense                                            3,485       322,727 
  Non-cash stock option expense                             122,220           -   
Changes in operating assets and liabilities:                                      
  Accounts receivable                                      (566,998)      381,161 
  Other assets                                              (75,006)          -   
  Accounts payable                                         (416,935)      133,187 
  Accrued expenses and other current liabilities            157,638        38,226 
                                                        ------------  ------------
   Net Cash Provided by (Used in) Operating Activities   (1,360,683)      243,190 
                                                        ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:                                             
  Purchase of subsidiary                                        -      (1,600,000)
                                                        ------------  ------------
   Net Cash Provided by (Used in) Investing Activities          -      (1,600,000)
                                                        ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:                                             
  Payments made on notes payable                           (350,396)     (124,054)
  Net advances from factored receivables                    244,648       335,132 
  Proceeds received on convertible debt                     425,000     2,150,000 
                                                        ------------  ------------
   Net Cash Provided by (Used in) Financing Activities      319,251     2,361,078 
                                                        ------------  ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     (1,041,432)    1,004,268 
                                                        ------------  ------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR            1,041,433        37,165 
                                                        ------------  ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                $         1   $ 1,041,433 
                                                        ============  ============

SUPPLEMENTAL CASH FLOW INFORMATION                                                
  Cash Payments For:                                                              
   Interest                                             $    53,472   $    14,670 
   Income taxes                                         $       -     $       -   


The accompanying notes are an integral part of      
these consolidated financial statements     
F-7   

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            

a. Organization                                                                 

The consolidated financial statements presented are those of Monarch            
Staffing, Inc. (formerly MT Ultimate Healthcare Corp.) (Monarch), and its       
wholly-owned subsidiaries, Drug Consultants International, Inc.., formerly      
known as iTechexpress, Inc., (DCII) and Drug Consultants, Inc. (DCI), and       
DCII's wholly-owned subsidiary, Success Development Group, Inc. (SDG).          
Collectively, they are referred to herein as the "Company". Monarch was         
originally incorporated in Nevada under the name JavaJuice.net on September     
13, 2000. The Company filed amended Articles of Incorporation with the          
State of Nevada on August 15, 2003 to change the name to MT Ultimate            
Healthcare Corp. On March 31, 2006, the name was changed to Monarch             
Staffing, Inc. Monarch was organized to operate a payroll nurse staffing        
and homecare business, and provided healthcare professionals to hospitals,      
nursing homes, licensed home care service agencies, other health-related        
businesses, to the homes of the elderly, sick and incapacitated.                

Prior to the Spinoff Agreement as described below, Monarch also included        
Abundant Nursing, Inc. (Abundant) (a Pennsylvania corporation),                 
wholly-owned by Monarch through an acquisition agreement dated October 1,       
2004. Abundant provided staffing in the central area of Pennsylvania and        
the Lancaster area.                                                             

In addition, as disclosed in prior filings of the Company, Monarch included     
a wholly-owned subsidiary, BP Senior Care, Inc. (BP), acquired on May 20,       
2004. The acquisition agreement between Monarch and BP, however, was            
rescinded during 2005. The financial statements do not include any amounts      
related to the operations of BP.                                                

On November 4, 2005, Monarch and DCII and the former DCII shareholders          
entered into a Share Exchange and Reorganization Agreement (the "Exchange"      
or "Acquisition") whereby DCII became a wholly-owned subsidiary of Monarch.     
As part of the Exchange, Monarch acquired 100% of the issued and                
outstanding shares of  DCII in exchange for 828,333,333 (9,203,704              
post-split) newly issued shares of Monarch's common stock. As the number of     
shares issued represented approximately 92% of the outstanding common stock     
of Monarch after issuance, the transaction has been accounted for as a          
reverse takeover of Monarch by the shareholders of DCII. Accordingly, the       
transaction has been treated for accounting purposes as a recapitalization      
of  DCII; therefore, these consolidated financial statements represent a        
continuation of DCII, not Monarch, the legal survivor. DCII is treated as       
the survivor for accounting purposes and Monarch is the survivor for legal      
purposes. The historical financial statements presented are those of DCII       
rather than Monarch.                                                            

F-8   

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            
(Continued)                                                                     

a. Organization (Continued)                                                     

On November 7, 2005, DCII entered into a Stock Purchase Agreement               
("Purchase") with Drug Consultants, Inc. ("DCI"), whereby DCI became a          
wholly-owned subsidiary of DCII. As part of the Purchase, DCII purchased        
all of the outstanding shares of DCI from the former shareholder of DCI for     
a purchase price of $1,800,000, of which $1,600,000 was paid at the closing     
of the Purchase and $200,000 shall be paid pursuant to a Secured Promissory     
Note (see Note 5). The Promissory Note is secured by a Stock Pledge             
Agreement ("Pledge Agreement"), whereby DCII pledged to the former DCI          
shareholder 51% of the stock of DCI ("DCI Stock") held by DCII to secure        
the full and prompt payment and performance by DCII of the Promissory Note.     
Pursuant to this Purchase, the Company recorded goodwill of $1,245,481.         

Effective December 15, 2005, Macdonald Tudeme and Marguerite Tudeme             
(collectively, the "Tudemes"), the former controlling shareholders of the       
Company and the Company entered into a Spinoff Agreement ("Spinoff") which      
provided for (1) the transfer of the corporate names, business, operations,     
assets, properties, intellectual properties, trademarks, service marks,         
trade names, uniform resource locators, telephone numbers, and goodwill of      
the Company and its subsidiaries (other than DCII and DCI), together with       
the operating business of Abundant, to be placed into to a newly-formed         
Delaware corporation wholly-owned by the Company ("Marathon"), (2) the          
acquisition and cancellation by the Company from the Tudemes of their           
outstanding shares of capital stock of the Company, totaling 35,691,200         
(396,569 post-split) shares, (3) the assumption and release by the Company      
and its subsidiaries and the Tudemes of certain liabilities, and (4) the        
sale to the Tudemes of all of the outstanding capital stock of Marathon,        
and the payment to the Tudemes of $80,441 for amounts owed to the Tudemes       
and other creditors by the Company, of which $50,000 was paid prior to          
December 31, 2005.                                                              

The Company also entered into a Security Agreement ("Security Agreement")       
with Marathon, whereby the Company pledged to Marathon 20,000,000 (222,222      
post-split) shares of its common stock as collateral ("Collateral") to          
secure its performance and payment of the promissory note payable to Lisa       
Stern ("Stern Note") originally entered into as part of Monarch's purchase      
of Abundant during 2004. The Company will be in default under the Security      
Agreement upon the failure to pay any principal or interest of the Stern        
Note when due. Upon default, Marathon is able to retain the Collateral and      
apply the consideration received from the Collateral against any principal      
and interest due.                                                               

F-9   

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            
(Continued)                                                                     

a. Organization (Continued)                                                     

DCII, established in 1999 and located in Irvine, California, places             
technicians into technical jobs in both commercial and government sectors       
on a national basis.   DCII performs various IT and staffing services for       
Equant.                                                                         

DCII's wholly-owned subsidiary, SDG, a Nevada corporation, established in       
April 2000, provides management services on behalf of DCII and other            
clients of DCII.                                                                

DCI, established in 1977 and located in Irvine, California, is engaged in       
furnishing personnel to perform a range of pharmacy technician, nursing and     
other health care services in support of the operations of government and       
commercial facilities. DCI currently operates under three State of              
California contracts, three years in length. DCI's largest client is the        
State of California and DCI provides many of its services in rural areas of     
California where health care professionals are not readily available.           

As a result of the above transactions, the operations of the Company going      
forward will be comprised of the operations of DCII, DCI and SDG.               

Effective March 31, 2006, the Company completed the following corporate         
actions: (a) effected a one-for-ninety (1 for 90) reverse stock split of        
its outstanding common stock, (b) re-authorized for issuance 400,000,000        
shares of Common Stock, par value $.001 per share, (c) authorized 5,000,000     
shares of "blank check" preferred stock. The reverse stock split resulted       
in corresponding adjustments to the calculation of the conversion price of      
the Company's secured convertible notes and the exercise price of the           
Company's outstanding warrants.  The accompanying financial statements have     
been adjusted to retroactively reflect this stock split.                        

b. Basis of Presentation                                                        

The accompanying consolidated financial statements have been prepared in        
accordance with the rules and regulations of the Securities and Exchange        
Commission ("SEC") for the presentation of financial information. These         
consolidated financial statement, in the opinion of management, include all     
adjustments (consisting of normal recurring adjustments and accruals)           
necessary to present fairly the consolidated balance sheet, consolidated        
operating results and consolidated cash flows for the periods presented in      
accordance with accounting principles generally accepted in the United          
States of America ("GAAP"). Certain information and footnote disclosures        
normally included in financial statements prepared in accordance with GAAP      
have been omitted in accordance with the rules and regulations of the SEC.      

c. Accounting Methods                                                           

The Company's consolidated financial statements are prepared using the          
accrual method of accounting. The Company has elected a December 31 year        
end.                                                                            

F-10  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            
(Continued)                                                                     

d. Cash and Cash Equivalents                                                    

Cash equivalents include short-term, highly liquid investments with             
maturities of three months or less at the time of acquisition.                  

e. Principles of Consolidation                                                  

The consolidated financial statements include the accounts of Monarch           
Staffing, Inc. (formerly MT Ultimate Healthcare Corp.) (Monarch), and its       
wholly-owned subsidiaries, Drug Consultants International, Inc., formerly       
known as  iTechexpress, Inc., (DCII) and Drug Consultants, Inc. (DCI), and      
DCII's wholly-owned subsidiary, Success Development Group, Inc. (SDG). All      
significant intercompany balances and transactions have been eliminated in      
the consolidation.                                                              

f. Use of Estimates                                                             

The preparation of financial statements in conformity with accounting           
principles generally accepted in the United States of America requires          
management to make a number of estimates and assumptions relating to the        
reporting of assets and liabilities and the disclosure of contingent assets     
and liabilities at the dates of the financial statements and the reported       
amounts of revenue and expenses during the reporting periods.  Actual           
results could differ from those estimates.                                      

g. Accounts Receivable and Allowance for Doubtful Accounts                      

Accounts receivable consists of amounts billed to customers upon                
performance of service.  The Company performs ongoing credit evaluations of     
customers and adjusts credit limits based upon payment history and the          
customer current creditworthiness, as determined by its review of their         
current credit information.  The Company continuously monitors collections      
and payments from its customers and maintains a provision for estimated         
credit losses based upon its historical experience and any                      
customer-specific collection issues that it has identified.  Accounts           
receivable are shown net of an allowance for doubtful accounts of $0 at         
December 31, 2006 and 2005, respectively. An allowance is established           
whenever receivables are over 90 days old and the customer has not              
responded to efforts to reconcile differences. Such receivables are deemed      
to be uncollectible after 180 days. There were no such receivables for the      
current year or prior year.                                                     

F-11  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            
(Continued)                                                                     

h. Basic Income Per Share                                                       

The computations of basic income per share of common stock are based on the     
weighted average number of common shares outstanding during the period of       
the consolidated financial statements. Common stock equivalents, consisting     
of employee stock options of 931,589, and stock warrants, in the amount of      
315,277, have been considered but have not been included in the calculation     
as their effect is antidilutive for the periods presented.                      

                                                                [Download Table]
                                                       December 31,      
                                               --------------------------
                                                   2006          2005    
                                               ------------  ------------
                                                                         
Numerator - Net income (loss)                  $  (866,452)  $   299,231 

Denominator - weighted average number of                                 
 shares outstanding                              9,862,691     9,862,691 
                                               ------------  ------------
Net income (loss) per share                    $     (0.09)  $      0.03 
                                               ------------  ------------

i. Revenue Recognition                                                          

Revenues and costs of revenues from services are recognized during the          
period in which the services are provided.  The Company applies the             
provisions of SEC Staff Accounting Bulletin ("SAB") No. 104, Revenue            
Recognition in Financial Statements ("SAB 104"), which provides guidance on     
the recognition, presentation, and disclosure of revenue in financial           
statements filed with the SEC. SAB 104 outlines the basic criteria that         
must be met to recognize revenue and provides guidance for disclosure           
related to revenue recognition policies. In general, the Company recognizes     
revenue related to monthly contracted amounts for services provided when        
(i) persuasive evidence of an arrangement exists, (ii) delivery has             
occurred or services have been rendered, (iii) the fee is fixed or              
determinable, and (iv) collectibility is reasonably assured.                    

j. Provision for Income Taxes                                                   

The Company has adopted the provisions of Financial Accounting Standards        
Board Statement No. 109, Accounting for Income Taxes. The Company currently     
has no issues that create timing differences that would mandate deferred        
tax expense. Net operating losses would create possible tax assets in           
future years. Due to the uncertainty as to the utilization of net operating     
loss carry forwards, a valuation allowance has been made to the extent of       
any tax benefit that net operating losses may generate.                         

No provision for income taxes has been recorded due to net operating loss       
carryforwards totaling approximately $2,039,000 as of December 31, 2005         
that will be offset against future taxable income. These NOL carryforwards      
begin to expire in the year 2021. No tax benefit has been reported in the       
consolidated financial statements because the Company believes there is a       
50% or greater chance the carryforwards will expire unused.                     

F-12  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            
(Continued)                                                                     

j. Provision for Income Taxes (continued)                                       

Deferred tax asset and the valuation account is as follows:                     

                                                                [Download Table]

                                                             December 31,       
                                                      --------------------------
                                                          2006          2005    
                                                      ------------  ------------
                                                                                
Deferred tax asset:                                                             
  NOL Carryforward                                    $   693,260   $   494,360 
  Valuation allowances                                   (693,260)     (494,360)
                                                      ------------  ------------
   Total                                              $      -      $      -    
                                                      ============  ============
The components of income tax expense are as follows:                            

Current Federal Tax                                   $       -     $       -   
Current State Tax                                             -             -   
Change in NOL benefit                                     198,900       453,709 
Change in valuation allowance                            (198,900)     (453,709)
                                                      ------------  ------------
                                                      $       -     $       -   
                                                      ============  ============

k. Goodwill                                                                     

The excess of purchase price and related costs over the fair value of net       
assets of entities acquired is recorded as goodwill. In accordance with         
SFAS No. 142, Goodwill and Other Intangible Assets , the Company evaluates      
goodwill annually for impairment at the reporting unit level and whenever       
circumstances occur indicating that goodwill might be impaired. The             
performance of the test involves a two-step process. The first step of the      
impairment test involves comparing the fair value of the Company's              
reporting units with the reporting unit's carrying amount, including            
goodwill. The Company generally determines the fair value of its reporting      
units using the expected present value of future cash flows, giving             
consideration to the market valuation approach. If the carrying amount of       
the Company's reporting units exceeds the reporting unit's fair value, the      
Company performs the second step of the goodwill impairment test to             
determine the amount of impairment loss. The second step of the goodwill        
impairment test involves comparing the implied fair value of the Company's      
reporting unit's goodwill with the carrying amount of that goodwill. At         
December 31, 2006 and 2005, the Company performed the annual impairment         
test and determined there was no impairment of goodwill.                        

