UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
Date of Report (Date of Earliest Event Reported): 9-25-03
MEDICAL STAFFING SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 333-71276 91-2135006
(State or jurisdiction (Commission (I.R.S. Employer
of incorporation or File Identification
Number)
organization) Number)
8150 Leesburg Pike, Suite 1200
Vienna, Virginia 22182
(Address of principal executive offices)
703-641-8890
Registrant's telephone number, including area code)
3021 West Excel
Spokane, Washington 99208
(Former name or former address, if changed since last
report)
ITEM 1. CHANGES IN CONTROL OF THE REGISTRANT.
On September 25, 2003, the Registrant entered into a Share Exchange
Agreement (the "Agreement") to acquire TeleScience International, Inc.
("TII"), a private company, as more fully described in Exhibit 10.1
attached hereto.
Under the terms of the Agreement, the Registrant will issue
2,200,000 shares of its common stock to the sole TII security holder in
exchange for all of the outstanding securities of TII. The Agreement
was approved by the Board of Directors of TII on September 25, 2003, and
by the Board of Directors of the Registrant on September 25, 2003, at
which time the agreement was closed. On that date, the Registrant's two
officers and directors, Kelly P. Jones and Nicole M. Jones, resigned
after electing B.B. Sahay as the new director of the Registrant. Mr.
Jones also directed the Registrant to cancel 9,953,333 of the common
shares previously issued to him. Thus, Dr. Sahay assumed control of the
Registrant.
TII is a government contractor specializing in staffing hospitals
and medical facilities for federal, state and local governments. TII
also has a homeland security division that markets decontamination
products and services to federal, state, and local governments. TII
also has a technical services division that focuses on systems
integration services and maintenance for the U.S. government. TII
currently has more than 200 employees working in 24 states and the
District of Columbia. TII has grown from initial revenues of $200,000
in its first year of operations to approximately $10 million projected
for 2003.
Brief background of the new management of the Registrant is as follows:
B.B. Sahay B Chairman/CEO - Dr. Sahay earned his Ph.D. in control
systems, science and engineering from Washington University in St.
Louis, Missouri in 1973. He founded TII in 1987, and began operations
in 1992. Prior to establishing TII, he held management and advisory
positions with such companies as CONTEL, IBM's Satellite Business
Systems, MCI and MITRE Corporation.
Page -1-
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS.
On September 26, 2003, the Board of Directors of the Registrant declared
a stock dividend for all common stock shareholders in the amount of 14-
for-1 or 1,400%. The record date for the dividend was September 29,
2003, and the projected dividend pay date will be September 30, 2003.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Not Applicable
(b) Pro Forma Financial Information
1.) TELESCIENCE INTERNATIONAL, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
2.) TELESCIENCE INTERNATIONAL, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
Page -2-
TELESCIENCE INTERNATIONAL, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
TELESCIENCE INTERNATIONAL, INC.
Page -3-
INDEX TO FINANCIAL STATEMENTS
PAGE(S)
Independent Auditors' Report 1
Balance Sheets as of December 31, 2002 and 2001 2
Statements of Operations for the Years Ended
December 31, 2002 and 2001 3
Statements of Changes in Stockholder's Equity (Deficit) for the
Years Ended December 31, 2002 and 2001 4
Statements of Cash Flows for the Years Ended
December 31, 2002 and 2001 5
Notes to Financial Statements
6-13
Page -4-
INDEPENDENT AUDITORS' REPORT
To the Stockholder of
Telescience International, Inc.
Vienna, VA
We have audited the accompanying balance sheets of
Telescience International, Inc. (the "Company") as of
December 31, 2002 and 2001 and the related statements of
operations, changes in stockholders' equity (deficit), and
cash flows for the years then ended. These financial
statements are the responsibility of management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of
America. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides
a reasonable basis for our opinion.
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As
discussed in Note 12 to the financial statements, the
Company has recurring operating deficits and cash flow
concerns that lead to doubt about its ability to continue as
a going concern. Management's plans in regards to these
matters are also discussed in Note 12. The financial
statements do not include any adjustments that might result
from the outcome of these uncertainties.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Telescience International, Inc. as of December
31, 2002 and 2001, and the results of its statements of
operations, changes in stockholders' equity (deficit), and
cash flows for the years then ended in conformity with
accounting principles generally accepted in the United
States of America.
BAGELL, JOSEPHS & COMPANY, L.L.C.
BAGELL, JOSEPHS & COMPANY, L.L.C.
Gibbsboro, New Jersey
December 24, 2003
Page -5- F1
TELESCIENCE INTERNATIONAL, INC.
BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
ASSETS
2002 2001
----------
- ----------
Current Assets:
Cash and cash equivalents $ 10,402 $
7,297
Accounts receivable, net 1,235,793
825,573
Prepaid expenses 21,824
- -
----------
- ----------
Total Current Assets 1,268,019
832,870
----------
- ----------
Fixed assets, net of depreciation 29,252
36,392
Deposits 11,410
11,410
----------
- ----------
TOTAL ASSETS $ 1,308,681 $
880,672
==========
==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities:
Note payable - current portion $ 731,758 $
983,156
Accounts payable and accrued expenses 1,235,264
613,590
Litigation settlement payable 1,092,156
- -
Due to officers 71,379
73,070
----------
- ----------
Total Current Liabilities 3,130,557
1,669,816
----------
- ----------
Note payable, net of current portion 220,000
163,000
----------
- ----------
Total Liabilities 3,350,557
1,832,816
----------
- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, $.01 and $1.00 Par Value; 10,000,000
shares authorized and 4,000,000 and 3,000 shares
issued and outstanding at December 31, 2002
and 2001, respectively 40,000
3,000
Additional Paid-in Capital 941,366
828,366
Deficit (3,023,242)
(1,783,510)
----------
- ----------
Total Stockholders' Equity (Deficit) (2,041,876)
(952,144)
----------
- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 1,308,681 $
880,672
==========
==========
The accompanying notes are an integral part of the financial statements.
