As filed with the Securities and Exchange Commission on April 13, 2005
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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MEDICAL STAFFING
NEVADA SOLUTIONS, INC. 91-2135006
(State or Other Jurisdiction of (Name of Registrant in Our (I.R.S. Employer Identification No.)
Incorporation Charter)
or Organization)
DR. BRAJNANDAN B. SAHAY
8150 LEESBURG PIKE, SUITE 1200 8150 LEESBURG PIKE, SUITE 1200
VIENNA, VIRGINIA 22182 VIENNA, VIRGINIA 22182
(703) 641-8890 7363 7363 (703) 641-8890
(Address and telephone number (Primary Standard Industrial (Name, address and telephone number
of Principal Executive Classification Code Number) of agent for service)
Offices and Principal
Place of Business)
Copies to:
Clayton E. Parker, Esq. Jacqueline G. Hodes, Esq.
Kirkpatrick & Lockhart Nicholson Graham LLP Kirkpatrick & Lockhart Nicholson Graham LLP
201 S. Biscayne Boulevard, Suite 2000 201 S. Biscayne Boulevard, Suite 2000
Miami, Florida 33131 Miami, Florida 33131
Telephone: (305) 539-3300 Telephone: (305) 539-3300
Telecopier: (305) 358-7095 Telecopier: (305) 358-7095
Approximate date of commencement of proposed sale to the public: AS
SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE (1) PRICE (1) FEE
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Common Stock, par value $0.001 per share 102,000,000 shares (2) $0.0265 $2,244,000 $319.00
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TOTAL 102,000,000 shares (2) $0.0265 $2,244,000 $319.00
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933. For the purposes
of this table, we have used the average of the closing bid and asked
prices as of April 11, 2005.
(2) 100,000,000 of these shares are being registered under the Standby Equity
Distribution Agreement and 2,000,000 shares are being registered under a
Consulting Agreement.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
PROSPECTUS
Subject to completion, dated April 13, 2005
MEDICAL STAFFING SOLUTIONS, INC.
102,000,000 SHARES OF COMMON STOCK
This prospectus relates to the sale of up to 102,000,000 shares of
common stock of Medical Staffing Solutions, Inc. ("Medical Staffing") by certain
persons who are stockholders of Medical Staffing, including Cornell Capital
Partners, LP ("Cornell Capital Partners") and Fitzgerald Galloway Management,
Inc. ("Fitzgerald"). Please refer to "Selling Stockholders" beginning on page
11. Medical Staffing is not selling any shares of common stock in this offering
and therefore will not receive any proceeds from this offering. Medical Staffing
will, however, receive proceeds from the sale of common stock under the Standby
Equity Distribution Agreement ("Standby Equity Distribution Agreement"), which
was entered into on March 11, 2004 between Medical Staffing and Cornell Capital
Partners, and no other stockholders. All costs associated with this registration
will be borne by Medical Staffing. Medical Staffing has agreed to allow Cornell
Capital Partners to retain 5% of the proceeds raised under the Standby Equity
Distribution Agreement that is more fully described below.
The shares of common stock are being offered for sale by the selling
stockholders at prices established on the Over-the-Counter Bulletin Board during
the term of this offering. On April 11, 2005, the last reported sale price of
our common stock was $0.027 per share. Our common stock is quoted on the
Over-the-Counter Bulletin Board under the symbol "MSSI.OB." These prices will
fluctuate based on the demand for the shares of common stock.
The selling stockholders consist of Cornell Capital Partners, who
intends to sell up to 100,000,000 shares of common stock under the Standby
Equity Distribution Agreement and Fitzgerald who intends to sell up to 2,000,000
shares of common stock, 1,000,000 of which were issued to Fitzgerald pursuant to
a Consulting Services Contract dated April 8, 2005 and the remaining 1,000,000
shares were placed in an escrow account and will be received by Fitzgerald in
the beginning of July 2005 upon the completion of consulting services to be
provided to the Company and at the conclusion of the 90-day contract expiration
period. Upon issuance, the 100,000,000 shares under the Standby Equity
Distribution Agreement would equal 64.96% of Medical Staffing's then-outstanding
common stock.
Cornell Capital Partners is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the sale of common stock under the
Standby Equity Distribution Agreement. Cornell Capital Partners will pay Medical
Staffing 100% of the market price of its common stock, which is defined as the
lowest volume weighted average price of the common stock during the five trading
days following the notice date. In addition, Cornell Capital Partners will
retain 5% of each advance under the Standby Equity Distribution Agreement. On
March 11, 2004, Cornell Capital Partners received a one-time commitment fee in
the form of 750,000 shares of common stock. The 5% retainage and the 750,000
shares of common stock are underwriting discounts payable to Cornell Capital
Partners.
Brokers or dealers effecting transactions in these shares should
confirm that the shares are registered under the applicable state law or that an
exemption from registration is available.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 6.
With the exception of Cornell Capital Partners, which is an
"underwriter" within the meaning of the Securities Act of 1933, no other
underwriter or person has been engaged to facilitate the sale of shares of
common stock in this offering. This offering will terminate twenty-four months
after the accompanying registration statement is declared effective by the
Securities and Exchange Commission ("SEC"). None of the proceeds from the sale
of stock by the selling stockholders will be placed in escrow, trust or any
similar account.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
NEITHER THE SELLING STOCKHOLDERS NOR WE MAY SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
The date of this prospectus is April __, 2005.
TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................1
THE OFFERING...................................................................2
RISK FACTORS...................................................................6
FORWARD-LOOKING STATEMENTS....................................................10
SELLING STOCKHOLDERS..........................................................11
USE OF PROCEEDS...............................................................13
DILUTION......................................................................14
STANDBY EQUITY DISTRIBUTION AGREEMENT.........................................15
PLAN OF DISTRIBUTION..........................................................17
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.....................18
DESCRIPTION OF BUSINESS.......................................................25
MANAGEMENT....................................................................28
PRINCIPAL STOCKHOLDERS........................................................31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................32
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS...................................................33
DESCRIPTION OF SECURITIES.....................................................34
EXPERTS.......................................................................36
LEGAL MATTERS.................................................................36
HOW TO GET MORE INFORMATION...................................................36
PART II ...................................................................II-1
EXHIBIT 5.1................................................................5.1-1
EXHIBIT 23.2..............................................................23.1-1
FINANCIAL STATEMENTS.........................................................F-1
PROSPECTUS SUMMARY
INTRODUCTION
Medical Staffing was a developmental stage business and generated no
revenue from its inception, in June 2001, until it acquired its subsidiary,
TeleScience International, Inc., ("TeleScience") in September 2003. Under the
terms of the share exchange agreement, Medical Staffing acquired 100% of the
stock of TeleScience, in exchange for 80% of the outstanding shares of Medical
Staffing. Control of Medical Staffing was transferred to TeleScience and the
current President and Chief Executive Officer of TeleScience has become the
Chairman, President, and Chief Executive Officer of Medical Staffing.
We have now become a small government contracting firm which provides,
through its wholly-owned subsidiary, TeleScience, services such as long-term
staffing of professionals to government clients in the medical and information
technology areas and anticipates making sales of products in the medical and
homeland security areas, also primarily to government clients.
GOING CONCERN
As reflected in Medical Staffing's financial statements for the twelve
months ended December 31, 2004, Medical Staffing's accumulated deficit of
$5,428,529 and its working capital deficiency of $869,038 raise doubt about its
ability to continue as a going concern. The ability of Medical Staffing to
continue as a going concern is dependent on Medical Staffing's ability to raise
additional debt or capital, including the ability to raise capital under the
Standby Equity Distribution Agreement. The financial statements for December 31,
2004 do not include any adjustments that might be necessary if Medical Staffing
is unable to continue as a going concern.
ABOUT US
Our principal executive offices are located at 8150 Leesburg Pike,
Suite 1200, Vienna, Virginia 22182. Our telephone number is (703) 641-8890.
1
THE OFFERING
This offering relates to the sale of common stock by certain persons
who are stockholders of Medical Staffing. Cornell Capital Partners is a
stockholder of Medical Staffing who intends to sell up to 100,000,000 shares of
common stock under the Standby Equity Distribution Agreement. Fitzgerald is a
stockholder of the Company who intends to sell up to 2,000,000 shares of common
stock, 1,000,000 of which were issued to Fitzgerald pursuant to a Consulting
Services Contract dated April 8, 2005 and the remaining 1,000,000 shares were
placed in an escrow account and will be received by Fitzgerald in the beginning
of July 2005 upon the completion of consulting services to be provided to the
Company and at the conclusion of the 90-day contract expiration period..
On March 11, 2004, Medical Staffing entered into a Standby Equity
Distribution Agreement with Cornell Capital Partners. Under the Standby Equity
Distribution Agreement, Medical Staffing may issue and sell to Cornell Capital
Partners common stock for a total purchase price of up to $15,000,000. The
purchase price for the shares is equal to their market price, which is defined
in the Standby Equity Distribution Agreement as the lowest volume weighted
average price of the common stock during the five trading days following the
notice date. The amount of each advance is subject to an aggregate maximum
advance amount of $250,000, with no advance occurring within seven trading days
of a prior advance. On March 11, 2004, Cornell Capital Partners received a
one-time commitment fee of 750,000 shares of the Company's common stock. Cornell
Capital Partners is paid a fee equal to 5% of each advance, which is retained by
Cornell Capital Partners from each advance. Prior to this registration
statement, Medical Staffing previously made draws totaling $2,215,000 under the
Standby Equity Distribution Agreement, in accordance with a registration
statement declared effective by the Securities and Exchange Commission on May
14, 2004. At an assumed price of $0.032 per share, Medical Staffing will be able
to receive $3,200,000 in gross proceeds assuming the sale of the entire
100,000,000 shares being registered under this registration statement. The
Company would be required to register 299,531,250 additional shares at this
assumed price to obtain the entire $15 million available under the Standby
Equity Distribution Agreement. Based on the limited number of available
authorized shares of common stock, Medical Staffing would need to obtain
shareholder approval to increase the authorized shares of common stock to access
additional amounts under the Standby Equity Distribution Agreement.
There is an inverse relationship between our stock price and the number
of shares to be issued under the Standby Equity Distribution Agreement. That is,
as our stock price declines, we would be required to issue a greater number of
shares under the Standby Equity Distribution Agreement for a given advance. This
inverse relationship is demonstrated by the following table, which shows the
number of shares to be issued under the Standby Equity Distribution Agreement at
a recent price of $0.032 per share and 25%, 50% and 75% discounts to the recent
price.
Purchase Price: $0.032 $0.0240 $0.0160 $0.0080
No. of Shares(1): 100,000,000 100,000,000 100,000,000 100,000,000
Total Outstanding (2): 253,943,803 253,943,803 252,943,803 253,943,803
Percent Outstanding (3): 64.96% 64.96% 64.96% 64.96%
Net Cash to Medical Staffing:(4) $2,995,000 $2,195,000 $1,435,000 $675,000
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(1) Represents the number of shares of common stock to be issued to Cornell
Capital Partners under the Standby Equity Distribution Agreement at the
prices set forth in the table.
(2) Represents the total number of shares of common stock outstanding after
the issuance of the shares to Cornell Capital Partners under the Standby
Equity Distribution Agreement.