As previously discussed, effective November 7, 2005, the Company acquired       
the business and certain related assets of DCI, an unrelated company. The       
purchase price of $1,800,000 was satisfied by the Company paying $1,600,000     
in cash and a $200,000 pursuant to a secured promissory note. The               
acquisition was an arm's length transaction and has been accounted for          
using the purchase method.                                                      

F-13  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            
(Continued)                                                                     

l. Newly Adopted Pronouncements                                                 

Accounting Changes and Error Corrections                                        

In May 2005, the FASB issued FASB Statement No. 154, "Accounting Changes        
and Error Corrections." This new standard replaces APB Opinion No. 20,          
"Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes     
in Interim Financial Statements," and represents another step in the FASB's     
goal to converge its standards with those issued by the IASB. Among other       
changes, Statement 154 requires that a voluntary change in accounting           
principle be applied retrospectively with all prior period financial            
statements presented on the new accounting principle, unless it is              
impracticable to do so. Statement 154 also provides that (1) a change in        
method of depreciating or amortizing a long-lived non-financial asset be        
accounted for as a change in estimate (prospectively) that was effected by      
a change in accounting principle, and (2) correction of errors in               
previously issued financial statements should be termed a "restatement."        
The new standard is effective for accounting changes and correction of          
errors made in fiscal years beginning after December 15, 2005. Early            
adoption of this standard is permitted for accounting changes and               
correction of errors made in fiscal years beginning after June 1, 2005 .        
The adoption of this statement in 2006 did not have a material impact on        
the Company's consolidated financial position or results of operations.         

Accounting for Uncertainty in Income Taxes                                      

In June 2006, the FASB issued Interpretation No. 48, "Accounting for            
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,"      
("FIN 48"). The interpretation prescribes a recognition threshold and           
measurement attribute for the financial  statement recognition and              
measurement of a tax position taken or expected to be taken in a tax            
return. It also provides guidance on derecognition, classification,             
interest and penalties, accounting in interim periods, disclosure, and          
transition. The Company is currently evaluating the impact of FIN 48 on its     
consolidated results of operations and financial position but has not yet       
determined or reasonably estimated the impact as of December 31, 2006. The      
Company is required to adopt this interpretation effective January 1, 2007.     

Accounting for Certain Hybrid Financial Instruments                             

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain         
Hybrid Financial Instruments an Amendment of FASB Statements No. 133 and        
No. 140."  This Statement amends FASB Statements No. 133, accounting for        
Derivative Instruments and Hedging Activities, and No. 140, Accounting for      
Transfers and Servicing of Financial Assets and Extinguishments of              
Liabilities.  This statement resolves issues addressed in Statement 133         
Implementation Issued No. D1, "Application of Statement 133 to Beneficial       
Interests in Securitized Financial Assets."  The adoption of SFAS No. 155       
did not have an impact on the Company's consolidated financial statements.      

F-14  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            
(Continued)                                                                     

l. Newly Adopted Pronouncements (continued)                                     

Accounting for Servicing of Financial Assets                                    

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of       
Financial Assets - an amendment of FASB Statement No. 140" ("SFAS No.           
156"). This Statement amends SFAS No. 140, "Accounting for Transfers and        
Servicing of Financial Assets and Extinguishments of Liabilities," with         
respect to the accounting for separately recognized servicing assets and        
servicing liabilities. SFAS No. 156 requires that an entity recognize a         
servicing asset or servicing liability each time it undertakes an               
obligation to service a financial asset by entering into a servicing            
contract and that the separately recognized servicing asset or servicing        
liability be initially measured at fair value, if practicable. This             
Statement is effective as of the beginning of the first fiscal year that        
begins after September 15, 2006. The adoption of this statement in 2007 is      
not expected to have a material impact on the Company's consolidated            
financial position or results of operations.                                    

Fair Value Measurements                                                         

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"      
("SFAS No. 157"). This statement defines fair value, establishes a              
framework for measuring fair value in U.S. GAAP and expands disclosures         
about fair value measurements. This statement does not require any new fair     
value measurements. The effective date of this statement is for fiscal          
years beginning after November 15, 2007, and interim periods within those       
fiscal years. The Company is currently evaluating the impact, if any, of        
the adoption of SFAS No. 157.                                                   

Employers' Accounting for Defined Benefit Pension and Other Postretirement      
Plans                                                                           

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for     
Defined Benefit Pension and Other Postretirement Plans an Amendment of FASB     
Statements No. 87, 88, 106 and 132(R)."  This statement improves financial      
reporting by requiring an employer to recognize the over-funded or              
under-funded status of a defined benefit postretirement plan (other than a      
multiemployer plan) as an asset or liability in its statement of financial      
position and to recognize changes in that funded status in the year in          
which the changes occur through comprehensive income of a business entity       
of changes in unrestricted net assets of a not-for-profit organization.         
The adoption of SFAS No. 158 did not have an impact on the Company's            
consolidated financial statements.                                              

F-15  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            
(Continued)                                                                     

l. Newly Adopted Pronouncements (continued)                                     

Considering the Effects of Prior Year Misstatements When Quantifying            
Current Year Misstatements                                                      

In September 2006, the Securities and Exchange Commission, or the SEC,          
released Staff Accounting Bulletin, or SAB, No. 108, Considering the            
Effects of Prior Year Misstatements When Quantifying Current Year               
Misstatements, or SAB No. 108, to address diversity in practice regarding       
consideration of the effects of prior year errors when quantifying              
misstatements in current year financial statements. The SEC staff concluded     
that registrants should quantify financial statement errors using both a        
balance sheet approach and an income statement approach and evaluate            
whether either approach results in quantifying a misstatement that, when        
all relevant quantitative and qualitative factors are considered, is            
material. SAB No. 108 states that if correcting an error in the current         
year materially affects the current year's income statement, the prior          
period financial statements must be restated. SAB No. 108 is effective for      
fiscal years ending after November 15, 2006. The adoption of SAB No. 108 in     
the fourth quarter of 2006 did not have a material impact on our                
consolidated financial statements.                                              

The Fair Value Option for Financial Assets and Financial Liabilities            

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for       
Financial Assets and Financial Liabilities, or SFAS No. 159. SFAS No. 159       
permits entities to choose to measure many financial instruments and            
certain other items at fair value. The objective of the guidance is to          
improve financial reporting by providing entities with the opportunity to       
mitigate volatility in reported earnings caused by measuring related assets     
and liabilities differently without having to apply complex hedge               
accounting provisions. SFAS No. 159 is effective as of the beginning of the     
first fiscal year that begins after November 15, 2007. Early adoption is        
permitted as of the beginning of the fiscal year beginning on or before         
November 15, 2007, provided the provisions of SFAS No. 157 are applied. We      
will adopt SFAS No. 159 on January 1, 2008. We are evaluating SFAS No. 159      
and have not yet determined the impact the adoption, if any, will have on       
our consolidated financial statements.                                          

F-16  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            
(Continued)                                                                     

m. Derivative Financial Instruments                                             

The Company's derivative financial instruments consist of embedded              
derivatives related to the convertible notes entered into on August 31,         
2004, since the notes are not conventional convertible debt (see Note 5).       
The embedded derivatives include the conversion feature, monthly payment        
options, variable interest features, call options, liquidated damages           
clauses in the registration rights agreement and certain default                
provisions. The accounting treatment of derivative financial instruments        
requires that the Company records the derivatives and related warrants at       
their fair values as of the inception date of the agreement and at fair         
value as of each subsequent balance sheet date.                                 

In addition, under the provisions of EITF Issue No. 00-19, "Accounting for      
Derivative Financial Instruments Indexed to, and Potentially Settled in, a      
Company's Own Stock," as a result of entering into the convertible debt,        
the Company is required to classify all other non-employee stock options as     
warrants and derivative liabilities and mark them to market at each             
reporting date (see Note 5).                                                    

Conversion-related derivatives were valued using the Binomial Option            
Pricing Model.  The interest rate adjustment provision was valued using         
discounted cash flows and probability analysis.  Options and warrants were      
valued using the Black-Sholes model.  The following assumptions were used       
in valuing the derivative and warrant liabilities as of December 31:            

                                                                [Download Table]


                                          2006             2005    
                                    --------------   --------------
                                                                   
Risk-free interest rate              4.70 - 4.85 %    4.35 - 4.36 %
Volatility                                   200 %            238 %
Expected dividend yield                        0 %              0 %

The valuation of the conversion derivatives also considered probability         
analysis related to trading volume restrictions.                                

Any change in fair value of these instruments will be recorded as               
non-operating, non-cash income or expense at each reporting date. If the        
fair value of the derivatives is higher at the subsequent balance sheet         
date, we will record a non-operating, non-cash charge. If the fair value of     
the derivatives is lower at the subsequent balance sheet date, we will          
record non-operating, non-cash income. The derivative and warrant               
liabilities are recorded as liabilities in the consolidated balance sheet.      

F-17  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            
(Continued)                                                                     

n. Fair Value of Financial Instruments                                          

The Company's financial instruments consist of cash and cash equivalents,       
accounts receivable, accounts payable, accrued expenses, notes payable and      
convertible debt. Pursuant to SFAS No. 107, "Disclosures About Fair Value       
of Financial Instruments," the Company is required to estimate the fair         
value of all financial instruments at the balance sheet date. The Company       
considers the carrying values of its financial instruments in the financial     
statements to approximate their fair values.                                    

o. Concentrations of Credit Risk                                                

The Company extends credit to its customers based upon its assessment of        
their credit worthiness and generally does not require collateral.              
Approximately 99% of the Company's revenue comes from the State of              
California for the years ended December 31, 2006 and 2005, respectively.        
Accounts receivable from the State of California totaled $1,295,186 and         
$705,680 as of December 31, 2006 and 2005, respectively.                        

The Company also had $841,219 on deposit with a financial institution at        
December 31, 2005. Such deposits were not insured beyond the federally          
insured limit of $100,000 per account.                                          

p. Beneficial Conversion Feature                                                

The Company has adopted Emerging Issues Task Force ("EITF") Issue No. 98-5,     
"Accounting for Convertible Securities with Beneficial Conversion Features      
or Contingently Adjustable Conversion Ratios", and EITF Issue No. 00-27,        
"Application of EITF Issue No. 98-5 to Certain Convertible Instruments."        
The Company incurred debt whereby the convertible feature of the debt           
provides for a rate of conversion that is below market value. This feature      
is recorded by the Company as a beneficial conversion feature pursuant to       
EITF Issue No. 98-5 and 00-27.                                                  

q. Fixed assets                                                                 

Property and equipment are recorded at cost less accumulated depreciation.      
Depreciation on property and equipment is calculated using the                  
straight-line method based on the estimated useful lives of the assets.         

Useful lives as follows:                                                        

Computer equipment                                        3 years     
Furniture and fixtures                                  5-7 years     

Expenditures for repairs and maintenance are expensed as incurred.              
Expenditures for major renewals and betterments that extend the useful          
lives of existing property and equipment are capitalized and depreciated.       
Upon retirement or disposition of property and equipment, any resulting         
gain or loss is recognized in the consolidated statement of operations.         
Depreciation expense for the years ended December 31, 2006 and 2005 was $0      
and $1,649, respectively. At December 31, 2005, the Company recorded a loss     
on disposition of assets totaling $1,062 for the remaining book value of        
assets previously recorded. Accordingly, property and equipment at December     
31, 2005 was $0.  The Company did not have any fixed asset additions during     
the year ended December 31, 2006.                                               

F-18  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 2 - GOING CONCERN                                                          

The Company's consolidated financial statements are prepared using              
generally accepted accounting principles applicable to a going concern          
which contemplates the realization of assets and liquidation of liabilities     
in the normal course of business. We had $617,813 in accumulated deficit at     
December 31, 2006 as well as a net loss of $866,452.  These factors             
combined, raise substantial doubt about the Company's ability to continue       
as a going concern. Management has taken various steps to revise its            
operating and financial requirements, which it believes will be sufficient      
to provide the Company with the ability to continue its operations for the      
next twelve months.                                                             

In view of the matters described above, recoverability of a major portion       
of the recorded asset amounts shown in the accompanying consolidated            
balance sheet is dependent upon continued operations of the Company, which      
in turn is dependent upon the Company's ability to raise additional             
capital, obtain financing and to succeed in its future operations. The          
financial statements do not include any adjustments relating to the             
recoverability and classification of recorded asset amounts and                 
classification of liabilities that might be necessary should the Company be     
unable to continue as a going concern.                                          

NOTE 3 - RELATED PARTY TRANSACTIONS                                             

As part of the Spinoff Agreement as described in Note 1 and Note 7, a           
remaining amount of $30,441 is owed by the Company to the former                
controlling shareholders of the Company. The amount is non-interest             
bearing, unsecured, and payable on demand.                                      

In November 2005, the Company agreed to issue an aggregate of 8,283,334         
shares of common stock, to two entities, 4,141,667 shares to MEL                
Enterprises, Ltd., beneficially owned by Keith Moore, a Director of the         
Company and 8,283,334 shares to Monarch Bay Capital Group, LLC,                 
beneficially owned by David Walters, our Chairman and Chief Financial           
Officer, in connection with the Company's acquisition of DCII.                  

An amount of $22,800 was owed to Mr. Moore at December 31, 2005 for             
services rendered to SDG. This amount was non-interest bearing, unsecured,      
and due on demand.  The Company repaid this amount in March 2006.               

F-19  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)                                 

Both Mr. Walters and Mr. Moore entered into Independent Contractor              
Agreements with DCII on February 1, 2005 (each a "Contractor Agreement" and     
collectively the "Contractor Agreements"). Mr. Moore's Contractor Agreement     
provides for him to serve DCII in the capacity of Secretary and Director        
and Mr. Walters' Contractor Agreement provides for him to serve DCII in the     
capacity of Chief Executive Officer. The Contractor Agreements were renewed     
on February 1, 2006 and expire December 31, 2008.  The Contractor               
Agreements renew thereafter on an annual basis unless terminated by either      
party. Either of the Contractor Agreements may be terminated upon the           
breach of a term of either Contractor Agreement, which breach remains           
uncured for thirty (30) days or by either party, for any reason with thirty     
(30) days written notice. The Contractor Agreements contain confidentiality     
clauses and work for hire clauses. The Contractor Agreements provide that       
neither Mr. Walters nor Mr. Moore are employees of DCII. Mr. Walters and        
Mr. Moore are entitled to be paid $10,000 per month under the Contractor        
Agreements.   The Company paid $350,000 and $170,000 (including $40,000         
outstanding as of December 31, 2004) during the years ended December 31,        
2006 and 2005, respectively, related to the Contractor Agreements.  Amounts     
owed by the Company totaled $0 and $110,000 at December 31, 2006 and 2005,      
respectively.                                                                   

The Company also paid $25,000 to both Mr. Moore and Mr. Walters during 2006     
for other consultation services which were outside of the scope of the          
Independent Contractor Agreements described above.                              