Page -6- F2
TELESCIENCE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
------------- -------------
OPERATING REVENUES
Revenue $ 6,366,894 $ 4,388,694
COST OF SALES 4,378,641 3,723,377
------------- -------------
GROSS PROFIT 1,988,253 665,317
------------- -------------
OPERATING EXPENSES
Administrative commissions and payroll 1,267,572 580,746
Rent and insurance expense 377,768 239,129
Advertising expense 19,435 24,432
General and administrative expenses 288,331 358,127
Depreciation and amortization 7,140 7,140
------------- -------------
Total Operating Expenses 1,960,246 1,209,574
------------- -------------
LOSS BEFORE OTHER (EXPENSES) 28,007 (544,257)
OTHER (EXPENSES)
Unrealized loss on investment (151,773) (235,496)
Litigtation settlement (1,092,156) -
Interest expense (23,810) (76,982)
------------- -------------
Total Other (Expenses) (1,267,739) (312,478)
------------- -------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES $(1,239,732) $ (856,735)
Provision for Income Taxes - -
------------- -------------
NET LOSS APPLICABLE TO COMMON SHARES $(1,239,732) $ (856,735)
============= =============
NET LOSS PER BASIC AND DILUTED SHARES $ (0.61925) $ (285.57839)
============= =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 2,002,000 3,000
============= =============
The accompanying notes are an integral part of the financial statements.
Page -7- F3
TELESCIENCE INTERNATIONAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
Common Stock Additional
Description Shares Amount Paid - in
Deficit Total
Capital
- ---------------------------------------------------------------
Balance, January 1, 2001 3,000 $ 3,000 $ 828,366 $
(926,775) $ (95,409)
Net loss for the year - - -
(856,735) (856,735)
- ---------------------------------------------------------------
Balance, December 31, 2001 3,000 3,000 828,366
(1,783,510) (952,144)
Issuance of common stock for cash 1,000 1,000 149,000
- 150,000
1000 to 1 stock split and par
value change 3,996,000 36,000 (36,000)
- -
Net loss for the year - - -
(1,239,732) (1,239,732)
- ---------------------------------------------------------------
Balance, December 31, 2002 4,000,000 $ 40,000 $ 941,366 $
(3,023,242) $ (2,041,876)
The accompanying notes are an integral part of the financial statements.
Page -8- F4
TELESCIENCE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
------------ ------------
CASH FLOW FROM OPERTING ACTIVIITES
Net loss $(1,239,732) $ (856,735)
------------ ------------
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 7,140 7,140
Changes in assets and liabilities
(Increase) decrease in accounts receivable (410,220) 458,188
(Increase) in prepaid expenses (21,824) -
(Increase) in deposits - (2,000)
Increase in accounts payable and
and accrued expenses 651,768 408,643
Increase in litigation
settlement payable 929,156 -
------------ ------------
Total adjustments 1,156,020 871,971
------------ ------------
Net cash (used in) operating activities (83,712) 15,236
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase (decrease) in amounts due from
officer (1,691) 73,070
------------ ------------
Net cash provided by (used in) investing
activities (1,691) 73,070
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITES
Proceeds from common stock issuances 150,000 -
Net payments of notes payable (31,398) (93,072)
------------ ------------
Net cash provided by financing activities 118,602 (93,072)
------------ ------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 33,199 (4,766)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD (22,797) 12,063
------------ ------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 10,402 $ 7,297
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest expense $ 20,685 $ 5,498
============ ============
The accompanying notes are an integral part of the financial statements.
Page -9- F5
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Telescience International, Inc. (the "Company"),
was founded in 1987. The Company is a provider of
medical personnel to state and federal government
agencies, primarily hospital and medical
facilities. The Company also operates a Homeland
Security division that provides emergency
equipment, decontamination products, vehicles and
supplies to state and local governments.
Additionally, the Company's Technology Services
division provides systems integration and
technology services to the federal government.
On September 26, 2003, the Company was acquired by
Medical Staffing Solutions, Inc. Upon this
acquisition, the Company became a wholly-owned
subsidiary of Medical Staffing Solutions, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally
accepted in the United States of America requires
management to make estimates and assumptions that
affect the reported amounts of assets and
liabilities and disclosures of contingent assets
and liabilities at the date of the financial
statements and the reported amounts of revenues
and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue and Cost Recognition
Revenue is recognized under the accrual method of
accounting when the services are rendered rather
than when cash is collected for the services
provided.
Cost is recorded on the accrual basis as well,
when the services are incurred rather than paid
for.
Cash and Cash Equivalents
The Company considers all highly liquid debt
instruments and other short-term investments with
an initial maturity of three months or less to be
cash equivalents.
The Company maintains cash and cash equivalent
balances at several financial institutions that
are insured by the Federal Deposit Insurance
Corporation up to $100,000.
Page -10- F6
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2002 AND 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Fixed Assets
Fixed assets are stated at cost. Depreciation is
computed primarily using the straight-line method
over the estimated useful life of the assets.