(3) Represents the shares of common stock to be issued as a percentage of the
total number shares outstanding.
(4) Net cash equals the gross proceeds minus the 5% retainage and $85,000 in
offering expenses.
2
COMMON STOCK OFFERED 102,000,000 shares by selling stockholders
OFFERING PRICE Market price
COMMON STOCK OUTSTANDING
BEFORE THE OFFERING1 153,943,803 shares as of April 11, 2005
USE OF PROCEEDS We will not receive any proceeds of the
shares offered by the selling stockholders.
Any proceeds we receive from the sale of
common stock under the Standby Equity
Distribution Agreement will be used for
general working capital purposes. See "Use
of Proceeds."
RISK FACTORS The securities offered hereby involve a high
degree of risk and immediate substantial
dilution. See "Risk Factors" and "Dilution."
OVER-THE-COUNTER BULLETIN
BOARD SYMBOL MSSI.OB
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1 Excludes up to 100,000,000 shares of common stock to be issued under the
Standby Equity Distribution Agreement.
3
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
FOR YEAR FOR YEAR
ENDED ENDED
STATEMENTS OF OPERATIONS DECEMBER 31 DECEMBER 31
2004 2003
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Revenue $ 6,734,564 $ 8,385,675
Cost of sales 5,018,601 5,886,077
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Gross profit 1,715,963 2,499,598
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Operating expenses:
Administrative commissions and payroll 2,046,954 1,700,120
General and administrative expenses 1,371,377 946,401
Depreciation and amortization 61,726 15,429
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TOTAL OPERATING EXPENSES 3,480,057 2,661,950
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Total Other Income (Expenses) (347,569) (131,272)
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Net Loss Applicable to Common Shares $(2,111,663) $ (293,624)
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Net Loss Per Basic and Diluted Shares $ (0.03320) $ (00713)
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DECEMBER 31
BALANCE SHEET DATA 2004
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Cash and cash equivalents $ 28,348
Accounts receivable, net of allowance for
doubtful accounts of $36,642 1,477,837
Due from related parties 10,341
Prepaid expenses 53,110
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Total current assets $ 1,569,636
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Fixed assets, net of depreciation 60,689
Loan commitment fees 65,625
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Deposits 52,643
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TOTAL ASSETS $ 1,748,593
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Current liabilities:
Note payable - current portion $ 1,069,584
Promissory note payable 365,000
Due to related parties 105,333
Accounts payable and accrued expenses 833,757
Loan payable - officer / Litigation settlement payable 65,000
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Total current liabilities 2,438,674
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Total liabilities 3,523,418
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4
DECEMBER 31
BALANCE SHEET DATA 2004
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Stockholders' (deficit)
Preferred stock, $.001 par value; 30,000,000 shares authorized
0 shares issued and outstanding at December 31, 2004 --
Common stock, $.001 par value; 300,000,000 shares authorized
113,567,448 shares issued and outstanding at December 31, 2004 122,509
Additional paid-in capital 4,615,939
Deficit (5,428,529)
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Total stockholders' (deficit) (690,081)
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TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 1,748,593
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5
RISK FACTORS
WE ARE SUBJECT TO VARIOUS RISKS THAT MAY MATERIALLY HARM OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. YOU SHOULD CAREFULLY CONSIDER THE
RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS FILING
BEFORE DECIDING TO PURCHASE OUR COMMON STOCK. IF ANY OF THESE RISKS OR
UNCERTAINTIES ACTUALLY OCCURS, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING
RESULTS COULD BE MATERIALLY HARMED. IN THAT CASE, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
MEDICAL STAFFING HAS HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE
FUTURE, WHICH MAY CAUSE US TO CURTAIL OPERATIONS
Since our inception we have not been profitable and have lost money on
both a cash and non-cash basis. For the year ended December 31, 2004, we lost
$2,111,663. Our accumulated deficit was $5,428,529 as at the end of December 31,
2004. Future losses are likely to occur, as we are dependent on spending money
to pay for our operations. We may not be successful in reaching or maintaining
profitable operations. Accordingly, we may experience liquidity and cash flow
problems. If our losses continue, our ability to operate may be severely
impacted, which could cause the Company to curtail its operations.
WE HAVE BEEN THE SUBJECT OF A GOING CONCERN OPINION FOR DECEMBER 31, 2004 AND
DECEMBER 31, 2003, FROM OUR INDEPENDENT AUDITORS, WHICH MEANS THAT WE MAY NOT BE
ABLE TO CONTINUE OPERATIONS UNLESS WE CAN BECOME PROFITABLE OR OBTAIN ADDITIONAL
FUNDING
Our independent auditors have added an explanatory paragraph to their
audit opinions issued in connection with our financial statements for the years
ended December 31, 2004 and December 31, 2003, which states that the financial
statements raise doubt as to Medical Staffing's ability to continue as a going
concern. Our ability to make operations profitable or obtain additional funding
will determine our ability to continue as a going concern. Our financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. We expect to be able to continue operations for twelve months
with the cash currently on hand, anticipated from our operations and from the
Standby Equity Distribution Agreement entered into by the Company with Cornell
Capital Partners on March 11, 2004. Based on our current budget assessment, and
excluding any acquisitions which may occur in 2005, we believe that we may need
to obtain approximately $2 million in additional debt or equity capital from one
or more sources to fund operations for the next twelve months. These funds are
expected to be obtained from the sale of securities, including the sale of stock
under the Standby Equity Distribution Agreement.