In March 2006, the Company entered into an agreement with Monarch Bay           
Management Company, L.L.C. ("MBMC") for chief financial officer services.       
David Walters, our Chairman and Chief Financial Officer, and Keith Moore,       
our director, each are members of, and each beneficially owns 50% of the        
ownership interests in, MBMC. Under the chief financial officer services        
agreement with MBMC, the Company is obligated to pay MBMC a monthly fee of      
$5,000 in cash.  The Company also reimburses MBMC for certain expenses in       
connection with providing services to the Company. The initial term of the      
agreement expires on March 31, 2007 and renews thereafter on an annual          
basis unless terminated by either party.  To date, no services have been        
provided under this agreement, accordingly, no amounts were paid to MBMC        
and/or accrued as of and for the year ended December 31, 2006.  The Company     
expects that services provided under this agreement will commence in March      
2007.                                                                           

On December 20, 2006, MBMC loaned $95,000 to DCII at 10% per annum.  The        
principal balance of loan was repaid in full on December 28, 2006 and           
accrued interest expense totaled $208 as of December 31, 2006.  On February     
5, 2007, MBMC loaned $125,000 to DCII at 10% per annum.  The principal          
balance of the loan was repaid in full on February 8, 2007.  On February 5,     
2007, MBMC also loaned $70,000 to the Company at 10% per annum.  The            
principal balance of the loan was repaid in full on February 15, 2007.          

In March 2006, DCII made a $7,500 payment to a vendor on behalf of Monarch      
Bay Associates, L.L.C. ("MBA").  David Walters, our Chairman and Chief          
Financial Officer, and Keith Moore, our director, each are members of, and      
each beneficially owns 50% of the ownership interests in MBA.  The              
amount is non-interest bearing and owed to the Company as of December 31,       
2006.  The Company received payment in full in March 2007.                      

F-20  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)                                 

In December 2006, DCI made two payments totaling $33,502 to vendors on          
behalf of Solana Technologies, Inc. ("STI").  At the time of the payments,      
David Walters, our Chairman and Chief Financial Officer, was Chairman and       
Chief Executive Officer of STI and beneficially owned a majority of the         
outstanding common stock of STI.  The amounts were non-interest bearing.        
The Company received payment in full in December 2006.  On January 2, 2007,     
the Company purchased office equipment totaling $1,244 from STI.                

On August 4, 2006, DCI borrowed $150,000 from BounceGPS, Inc. ("BounceGPS")     
at 10% per annum.  At the time of the loan, David Walters, our Chairman and     
Chief Financial Officer, was the Chairman and Chief Executive Officer of        
the parent company of BounceGPS and beneficially owned a majority of the        
outstanding common stock of such parent company.  The principal balance was     
repaid in full on September 11, 2006.  On October 4, 2006, the Company          
borrowed $18,000 from the same related company.  The principal balance was      
repaid in full on October 11, 2006.  On October 5, 2006, DCII borrowed          
$95,000 from the same related company.  The principal balance was repaid in     
full on October 11, 2006.  DCII also borrowed $220,000 during late October      
and early November 2006 from the same related company.  The entire              
outstanding balance of $220,000 was repaid on November 8, 2006.  Interest       
payments of $636 were made during 2006 and accrued interest totaled $1,899      
as of December 31, 2006.                                                        

During 2006, DCI and DCII paid $1,361 and $27,395, respectively, to             
DataLogic International, Inc. for various services including accounting,        
payroll, human resource, and other administrative duties.  Mr. Moore, our       
Director, is the Chairman and  Chief Executive Officer of DataLogic             
International, Inc.                                                             

As discussed in Note 6, on November 8, 2005, DCII and DCI entered into a        
Factoring and Security Agreement to sell accounts receivables to Systran        
Financial Services Corporation ("Systran").   David Walters and Keith Moore     
have personally guaranteed $500,000 of the total available facility.  Mr.       
Walters and Mr. Moore did not receive any compensation for this personal        
guarantee in 2006 or 2005.                                                      

F-21  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 4 - NOTES PAYABLE                                                          

                                                                [Download Table]

                                                                December 31,       
                                                             2006          2005    
                                                         ------------  ------------
                                                                                   
Note payable to the former owner of Abundant Nursing                               
 Inc. interest at 7% per annum, principal and interest                             
 payments of $5,841 due monthly, matures on October                                
 1, 2009, secured by the stock of Abundant Nursing,                                
 Inc. (see Note below).                                  $   179,678   $   235,074 
Note payable to the former owner of Drug Consultants                               
 Inc. interest at 7% per annum, principal and interest                             
 due March 6, 2006, secured by a Stock Pledge Agreement                            
 (See Stock Pledge Agreement below).                               -       200,000 
Note payable to an individual, non-interest bearing,                               
 principal due on demand, unsecured.                               -        30,000 
Note payable to an individual, non-interest bearing,                               
 principal due on demand, unsecured.                               -        65,000 
                                                         ------------  ------------
Total notes payable                                          179,678       530,074 
Less: current portion                                        (59,401)     (350,394)
                                                         ------------  ------------
Long-term portion of notes payable                       $   120,277   $   179,680 
                                                         ============  ============

The aggregate principal maturities of notes payable are as follows:             

                                                                [Download Table]

         Years ending December 31,      Amount 
-----------------------------------------------
                                               
                2007              $     59,401 
                2008                    63,695 
                2009                    56,582 
                Thereafter                 -   
                                  -------------
                    Total         $    179,678 
                                  =============

Note: The Company also entered into a Security Agreement ("Security             
Agreement") with Marathon (as described in Note 1), whereby the Company         
pledged to Marathon 20,000,000 (222,222 post-split) shares of its common        
stock as collateral ("Collateral") to secure its performance and payment of     
the promissory note payable originally entered into as part of the              
Company's purchase of Abundant. The Company will be in default under the        
Security Agreement upon the failure to pay any principal or interest of the     
Abundant Note when due. Upon default, Marathon is able to retain the            
Collateral and apply the consideration received from the Collateral against     
any principal and interest due.                                                 

Stock Pledge Agreement    
----------------------    
Pursuant to the acquisition of DCI and the above promissory note, the           
Company entered into a Stock Pledge Agreement whereby DCII pledged to the       
former DCI shareholder 51% of the stock of DCI ("DCI Stock") held by DCII       
to secure the full and prompt payment and performance by DCII of the            
Promissory Note.  DCII fully repaid this Promissory Note during the year        
ended December 31, 2006.                                                        
F-22  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 5 - CALLABLE SECURED CONVERTIBLE NOTES                                     

On August 31, 2004, the Company entered into a securities purchase              
agreement with four accredited investors for the sale of secured                
convertible notes having an aggregate principal amount of $700,000, a 10%       
annual interest rate (payable quarterly), and a term of two years.  The         
Company also agreed to sell warrants to purchase up to an aggregate of          
7,777 shares of Common Stock at $40.50 per share.  The Company only sold        
$500,000 principal amount of secured convertible notes under the 2004           
agreement.  As a result, the Company sold to the investors warrants to          
purchase up to an aggregate of 5,556 shares of our Common Stock at $40.50       
per share.   The investors have agreed to purchase the remaining $200,000       
commitment under the terms of our 2005 securities purchase agreement with       
the investors.                                                                  

On November 4, 2005, the Company entered into an additional securities          
purchase agreement with the same accredited investors, for the sale of          
secured convertible notes having an aggregate principal amount of               
$3,000,000, an 8% annual interest rate (payable quarterly), and a term of       
three years.  We also agreed to sell warrants to purchase up to an              
aggregate of 166,667 shares of our Common Stock at $9.00 per share.             

As of December 31, 2006 the Company had issued under the two securities         
purchase agreements dated August 31, 2004 and November 4, 2005:                 

-   $3,075,000 aggregate principal amount of secured convertible notes,     
-   Warrants to purchase 5,556 shares of our Common Stock at $40.50 per     
shares, and                                                         
-   Warrants to purchase 143,056 shares of our Common Stock at $9.00 per    
share, and                                                          
-   Warrants to purchase 166,667 shares of our Common Stock at $4.50 per    
share (due to an amendment discussed below).                        

Stock warrants issued and outstanding during the year ended December 31,        
2006 and 2005 are as follows:                                                   

                                                                [Download Table]

                                                               Average
                                                              Exercise
                                                  Common         Price
                                                  Shares     Per Share
                                            ------------  ------------
                                                                      
Warrants outstanding, December 31, 2004           5,556   $     40.50 
                                            ============              
Warrants issued                                 119,445          9.00 
Warrants exercised                                  -             -   
                                            ------------              
Warrants outstanding, December 31, 2005         125,001         10.40 
                                            ============              
Warrants issued                                 190,278          5.06 
Warrants exercised                                  -             -   
                                            ------------              
Warrants outstanding, December 31, 2006         315,279          7.18 
                                            ============              

F-23  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 5 - CALLABLE SECURED CONVERTIBLE NOTES (Continued)                         

As mentioned above, the investors are required to purchase an additional        
$200,000 principal amount of secured convertible notes and warrants to          
purchase 2,222 shares of our Common Stock at $40.50 per share as well as an     
additional $425,000 principal amount of secured convertible notes and           
warrants to purchase 23,611 shares of our Common Stock at $9.00 per share       
five days following the date that the registration statement for the resale     
of the shares of common stock issuable upon conversion of the secured           
convertible notes and exercise of the warrants is declared effective by the     
Securities and Exchange Commission and if other conditions are satisfied,       
including: (i) the Company's representations and warranties contained in        
the 2005 securities purchase agreement being true and correct in all            
material respects on the date when made and as of the date of such              
purchase; (ii) the Company having performed, satisfied and complied in all      
material respects with the covenants, agreements and conditions required by     
the 2005 agreement; (iii) there being no litigation, statute, rule,             
regulation, executive order, decree, ruling or injunction that has been         
enacted, entered, promulgated or endorsed by or in any court or government      
authority of competent jurisdiction or any self-regulatory organization         
having requisite authority which prohibits the transactions contemplated by     
the 2005 agreement; (iv) no event having occurred which could reasonably be     
expected to have a material adverse effect on the Company; and (v) the          
shares of Common Stock issuable upon conversion of the secured convertible      
notes and exercise of the warrants having been authorized for quotation on      
the OTC Bulletin Board and trading in our Common Stock on the OTC Bulletin      
Board having not been suspended by the Securities and Exchange Commission       
or the OTC Bulletin Board.                                                      

On November 1, 2006, we obtained an amendment to the 2005 securities            
purchase agreement extending the date by which the Company must obtain the      
effectiveness of the registration statement covering the resale of the          
shares of our Commons Stock issuable upon conversion of the secured             
convertible notes and the exercise of the warrants to April 30, 2007 (or        
May 25, 2007 if the Company is making a good faith effort to respond to the     
Securities and Exchange Commission's comments) in exchange for issuing          
warrants to purchase 166,667 shares of our Common Stock at $4.50 per share      
to the holders of the secured convertible notes.                                

On March 29, 2007, we obtained an amendment extending the date by which         
the Company must obtain the effectiveness of the registration statement         
covering the resale of the shares of our Commons Stock issuable upon            
conversion of the secured convertible notes and the exercise of the             
warrants to October 31, 2007 (or November 25, 2007 if the Company is            
making a good faith effort to respond to the Securities and Exchange            
Commission's comments).  See Note 11 "Subsequent Events" for further            
discussion.                                                                     

F-24  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 5 - CALLABLE SECURED CONVERTIBLE NOTES (Continued)                         

In connection with the 2005 securities purchase agreement, we entered into      
a security agreement, whereby we granted the investors a continuing, first      
priority security interest in the Company's general assets including all of     
the Company's:                                                                  

-   Goods, including without limitations, all machinery, equipment,         
computers, motor vehicles, trucks, tanks, boats, ships, appliances, 
furniture, special and general tools, fixtures, test and quality    
control devices and other equipment of every kind and nature and    
wherever situated;                                                  
-   Inventory (except that the proceeds of inventory and accounts           
receivable);                                                        
-   Contract rights and general intangibles, including, without             
limitation, all partnership interests, stock or other securities,   
licenses, distribution and other agreements, computer software      
development rights, leases, franchises, customer lists, quality     
control procedures, grants and rights, goodwill, trademarks, service
marks, trade styles, trade names, patents, patent applications,     
copyrights, deposit accounts, and income tax refunds;               
-   Receivables including all insurance proceeds, and rights to refunds     
or indemnification whatsoever owing, together with all instruments, 
all documents of title representing any of the foregoing, all rights
in any merchandising, goods, equipment, motor vehicles and trucks   
which any of the same may represent, and all right, title, security 
and guaranties with respect to each receivable, including any right 
of stoppage in transit; and                                         
-   Documents, instruments and chattel paper, files, records, books of      
account, business papers, computer programs and the products and    
proceeds of all of the foregoing and the Company's intellectual     
property.                                                           

Additionally, we entered into an intellectual property security agreement       
with the investors, whereby we granted them a security interest in all of       
the Company's software programs, including source code and data files, then     
owned or thereafter acquired, all computers and electronic processing           
hardware, all related documentation, and all rights with respect to any         
copyrights, copyright licenses, intellectual property, patents, patent          
licenses, trademarks, trademark licenses or trade secrets.                      

The notes include certain features that are considered embedded derivative      
financial instruments, such as the conversion feature, a variable interest      
rate feature, events of default and a liquidated damages clause, which have     
been recorded at their fair value. These features are described below, as       
follows:                                                                        

-   The notes conversion feature;                                           
-   Interest on the notes is subject to downward adjustment based on our    
common stock price;                                                 
-   The registration rights agreement includes a penalty provision based    
on any failure to meet and/or maintain registration requirements for
shares issuable under the conversion of the notes or exercise of the
warrants; and                                                       
-   The notes contain certain events of default, wherein we may be          
required to pay a default interest rate above the normal rate.      

F-25  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 5 - CALLABLE SECURED CONVERTIBLE NOTES (Continued)                         

Because the convertible notes are not conventional convertible debt, the        
Company is also required to record the related warrants at their fair           
values.  During the year ended December 31, 2005, the value of the              
derivative and warrant liabilities decreased by $1,674,440 and $67,709,         
respectively, which is reflected as a component of other income in the          
accompanying consolidated statements of operations.  During the year ended      
December 31, 2006, the value of the derivative and warrant liabilities          
decreased by $513,913 and $26,665, respectively.                                