Furniture and fixtures 7 Years
Office equipment 5 Years
Income Taxes
The income tax benefit is computed on the pretax
loss based on the current tax law. Deferred income
taxes are recognized for the tax consequences in
future years of differences between the tax basis
of assets and liabilities and their financial
reporting amounts at each year-end based on
enacted tax laws and statutory tax rates.
Advertising
Costs of advertising and marketing are expensed as
incurred. Advertising and marketing costs were
$19,435 and $24,432 for the years ended December
31, 2002 and 2001, respectively.
Page -11- F7
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2002 AND 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Software Development Costs
Software development costs are accounted for in
accordance with Statement of Position 98-1,
"Software Developed or Obtained for Internal Use".
Costs incurred in a preliminary project stage are
expensed as incurred. External direct costs,
payroll and payroll related costs for those
directly involved with a project and interest
costs in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS)
No. 34, "Capitalization of Interest Cost", are
capitalized during the application development
stage. Costs incurred during the post-
implementation/ operation stage are expensed as
incurred. During 2002 and 2001, the Company
expensed all software development costs.
Fair Value of Financial Instruments
The carrying amount reported in the balance sheets
for cash and cash equivalents, accounts payable
and accrued expenses approximate fair value
because of the immediate or short-term maturity of
these financial instruments. The carrying amount
reported for notes payable approximates fair value
because, in general, the interest on the
underlying instruments fluctuates with market
rates.
Start-up Costs
In accordance with Statement of Position 98-5,
"Accounting for Start-up Costs", the Company has
expensed all of their costs relating to the start-
up of their Homeland Security division in the
period in which those costs related to. The
Company has expensed approximately $150,000 as of
December 31, 2002, and these costs are included in
the accompanying statements of operations.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities".
SFAS No. 133 requires companies to recognize all
derivative contracts as either assets or
liabilities in the balance sheet and to measure
them at fair value. If certain conditions are
met, a derivative may be specifically designated
as a hedge, the objective of which is to match the
timing of the gain or loss recognition on the
hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged
forecasted transaction.
Page -12- F8
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2002 AND 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent Accounting Pronouncements (Continued)
For a derivative not designated as a hedging
instrument, the gain or loss is recognized in
income in the period of change. On June 30, 1999,
the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement
No. 133". SFAS No. 133 as amended by SFAS No. 137
is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. In June
2000, the FASB issued SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain
Hedging Activities". SFAS No. 133 as amended by
SFAS No. 137 and 138 is effective for all fiscal
quarters of fiscal years beginning after June 15,
2000.
Historically, the Company has not entered into
derivatives contracts to hedge existing risks or
for speculative purposes. Accordingly, the
Company does not expect adoption of the new
standard to have a material effect on the
financial statements.
In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB 101 provides guidance for
revenue recognition under certain circumstances,
and is effective during the first quarter of
fiscal year 2001. SAB 101 is not expected to have
a material effect on the results of operations,
financial position and cash flows.
In June 2001, the FASB issued Statement No. 142
"Goodwill and Other Intangible Assets". This
Statement addresses financial accounting and
reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No.
17, Intangible Assets. It addresses how intangible
assets that are acquired individually or with a
group of other assets (but not those acquired in a
business combination) should be accounted for in
financial statements upon their acquisition. This
Statement also addresses how goodwill and other
intangible assets should be accounted for after
they have been initially recognized in the
financial statements. This statement is not
expected to have a material effect on the
financial statements.
Page -13- F9
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2002 AND 2001
NOTE 3- ACCOUNTS RECEIVABLE
A majority of the Company's revenues are derived
from government contracts for personnel at various
state and federal agencies including hospitals,
medical facilities and penitentiaries. As such,
payment for services rendered are based on
negotiated terms. The Company does not currently
provide for an allowance of doubtful accounts and
often evaluates receivables for collectibility. At
December 31, 2002 and 2001, the Company has
$1,235,793 and $825,573 due to them for their
services.
The accounts receivable are being used as
collateral on a line of credit the Company has
with a factor (See Note 5).
NOTE 4- PROPERTY AND EQUIPMENT
Property and equipment consist of the following at
December 31, 2002 and 2001:
2002 2001
------ --------
Furniture, fixtures and equipment $ 83,849 $ 83,849
Less: accumulated depreciation (54,597) (47,457)
---------- -----------
Net book value $ 29,252 $ 36,392
Depreciation expense for the years ended December
31, 2002 and 2001 was $7,140 and $7,140, respectively.
NOTE 5- NOTES PAYABLE
In May 2002, the Company entered into a line of
credit agreement with a factor. The loan, which is
due on demand bears interest at prime plus 1.00%
plus .71% per month. The factor lends up to 90% of
the receivable balance to the Company, and
receives payment directly on the outstanding
receivables and the remaining balance is remitted
to the Company. The outstanding balance at
December 31, 2002 was $796,732. The balance is
reflected net of a 10% reserve that the factor has
established which is adjusted on each funding.
In 2001, and up through May 2002, the Company had
a line of credit with a bank to fund working
capital. The line of credit was collateralized by
the Company's accounts receivable. The outstanding
balance at December 31, 2001 was $983,156.
Page -14- F10
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2002 AND 2001
NOTE 5- NOTES PAYABLE (CONTINUED)
In May 2002, the Company borrowed $220,000 from an
individual to be used in developing the Company's
business plan, including the Homeland Security
division. The note payable is non-interest
bearing, and due on demand. At December 31, 2002,
the balance remains $220,000. The Company does not
anticipate this note to be due during the next
fiscal year however, due to this note being due on
demand has classified this as a current liability.