WE ARE SUBJECT TO A WORKING CAPITAL DEFICIT, WHICH MEANS THAT OUR CURRENT ASSETS
ON DECEMBER 31, 2004, WERE NOT SUFFICIENT TO SATISFY OUR CURRENT LIABILITIES
AND, THEREFORE, OUR ABILITY TO CONTINUE OPERATIONS IS AT RISK
We had a working capital deficit of $869,038 at December 31, 2004,
which means that our current liabilities as of that date exceeded our current
assets on December 31, 2004 by $869,038. Current assets are assets that are
expected to be converted to cash within one year and, therefore, may be used to
pay current liabilities as they become due. Our working capital deficit means
that our current assets on December 31, 2004, were not sufficient to satisfy all
of our current liabilities on that date. If our ongoing operations do not begin
to provide sufficient profitability to offset the working capital deficit, we
may have to raise capital or debt to fund the deficit or curtail future plans.
MEDICAL STAFFING WILL NEED TO RAISE ADDITIONAL CAPITAL OR DEBT FUNDING TO
SUSTAIN OPERATIONS WHICH MAY NOT BE AVAILABLE WHICH COULD BE MATERIALLY HARMFUL
TO OUR BUSINESS
Unless Medical Staffing can become profitable with the existing sources
of funds we have available, we will require additional capital to sustain
operations and we may need access to additional capital or additional debt
financing to grow our sales. In addition, to the extent that we have a working
capital deficit and cannot offset the deficit from profitable sales we may have
to raise capital to repay the deficit and provide more working capital to permit
growth in revenues. Financing, whether from external sources or related parties,
may not be available if needed or on favorable terms. Our inability to obtain
adequate financing will result in the need to reduce the pace of business
operations. Any of these events could be materially harmful to our business and
may result in a lower stock price.
6
OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY FLUCTUATE
SIGNIFICANTLY, WHICH MAY AFFECT SHAREHOLDERS' ABILITY TO SELL SHARES OF OUR
COMMON STOCK
There has been a limited public market for our common stock and a more
active trading market for our common stock may not develop. An absence of an
active trading market could adversely affect our shareholders' ability to sell
our common stock in short time periods, or possibly at all. Our common stock has
experienced, and is likely to experience in the future, significant price and
volume fluctuations, which could adversely affect the market price of our common
stock without regard to our operating performance. In addition, we believe that
factors such as quarterly fluctuations in our financial results and changes in
the overall economy or the condition of the financial markets could cause the
price of our common stock to fluctuate substantially. These fluctuations may
also cause short sellers to enter the market from time to time in the belief
that Medical Staffing will have poor results in the future. The market for our
stock may not be stable or appreciate over time. These factors may negatively
impact shareholders' ability to sell shares of the Company's common stock.
OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT MORE DIFFICULT
FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS
Our common stock is deemed to be "penny stock" as that term is defined
in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. These
requirements may reduce the potential market for our common stock by reducing
the number of potential investors. This may make it more difficult for investors
in our common stock to sell shares to third parties or to otherwise dispose of
them. This could cause our stock price to decline. Penny stocks are stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ listed stock must still have a price of not less than $5.00 per share);
or
o In issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or $10.0
million (if in continuous operation for less than three years), or with average
revenues of less than $6.0 million for the last three years.
Broker/dealers dealing in penny stocks are required to provide
potential investors with a document disclosing the risks of penny stocks.
Moreover, broker/dealers are required to determine whether an investment in a
penny stock is a suitable investment for a prospective investor.
WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL, WHICH COULD BE DETRIMENTAL TO
OUR OPERATIONS
Our success largely depends on the efforts and abilities of key
executives, including B.B. Sahay, our Chairman, President, Acting Principal
Financial Officer and Chief Executive Officer. The loss of the services of B.B.
Sahay could materially harm our business because of the cost and time necessary
to replace and train a replacement. Such a loss would also divert management
attention away from operational issues. We do not presently maintain key-man
life insurance policies on B.B. Sahay. We also have other key employees who
manage our operations and if we were to lose their services, senior management
would be required to expend time and energy to replace and train replacements.
To the extent that we are smaller than our competitors and have fewer resources
we may not be able to attract the sufficient number and quality of staff.
7
RISKS RELATED TO THIS OFFERING
FUTURE SALES BY OUR STOCKHOLDERS MAY BE NEGATIVELY AFFECT OUR STOCK PRICE AND
OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS
Sales of our common stock in the public market following this offering
could lower the market price of our common stock. Sales may also make it more
difficult for us to sell equity securities or equity-related securities in the
future at a time and price that our management deems acceptable or at all. Of
the 153,943,803 shares of common stock outstanding as of April 11, 2005,
112,415,983 shares are, or will be, freely tradable without restriction, unless
held by our "affiliates." The remaining 41,527,820 shares of common stock, which
will be held by existing stockholders, including the officers and directors, are
"restricted securities" and may be resold in the public market only if
registered or pursuant to an exemption from registration. Some of these shares
may be resold under Rule 144.
EXISTING SHAREHOLDERS WILL EXPERIENCE SIGNIFICANT DILUTION FROM OUR SALE OF
SHARES UNDER THE STANDBY EQUITY DISTRIBUTION AGREEMENT
The sale of shares pursuant to the Standby Equity Distribution
Agreement will have a dilutive impact on our stockholders. For example, if the
offering occurred on September 30, 2004 at an assumed offering price of $0.032
per share (100% of a recent closing bid price of $0.032 per share), the new
stockholders would experience an immediate dilution in the net tangible book
value of $0.0149 per share. Dilution per share at prices of $0.0240, $0.0160 and
$0.0080 per share would be $0.00105, $0.0060 and $0.0016, respectively.
As a result, our net income per share could decrease in future periods,
and the market price of our common stock could decline. In addition, the lower
our stock price, the more shares of common stock we will have to issue under the
Standby Equity Distribution Agreement to draw down the full amount. If our stock
price is lower, then our existing stockholders would experience greater
dilution.