The debt discount is being first offset to the extent of the long-term          
portion of the convertible debt and then from the current portion of the        
convertible debt on the consolidated balance sheet and will be amortized        
over the life of the debt. The Company has recorded amortization expense of     
$821,942 and $108,480 for the years ended December 31, 2006 and 2005,           
respectively.                                                                   

The following table summarizes the Company's convertible notes payable by       
maturity dates at December 31, 2006                                             

                                                                [Download Table]

                                                        Less Debt               
                                          Principal      Discount      Amount   
                                        ------------  ------------  ------------
                                                                                
Year Ending December 31,           2007           -             -             - 
                                   2008 $ 2,650,000   $ 1,460,004   $ 1,189,996 
                                   2009     425,000        67,348       357,652 
                                        ------------  ------------  ------------
Total Notes Payable by Maturity Date    $ 3,075,000   $ 1,527,352   $ 1,547,648 
                                        ============  ============  ============

Additional material terms of the 2005 securities purchase agreement, the        
secured convertible notes and the warrants are described below:                 

Conversion and Conversion Price                                                 
-------------------------------                                                 
The secured convertible notes are convertible into our Common Stock, at the     
investors' option, at the lower of (i) $0.90 or (ii) 50% of the average of      
the three lowest intraday trading prices for the Common Stock on a              
principal market for the 20 trading days before but not including the           
conversion date.  Accordingly, there is in fact no limit on the number of       
shares into which the notes may be converted.                                   

The conversion price is adjusted after major announcements by the Company.      
In the event the Company makes a public announcement that the Company           
intends to consolidate or merge with any other corporation  (other  than  a     
merger  in  which the Company is the surviving or continuing  corporation       
and its capital stock is unchanged) or sell or transfer all or                  
substantially all of the assets of the Company or any person, group or          
entity (including the Company) publicly announces a tender offer to             
purchase 50%  or  more of the Company's Common Stock (or any other takeover     
scheme) then  the conversion price will be equal to the lower of the            
conversion price that would be effect on the date the announcement is made      
or the current conversion price at the time the secured convertible note        
holders wish to convert.                                                        
F-26  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 5 - CALLABLE SECURED CONVERTIBLE NOTES (Continued)                         

The secured convertible notes also provide anti-dilution rights, whereby        
the conversion price shall be adjusted in the event that the Company issues     
or sells any shares of Common Stock for no consideration or consideration       
less than the average of the last reported sale prices for the shares of        
the Common Stock on the OTC Bulletin Board for the five trading days            
immediately preceding such date of issuance or sale.  The conversion price      
is also proportionately increased or decreased in the event of a reverse        
stock split or forward stock split, respectively.  The conversion price is      
also adjusted in the event the Company effects a consolidation, merger or       
sale of substantially all its assets (which may also be treated as an event     
of default) or if the Company declares or makes any distribution of its         
assets (including cash) to holders of its Common Stock, as provided in the      
secured convertible notes.                                                      

If a note holder gives the Company a notice of conversion relating to the       
secured convertible notes and the Company is unable to issue such note          
holder the shares of Common Stock underlying the secured convertible note       
within five days from the date of receipt of such notice, the Company is        
obligated to pay the note holder $2,000 for each day that the Company is        
unable to deliver such Common Stock underlying the secured convertible          
note.                                                                           

The secured convertible notes contain a provision whereby no note holder is     
able to convert any part of the notes into shares of the Company's Common       
Stock, if such conversion would result in beneficial ownership by the note      
holder and its affiliates of more than 4.99% of the Company's then              
outstanding shares of Common Stock.                                             

In addition, we have the right under certain circumstances described below      
under "Company Call Option and Prepayment Rights" to prevent the note           
holders from exercising their conversion rights during any month after a        
month in which we have exercised certain prepayment rights.                     

Company Call Option and Prepayment Rights                                       
-----------------------------------------                                       
Each secured convertible note contains a call option in favor of the            
Company, whereby as long as no event of default under the note has              
occurred, the Company has a sufficient number of authorized shares reserved     
for issuance upon full conversion of the secured convertible notes and our      
Common Stock is trading at or below $0.90 per share (subject to adjustment      
in the secured convertible note), the Company has the right to prepay all       
or a portion of the note.  The prepayment amount is equal to the total          
amount of principal and accrued interest outstanding under the note, and        
any other amounts which may be due to the note holders, multiplied by 130%.     

In the event that the average daily trading price of our Common Stock for       
each day of any month is below $0.90, the Company may at its option prepay      
a portion of the outstanding principal amount of the secured convertible        
notes equal to 104% of the principal amount thereof divided by thirty-six       
plus one month's interest on the secured convertible notes, or the amount       
of the remaining principal and interest, whichever is less.  No note holder     
is entitled to convert any portion of the secured convertible notes during      
any month after the month on which the Company exercises this prepayment        
option.                                                                         

F-27  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 5 - CALLABLE SECURED CONVERTIBLE NOTES (Continued)                         

Events of Default                                                               
-----------------                                                               
Upon an event of default under the secured convertible notes, and in the        
event the note holders give the Company a written notice of default, an         
amount equal to 130% of the amount of the outstanding secured convertible       
notes and interest thereon shall become immediately due and payable or          
another amount as otherwise provided in the notes.  Events of default under     
the secured convertible notes include the following:                            

-   failure to pay any amount of principal or interest on the notes;        
-   failure to issue shares to the selling stockholders upon conversion     
of the notes, and such failure continues for ten days after         
notification by the note holders;                                   
-   failure to obtain effectiveness of the registration statement           
covering the resale of the shares of our Commons Stock issuable upon
conversion of the secured convertible notes and the exercise of the 
warrants on or before April 30, 2007 (or May 25, 2007 if the Company
is making a good faith effort to respond to the Securities and      
Exchange Commission's comments), or an effective registration       
statement covering such shares ceases to be effective for any ten   
consecutive days or any twenty days in any twelve month period;     
-   breaches by the Company of any of the convents contained in the         
notes;                                                              
-   breaches by the Company of any representations and warranties made      
in the 2005 securities purchase agreement or any related document;  
-   appointment by the Company of a receiver or trustee or makes an         
assignment for the benefit of creditors;                            
-   filing of any judgment against the Company for more than $50,000;       
-   bringing of bankruptcy proceedings against the Company and such         
proceedings are not stayed within sixty days of such proceedings    
being brought; or                                                   
-   delisting of the Common Stock from the OTC Bulletin Board or            
equivalent replacement exchange.                                    

Stock Purchase Warrants                                                         
-----------------------                                                         
The warrants expire five years from their date of issuance.  The warrants       
include anti-dilution rights, whereby the exercise price of the warrants        
shall be adjusted in the event that the Company issues or sells any shares      
of the Company's Common Stock for no consideration or consideration less        
than the average of the last reported sale prices for the shares of the         
Company's Common Stock on the OTC Bulletin Board for the five trading days      
immediately preceding such date of issuance or sale.  The exercise price of     
the warrants are also proportionately increased or decreased in the event       
of a reverse stock split or forward stock split, respectively.  The             
exercise price is also adjusted pursuant to the warrants in the event the       
Company effects a consolidation, merger or sale of substantially all of its     
assets and/or if the Company declares or makes any distribution of its          
assets (including cash) to holders of its common stock as a partial             
liquidating dividend, as provided in the warrants.                              

F-28  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 5 - CALLABLE SECURED CONVERTIBLE NOTES (Continued)                         

The warrants also contain a cashless exercise, whereby after February 2,        
2006, and if a registration statement covering the warrants is not              
effective, the warrant holders may convert the warrants into shares of the      
Company's restricted Common Stock.  In the event of a cashless exercise         
under the warrants, in lieu of paying the exercise price in cash, the           
selling stockholders can surrender the warrant for the number of shares of      
Common Stock determined by multiplying the number of warrant shares to          
which it would otherwise be entitled by a fraction, the numerator of which      
is the difference between (i) the average of the last reported sale prices      
for the Company's Common Stock on the OTC Bulletin Board for the five           
trading days preceding such date of exercise and (ii) the exercise price,       
and the denominator of which is the average of the last reported sale           
prices for the Company's Common Stock on the OTC Bulletin Board for the         
five trading days preceding such date of exercise .  For example, if the        
selling stockholder is exercising 100,000 warrants with a per warrant           
exercise price of $0.75 per share through a cashless exercise when the          
average of the last reported sale prices for the Company's Common Stock on      
the OTC Bulletin Board for the five trading days preceding such date of         
exercise is $2.00 per share, then upon such cashless exercise the warrant       
holder will receive 62,500 shares of the Company's Common Stock.                

Registration Rights Agreement                                                   
-----------------------------                                                   
We also entered into a registration rights agreement with the investors         
that grants the investors demand registration rights with respect to 200%       
of the Common Stock underlying the secured convertible notes and 200% of        
the Common Stock underlying the warrants. The Company will be subject to        
the payment of certain damages in the event that it does not satisfy its        
obligations including its obligation to have a registration statement with      
respect to the Common Stock underlying the secured convertible notes and        
warrants declared effective by the Securities and Exchange Commission on or     
prior to April 30, 2007; in the event that after the registration statement     
is declared effective, sales of the Company's securities cannot be made         
pursuant to the registration statement; and in the event that the Company's     
Common Stock is not listed on the OTC Bulletin Board or the NASDAQ, New         
York of American stock exchanges.  The damages are equal to 0.02 times the      
number of months (prorated for partial months) that any such event occurs       
(subject to adjustment as provided in the registration rights agreement).       

Side Letter Agreement                                                           
---------------------                                                           
We entered into a side letter agreement with the investors on November 10,      
2005.  The Side Letter Agreement provided that in consideration for the         
November 2005 sale of the secured convertible  notes, the investors agreed      
that the face amount of the $500,000 of secured convertible notes issued to     
the investors in August 2004 and the $200,000 in secured convertible notes      
which remained to be issued under the 2004 securities purchase agreement        
upon the effectiveness of a registration statement covering such secured        
convertible notes shall be included in the amount advanced to the Company       
under the November 2005 secured convertible notes.  The side letter             
agreement also provided that the terms of the 2005 securities purchase          
agreement shall supercede the prior 2004 securities purchase agreement and      
that all interest, penalties, fees, charges or other obligations accrued or     
owed by the Company to the investors pursuant to the 2004 securities            

F-29  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 5 - CALLABLE SECURED CONVERTIBLE NOTES (Continued)                         

purchase agreement are waived, provided that in the event of any material       
breach of the 2005 securities purchase agreement by the Company, which          
breach is not cured within five days of receipt by the Company of written       
notice of such breach, the novation of the 2004 securities purchase             
agreement and the waiver of the prior obligations thereunder shall be           
revocable by the selling stockholders and all such prior obligations shall      
be owed as if the 2004 securities purchase agreement was never superceded.      

NOTE 6 - FACTORING AND SECURITY AGREEMENT                                       

On November 8, 2005, DCII and DCI entered into a Factoring and Security         
Agreement to sell accounts receivables to Systran Financial Services            
Corporation ("Systran").  The purchase price for each invoice sold is the       
face amount of the invoice less a discount of 1.5%.                             

On July 24, 2006, the Factoring Agreement was amended and under the terms       
of the amendment a fee equal to prime plus 1.50% shall be charged on a          
daily basis based upon total of invoices purchased by Systran that remain       
unpaid and outstanding, less the deposit held by Systran.   Further, the        
purchase price for each invoice sold was amended to be the face amount of       
the invoice less a discount of 0.65%.  Additionally, a one time fee of          
0.50% on all invoices that remain unpaid from the date sold shall be            
incurred on the 91st day from the date sold.                                    

All accounts sold are with recourse by Systran.  Systran may defer making       
payment to DCII of a portion of the purchase price payable for all accounts     
purchased which have not been paid up to 10.0% of such accounts (reserve).      
All of DCII's and DCI's accounts receivable are pledged as collateral under     
this agreement.  In addition, David Walters and Keith Moore have personally     
guaranteed $500,000 of the total available facility.  Mr. Walters and Mr.       
Moore did not receive any compensation for this personal guarantee in 2006      
or 2005.  The initial term is for thirty six months and will automatically      
renew for an additional twelve months at the end of the term, unless the        
Company gives thirty days written notice of its intention to terminate the      
Factoring Agreement. The amount advanced to the Company by Systran at           
December 31, 2006 and 2005 totals $579,780 and $335,132, respectively.          
These amounts are being shown as a liability in the accompanying financial      
statements as a factoring liability.                                            

F-30  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 7 - LOSS ON DISCONTINUED OPERATIONS AND DISPOSITION OF SUBSIDIARY          

As previously discussed, effective December 15, 2005, the Tudemes, the          
former controlling shareholders of the Company and the Company entered into     
a Spinoff Agreement which provided for (1) the transfer of the corporate        
names, business, operations, assets, properties, intellectual properties,       
trademarks, service marks, trade names, uniform resource locators,              
telephone numbers, and goodwill of the Company and its subsidiaries (other      
than DCII and DCI), together with the operating business of Abundant, to be     
placed into to a newly-formed Delaware corporation wholly-owned by the          
Company, (2) the acquisition and cancellation by the Company from the           
Tudemes of their outstanding shares of capital stock of the Company,            
totaling 35,691,200 (396,569 post-split) shares, (3) the assumption and         
release by the Company and its subsidiaries and the Tudemes of certain          
liabilities, and (4) the sale to the Tudemes of all of the outstanding          
capital stock of Marathon, and the payment to the Tudemes of $80,441 for        
amounts owed to the Tudemes and other creditors by the Company, of which        
$50,000 was paid prior to December 31, 2005. Pursuant to this transaction,      
the Company recorded a loss on discontinued operations as follows:              

                                                                [Download Table]

                                                        For the  
                                                      Year Ended 
                                                     December 31,
                                                         2005    
                                                     ------------
                                                                 
REVENUES                                             $   321,991 

OPERATING EXPENSES                                               
  Cost of revenues                                       225,988 
  General and administrative                              64,179 
  Depreciation and amortization                            3,796 
  Bad debt expense                                         4,239 
                                                     ------------
     Total Operating Expenses                            298,202 
                                                     ------------
INCOME FROM OPERATIONS                                    23,789 

OTHER INCOME (EXPENSE)                                           
  Interest expense                                       (39,614)
                                                     ------------
     Total Other Income (Expense)                        (39,614)
                                                     ------------
NET LOSS FROM DISCONTINUED OPERATIONS                $   (15,825)
                                                     ============

F-31  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 7 - LOSS ON DISCONTINUED OPERATIONS AND DISPOSITION OF SUBSIDIARY          
(Continued)                                                                     

In addition, the Company recorded a loss on the disposition of subsidiary       
related to the above transaction totaling $699,616 for the year ended           
December 31, 2005. The loss represents the excess of assets over                
liabilities disposed of in the spinoff, as follows:                             

Net assets disposed of in the subsidiary spinoff         $    976,744           
Net liabilities released in the subsidiary spinoff           (277,128)          
                                               -------------
Net loss on disposition of subsidiary                    $    699,616           
                                               =============

NOTE 8 - COMMITMENTS  AND CONTINGENCIES                                         

On January 19, 2006, Community Capital Bank filed a complaint in the            
Supreme Court of the State of New York (Kings County) against the Company,      
Macdonald S. Tudeme (our former CEO) and Marguerite Tudeme (our former          
Secretary). The complaint seeks payment of three loans made by Community        
Capital Bank having a total outstanding principal amount of $202,527.67         
plus unpaid interest. The Company believes that the Community Capital Bank      
loans were made to MTM, a former subsidiary that was disposed of on             
December 15, 2005 as part of the disposition of Marathon (as described in       
Note 1), and are guaranteed by the Tudemes. As a result, the Company does       
not believe it is obligated to repay any amounts due under the Community        
Capital Bank loans.                                                             

On January 25, 2006, the Company received notice from the Internal Revenue      
Service (the "IRS") that the IRS had concluded that the Company's               
subsidiary (DCI) was a third-party payer to and thus employer of a              
pharmacist who provided services to DCI's client, the California Department     
of Corrections.  Although the IRS notice applies only to the case of the        
individual pharmacist, if unchanged, it could require DCI to classify other     
pharmacists and nurses in its registry who provide services to DCI's            
clients as employees of DCI.  Accordingly, compensation payable to such         
pharmacists and nurses would be subject to federal income tax withholding,      
Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment        
Tax Act (FUTA) tax.   This result would have a material adverse effect on       
the Company's business, financial condition and results of operations.  The     
Company disagrees with the conclusion of the IRS notice, believes that the      
pharmacist in question was properly classified as an independent contractor     
and is in the process of contesting the conclusion of the IRS.                  