In 1997, the Company borrowed $300,000 plus
interest at 10% from an individual and had started
repayments of that note with interest and paid
down the balance to $163,000. The Company received
notice in 2002 that the lender filed a lawsuit
against the Company, and in 2002 recorded the full
settlement amount due the lender. The remaining
balance of $163,000 is included in that settlement
amount as of December 2002.
NOTE 6- INVESTMENT
Beginning in 2001, the Company started investing
in a private air strip in Branson, Missouri. The
project after the Company funded approximately
$387,269 as of December 31, 2002 ($235,496 as of
December 31, 2001), ran out of funding, and the
project has since ceased for the moment.
Management has reserved an allowance for the
entire amount, as the investment value is not
known.
NOTE 7- DUE TO OFFICER
Advances to/from an officer of the Company in the
amount of $71,379 and $73,070 at December 31, 2002
and 2001, respectively. The officer has not been
charging interest, and the amounts are classified
as current liabilities as they are due on demand.
Advances were being utilized to help fund
operations.
NOTE 8- PROVISION FOR INCOME TAXES
Deferred income taxes will be determined using the
liability method for the temporary differences
between the financial reporting basis and income
tax basis of the Company's assets and liabilities.
Deferred income taxes will be measured based on
the tax rates expected to be in effect when the
temporary differences are included in the
Company's consolidated tax return. Deferred tax
assets and liabilities are recognized based on
anticipated future tax consequences attributable
to differences between financial statement
carrying amounts of assets and liabilities and
their respective tax bases.
Page -15- F11
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2002 AND 2001
NOTE 8- PROVISION FOR INCOME TAXES (CONTINUED)
At December 31, 2002 and 2001, deferred tax assets
approximated the following:
2002 2001
------ ------
Net operating loss carryforwards $ 1,027,964 $ 606,393
Less: valuation allowance ( 1,027,964) (606,393)
------------ ----------
$ -0- $ -0-
At December 31, 2002 and 2001, the Company had
accumulated deficits approximating $3,023,242 and
$1,783,510, respectively, available to offset
future taxable income through 2022. The Company
established valuation allowances equal to the full
amount of the deferred tax assets due to the
uncertainty of the utilization of the operating
losses in future periods.
NOTE 9- STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock
The Company incorporated in 1987 with 10,000
shares of common stock authorized at $1.00 par
value. It remained that way until June 2002 when
the Company had a 1,000 to 1 stock split and
currently has 10,000,000 shares authorized. With
this the par value changed to $.01.
In 1987 through 1994, 3,000 shares of common stock
were issued for various amounts of money, and
those 3,000 shares remained issued and outstanding
until 2002, when, net 1,000 additional shares were
issued for $150,000. These shares were issued to
the President who put the additional funds into
the Company for the equity. The 4,000 shares were
split into 4,000,000 shares which remained until
September 2003, when the Company reverse merged
into a public shell company, Medical Staffing
Solutions, Inc.
Preferred Stock
The Company had a class of preferred stock with
1,000 shares authorized at $1.00 par value until
2002 when the class of stock was no longer
authorized. There were no issuances of preferred
stock at anytime.
Page -16- F12
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2002 AND 2001
NOTE 10- LITIGATION
The Company is party to a claim pursuant to which
an individual was seeking damages under an
agreement the Company entered into in 2002. The
Company eventually settled this claim, and
consequently recorded a liability for the settled
amount of $1,092,156, which includes attorney's
fees. The payout of this settlement will be over
forty-two months in monthly installments of
$12,500 commencing February 2003. The settlement
accrues interest at 12% upon any default of the
agreement. As part of this agreement the
individual can seek no further damages against the
Company.
In November 2003, the President of the Company in
a private stock transaction, signed over personal
shares of Medical Staffing Solutions, Inc. stock
in consideration for this liability. As such, the
Company recorded a loan payable to the President
for the unpaid liability at that time, $979,656.
NOTE 11- COMMITMENT
The Company has established a 401(k) Plan for its
employees, and the Company has agreed to match a
portion of the contribution. The expense for the
Company for the years ended December 31, 2002 and
2001 were $23,505 and $46,929, respectively.
NOTE 12- GOING CONCERN
As shown in the accompanying financial statements,
the Company incurred substantial net losses for
the years ended December 31, 2002 and 2001. There
is no guarantee whether the Company will be able
to generate enough revenue and/or raise capital to
support those operations. This raises doubt about
the Company's ability to continue as a going
concern.
Management also states that they are confident
that they can improve operations and raise the
appropriate funds needed through their recent
contracts the Company has entered into in the past
few months, as well as the completed reverse
merger with Medical Staffing Solutions, Inc., with
which the Company now has the ability to raise
money in the public markets, and has been offered
a term sheet for an equity line of credit for up
to 10 million dollars and additional short term
financing that it will use for working capital and
acquisitions. This will provide the Company funds
in which to continue to ensure that their goals in
their business plan are achieved.
The financial statements do not include any
adjustments that might result from the outcome of
these uncertainties.
NOTE 13- SUBSEQUENT EVENTS
On September 26, 2003, the Company was acquired by
Medical Staffing Solutions, Inc., a publicly
traded bulletin board company (OTC) in a reverse
merger.