CORNELL CAPITAL PARTNERS WILL PAY LESS THAN THE THEN-PREVAILING MARKET PRICE OF
OUR COMMON STOCK UNDER THE STANDBY EQUITY DISTRIBUTION AGREEMENT
The common stock to be issued under the Standby Equity Distribution
Agreement will be issued at the lowest volume weighted average price for the
five days immediately following the notice date of an advance. In addition,
Cornell Capital Partners will retain 5% from each advance. These discounted
sales could cause the price of our common stock to decline.
THE SELLING STOCKHOLDERS INTEND TO SELL THEIR SHARES OF COMMON STOCK IN THE
MARKET, WHICH SALES MAY CAUSE OUR STOCK PRICE TO DECLINE
The selling stockholders intend to sell in the public market
102,000,000 shares of common stock being registered in this offering. That means
that up to 102,000,000 shares may be sold pursuant to this registration
statement. Such sales may cause our stock price to decline. The officers and
directors of Medical Staffing and those shareholders who are significant
shareholders as defined by the SEC will continue to be subject to the provisions
of various insider trading and rule 144 regulations.
THE SALE OF OUR STOCK UNDER OUR STANDBY EQUITY DISTRIBUTION AGREEMENT COULD
ENCOURAGE SHORT SALES BY THIRD PARTIES, WHICH COULD CONTRIBUTE TO THE FUTURE
DECLINE OF OUR STOCK PRICE
In many circumstances the provision of a Standby Equity Distribution
Agreement for companies that are traded on the OTCBB has the potential to cause
a significant downward pressure on the price of common stock. This is especially
the case if the shares being placed into the market exceed the market's ability
to take up the increased stock or if Medical Staffing has not performed in such
a manner to show that the equity funds raised will be used to grow Medical
Staffing. Such an event could place further downward pressure on the price of
common stock. Under the terms of our Standby Equity Distribution Agreement,
Medical Staffing may request numerous draw downs pursuant to the terms of the
Standby Equity Distribution Agreement. Even if Medical Staffing uses the Standby
Equity Distribution Agreement to grow its revenues and profits or invest in
assets which are materially beneficial to Medical Staffing the opportunity
exists for short sellers to contribute to the future decline of Medical
Staffing's stock price. If there are significant short sales of stock, the price
decline that would result from this activity will cause the share price to
decline more so which in turn may cause long holders of the stock to sell their
shares thereby contributing to sales of stock in the market. If there is an
imbalance on the sell side of the market for the stock the price will decline.
8
It is not possible to predict if the circumstances whereby short sales
could materialize or to what the share price could drop. In some companies that
have been subjected to short sales the stock price has dropped to near zero.
This could happen to Medical Staffing.
THE PRICE YOU PAY IN THIS OFFERING WILL FLUCTUATE AND MAY BE HIGHER OR LOWER
THAN THE PRICES PAID BY OTHER PEOPLE PARTICIPATING IN THIS OFFERING
The price in this offering will fluctuate based on the prevailing
market price of the common stock on the Over-the-Counter Bulletin Board.
Accordingly, the price you pay in this offering may be higher or lower than the
prices paid by other people participating in this offering.
WE MAY NOT BE ABLE TO ACCESS SUFFICIENT FUNDS UNDER THE STANDBY EQUITY
DISTRIBUTION AGREEMENT WHEN NEEDED
We are dependent on external financing to fund our operations. Our
financing needs are expected to be partially provided from the Standby Equity
Distribution Agreement. No assurances can be given that such financing will be
available in sufficient amounts or at all when needed, in part, because we are
limited to a maximum drawdown of $250,000 during any seven trading day period.
In addition, the number of shares being registered may not be sufficient to draw
all funds available to us under the Standby Equity Distribution Agreement. Based
on the assumed offering price of $0.032 and the 100,000,000 shares we are
registering, we would not be able to draw the entire $15 million available under
the Standby Equity Distribution Agreement. At this assumed price, we will be
able to draw $3,200,000 with the 100,000,000 shares being registered. Medical
Staffing would be required to register 299,531,250 additional shares at this
assumed price to obtain the entire $15 million available under the Standby
Equity Distribution Agreement.
WE MAY NOT BE ABLE TO DRAW DOWN UNDER THE STANDBY EQUITY DISTRIBUTION AGREEMENT
IF THE INVESTOR HOLDS MORE THAN 9.9% OF OUR COMMON STOCK
In the event Cornell Capital Partners holds more than 9.9% of the
then-outstanding common stock of Medical Staffing, we will be unable to draw
down on the Standby Equity Distribution Agreement. Currently, Cornell Capital
Partners has beneficial ownership of 4.926% of our common stock and therefore we
would be able to make limited draw downs on the Standby Equity Distribution
Agreement so long as Cornell Capital Partners' beneficial ownership remains
below 9.9%. If Cornell Capital Partner's beneficial ownership becomes 9.9% or
more, we would be unable to draw down on the Standby Equity Distribution
Agreement. In that event, if we are unable to obtain additional external funding
or generate revenue from the sale of our products, we could be forced to curtail
or cease our operations.
9
FORWARD-LOOKING STATEMENTS
Information included or incorporated by reference in this prospectus
may contain forward-looking statements. This information may involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from the future
results, performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words "may," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative of these words or other variations on
these words or comparable terminology.
This prospectus contains forward-looking statements, including
statements regarding, among other things, (a) our projected sales and
profitability, (b) our growth strategies, (c) anticipated trends in our
industry, (d) our future financing plans and (e) our anticipated needs for
working capital. These statements may be found under "Management's Discussion
and Analysis" and "Description of Business," as well as in this prospectus
generally. Actual events or results may differ materially from those discussed
in forward-looking statements as a result of various factors, including, without
limitation, the risks outlined under "Risk Factors" and matters described in
this prospectus generally. In light of these risks and uncertainties, there can
be no assurance that the forward-looking statements contained in this prospectus
will in fact occur.