On June 5, 2006, Phillip Evans, a former contractor of DCI, filed a             
complaint in the Superior Court of California (Riverside County) against        
DCI.  The complaint alleges, among other things, libel and unfair business      
practices, and seeks general special and punitive damages of $2,170,000.        
The Company believes the claims are without merit and is contesting the         
suit.                                                                           

F-32  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 9 - ACQUISITIONS                                                           

On November 7, 2005, the Company acquired the business and certain related      
assets of Drug Consultants, Inc. ("DCI"), a California corporation.  DCI        
furnishes personnel to perform a range of pharmacy, nursing and other           
health care services in support of the operations of government and             
commercial facilities, including its largest client, the State of               
California. DCI was formed in 1977 and is located in Irvine, California.        
The purchase price of $1,800,000 was satisfied by the Company paying            
$1,600,000 in cash and a $200,000 pursuant to a secured promissory note.        
The acquisition was an arm's length transaction and has been accounted for      
using the purchase method.                                                      

The following table summarizes the estimated fair value of the assets           
acquired and liabilities assumed at the date of acquisition. The purchase       
price allocation is based upon management's best estimate of the relative       
fair values of the identifiable assets acquired and liabilities assumed.        

                                                                [Download Table]
                                                                 
Net assets acquired:                                             
 Accounts receivable                                 $ 1,401,560 
 Goodwill                                              1,245,481 
                                                     ------------
 Net assets acquired                                   2,647,041 

Net liabilities assumed:                                         
 Accounts payable and accrued expenses               $   722,987 
 Notes payable                                           124,054 
                                                     ------------
 Net liabilities assumed                                 847,041 

 Consideration paid                                    1,800,000 
                                                     ------------

Pro Forma Results                                                               

The unaudited pro-forma consolidated financial statements give effect to        
the acquisition by Monarch of DCII pursuant to a reverse takeover effective     
November 4, 2005, and the subsequent acquisition of DCI by DCII effective       
November 7, 2005.  The unaudited pro forma consolidated financial               
statements have been prepared by management using the accounting principles     
disclosed in the consolidated financial statements of the Company as of and     
for the period ended September 30, 2005 as if the acquisition had occurred      
on January 1, 2005.                                                             

F-33  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 9 - ACQUISITIONS (continued)                                               

The unaudited pro forma consolidated statement of operations for the year       
ended December 31, 2004 is based on the unaudited financial statements as       
if the acquisition had occurred on January 1, 2004.  The unaudited pro          
forma combined financial statements are not necessarily indicative of the       
results of operations that would have been realized for the period              
presented, nor do they purport to project the results of operations for any     
future periods.  The unaudited pro forma financial statements should be         
read in conjunction with the consolidated financial statements of the           
Company as of and for the periods ended December 31, 2004 and September 30,     
2005.                                                                           

                                                                [Download Table]

                                                         (Unaudited)       
                                               ----------------------------
                                                For the Year        For the
                                               Ended Dec 31,   Period Ended
                                                        2004  Sept 30, 2005
                                               -------------  -------------
                                                                           
Revenue                                        $   6,647,053  $   7,049,314
                                               =============  =============
Gross Profit                                   $   1,359,726  $   1,875,317
                                               =============  =============
Operating Loss                                 $ (2,490,552)  $   (653,480)
                                               =============  =============
Net Loss                                       $ (3,285,010)  $ (1,073,180)
                                               =============  =============
Net Loss per Common Share - Basic / Diluted    $     (0.004)  $     (0.001)
                                               =============  =============

NOTE 10 - STOCK BASED COMPENSATION                                              

On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004),            
"Share-Based Payment" ("SFAS 123(R)") which establishes standards for the       
accounting for transactions in which an entity exchanges its equity             
instruments for goods or services, primarily focusing on accounting for         
transactions where an entity obtains employee services in share-based           
payment transactions.  SFAS No. 123(R) requires a public entity to measure      
the cost of employee services received in exchange for an award of equity       
instruments, including stock options, based on the grant-date fair value of     
the award and to recognize it as compensation expense over the period the       
employee is required to provide service in exchange for the award, usually      
the vesting period.  SFAS 123(R) supersedes Accounting Principles Board         
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" for          
periods beginning in fiscal 2006.  In March 2005, the Securities and            
Exchange Commission issued SAB No. 107 relating to SFAS 123(R). The Company     
has applied the provisions of SAB 107 in its adoption of SFAS 123(R).           

F-34  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 10 - STOCK BASED COMPENSATION (Continued)                                  

The Company adopted SFAS 123(R) using the modified prospective transition       
method, which requires the application of the accounting standard as of         
January 1, 2006, the first day of the Company's fiscal year 2006. The           
Company's consolidated financial statements for the year ended December 31,     
2006 reflect the impact of SFAS 123(R).  In accordance with the modified        
prospective transition method, the Company's consolidated financial             
statements for prior periods have not been restated to reflect, and do not      
include, the impact of SFAS 123(R).                                             

SFAS 123(R) requires companies to estimate the fair value of share-based        
payment awards on the date of grant using an option-pricing model.  The         
value of the portion of the award that is ultimately expected to vest is        
recognized as expense over the requisite service periods in the Company's       
consolidated statement of operations.  Prior to the adoption of SFAS            
123(R), the Company accounted for stock-based awards to employees and           
directors using the intrinsic value method in accordance with APB Opinion       
No. 25 as allowed under SFAS No. 123, "Accounting for Stock-Based               
Compensation."  Under the intrinsic value method, no stock-based                
compensation expense had been recognized in the Company's consolidated          
statements of operations, other than as related to option grants to             
employees and consultants below the fair market value of the underlying         
stock at the date of grant.                                                     

Stock-based compensation expense recognized during the period is based on       
the value of the portion of share-based payment awards that is ultimately       
expected to vest during the period.  Stock-based compensation expense           
recognized in the Company's consolidated statement of operations for the        
year ended December 31, 2006 included compensation expense for share-based      
payment awards granted prior to, but not yet vested as of December 31, 2005     
based on the grant date fair value estimated in accordance with the pro         
forma provisions of SFAS No. 123 and compensation expense for the               
share-based payment awards granted subsequent to December 31, 2005 based on     
the grant date fair value estimated in accordance with the provisions of        
SFAS 123(R). As stock-based compensation expense recognized in the              
consolidated statement of operations for the year ended December 31, 2006       
is based on awards ultimately expected to vest, it has been reduced for         
estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at      
the time of grant and revised, if necessary, in subsequent periods if           
actual forfeitures differ from those estimates.  The estimated average          
forfeiture rate for the year ended December 31, 2006, of approximately 0%       
was based on historical forfeiture experience.  The estimated pricing term      
of option grants for the year ended December 31, 2006 was 5.0 years.  In        
the Company's pro forma information required under SFAS 123(R) for the          
periods prior to fiscal 2006, the Company accounted for forfeitures as they     
occurred.                                                                       

SFAS 123(R) requires the cash flows resulting from the tax benefits             
resulting from tax deductions in excess of the compensation cost recognized     
for those options to be classified as financing cash flows.  Due to the         
Company's loss position, there were no such tax benefits during the year        
ended December 31, 2006.  Prior to the adoption of SFAS 123(R), those           
benefits would have been reported as operating cash flows had the Company       
received any tax benefits related to stock option exercises.                    

F-35  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 10 - STOCK BASED COMPENSATION (Continued)                                  

The fair value of stock-based awards to employees and directors is              
calculated using the Black-Scholes option pricing model, even though this       
model was developed to estimate the fair value of freely tradable, fully        
transferable options without vesting restrictions, which differ                 
significantly from the Company's stock options.  The Black-Scholes model        
also requires subjective assumptions, including future stock price              
volatility and expected time to exercise, which greatly affect the              
calculated values.  The expected term of options granted is derived from        
historical data on employee exercises and post-vesting employment               
termination behavior.  The risk-free rate selected to value any particular      
grant is based on the U.S Treasury rate that corresponds to the pricing         
term of the grant effective as of the date of the grant.  The expected          
volatility is based on the historical volatility of the Company's stock         
price.  These factors could change in the future, affecting the                 
determination of stock-based compensation expense in future periods.            

Valuation and Expense Information under SFAS 123(R)                             

The weighted-average fair value of stock-based compensation is based on the     
single option valuation approach.  Forfeitures are estimated and it is          
assumed no dividends will be declared.  The estimated fair value of             
stock-based compensation awards to employees is amortized using the             
straight-line method over the vesting period of the options.                    

The fair value calculations are based on the following assumptions:             

                                                                [Download Table]

                                               2006                2005     
                                          --------------     ---------------
                                                                            
Risk-free interest rate                   4.47% - 5.12%       4.01% - 4.54% 
Expected life of the options                   5.00 yrs            5.00 yrs 
Expected volatility                         461% - 497%         419% - 497% 
Expected dividend yield                              0                   0  

The following table summarizes stock-based compensation expense related to      
stock options and employee stock purchase plan purchases under SFAS 123(R)      
for the years ended December 31, 2006 and 2005 which was allocated as           
follows:                                                                        

                                                                [Download Table]

                                               Year Ended December 31, 2005
                                               ----------------------------
                                                                APB Opinion
                                               SFAS No. 123R         No. 25
                                               -------------  -------------
                                                                           
Net income (loss)                              $    299,231   $    299,231 
                                               =============  =============
Net income (loss) per share                    $       0.03   $       0.03 
                                               =============  =============

                                                                [Download Table]

                                               Year Ended December 31, 2006
                                              -----------------------------
                                                                APB Opinion
                                               SFAS No. 123R         No. 25
                                               -------------  -------------
                                                                           
Net income (loss)                              $   (866,452)  $   (744,232)
                                               =============  =============
Net income (loss) per share                    $      (0.09)  $      (0.08)
                                               =============  =============

F-36  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 10 - STOCK BASED COMPENSATION (Continued)                                  

A summary of option activity under the Company's stock equity plans during      
the year ended December 31, 2006 is as follows:                                 

                                                                [Download Table]

                                                            Weighted             
                                                             Average             
                                                Weighted   Remaining    Aggregate
                                   Number of    Average  Contractual    Intrinsic
                                  Shares (In    Exercise    Term (in    Value (In
                                  Thousands)      Price       Years)   Thousands)
                                  ----------  ---------- -----------   ----------
                                                                                 
Outstanding at December 31, 2005         92       $0.72                          
   Granted                              840       $0.62                          
   Forfeited                              -       $0.00                          
   Exercised                              -       $0.00                          
                                  ----------  ----------                         
Outstanding at December 31, 2006        932       $0.63        4.29   $      590 
                                  ==========  ========== ===========  ===========
Vested and expected to vest                                                      
 at December 31, 2006                   342   $    0.64        4.51   $      218 
                                  ==========  ========== ===========  ===========
Exercisable at December 31, 2006        342   $    0.64        4.51   $      218 
                                  ==========  ========== ===========  ===========

The per share weighted average fair value of options granted during the         
years ended December 31, 2006 and 2005 were $0.27 and $0.72, respectively.      
The total intrinsic value of options exercised during the years ended           
December 31, 2006 and 2005 was $ 0 and $ 0, respectively, as there we no        
options exercised during those periods.  As of December 31, 2006, total         
unrecognized forfeiture adjusted compensation costs related to nonvested        
stock options was $171,067, which is expected to be recognized as an            
expense over a weighted average period of approximately 1.7 years.              

Prior to fiscal 2006, the weighted-average fair value of stock-based            
compensation to employees was based on the single option valuation              
approach. Forfeitures were recognized as they occurred and it was assumed       
no dividends would be declared.                                                 

F-37  

MONARCH STAFFING, INC. AND SUBSIDIARIES     
(Formerly MT Ultimate Healthcare Corp.)     

Notes to the Consolidated Financial Statements December 31, 2006 and 2005       

NOTE 10 - STOCK BASED COMPENSATION (Continued)                                  

The estimated fair value of stock-based compensation awards to employees        
was amortized using the straight-line method over the vesting period of the     
options.                                                                        

Pro forma results are as follows:                                               

                                                                [Download Table]

                                                    For the year ended
                                                     December 31, 2005
                                                    ------------------
                                                                      
Net income - as reported                            $        299,231  

Stock-based employee compensation                                     
 expense included in reported net                                     
 income (loss), net of tax                                          - 

Total stock-based employee                                            
 compensation expense determined                                      
 under fair-value-based method for                                    
 all rewards, net of tax                                        2,760 
                                                    ------------------
Pro forma net income                                $         296,471 
                                                    ==================
Net income per share:                                                 
 Basic and diluted, as reported                     $            0.03 
                                                    ==================
 Basic and diluted, pro forma                       $            0.03 
                                                    ==================

NOTE 11 - SUBSEQUENT EVENTS                                                     

On February 5, 2007, MBMC loaned $125,000 to DCII at 10% per annum.  The        
principal balance of the loan was repaid in full on February 8, 2007.  On       
February 5, 2007, MBMC also loaned $70,000 to the Company at 10% per annum.     
The principal balance of the loan was repaid in full on February 15, 2007.      
See Note 3 for further discussion on related party transactions.                