In October 2003, the Company announced plans to
enter into the Home Health Care Industry and
provide services to the private sector as well as
expand services in the public sector.
In October 2003, the Company extended their
agreement with the California State Department of
Corrections for Contract Nursing Staff. This
agreement as an annual estimated value of 2.5
million dollars.
In November 2003, the Company was awarded a three-
year 2.6 million dollar contract with the
Department of Health and Human Services to provide
nursing staff to the U.S. Public Health Service in
support of the National Hansen's Disease Programs
based in Louisiana. This is the second such
contract won by the Company.
In November 2003, the President of the Company in
a private stock transaction, signed over personal
shares of Medical Staffing Solutions, Inc. stock
in consideration for the settled litigation
amount. As such, the Company recorded a loan
payable to the President for the unpaid liability
at that time, $979,656.
Page -17- F13
TELESCIENCE INTERNATIONAL, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
TELESCIENCE INTERNATIONAL, INC.
Page -18-
INDEX TO FINANCIAL STATEMENTS
PAGE(S)
Accountants' Review Report 1
Balance Sheets as of September 30, 2003 and 2002 2
Statements of Operations for the Nine Months Ended
September 30, 2003 and 2002 3
Statements of Changes in Stockholder's Equity (Deficit) for the
Nine Months Ended September 30, 2003 and 2002 4
Statements of Cash Flows for the Nine Months Ended
September 30, 2003 and 2002 5
Notes to Financial Statements 6-14
Page -19-
INDEPENDENT AUDITORS' REPORT
To the Stockholder of
Telescience International, Inc.
Vienna, VA
We have reviewed the accompanying balance sheets of
Telescience International, Inc. (the "Company") as of
September 30, 2003 and 2002, and the related statements of
operations, changes in stockholders' equity (deficit), and
cash flows for the nine months then ended, in accordance
with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified
Public Accountants. All information included in these
financial statements is the responsibility of the Company's
management.
A review consists principally of inquiries of company
personnel and analytical procedures applied to financial
data. It is substantially less in scope than an audit in
accordance with auditing standards generally accepted in the
United States of America, the objective of which is the
expression of an opinion regarding the consolidated
financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the consolidated
financial statements referred to above in order for them to
be in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As
discussed in Note 12 to the financial statements, the
Company has recurring operating deficits and cash flow
concerns that lead to doubt about its ability to continue as
a going concern. Management's plans in regards to these
matters are also discussed in Note 12. The financial
statements do not include any adjustments that might result
from the outcome of these uncertainties.
BAGELL, JOSEPHS & COMPANY, L.L.C.
BAGELL, JOSEPHS & COMPANY, L.L.C.
Gibbsboro, New Jersey
December 24, 2003
Page -20- F1
TELESCIENCE INTERNATIONAL, INC.
BALANCE SHEETS
SEPTEMBER 30, 2003 AND 2002
ASSETS
2003 2002
----------
- ----------
Current Assets:
Cash and cash equivalents $ 39,543 $
45,156
Accounts receivable, net 1,825,701
1,388,042
Due from officer 32,513
- -
Prepaid expenses 65,713
- -
----------
- ----------
Total Current Assets 1,963,470
1,433,198
----------
- ----------
Fixed assets, net of depreciation 76,405
31,264
Deposits 12,410
11,410
----------
- ----------
TOTAL ASSETS $ 2,052,285 $
1,475,872
==========
==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities:
Note payable - current portion $ 1,499,172 $
1,053,868
Accounts payable and accrued expenses 1,393,862
719,206
Litigation settlement payable/Loan payable - officer 979,656
1,092,156
Due to officers -
90,620
----------
- ----------
Total Current Liabilities 3,872,690
2,955,850
----------
- ----------
Note payable, net of current portion 220,000
220,000
----------
- ----------
Total Liabilities 4,092,690
3,175,850
----------
- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, $.01 and $1.00 Par Value; 10,000,000
shares authorized and 4,000,000 shares issued and
outstanding at September 30, 2003 and 2002,
respectively 40,000
40,000
Additional Paid-in Capital 1,173,866
941,366
Deficit (3,254,271)
(2,681,344)
----------
- ----------
Total Stockholders' Equity (Deficit) (2,040,405)
(1,699,978)
----------
- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 2,052,285 $
1,475,872
==========
==========
See accountants' review report and notes to the financial
statements.
Page -21- F2
TELESCIENCE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
2003 2002
------------- -------------
OPERATING REVENUES
Revenue $ 6,779,920 $ 4,439,751
COST OF SALES 4,814,199 3,135,416
------------- -------------
GROSS PROFIT 1,965,721 1,304,335
------------- -------------
OPERATING EXPENSES
Administrative commissions and payroll 1,722,108 447,984
General and administrative expenses 374,011 316,862
Depreciation and amortization 9,629 5,128
------------- -------------
Total Operating Expenses 2,105,748 769,974
------------- -------------
LOSS BEFORE OTHER (EXPENSES) (140,027) 534,361
OTHER INCOME (EXPENSES)
Unrealized loss on investment - (316,229)
Litigtation settlement - (1,092,156)
Interest income 6,323 -
Interest expense (97,325) (23,810)
------------- -------------
Total Other Income (Expenses) (91,002) (1,432,195)
------------- -------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES $ (231,029) $ (897,834)
Provision for Income Taxes - -
------------- -------------
NET LOSS APPLICABLE TO COMMON SHARES $ (231,029) $ (897,834)
============= =============
NET LOSS PER BASIC AND DILUTED SHARES $ (0.05776) $ (0.67237)
============= =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,000,000 1,335,333
============= =============
See accountants' review report and notes to the financial
statements.