10
SELLING STOCKHOLDERS
The following table presents information regarding the selling
stockholders. The selling shareholders are the entities who have assisted in or
provided financing to Medical Staffing. A description of each selling
shareholder's relationship to Medical Staffing and how each selling shareholder
acquired the shares to be sold in this offering is detailed in the information
immediately following this table.
PERCENTAGE
OF
PERCENTAGE OUTSTANDING
OF SHARES TO BE SHARES TO BE PERCENTAGE
OUTSTANDING ACQUIRED ACQUIRED OF SHARES
SHARES SHARES UNDER THE UNDER THE BENEFICIALLY
BENEFICIALLY BENEFICIALLY STANDBY STANDBY OWNED
OWNED OWNED EQUITY EQUITY SHARES TO BE AFTER
BEFORE BEFORE DISTRIBUTION DISTRIBUTION SOLD IN THE OFFERING
SELLING STOCKHOLDER OFFERING OFFERING (1) AGREEMENT AGREEMENT OFFERING (1)
- ---------------------- ------------- ------------ ------------- -------------- ------------ ------------
SHARES ACQUIRED IN FINANCING TRANSACTIONS WITH MEDICAL STAFFING
Cornell Capital
Partners, LP 7,582,897 4.926% 100,000,000 64.96% 100,000,000(2) 0%
CONSULTANTS AND OTHERS
Fitzgerald Galloway
Management, Inc. 1,000,000 * -- -- 2,000,000(2) 0%
------------- ------------ ------------- -------------- ------------ ------------
TOTAL 8,582,897 5.576% 100,000,000 64.96% 102,000,000 0%
============= ============ ============= ============== ============ ============
- ---------------
* Less than 1%.
(1) Applicable percentage of ownership is based on 153,943,803 shares of
common stock outstanding as of April 11, 2005, together with securities
exercisable or convertible into shares of common stock within 60 days of
April 11, 2005, for each stockholder. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of common stock subject to securities exercisable or convertible
into shares of common stock that are currently exercisable or exercisable
within 60 days of April 11, 2005 are deemed to be beneficially owned by
the person holding such securities for the purpose of computing the
percentage of ownership of such person, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other person.
Note that affiliates are subject to Rule 144 and Insider trading
regulations - percentage computation is for form purposes only.
(2) Includes the 100,000,000 shares acquired by Cornell Capital Partners under
the Standby Equity Distribution Agreement.
(3) Includes the 1,000,000 shares issued by the Company on April 4, 2005 and
the 1,000,000 shares which were placed in an escrow account and will be
received by Fitzgerald in the beginning of July 2005 upon the completion
of consulting services to be provided to the Company and at the conclusion
of the 90-day contract expiration period.
The following information contains a description of each selling
shareholder's relationship to Medical Staffing and how each selling shareholder
acquired the shares to be sold in this offering is detailed below. None of the
selling stockholders have held a position or office, or had any other material
relationship, with Medical Staffing, except as follows:
SHARES ACQUIRED IN FINANCING TRANSACTIONS WITH MEDICAL STAFFING
CORNELL CAPITAL PARTNERS, LP. Cornell Capital Partners is the investor
under the Standby Equity Distribution Agreement. All investment decisions of,
and control of, Cornell Capital Partners are held by its general partner,
Yorkville Advisors, LLC. Mark Angelo, the managing member of Yorkville Advisors,
makes the investment decisions on behalf of and controls Yorkville Advisors.
Cornell Capital Partners acquired all shares being registered in this offering
in financing transactions with Medical Staffing. Those transactions are
explained below:
o STANDBY EQUITY DISTRIBUTION AGREEMENT. On March 11, 2004, Medical
Staffing entered into an Standby Equity Distribution Agreement with
Cornell Capital Partners. Under the Standby Equity Distribution
Agreement, Medical Staffing may issue and sell to Cornell Capital
Partners common stock for a total purchase price of up to
$15,000,000. The purchase price for the shares is equal to 100% of
the market price, which is defined as the lowest volume weighted
average price of the common stock during the five trading days
following the notice date. The amount of each advance is subject to
an aggregate maximum advance amount of $250,000, with no advance
occurring within seven trading days of a prior advance. Cornell
Capital Partners received a one-time commitment fee of 750,000
shares of the Company's common stock. Cornell Capital Partners is
11
entitled to retain a fee of 5% of each advance. Prior to this
registration statement, Medical Staffing previously made draws
totaling $2,215,000 under the Standby Equity Distribution Agreement,
in accordance with a registration statement declared effective by
the Securities and Exchange Commission on May 14, 2004. At an
assumed price of $0.032 per share, Medical Staffing will be able to
receive $3,200,000 in gross proceeds assuming the sale of the entire
100,000,000 shares being registered under this registration
statement. The Company would be required to register 299,531,250
additional shares at this assumed price to obtain the entire $15
million available under the Standby Equity Distribution Agreement.
Based on the limited number of available authorized shares of common
stock, Medical Staffing would need to obtain shareholder approval to
increase the authorized shares of common stock to access additional
amounts under the Standby Equity Distribution Agreement. We are
registering 100,000,000 shares in this offering which may be issued
under the Standby Equity Distribution Agreement.