On March 29, 2007, the Company obtained an amendment to the 2005 securities     
purchase agreement whereby interest payments are payable at the same time       
the corresponding principal balance is due and payable, whether at maturity     
or upon acceleration or by prepayment.  In addition, the amendment extended     
the date by which the Company must obtain the effectiveness of the              
registration statement covering the resale of the shares of our Common          
Stock issuable upon conversion of the secured convertible notes and the         
exercise of the warrants to October 31, 2007 (or November 25, 2007 if the       
Company is making a good faith effort to respond to the Securities and          
Exchange Commission's comments).   See Note 5 for further discussion.           

F-38  

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND         
FINANCIAL DISCLOSURE                                                            

On May 16, 2005, the Company's Board of Directors accepted the resignation      
of Clyde Bailey P.C., its independent auditors, due to health and other         
personal reasons; thus dismissing and terminating the engagement of Clyde       
Bailey P.C. as its independent auditor.                                         

Clyde Bailey P.C. submitted audit reports on the Company's financial            
statements for the year ended December 31, 2004. The submitted audit            
reports did not contain any adverse opinions, disclaimers of opinions or        
other modifications or qualifications. Clyde Bailey P.C. did not, during        
the applicable periods, advise the Company of any of the enumerated items       
described in Item 304(a) (1) of Regulation S-K.                                 

The decision to change accountants was recommended and approved by the          
Board of Directors of the Company.                                              

During the fiscal year ended December 31, 2004 and the period from January      
1, 2005 through the date of dismissal and termination of the engagement of      
Clyde Bailey P.C., there were no disagreements with Clyde Bailey P.C. on        
any matter of accounting principles or practices, financial statement           
disclosure, or auditing scope or procedure, which disagreements, if not         
resolved to the satisfaction of Clyde Bailey P.C., would have caused Clyde      
Bailey P.C. to make reference thereto in, or in connection with, his            
reports on financial statements for the years or such interim period.           

On June 10, 2005 the Company's Board of Directors ratified the engagement       
of Chisholm Bierwolf & Nilson, LLC, as its auditors. The Company authorized     
Clyde Bailey P.C. to fully respond to any and all inquiries of Chisholm         
Bierwolf & Nilson, LLC, concerning the finances and previously performed        
audits of the Company.                                                          

During the two most recent fiscal years prior to the date of engagement,        
and the subsequent interim period prior to engaging Chisholm Bierwolf &         
Nilson, LLC, neither the Company (nor someone on the Company's behalf)          
consulted the newly engaged accountant regarding any matter.                    

The Company engaged Corbin & Company LLP to act as its independent              
auditors, effective November 8, 2005, for DCII for the year ended December      
31, 2005. The Company's principal accountant, Chisholm, Bierwolf & Nilson,      
LLC, acted as its independent auditors for the Company and all subsidiaries     
during 2006.                                                                    

During the Company's two most recent fiscal years and any subsequent            
interim period prior to engaging Corbin & Company LLP, the Company has not      
consulted Corbin & Company LLP regarding either: (i) the application of         
accounting principles to a specified transaction, either completed or           
proposed, or the type of audit opinion that might be rendered on the            
Company's financial statements, and Corbin & Company LLP did not provide        
either a written report or oral advice to the Company that Corbin & Company     
LLP concluded was an important factor considered by the Company in reaching     
a decision as to the accounting, auditing or financial reporting issue; or      
(ii) any matter that was either the subject of a disagreement or a              
reportable event, each as defined in Item 304 of Regulation S-K. Corbin &       
Company LLP has not provided due diligence services in connection with          
proposed and/or consummated investment transactions by the Company and its      
affiliates.                                                                     

78    

On February 1, 2006, the Company engaged Chisholm, Bierwolf & Nilson, LLC,      
its independent registered public accounting firm, to re-audit its              
financial statements for the years ended December 31, 2003 and 2004. This       
decision was based on; (i) action taken by the Public Company Accounting        
Oversight Board ("PCAOB") revoking the registration of the Company's prior      
independent auditor, Clyde Bailey, P.C., due to violations of PCAOB rules       
and auditing standards and (ii) as part of its analysis of comments made by     
the staff of the SEC during it's review of a registration statement filed       
by the Company.                                                                 

ITEM 8A. CONTROLS AND PROCEDURES                                                

Evaluation of Disclosure Controls and Procedures                                

We maintain "disclosure controls and procedures," as such term is defined       
in Rules  13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934        
(the "Exchange Act"), designed to ensure information required to be             
disclosed by us in reports that we file or submit under the Exchange Act is     
recorded, processed, summarized, and reported within the time periods           
specified in the Securities and Exchange Commission's rules and forms, and      
that such information is accumulated and communicated to our management,        
including our Chief Executive Officer and Chief Financial Officer, as           
appropriate, to allow timely decisions regarding required disclosure.           

Under the supervision and with the participation of our Disclosure              
Committee and management, including our Chief Executive Officer and Chief       
Financial Officer, we conducted an evaluation of the effectiveness of the       
design and operation of our disclosure controls and procedures, as required     
by the Exchange Act Rules  13a-15(b) and 15d-15(b).                             

Based on that evaluation, our Chief Executive Officer and our Chief             
Financial Officer concluded that, as of December 31, 2006, our disclosure       
controls and procedures were not effective, due to the identification of        
the material weaknesses in internal control over financial reporting            
described below.  Notwithstanding the material weaknesses described below,      
management believes the consolidated financial statements included in this      
report fairly present, in all material respects, our financial condition,       
results of operations and cash flows for the periods presented.                 

Material Weaknesses in Internal Control Over Financial Reporting                

A material weakness is a control deficiency, or combination of control          
deficiencies, that results in a more than remote likelihood that a material     
misstatement of the annual or interim financial statements will not be          
prevented or detected. In connection with the preparation of our 2006           
consolidated financial statements, we have identified the following control     
deficiencies, which represent material weaknesses in the Company's internal     
control over financial reporting as of December 31, 2006:                       

-   We did not maintain a sufficient complement of personnel with an        
appropriate level of accounting knowledge, experience, and training 
in the application of U.S. generally accepted accounting principles 
commensurate with our existing financial reporting requirements and 
the requirements we face as a public company. Accordingly,          
management has concluded that this control deficiency constitutes a 
material weakness, and that it contributed to the following material
weakness.                                                           

-   We did not maintain effective controls with respect to reviewing and    
authorizing related party transactions.  Specifically, our control  
procedures did not prevent the Company from making payments on      
behalf of other related parties.  Accordingly, management has       
concluded that this control deficiency constitutes a material       
weakness.                                                           
79    

Management's Remediation Initiatives                                            

During the first half of 2007, we plan to remediate these material              
weaknesses as follows:                                                          

-   We assessed the organization of our accounting personnel and the        
technical expertise within the accounting function. We plan to      
appoint a new Chief Financial Officer in order to increase our depth
of experience in generally accepted accounting principles and       
guidelines required by the Securities and Exchange Commission.      

-   We plan to add an independent director to the Company's board of        
directors.  This independent director will approve all related party
transactions prior to occurring and ensure appropriate preventative 
controls are in place.                                              

ITEM 8B. OTHER MATTERS                                                          

None.                                                                           

PART III.     

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY                         

The directors and principal executive officers of the Company are as            
specified on the following table:                                               

NAME                AGE       POSITION                                          
---------------------------------------------------------------------------     
Joel Williams       51        Chief Executive Officer                           

David Walters       44        Chairman, President, Chief Financial Officer,     
  Treasurer and Director

Keith Moore         46        Secretary and Director                            

JOEL WILLIAMS has served as Chief Executive Officer since September 1,          
2006.  Mr. Williams has been a senior executive of health care staffing         
companies for the past 14 years. Most recently, he served as a divisional       
President (2005-July 2006) and Senior Vice President (2003-2005) with           
Supplemental Health Care, a privately held health care staffing company.        
Previously, Mr. Williams was a senior executive at Staff Search Health          
Care, a privately held healthcare staffing company, serving as Chief            
Operating Officer (2000-2003) and Chief Financial Officer (1999-2000).          
Prior to Staff Search Health Care, Mr. Williams held financial and              
corporate development management positions with a variety of other health       
care staffing and other companies.  He received an MBA from the University      
of Houston and a B.A. in finance from the University of Texas.                  

DAVID WALTERS has served as President, Chief Financial Officer and              
Treasurer since December 15, 2005. He served as Chief Executive Officer         
from December 15, 2005 until September 1, 2006 and served as Executive Vice     
President of the Company from November 4, 2005 to December 15, 2005. He has     
been a Director of the Company since November 4, 2005 and currently is          
Chairman of the Board.  Since January 2005, he has served as Chairman and       
Chief Executive Officer of DCII, which since November 4, 2005, has been         

80    

wholly owned by the Company. Since February 2000, he has served as a            
managing member of Monarch Bay Capital Group, LLC, a consulting company         
and, since March 2006,  as a managing member of Monarch Bay Management          
Company, L.L.C., a consulting company.. Mr. Walters has extensive               
experience in investment management, corporate growth development               
strategies and capital markets. Mr. Walters earned a B.S. in Bioengineering     
from the University of California, San Diego in 1985.  Mr. Walters also         
serves as Chairman of the Board of Directors of Remote Dynamics, Inc. and       
is a member of the Board of Directors of Precision Aerospace Components,        
Inc.                                                                            

KEITH MOORE has served as a Director of the Company since November 4, 2005      
and has extensive experience in growing and financing technology and            
service companies. Mr. Moore is Chairman and Chief Executive Officer of         
DataLogic International, Inc., an information technology company, positions     
he has held since January 2005. Since March 2006,  Mr. Moore has also           
served as a managing member of Monarch Bay Management Company, L.L.C., a        
consulting company.  From April 1999 to January 2005, Mr. Moore served as       
Chairman and Chief Executive Officer of DCII which since November 4, 2005,      
has been wholly owned by the Company. Mr. Moore received his Bachelors          
degree in Finance from Eastern Michigan University in 1982 and his Masters      
degree from Eastern Michigan University in Finance in 1984.  Mr. Moore is       
also a member of the Board of Directors of Remote Dynamics, Inc.                

Audit Committee and Financial Expert Disclosures                                

Section 301 of the Sarbanes-Oxley Act of 2003, and SEC regulations              
implementing that provision require that public companies disclose a            
determination by their Board of Directors as to the existence of a              
financial expert on their audit committee and, if none is determined to         
exist, that the Board of Directors has determined that no one serving on        
its Board of Directors meets the qualification of a financial expert as         
defined in the Sarbanes-Oxley Act and implementing regulations.                 

As of December 31, 2006, and as of the date of filing of this report, we        
have not created any standing committees of the Board of Directors,             
including an audit committee. Accordingly, our entire Board of Directors        
serves as our audit committee. We also disclose that our Board has              
determined that we have not, and we do not, possess on our Board of             
Directors anyone who qualifies as an audit committee financial expert and,      
unless and until one is identified and agrees to serve, we will continue to     
rely on outside professional consultants who advise us with respect to          
audit matters.                                                                  

Changes to Procedures Regarding Nomination of Directors to the Board of         
Directors                                                                       

During our fiscal year ended December 31, 2006, there were no material          
changes to the procedures by which our security holders may recommend           
nominees to our board of directors.                                             

Code of Ethics                                                                  

We do not presently have a Code of Business Conduct and Ethics. We expect       
to adopt such a Code prior to our annual meeting and will report the            
adoption of a Code of Business Conduct and Ethics on Form 8-K promptly          
thereafter.                                                                     

Section 16(a) Beneficial Ownership Reporting Compliance                         

Based upon a review of the reports filed under Section 16 of the Securities     
Exchange Act during the last fiscal year, all required reports were timely      
filed, except that Joel Williams filed a late Form 3.                           
81    

ITEM 10. EXECUTIVE COMPENSATION                                                 

Any compensation received by officers, directors, and management personnel      
of the Company will be determined from time to time by the Board of             
Directors of the Company. Officers, directors, and management personnel of      
the Company will be reimbursed for any out-of-pocket expenses incurred on       
behalf of the Company.                                                          

The table set forth below summarizes the annual and long-term compensation      
for services in all capacities to the Company paid to our most highly           
compensated executive officers during the last two fiscal years.                

                                                                [Download Table]


Name &                                        Stock    Option    All Other          
Principal                  Salary            Awards    Awards      Compen-          
Position           Year       ($)  Bonus ($)    ($)   ($) (4)   sation (5)     Total
----------------  -----  --------  --------- ------  --------  -----------  --------
                                                                                    
Joel Williams (2)  2006  $ 49,846  $      -  $   -   $197,068  $        -   $246,914
 Chief Executive   2005  $     -   $      -  $   -   $     -   $        -   $     - 
  Office                                                                            

David Walters (3)  2006  $135,000  $      -  $   -   $     -   $   145,000  $280,000
 Chairman,         2005  $ 86,000  $      -  $   -   $     -   $   120,000  $206,000
 President, Chief                                                                   
 Financial Officer,                                                                 
 Treasurer and                                                                      
 Director                                                                           

(1) Does not include perquisites and other personal benefits in amounts         
less than 10% of the total annual salary and other compensation.                

(2)  Joel Williams became Chief Executive Officer on September 1, 2006.         