Page -22- F3
TELESCIENCE INTERNATIONAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
Common Stock Additional
Description Shares Amount Paid - in
Deficit Total
Capital
- ---------------------------------------------------------------
Balance, January 1, 2001 3,000 $ 3,000 $ 828,366 $
(926,775) $ (95,409)
Net loss for the year - - -
(856,735) (856,735)
- ---------------------------------------------------------------
Balance, December 31, 2001 3,000 3,000 828,366
(1,783,510) (952,144)
Issuance of common stock for cash 1,000 1,000 149,000
- 150,000
1000 to 1 stock split and par
value change 3,996,000 36,000 (36,000)
- -
Net loss for the nine months - - -
(897,834) (897,834)
- ---------------------------------------------------------------
Balance, September 30, 2002 4,000,000 40,000 941,366
(2,681,344) (1,699,978)
Net loss for the three months - - -
(341,898) (341,898)
- ---------------------------------------------------------------
Balance, December 31, 2002 4,000,000 40,000 941,366
(3,023,242) (2,041,876)
Contributed capital by officer - - 232,500
- 232,500
Net loss for the nine months - - -
(231,029) (231,029)
- ---------------------------------------------------------------
Balance, September 30, 2003 4,000,000 $ 40,000 $ 1,173,866 $
(3,254,271) $ (2,040,405)
===============================================================
See accountants' review report and notes to the financial
statements.
Page -23- F4
TELESCIENCE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
2003 2002
------------ ------------
CASH FLOW FROM OPERTING ACTIVIITES
Net loss $ (231,029) $ (897,834)
------------ ------------
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 9,629 5,128
Changes in assets and liabilities
(Increase) decrease in accounts receivable (589,908) (562,469)
(Increase) in prepaid expenses (43,889) -
(Increase) in deposits (1,000) -
Increase in accounts payable and
and accrued expenses 158,598 105,616
Increase (payments) in litigation
settlement payable (112,500) 929,156
------------ ------------
Total adjustments (579,070) 477,431
------------ ------------
Net cash (used in) operating activities (810,099) (420,403)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of fixed assets (56,782) -
Increase (decrease) in amounts due from
officer (103,892) 17,550
------------ ------------
Net cash provided by (used in) investing
activities (160,674) 17,550
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITES
Proceeds from common stock issuances - 150,000
Contributed capital 232,500 -
Net proceeds of notes payable 767,414 290,712
------------ ------------
Net cash provided by financing activities 999,914 440,712
------------ ------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 29,141 37,859
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 10,402 7,297
------------ ------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 39,543 $ 45,156
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest expense $ 20,685 $ 5,498
============ ============
See accountants' review report and notes to the financial
statements.
Page -24- F5
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Telescience International, Inc. (the "Company"),
was founded in 1987. The Company is a provider of
medical personnel to state and federal government
agencies, primarily hospital and medical
facilities. The Company also operates a Homeland
Security division that provides emergency
equipment, decontamination products, vehicles and
supplies to state and local governments.
Additionally, the Company's Technology Services
division provides systems integration and
technology services to the federal government.
On September 26, 2003, the Company was acquired by
Medical Staffing Solutions, Inc. Upon this
acquisition, the Company became a wholly-owned
subsidiary of Medical Staffing Solutions, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally
accepted in the United States of America requires
management to make estimates and assumptions that
affect the reported amounts of assets and
liabilities and disclosures of contingent assets
and liabilities at the date of the financial
statements and the reported amounts of revenues
and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue and Cost Recognition
Revenue is recognized under the accrual method of
accounting when the services are rendered rather
than when cash is collected for the services
provided.
Cost is recorded on the accrual basis as well,
when the services are incurred rather than paid
for.
Cash and Cash Equivalents
The Company considers all highly liquid debt
instruments and other short-term investments with
an initial maturity of three months or less to be
cash equivalents.
The Company maintains cash and cash equivalent
balances at several financial institutions that
are insured by the Federal Deposit Insurance
Corporation up to $100,000.
Page -25- F6
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2003 AND 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Fixed Assets
Fixed assets are stated at cost. Depreciation is
computed primarily using the straight-line method
over the estimated useful life of the assets.
Furniture and fixtures
7 Years
Office equipment
5 Years
Income Taxes
The income tax benefit is computed on the pretax
loss based on the current tax law. Deferred income
taxes are recognized for the tax consequences in
future years of differences between the tax basis
of assets and liabilities and their financial
reporting amounts at each year-end based on
enacted tax laws and statutory tax rates.
Advertising
Costs of advertising and marketing are expensed as
incurred. Advertising and marketing costs were
included in general and administrative expenses
for the nine months ended September 30, 2003 and
2002, respectively.
Page -26- F7
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2003 AND 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Software Development Costs
Software development costs are accounted for in
accordance with Statement of Position 98-1,
"Software Developed or Obtained for Internal Use".
Costs incurred in a preliminary project stage are
expensed as incurred. External direct costs,
payroll and payroll related costs for those
directly involved with a project and interest
costs in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS)
No. 34, "Capitalization of Interest Cost", are
capitalized during the application development
stage. Costs incurred during the post-
implementation/ operation stage are expensed as
incurred. During 2003 and 2002, the Company
expensed all software development costs.