There are certain risks related to sales by Cornell Capital Partners,
including:
o The outstanding shares will be issued based on discount to the
market rate. As a result, the lower the stock price around the time
Cornell Capital Partners is issued shares, the greater likelihood
that Cornell Capital Partners gets more shares. This could result in
substantial dilution to the interests of other holders of common
stock.
o To the extent Cornell Capital Partners sells its common stock, the
common stock price may decrease due to the additional shares in the
market. This could allow Cornell Capital Partners to sell greater
amounts of common stock, the sales of which would further depress
the stock price.
o The significant downward pressure on the price of the common stock
as Cornell Capital Partners sells material amounts of common stocks
could encourage short sales by third parties. This could place
further downward pressure on the price of the common stock.
FITZGERALD GALLOWAY MANAGEMENT, INC. On April 8, 2004, the Company and
Fitzgerald entered into a 90 Days Consulting Services Contract, pursuant to
which Fitzgerald is to provide public/media relations services to the Company.
In exchange for these services, Fitzgerald is to receive 2,000,000 shares of
common stock from the Company. 1,000,000 shares of common stock were issued to
Fitzgerald on April 4, 2005 and the remaining 1,000,000 shares were placed in an
escrow account and will be received by Fitzgerald in the beginning of July 2005
upon the completion of the consulting services to be provided to the Company and
at the conclusion of the 90-day contract expiration period. These shares are
being registered in this offering. Grant Fitzgerald Galloway, Fitzgerald's sole
proprietor, makes the investment decisions on behalf of and controls Fitzgerald.
With respect to the sale of these securities, all transactions were
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933
(the "1933 Act"), and Regulation D promulgated under the 1933 Act. In each
instance, the purchaser had access to sufficient information regarding Medical
Staffing so as to make an informed investment decision. More specifically,
Medical Staffing had a reasonable basis to believe that each purchaser was an
"accredited investor" as defined in Regulation D of the 1933 Act and otherwise
had the requisite sophistication to make an investment in the Company's
securities.
12
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be
offered and sold from time to time by certain selling stockholders. There will
be no proceeds to us from the sale of shares of common stock in this offering.
However, we will receive the proceeds from the sale of shares of common stock to
Cornell Capital Partners under the Standby Equity Distribution Agreement. The
purchase price of the shares purchased under the Standby Equity Distribution
Agreement will be equal to 100% of the lowest volume weighted average price of
our common stock on the Over-the-Counter Bulletin Board for the five days
immediately following the notice date. Medical Staffing will pay Cornell Capital
Partners 5% of each advance as an additional fee.
Pursuant to the Standby Equity Distribution Agreement, Medical Staffing
cannot draw more than $250,000 every seven trading days or more than $15,000,000
over 24 months. Based on Medical Staffing's prior draws, there is $12,785,000
remaining available under the Standby Equity Distribution Agreement.
For illustrative purposes only, we have set forth below our intended
use of proceeds for the range of net proceeds indicated below to be received
under the Standby Equity Distribution Agreement. The table assumes estimated
offering expenses of $85,000, plus 5% retainage payable to Cornell Capital
Partners under the Standby Equity Distribution Agreement. The figures below are
estimates only, and may be changed due to various factors, including the timing
of the receipt of the proceeds.
GROSS PROCEEDS $3,200,000 $5,000,000 $12,785,000
NET PROCEEDS $2,955,000 $4,665,000 $12,060,750
NO. OF SHARES ISSUED UNDER THE STANDBY EQUITY
DISTRIBUTION AGREEMENT AT AN ASSUMED PRICE OF $0.032 100,000,000 156,250,000 399,531,250(1)
USE OF PROCEEDS: AMOUNT AMOUNT AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------
General Working Capital $2,955,000 $4,665,000 $12,060,750
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL $ 2,955,000 $ 4,665,000 $ 12,060,750
=============== =============== ==============
(1) Medical Staffing would need to register additional shares of common stock
to access this amount of proceeds under the Standby Equity Distribution
Agreement at an assumed offering price of $0.032. Medical Staffing would be
required to register 299,531,250 additional shares at this price to obtain the
entire remaining $15 million available under the Standby Equity Distribution
Agreement.
The Standby Equity Distribution Agreement limits Medical Staffing's use
of proceeds to general corporate purposes and prohibits the use of proceeds to
pay any judgment or liability incurred by any officer, director or employee of
Medical Staffing, except under certain limited circumstances.
13
DILUTION
The net tangible book value of Medical Staffing as of December 31, 2004
was $690,081 or $0.0061 per share of common stock. Net tangible book value per
share is determined by dividing the tangible book value of Medical Staffing
(total tangible assets less total liabilities) by the number of outstanding
shares of our common stock. Since this offering is being made solely by the
selling stockholders and none of the proceeds will be paid to Medical Staffing,
our net tangible book value will be unaffected by this offering. Our net
tangible book value and our net tangible book value per share, however, will be
impacted by the common stock to be issued under the Standby Equity Distribution
Agreement. The amount of dilution will depend on the offering price and number
of shares to be issued under the Standby Equity Distribution Agreement. The
following example shows the dilution to new investors at an offering price of
$0.032 per share, which is in the range of the recent share price.