(3) David Walters became President, Chief Financial Officer and Treasurer       
of the Company effective December 15, 2005. He served as Chief Executive        
Officer from December 15, 2005 until September 1, 2006.  He had served as       
Executive Vice President of the Company from November 4, 2005 to December       
15, 2005. He has been a Director of the Company since November 4, 2005 and      
currently is Chairman of the Board.                                             

(4) Stock option awards were valued in accordance with SFAS 123 (R).  Refer     
to Footnote 10 "Stock Based Compensation" of the Company's Financial            
Statements.                                                                     

(5) Mr. Walters entered into an Independent Contractor Agreement with DCII      
on February 1, 2005 ("Contractor Agreement"). Mr. Walters' Contractor           
Agreement provides for him to serve DCII in the capacity of Chief Executive     
Officer. The Contractor Agreement was renewed on February 1, 2006 and           
expires December 31, 2008.  The Contractor Agreement renews thereafter on       
an annual basis unless terminated by either party. The Contractor Agreement     
may be terminated upon the breach of a term of the Contractor Agreement,        
which breach remains uncured for thirty (30) days or by either party, for       
any reason with thirty (30) days written notice. The Contractor Agreement       
contains confidentiality clauses and work for hire clauses. The Contractor      
Agreement provides that Mr. Walters is not an employee of DCII. Mr. Walters     
is entitled to be paid $10,000 per month under the Contractor Agreement.        
The Company also paid $25,000 to Mr. Walters during 2006 for other              
consultation services which were outside of the scope of the Independent        
Contractor Agreement described above.                                           
82    

Summary of Employment Agreements                                                
--------------------------------                                                
On March 21, 2006, we entered into an employment agreement with David           
Walters, our Chairman and Chief Financial Officer (and Chief Executive          
Officer until  September 1, 2006). The employment agreement has an initial      
term of two years. The agreement provides for an initial payment of             
$33,750, a base salary of $135,000 for the first year and $160,000 for the      
second year, and a bonus on terms and conditions to be mutually agreed upon     
by Mr. Walters and us. If the employment agreement is terminated by us          
(other than for specified cause events), Mr. Walters will receive full          
compensation and benefits for the remaining term of the agreement and one       
year thereafter.                                                                

On September 1, 2006, we entered into an employment agreement with Joel         
Williams, our Chief Executive Officer, with an initial term of two years.       
The employment agreement provides for a base salary of $160,000 (subject to     
performance-based adjustments) and a quarterly bonus equal to 5% of our         
earnings before interest, taxes, depreciation and amortization.  If the         
employment agreement is terminated by us (other than for specified cause        
events), Mr. Williams will receive his full base salary for the remaining       
term of the agreement.  Pursuant to the agreement, we will grant to Mr.         
Williams options to purchase a total of 789,552 shares of our common stock.     
The options will be granted in four equal tranches having exercise prices       
equal to $0.25 per share, $0.50 per share, $0.75 per share and $1.00 per        
share, respectively.  Each tranche will vest 20% upon grant and thereafter      
10% for eight quarters with full vesting upon a change in control.              

Option Grants in 2006                                                           
---------------------                                                           
The following table provides details regarding stock options granted in         
2006 to our executive officers listed in the Summary Compensation Table         
above:                                                                          

                                                        [Enlarge/Download Table]

                     OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END                    
                                    OPTIONS AWARDS                                   

                           Number of         Number of                               
                          securities        securities                               
                          underlying        underlying                               
                         unexercised       unexercised        Option         Option  
                           options           options         exercise      expiration
Name                   (#)Exercisable  (#)Unexercisable      price ($)        date   
-------------------------------------------------------------------------------------
                                                                                     
Joel Williams                 59,216           138,172          $0.25       8/31/2011
Joel Williams                 59,216           138,172          $0.50       8/31/2011
Joel Williams                 59,216           138,172          $0.75       8/31/2011
Joel Williams                 59,216           138,172          $1.00       8/31/2011
                       -------------------------------                               
Total                        236,864           552,688                               
                       -------------------------------                               

Options vested 20% upon grant and thereafter 10% for eight quarters with        
full vesting upon a change in control.                                          

83    

Director Compensation                                                           
---------------------                                                           
The following director compensation disclosure reflects all compensation        
awarded to, earned by or paid to the directors below for the fiscal year        
ended December 31, 2006.                                                        

                                                        [Enlarge/Download Table]

                             Fees Earned     Stock  Option      All Other            
                              or Paid in    Awards  Awards   Compensation            
Name (1)                      Cash($)(2)       ($)     ($)         ($)(3)   Total ($)
-------------------------------------------------------------------------------------
                                                                                     
Keith Moore                   $       -    $    -  $    -    $   145,000    $ 145,000
Director & Secretary                                                                 

(1)  David Walters, Chairman and Director and Chief Financial Officer,          
total compensation is reflected in "Summary Compensation Table" above.
(2)  The Company did not pay any fees for director services.                    
(3)  Mr. Moore entered into an Independent Contractor Agreement with DCII       
on February 1, 2005 ("Contractor Agreement"). Mr. Moore's Contractor  
Agreement provides for him to serve DCII in the capacity of Secretary 
and Director.  The Contractor Agreement was renewed on February 1,    
2006 and expires December 31, 2008.  The Contractor Agreement renews  
thereafter on an annual basis unless terminated by either party. The  
Contractor Agreement may be terminated upon the breach of a term of   
the Contractor Agreement, which breach remains uncured for thirty (30)
days or by either party, for any reason with thirty (30) days written 
notice. The Contractor Agreement contains confidentiality clauses and 
work for hire clauses. The Contractor Agreement provides that Mr.     
Moore is not an employee of DCII.  Mr. Moore is entitled to be paid   
$10,000 per month under the Contractor Agreement.   The Company also  
paid $25,000 to Mr. Moore during 2006 for other consultation services 
which were outside of the scope of the Independent Contractor         
Agreement described above.                                            

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT         

The following table sets forth certain information regarding the beneficial     
ownership of the Company's common stock as of March 22, 2007 by (i) each        
person or entity known by the Company to be the beneficial owner of more        
than 5% of the outstanding shares of common stock, (ii) each of the             
Company's directors and named executive officers, and (iii) all directors       
and executive officers of the Company as a group.                               

84    

                                                                [Download Table]


Name and Address                        Shares of Common Stock      
of Beneficial Owners                    Beneficially Owned (1)      
                                        ----------------------------
                                        Number              Percent 
-------------------------------------   ------              ------- 
                                                                    
David Walters                           4,141,667 (2)       42.0%   
  30950 Rancho Viejo Rd #120                                        
  San Juan Capistrano, CA  92675                                    

Keith Moore                             4,141,667 (3)       42.0%   
  30950 Rancho Viejo Rd #120                                        
  San Juan Capistrano, CA  92675                                    

Joel Williams                             315,821 (4)        3.2%   
  30950 Rancho Viejo Rd #120                                        
  San Juan Capistrano, CA  92675                                    

Nite Capital, L.P.                        920,371 (5)        9.3%   
  101 East Cook Avenue, Suite 201                                   
  Libertyville, IL 60048                                            

All officers and directors              8,599,155 (2)(3)(4)  86.3%  
  as a group (3 people)                                             

(1) The number of shares of common stock owned are those "beneficially          
owned" as determined under the rules of the Securities and Exchange             
Commission, including any shares of common stock as to which a person has       
sole or shared voting or investment power and any shares of common stock        
which the person has the right to acquire within 60 days through the            
exercise of any option, warrant or right.  As of March 22, 2007, there were     
9,961,384 shares of common stock outstanding.                                   
(2) Mr. Walters beneficially owns his shares through Monarch Bay Capital        
Group, LLC, of which he is the sole member.                                     
(3) Mr. Moore beneficially owns his shares through MEL Enterprises, Ltd.        
(4)  Consists of 394,7766 shares of common stock issuable upon exercise of      
stock options granted under the Company's Stock Incentive Plan.                 
(5) The general partner of Nite Capital, LP is Nite Capital LLC, a Delaware     
limited liability company. Mr. Keith Goodman, a managing partner of Nite        
Capital LLC, has voting and investment control with respect to the shares       
of Common Stock beneficially owned by Nite Capital LP.                          

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS                   

On April 27, 1999, our Director, Keith Moore entered into a Working Capital     
Line of Credit agreement, with DCII, on January 1, 2001, Mr. Moore entered      
into a Working Capital Line of Credit agreement with DCII's wholly owned        
subsidiary, SDG, and on February 1, 2005, our Chairman and Chief Financial      
Officer, David Walters entered into a Working Capital Line of Credit            
agreement, with DCII (each a "Line of Credit" and collectively the "Lines       
of Credit").  Mr. Moore's Line of Credit agreements with DCII and SDG           
terminated effective December 31, 2005.                                         

85    

Mr. Walters' Line of Credit with DCII states that DCII shall pay him the        
amount owing under the Line of Credit (up to $250,000) on December 31,          
2006, plus any interest on the amounts outstanding as of the date the Line      
of Credit was entered into at the rate of 10% per annum. Interest on the        
Line of Credit is payable quarterly and becomes part of the principal           
amount of the Line of Credit if unpaid at the end of each quarter. The          
total amount outstanding under Mr. Walters' Line of Credit as of the date       
of December 31, 2006 was $0. In the event of default under the Line of          
Credit, which includes the failure of DCII to pay the Line of Credit when       
due, DCII's filing for bankruptcy, or the deterioration of the financial        
condition of DCII causing Mr. Walters to deem DCII insecure, the amount of      
unpaid principal and interest shall bear interest at the rate of 13% per        
annum until such time as it is paid. Mr. Walters' Line of Credit agreement      
with DCII terminated on December 31, 2006.                                      

In November 2005, the Company agreed to issue an aggregate of 8,283,334         
shares of common stock, to two entities, 4,141,667 shares to MEL                
Enterprises, Ltd., beneficially owned by Keith Moore, a Director of the         
Company and 8,283,334 shares to Monarch Bay Capital Group, LLC,                 
beneficially owned by David Walters, our Chairman and Chief Financial           
Officer, in connection with the Company's acquisition of DCII.                  

An amount of $22,800 was owed to Mr. Moore at December 31, 2005 for             
services rendered to SDG. This amount was non-interest bearing, unsecured,      
and due on demand.  The Company repaid this amount in March 2006.               

Both Mr. Walters and Mr. Moore entered into Independent Contractor              
Agreements with DCII on February 1, 2005 (each a "Contractor Agreement" and     
collectively the "Contractor Agreements"). Mr. Moore's Contractor Agreement     
provides for him to serve DCII in the capacity of Secretary and Director        
and Mr. Walters' Contractor Agreement provides for him to serve DCII in the     
capacity of Chief Executive Officer. The Contractor Agreements were renewed     
on February 1, 2006 and expire December 31, 2008.  The Contractor               
Agreements renew thereafter on an annual basis unless terminated by either      
party. Either of the Contractor Agreements may be terminated upon the           
breach of a term of either Contractor Agreement, which breach remains           
uncured for thirty (30) days or by either party, for any reason with thirty     
(30) days written notice. The Contractor Agreements contain confidentiality     
clauses and work for hire clauses. The Contractor Agreements provide that       
neither Mr. Walters nor Mr. Moore are employees of DCII. Mr. Walters and        
Mr. Moore are entitled to be paid $10,000 per month under the Contractor        
Agreements.   The Company paid $350,000 and $170,000 (including $40,000         
outstanding as of December 31, 2004) during the years ended December 31,        
2006 and 2005, respectively, related to the Contractor Agreements.  Amounts     
owed by the Company totaled $0 and $110,000 at December 31, 2006 and 2005,      
respectively.                                                                   

The Company also paid $25,000 to both Mr. Moore and Mr. Walters during 2006     
for other consultation services which were outside of the scope of the          
Independent Contractor Agreements described above.                              

86    

In March 2006, the Company entered into an agreement with Monarch Bay           
Management Company, L.L.C. ("MBMC") for chief financial officer services.       
David Walters, our Chairman and Chief Financial Officer, and Keith Moore,       
our director, each are members of, and beneficially own 50% of the              
ownership interests in, MBMC. Under the chief financial officer services        
agreement with MBMC, the Company is obligated to pay MBMC a monthly fee of      
$5,000 in cash.  The Company also reimburses MBMC for certain expenses in       
connection with providing services to the Company. The initial term of the      
agreement expires on March 31, 2007 and renews thereafter on an annual          
basis unless terminated by either party.  To date, no services have been        
provided under this agreement, accordingly, no amounts were paid to MBMC        
and/or accrued as of and for the year ended December 31, 2006.  The Company     
expects that services provided under this agreement will commence in March      
2007.                                                                           

On December 20, 2006, MBMC loaned $95,000 to DCII at 10% per annum.  The        
principal balance of loan was repaid in full on December 28, 2006 and           
accrued interest expense totaled $208 as of December 31, 2006.  On February     
5, 2007, MBMC loaned $125,000 to DCII at 10% per annum.  The principal          
balance of the loan was repaid in full on February 8, 2007.  On February 5,     
2007, MBMC also loaned $70,000 to the Company at 10% per annum.  The            
principal balance of the loan was repaid in full on February 15, 2007.          

In March 2006, DCII made a $7,500 payment to a vendor on behalf of Monarch      
Bay Associates, L.L.C. ("MBA").  David Walters, our Chairman and Chief          
Financial Officer, and Keith Moore, our director, each are members of, and      
beneficially own 50% of the ownership interests in MBA.     The amount is       
non-interest bearing and owed to the Company as of December 31, 2006.  The      
Company received payment in full in March 2007.                                 

In December 2006, DCI made two payments totaling $33,502 to vendors on          
behalf of Solana Technologies, Inc. ("STI").  At the time of the payments,      
David Walters, our Chairman and Chief Financial Officer, was Chairman and       
Chief Executive Officer of STI and beneficially owned a majority of the         
outstanding common stock of STI.  The amounts were non-interest bearing.        
The Company received payment in full in December 2006.  On January 2, 2007,     
the Company purchased office equipment totaling $1,244 from STI.                