Fair Value of Financial Instruments
The carrying amount reported in the balance sheets
for cash and cash equivalents, accounts payable
and accrued expenses approximate fair value
because of the immediate or short-term maturity of
these financial instruments. The carrying amount
reported for notes payable approximates fair value
because, in general, the interest on the
underlying instruments fluctuates with market
rates.
Start-up Costs
In accordance with Statement of Position 98-5,
"Accounting for Start-up Costs", the Company has
expensed all of their costs relating to the start-
up of their Homeland Security division in the
period in which those costs related to. The
Company has expensed approximately $300,000 as of
September 30, 2003, and these costs are included
in the accompanying statements of operations.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities".
SFAS No. 133 requires companies to recognize all
derivative contracts as either assets or
liabilities in the balance sheet and to measure
them at fair value. If certain conditions are
met, a derivative may be specifically designated
as a hedge, the objective of which is to match the
timing of the gain or loss recognition on the
hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged
forecasted transaction.
Page -27- F8
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2003 AND 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent Accounting Pronouncements (Continued)
For a derivative not designated as a hedging
instrument, the gain or loss is recognized in
income in the period of change. On June 30, 1999,
the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement
No. 133". SFAS No. 133 as amended by SFAS No. 137
is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. In June
2000, the FASB issued SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain
Hedging Activities". SFAS No. 133 as amended by
SFAS No. 137 and 138 is effective for all fiscal
quarters of fiscal years beginning after June 15,
2000.
Historically, the Company has not entered into
derivatives contracts to hedge existing risks or
for speculative purposes. Accordingly, the
Company does not expect adoption of the new
standard to have a material effect on the
financial statements.
In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB 101 provides guidance for
revenue recognition under certain circumstances,
and is effective during the first quarter of
fiscal year 2001. SAB 101 is not expected to have
a material effect on the results of operations,
financial position and cash flows.
In June 2001, the FASB issued Statement No. 142
"Goodwill and Other Intangible Assets". This
Statement addresses financial accounting and
reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No.
17, Intangible Assets. It addresses how intangible
assets that are acquired individually or with a
group of other assets (but not those acquired in a
business combination) should be accounted for in
financial statements upon their acquisition. This
Statement also addresses how goodwill and other
intangible assets should be accounted for after
they have been initially recognized in the
financial statements. This statement is not
expected to have a material effect on the
financial statements.
Page -28- F9
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2003 AND 2002
NOTE 3- ACCOUNTS RECEIVABLE
A majority of the Company's revenues are derived
from government contracts for personnel at various
state and federal agencies including hospitals,
medical facilities and penitentiaries. As such,
payment for services rendered are based on
negotiated terms. The Company does not currently
provide for an allowance of doubtful accounts and
often evaluates receivables for collectibility. At
September 30, 2003 and 2002, the Company has
$1,825,701 and $1,388,042 due to them for their
services.
The accounts receivable are being used as
collateral on a line of credit the Company has
with a factor (See Note 5).
NOTE 4- PROPERTY AND EQUIPMENT
Property and equipment consist of the following at
September 30, 2003 and 2002:
2003 2002
------- ------
Furniture, fixtures and equipment $ 140,631 $ 83,849
Less: accumulated depreciation (64,226) (52,585)
-------- --------
Net book value $ 76,405 $ 31,264
======== ========
Depreciation expense for the nine months ended
September 30, 2003 and 2002 was $9,629 and $5,128,
respectively.
NOTE 5- NOTES PAYABLE
In May 2002, the Company entered into a line of
credit agreement with a factor. The loan, which is
due on demand bears interest at prime plus 1.00%
plus .71% per month. The factor lends up to 90% of
the receivable balance to the Company, and
receives payment directly on the outstanding
receivables and the remaining balance is remitted
to the Company. The outstanding balance at
September 30, 2003 and 2002 was $1,499,172 and
$1,053,868, respectively. The balance is reflected
net of a 10% reserve that the factor has
established which is adjusted on each funding.
Page -29- F10
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2003 AND 2002
NOTE 5- NOTES PAYABLE (CONTINUED)
In May 2002, the Company borrowed $220,000 from an
individual to be used in developing the Company's
business plan, including the Homeland Security
division. The note payable, is non-interest
bearing, and due on demand. At September 30, 2003
and 2002, the balance remains $220,000. The
Company does not anticipate this note to be due
during the next fiscal year, however, due to this
note being due on demand has classified this as a
current liability.
In 1997, the Company borrowed $300,000 plus
interest at 10% from an individual and had started
repayments of that note with interest and paid
down the balance to $163,000. The Company received
notice in 2002 that the lender filed a lawsuit
against the Company, and in 2002 recorded the full
settlement amount due the lender. The remaining
balance of $163,000 is included in that settlement
amount as of September 30, 2003 and 2002.
NOTE 6- INVESTMENT
Beginning in 2001, the Company started investing
in a private air strip in Branson, Missouri. The
project after the Company funded approximately
$387,269 as of September 30, 2003 ($387,369 as of
December 31, 2002, and $316,229 as of September
30, 2002), ran out of funding, and the project has
since ceased for the moment. Management has
reserved an allowance for the entire amount, as
the investment value is not known.
NOTE 7- DUE TO/FROM OFFICER
Advances to/from an officer of the Company in the
amount of $32,513 due from officer and $90,620 due
to officer at September 30, 2003 and 2002,
respectively. The Company nor the officer has been
charging interest, and the amounts are classified
as current assets/liabilities as they are due on
demand. Advances were being utilized to help fund
operations.
NOTE 8- PROVISION FOR INCOME TAXES
Deferred income taxes will be determined using the
liability method for the temporary differences
between the financial reporting basis and income
tax basis of the Company's assets and liabilities.
Deferred income taxes will be measured based on
the tax rates expected to be in effect when the
temporary differences are included in the
Company's consolidated tax return. Deferred tax
assets and liabilities are recognized based on
anticipated future tax consequences attributable
to differences between financial statement
carrying amounts of assets and liabilities and
their respective tax bases.
Page -30- F11
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2003 AND 2002
NOTE 8- PROVISION FOR INCOME TAXES (CONTINUED)
At September 30, 2003 and 2002, deferred tax
assets approximated the following:
2003 2002
-------- -------
Net operating loss carryforwards $1,106,452 $911,657
Less: valuation allowance ( 1,106,452) (911,657)
--------- -------
$ -0- $ -0-
========= =======
At September 30, 2003 and 2002, the Company had
accumulated deficits approximating $3,254,271 and
$2,681,344, respectively, available to offset
future taxable income through 2022. The Company
established valuation allowances equal to the full
amount of the deferred tax assets due to the
uncertainty of the utilization of the operating
losses in future periods.
NOTE 9- STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock
The Company incorporated in 1987 with 10,000
shares of common stock authorized at $1.00 par
value. It remained that way until June 2002 when
the Company had a 1,000 to 1 stock split and
currently has 10,000,000 shares authorized. With
this the par value changed to $.01.
In 1987 through 1994, 3,000 shares of common stock
were issued for various amounts of money, and
those 3,000 shares remained issued and outstanding
until 2002, when, net 1,000 additional shares were
issued for $150,000. These shares were issued to
the President who put the additional funds into
the Company for the equity. The 4,000 shares were
split into 4,000,000 shares which remained until
September 2003, when the Company reverse merged
into a public shell company, Medical Staffing
Solutions, Inc.
Preferred Stock
The Company had a class of preferred stock with
1,000 shares authorized at $1.00 par value until
2002 when the class of stock was no longer
authorized. There were no issuances of preferred
stock at anytime.
Page -31- F12
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2003 AND 2002
NOTE 10- LITIGATION
The Company is party to a claim pursuant to which
an individual was seeking damages under an
agreement the Company entered into in 2002. The
Company eventually settled this claim, and
consequently recorded a liability for the settled
amount of $1,092,156, which includes attorney's
fees. The payout of this settlement will be over
forty-two months in semi-monthly installments of
$12,500 commencing February 2003. The settlement
accrues interest at 12% upon any default of the
agreement. As part of this agreement the
individual can seek no further damages against the
Company. The balance at September 30, 2003 was
$979,656.
In November 2003, the President of the Company in
a private stock transaction signed over personal
shares of Medical Staffing Solutions, Inc. stock
in consideration for this liability. As such, the
Company recorded a loan payable to the President
for the unpaid liability at that time, $979,656.
NOTE 11- COMMITMENT
The Company has established a 401(k) Plan for its
employees, and the Company had agreed to match a
portion of the contribution during fiscal year
2002. This expense for the Company in fiscal year
2002 is included in general and administrative
expenses. The Company discontinued the matching
program for fiscal year 2003.
NOTE 12- GOING CONCERN
As shown in the accompanying financial statements,
the Company incurred substantial net losses for
the years ended December 31, 2002 and 2001, and
for the nine months ended September 30, 2003.
There is no guarantee whether the Company will be
able to generate enough revenue and/or raise
capital to support those operations. This raises
doubt about the Company's ability to continue as a
going concern.
Management also states that they are confident
that they can improve operations and raise the
appropriate funds needed through their recent
contracts the Company has entered into in the past
few months, as well as the completed reverse
merger with Medical Staffing Solutions, Inc., with
which the Company now has the ability to raise
money in the public markets, and has been offered
a term sheet for an equity line of credit for up
to 10 million dollars and additional short term
financing that it will use for working capital and
acquisitions. This will provide the Company funds
in which to continue to ensure that their goals in
their business plan are achieved.
The financial statements do not include any
adjustments that might result from the outcome of
these uncertainties.
Page -32- F13
TELESCIENCE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2003 AND 2002
NOTE 13- SUBSEQUENT EVENTS
In October 2003, the Company announced plans to
enter into the Home Health Care Industry and
provide services to the private sector as well as
expand services in the public sector.
In October 2003, the Company extended their
agreement with the California State Department of
Corrections for Contract Nursing Staff. This
agreement as an annual estimated value of 2.5
million dollars.
In November 2003, the Company was awarded a three-
year 2.6 million dollar contract with the
Department of Health and Human Services to provide
nursing staff to the U.S. Public Health Service in
support of the National Hansen's Disease Programs
based in Louisiana. This is the second such
contract won by the Company.
In November 2003, the President of the Company in
a private stock transaction, signed over personal
shares of Medical Staffing Solutions, Inc. stock
in consideration for the settled litigation
amount. As such, the Company recorded a loan
payable to the President for the unpaid liability
at that time, $979,656.
Page -33- F14
(c) Exhibits
10.1 Share Exchange Agreement. Please refer to the original Form 8-K,
report dated September 25, 2003, filed on October 1, 2003, for
a copy of this exhibit.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: December 30, 2003 Medical Staffing Solutions, Inc.
(Registrant)
/s/ B.B. Sahay
By:_________________________
B.B. Sahay
Chairman of Board and CEO
Page -34-