On August 4, 2006, DCI borrowed $150,000 from BounceGPS, Inc. ("BounceGPS")     
at 10% per annum.  At the time of the loan, David Walters, our Chairman and     
Chief Financial Officer, was the Chairman and Chief Executive Officer of        
the parent company of BounceGPS and beneficially owned a majority of the        
outstanding common stock of such parent company.  The principal balance was     
repaid in full on September 11, 2006.  On October 4, 2006, the Company          
borrowed $18,000 from the same related company.  The principal balance was      
repaid in full on October 11, 2006.  On October 5, 2006, DCII borrowed          
$95,000 from the same related company.  The principal balance was repaid in     
full on October 11, 2006.  DCII also borrowed $220,000 during late October      
and early November 2006 from the same related company.  The entire              
outstanding balance of $220,000 was repaid on November 8, 2006.  Interest       
payments of $636 were made during 2006 and accrued interest totaled $1,899      
as of December 31, 2006                                                         

During 2006, DCI and DCII paid $1,361 and $27,395, respectively, to             
DataLogic International, Inc. for various services including accounting,        
payroll, human resource, and other administrative duties.  Mr. Moore, our       
Director, is the Chairman and  Chief Executive Officer of DataLogic             
International, Inc.                                                             

87    

On November 8, 2005, DCII and DCI entered into a Factoring and Security         
Agreement to sell accounts receivables to Systran Financial Services            
Corporation ("Systran").  All of DCII's and DCI's accounts receivable are       
pledged as collateral under this agreement.  In addition, David Walters and     
Keith Moore have personally guaranteed $500,000 of the total available          
facility.  Mr. Walters and Mr. Moore did not receive any compensation for       
this personal guarantee in 2006 or 2005.                                        

We have entered into an indemnification agreement with each of Mr. Walters,     
Mr. Moore and Joel Williams, our Chief Executive Officer. We will indemnify     
them to the fullest extent permitted by law if they become a party to or        
witness or other participant in, or are threatened to be made a party to or     
witness or other participant in, any threatened, pending or completed claim     
by reason of (or arising in part out of) any event or occurrence related to     
the fact that they are or were a director, officer, employee, agent or          
fiduciary of ours, or any subsidiary of ours, or they are or were serving       
at our request as a director, officer, employee, agent or fiduciary of          
another corporation, partnership, joint venture, trust or other enterprise,     
or by reason of any action or inaction on their part while serving in such      
capacity against any and all expenses, judgments, fines, penalties and          
amounts paid in settlement and any federal, state, local or foreign taxes       
imposed on them as a result of the actual or deemed receipt of any              
indemnification payments made by us to or on their behalf. We are entitled      
to reimbursement of any advance indemnification payments that we make to or     
on their behalf if, when and to the extent that a disinterested director,       
group of disinterested directors or independent legal counsel determines        
that they would not be permitted to be so indemnified under applicable law.     
We are not obligated to indemnify them for the following:                       

-   Acts, omissions or transactions for which they are prohibited from      
receiving indemnification under applicable law.                     
-   Claims initiated or brought voluntarily by them and not by way of       
defense, except for claims brought to establish or enforce a right  
to indemnification or in specific cases if our Board of Directors   
has approved the initiation or bringing of such claim, or as        
otherwise required under the Nevada Revised Statutes, regardless of 
whether they ultimately are determined to be entitled to such       
indemnification, advance expense payment or insurance recovery, as  
the case may be.                                                    
-   Any proceeding instituted by them to enforce or interpret their         
indemnification agreement, if a court of competent jurisdiction     
determines that each of the material assertions made by either of   
them in such proceeding was not made in good faith or was frivolous.
-   Violations of Section 16(b) of the Exchange Act or any similar          
successor statute.                                                  

As part of our focus on growing profitable operations, we decided to            
discontinue and dispose of certain operations which we determined did not       
demonstrate suitable growth or profitability prospects. On December 15,         
2005, we completed the disposition of all of the outstanding capital stock      
of Marathon Healthcare Corporation to Macdonald Tudeme and Marguerite           
Tudeme, the former controlling shareholders of the Company. At the time of      
the disposition, Marathon's assets included substantially all of the            
corporate names, business, operations, assets, properties, intellectual         
properties, trademarks, service marks, trade names, uniform resource            
locators, telephone numbers, and good will of the Company and its               
subsidiaries (other than DCII and DCI). These assets included all of the        
operations of the Company's former operating subsidiaries MT Marketing Int.     

88    

Corp and Abundant Healthcare, Inc. In exchange for all of the outstanding       
capital stock of Marathon and a  payment to the Tudemes of $80,442, of          
which $50,000 was paid as of December 31, 2006, the Company received from       
the Tudemes 396,569 shares of the Company's Common Stock. In connection         
with the disposition of Marathon, we also (a) assumed and released the          
Tudemes from certain liabilities and (b) pledged to Marathon 222,223 shares     
of our Common Stock as collateral to secure the performance and payment of      
a promissory note in the amount of $257,038 payable to Lisa Stern               
originally entered into as part of the Company's purchase of a former           
operating subsidiary. If we fail to pay any principal of or interest on the     
note when due, we will be in default of our obligations and Marathon will       
be able to retain and sell the pledged Common Stock to satisfy our              
obligations.                                                                    

ITEM 13. EXHIBITS                                                               

The exhibits required by Item 601 of Regulation S-B are identified below        
and attached hereto or incorporated by reference as noted in the list.          

3.1(1)       Articles of Incorporation                                      
3.2(2)       Articles of Amendment to Articles of Incorporation             
3.3(3)       Articles of Amendment to Articles of Incorporation             
3.4(4)       Articles of Amendment to Articles of Incorporation             
3.5(11)      Amended and Restated Bylaws                                    
4.1(11)      2005 Stock Incentive Plan.                                     
10.1(5)      Securities Purchase Agreement dated August 31, 2004            
10.2(5)      Callable Secured Convertible Note with AJW Partners, LLC,      
dated August 31, 2004                             
10.3(5)      Callable Secured Convertible Note with AJW Offshore, Ltd.,     
dated August 31, 2004                             
10.4(5)      Callable Secured Convertible Note with AJW Qualified           
Partners, LLC, dated August 31, 2004              
10.5(5)      Callable Secured Convertible Note with New Millennium          
Capital Partners II, LLC, dated August 31, 2004   
10.6(5)      Stock Purchase Warrant with AJW Partners, LLC, dated August    
31, 2004                                          
10.7(5)      Stock Purchase Warrant with AJW Offshore, Ltd., dated August   
31, 2004                                          
10.8(5)      Stock Purchase Warrant with AJW Qualified Partners, LLC,       
dated August 31, 2004                             
10.9(5)      Stock Purchase Warrant with New Millennium Capital Partners    
II, LLC, dated August 31, 2004                    
10.10(5)     Registration Rights Agreement dated August 31, 2004            
10.11(5)     Security Agreement dated August 31, 2004                       
10.12(5)     Intellectual Property Security Agreement dated August 31,      
2004                                              
10.13(5)     Guarantee and Pledge Agreement dated August 31, 2004           
10.14(6)     Modification of Loan Agreement with SBA                        
10.15(6)     Amended and Restated Note with SBA                             
10.16(7)     Share Exchange and Reorganization Agreement with iTech         
10.17(7)     Securities Purchase Agreement (November 4, 2005)               
10.18(7)     Callable Secured Convertible Note with AJW Partners, LLC,      
dated November 4, 2005                            
10.19(7)     Callable Secured Convertible Note with AJW Offshore, Ltd.,     
dated November 4, 2005                            
10.20(7)     Callable Secured Convertible Note with AJW Qualified           
Partners, LLC, dated November 4, 2005             
10.21(7)     Callable Secured Convertible Note with New Millennium          
Capital Partners II, LLC, dated November 4, 2005  
10.22(7)     Stock Purchase Warrant with AJW Partners, LLC, dated           
November 4, 2005                                  

89    

10.23(7)     Stock Purchase Warrant with AJW Offshore, Ltd., dated          
November 4, 2005                                  
10.24(7)     Stock Purchase Warrant with AJW Qualified Partners, LLC,       
dated November 4, 2005                            
10.25(7)     Stock Purchase Warrant with New Millennium Capital Partners    
II, LLC, dated November 4, 2005                   
10.26(7)     Registration Rights Agreement, dated November 4, 2005          
10.27(7)     Intellectual Property Security Agreement, dated November 4,    
2005                                              
10.28(7)     Security Agreement, dated November 4, 2005                     
10.29(7)     Spinoff Agreement                                              
10.30(7)     Security Agreement (with Marathon)                             
10.31(7)     Stock Purchase Agreement (November 7, 2005 - with Drug         
Consultants, Inc.)                                
10.32(7)     Secured Promissory Note with Drug Consultants                  
10.33(7)     Stock Pledge Agreement with Drug Consultants                   
10.34(7)     Factoring and Security Agreement (to sell accounts             
    receivables to Systran Financial Services Corporation)
10.35(13)    First Amendment to Factoring Agreement                         
10.36(7)     Letter Agreement (states that the Company is not in default    
      under 2005 securities purchase agreement unless defaults
under 2004 securities purchase agreement)         
10.37(7)     Working Capital Line of Credit (DCII) with David Walters       
10.38(7)     Working Capital Line of Credit (DCII) with Keith Moore         
10.39(7)     Working Capital Line of Credit (SDG) with Keith Moore          
10.39(11)    Indemnification Agreement with David Walters                   
10.40(11)    Indemnification Agreement with Keith Moore                     
10.45(14)    Indemnification Agreement with Joel Williams                   
10.41(8)     Amendment No. 1 to Securities Purchase Agreement               
10.42(11)    Amendment No. 2 to Securities Purchase Agreement               
10.42(14)    Amendment No. 3 to Securities Purchase Agreement               
10.42        Amendment No. 4 to Securities Purchase Agreement               
10.43(9)     Employment Agreement with David Walters                        
10.44(9)     Letter Agreement with Monarch Bay Management Company           
10.48(14)    Employment Agreement with Joel Williams                        
16.1(10)     Letter from Clyde Bailey P.C. dated June 20, 2005              
21.1         Subsidiaries of Registrant                                     
31.1         Certification of Principal Executive Officer pursuant to       
      Rules 13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934                              
31.2         Certification of Principal Financial Officer pursuant to       
      Rules 13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934                              
32.1         Certification of Chief Executive Officer and Chief Financial   
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
       pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1) Filed as Exhibits to the registration statement on Form 10-SB12G filed      
on July 15, 2002, and incorporated herein by reference.                         
(2) Filed as an Exhibit to the report on Form 8-K filed on September 2,         
2003, and incorporated herein by reference.                                     
(3) Filed as an Exhibit to the report on Form 8-K filed on September 30,        
2003, and incorporated herein by reference.                                     
(4) Filed as an Exhibit to the report on Form 8-K filed on April 4, 2006,       
and incorporated herein by reference.                                           
(5) Filed as an Exhibit to the SB-2 Registration Statement filed on October     
5, 2004, and incorporated herein by reference.                                  
(6) Filed as Exhibits to the Company's SB-2/A Registration Statement filed      
with the Securities and Exchange Commission on January 21, 2005, and            
incorporated herein by reference.                                               

90    

(7) Filed as Exhibits to the report on Form 8-K filed on November 14, 2005      
and incorporated herein by reference.                                           
(8) Filed as an Exhibit to the report on Form 8-K filed on February 24,         
2006 and incorporated herein by reference.                                      
(9) Filed as an Exhibit to the report on Form 8-K filed on March 27, 2006       
and incorporated herein by reference.                                           
(10) Filed as an Exhibit to the report on Form 8-K filed on June 21, 2005       
and incorporated herein by reference.                                           
(11) Filed as an Exhibit to the report on Form 10-KSB filed on May 19, 2006     
and incorporated herein by reference.                                           
(12) Filed as an Exhibit to the report on Form 10-QSB filed on August 9,        
2006 and incorporated herein by reference.                                      
(13) Filed as an Exhibit to the report on Form 8-K filed on September 7,        
2006 and incorporated herein by reference.                                      
(14) Filed as an Exhibit to the report on Form 10-QSB filed on November 14,     
2006 and incorporated herein by reference.                                      

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                 

Audit Fees                                                                      
----------                                                                      

The aggregate fees billed in each of the fiscal years ended December 31,    
2006 and 2005 for professional services rendered by the principal               
accountant for the audit of our annual financial statements and review of       
the financial statements included in our Form 10-KSB or services that are       
normally provided by the accountant in connection with statutory and            
regulatory filings or engagements for those fiscal years were $63,621 and       
$40,000, respectively.                                                          

Audit Related Fees                                                              
------------------                                                              
There were no fees billed for services reasonably related to the            
performance of the audit or review of the financial statements outside of       
those fees disclosed above under "Audit Fees" for fiscal years 2006 and         
2005.                                                                           

Tax Fees                                                                        
--------                                                                        
For the fiscal years ended December 31, 2006 and December 31, 2005, our     
principal accountants did not render any services for tax compliance, tax       
advice, and tax planning work.                                                  

All Other Fees                                                                  
--------------                                                                  
None.                                                                       

91    

SIGNATURES    

In accordance with Section 13 or 15(d) of the Exchange Act, the             
Registrant has caused this report to be signed on its behalf by the             
undersigned, thereunto duly authorized, in San Juan Capistrano, California,     
on March 30, 2007.                                                              

                        Monarch Staffing, Inc., a Nevada corporation

  By: /s/  Joel Williams
                  --------------------------------------
   Chief Executive Officer

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      
in San Juan Capistrano, California, as of the dates indicated.                  

NAME                          TITLE                         DATE                

/s/ David Walters             Chief Financial Officer,      March 30, 2007      
----------------------        and Chairman                                      
David Walter                                                                    

/s/ Keith Moore               Director and Secretary        March 30, 2007      
----------------------                                                          
Keith Moore                                                                     

92    

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This 10KSB Filing		Date		First		Last			Other Filings
		4/27/99		2
		9/13/00		1		2
		1/1/01		2
		7/15/02		2					10SB12G
		8/8/03		1					4, 8-K, 8-K/A, 3
		8/15/03		2
		9/2/03		2					8-K
		9/30/03		2					10QSB/A, 10QSB, 8-K
		12/31/03		2					NT 10-K, 10KSB, 10KSB/A
		1/1/04		2
		5/20/04		2
		8/31/04		1		2			4, 8-K
		10/1/04		2					8-K
		10/5/04		2					SB-2, 8-K
		12/31/04		2					NT 10-K, 10KSB
		1/1/05		2
		1/21/05		2					SB-2/A
		2/1/05		2
		5/16/05		2
		6/1/05		2
		6/10/05		2
		6/20/05		2
		6/21/05		2					8-K
		9/30/05		2					10QSB, NT 10-Q
		11/4/05		1		2			8-K, 3/A, 8-K/A, 3
		11/7/05		1		2
		11/8/05		1		2			8-K
		11/10/05		1		2			NT 10-Q
		11/14/05		2					8-K
		12/1/05		1
		12/15/05		1		2
		12/31/05		1		2			10KSB/A, 10KSB, NT 10-K
		1/1/06		2
		1/19/06		1		2
		1/25/06		1		2
		2/1/06		2					8-K
		2/2/06		1		2
		2/24/06		2					8-K
		3/6/06		2
		3/21/06		2					8-K
		3/27/06		1		2			8-K
		3/31/06		1		2			NT 10-Q, 10QSB, DEF 14C, 8-K
		4/4/06		2					8-K
		5/19/06		2					10KSB
		6/5/06		1		2
		7/24/06		1		2
		8/4/06		2
		8/9/06		2					10QSB
		9/1/06		2					3
		9/7/06		2					8-K
		9/11/06		2
		9/15/06		2
		10/4/06		2
		10/5/06		2
		10/11/06		2
		11/1/06		1		2
		11/8/06		2
		11/14/06		2					10QSB
		11/15/06		2
		12/20/06		2
		12/28/06		2
For The Period Ended		12/31/06		1		2
		1/1/07		2
		1/2/07		2
		2/5/07		2
		2/8/07		2
		2/15/07		2
		3/1/07		1
		3/21/07		1
		3/22/07		1		2
		3/29/07		1		2
Filed On		3/30/07		2
		3/31/07		2
Filed As Of		4/2/07
		4/30/07		1		2
		5/25/07		1		2
		9/30/07		1
		10/31/07		1		2
		11/15/07		2
		11/25/07		1		2
		11/30/07		1
		12/31/07		2
		1/1/08		2
		6/30/08		1
		12/31/08		2
		10/1/09		2
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