If we assume that Medical Staffing had issued 100,000,000 shares of
common stock under the Standby Equity Distribution Agreement at an assumed
offering price of $0.032 per share (i.e., the number of shares registered in
this offering under the Standby Equity Distribution Agreement), less retention
fees of $160,000 and offering expenses of $85,000, our net tangible book value
as of December 31, 2004 would have been $3,645,081 or $0.0171 per share. Note
that at an offering price of $0.032 per share, Medical Staffing would receive
gross proceeds of $3,200,000 of the remaining $12,785,000 available under the
Standby Equity Distribution Agreement. At an assumed offering price of $0.032,
Cornell Capital Partners would receive a discount of $160,000 on the purchase of
100,000,000 shares of common stock. Such an offering would represent an
immediate increase in net tangible book value to existing stockholders of
$0.0110 per share and an immediate dilution to new stockholders of $0.0149 per
share. The following table illustrates the per share dilution:
Assumed public offering price per share $0.0320
Net tangible book value per share before this offering $0.0061
Increase attributable to new investors $0.0110
-------
Net tangible book value per share after this offering $0.0171
-------
Dilution per share to new stockholders $0.0149
=======
The offering price of our common stock is based on the then-existing
market price. In order to give prospective investors an idea of the dilution per
share they may experience, we have prepared the following table showing the
dilution per share at various assumed offering prices:
DILUTION
ASSUMED NO. OF SHARES TO BE PER SHARE
OFFERING PRICE ISSUED TO NEW INVESTORS
$0.0320 100,000,000 (1) $0.0149
$0.0240 100,000,000 $0.0105
$0.0160 100,000,000 $0.0060
$0.0080 100,000,000 $0.0016
- ----------
(1) This represents the maximum number of shares of common stock that are
being registered under the Standby Equity Distribution Agreement at this
time.
14
STANDBY EQUITY DISTRIBUTION AGREEMENT
SUMMARY
On March 11, 2004, we entered into a Standby Equity Distribution
Agreement with Cornell Capital Partners. Pursuant to the Standby Equity
Distribution Agreement, we may, at our discretion, periodically sell to Cornell
Capital Partners shares of common stock for a total purchase price of up to
$15,000,000. For each share of common stock purchased under the Standby Equity
Distribution Agreement, Cornell Capital Partners will pay 100% of the lowest
volume weighted average price of our common stock on the Over-the-Counter
Bulletin Board or other principal market on which our common stock is traded for
the five days immediately following the notice date. The number of shares
purchased by Cornell Capital Partners for each advance is determined by dividing
the amount of each advance by the purchase price for the shares of common stock.
Further, Cornell Capital Partners will retain 5% of each advance under the
Standby Equity Distribution Agreement. Cornell Capital Partners is a private
limited partnership whose business operations are conducted through its general
partner, Yorkville Advisors, LLC. In addition, we engaged Newbridge Securities
Corporation, a registered broker-dealer, as our Placement Agent in connection
with the Standby Equity Distribution Agreement. For its services, Newbridge
Securities Corporation had previously received 10,000 shares of our common
stock, equal to approximately $1,400 based on Medical Staffing's stock price on
March 11, 2004 when the shares were issued. The effectiveness of the sale of the
shares under the Standby Equity Distribution Agreement was conditioned upon us
registering the shares of common stock with the SEC and obtaining all necessary
permits or qualifying for exemptions under applicable state law. The costs
associated with this registration will be borne by us. There are no other
significant closing conditions to draws under the Standby Equity Distribution
Agreement. Prior to this registration statement, Medical Staffing previously
made draws totaling $2,215,000 under the Standby Equity Distribution Agreement,
in accordance with a registration statement declared effective by the SEC on May
14, 2004. Accordingly, Medical Staffing may draw the remaining $12,785,000 under
the Standby Equity Distribution Agreement.
STANDBY EQUITY DISTRIBUTION AGREEMENT EXPLAINED
Pursuant to the Standby Equity Distribution Agreement, we may
periodically sell shares of common stock to Cornell Capital Partners to raise
capital to fund our working capital needs. The periodic sale of shares is known
as an advance. We may request an advance every seven trading days. A closing
will be held the first trading day after the pricing period at which time we
will deliver shares of common stock and Cornell Capital Partners will pay the
advance amount. There are no closing conditions imposed on the Company for any
of the draws other than that the Company has filed its periodic and other
reports with the SEC, has delivered the stock for an advance, the trading of the
Company's common stock has not been suspended. We may request advances under the
Standby Equity Distribution Agreement until Cornell Capital Partners has
advanced $15,000,000 or 24 months after the effective date of the this
registration statement, whichever occurs first.
The amount of each advance is subject to a maximum amount of $250,000,
and we may not submit an advance within seven trading days of a prior advance.
The amount available under the Standby Equity Distribution Agreement is not
dependent on the price or volume of our common stock. Our ability to request
advances is conditioned upon us registering the shares of common stock with the
SEC. In addition, we may not request advances if the shares to be issued in
connection with such advances would result in Cornell Capital Partners owning
more than 9.9% of our outstanding common stock. Based on a recent average stock
price of $0.032 Cornell Capital Partners' beneficial ownership of Medical
Staffing common stock is 4.926%. We would be permitted to make draws on the
Standby Equity Distribution Agreement only so long as Cornell Capital Partners'
beneficial ownership of our common stock remains lower than 9.9% and, therefore,
a possibility exists that Cornell Capital Partners may own more than 9.9% of
Medical Staffing's outstanding common stock at a time when we would otherwise
plan to make an advance under the Standby Equity Distribution Agreement.
We do not have any agreements with Cornell Capital Partners regarding
the distribution of such stock, although Cornell Capital Partners has indicated
that it intends to promptly sell any stock received under the Standby Equity
Distribution Agreement.
We cannot predict the actual number of shares of common stock that will
be issued pursuant to the Standby Equity Distribution Agreement, in part,
because the purchase price of the shares will fluctuate based on prevailing
market conditions and we have not determined the total amount of advances we
intend to draw. Nonetheless, we can estimate the number of shares of our common
stock that will be issued using certain assumptions. Assuming we issued the
number of shares of common stock being registered in the accompanying
registration statement at a recent price of $0.032 per share, we would issue
100,000,000 shares of common stock to Cornell Capital Partners for gross
15
proceeds of $3,200,000. These shares would represent 64.96% of our outstanding
common stock upon issuance. We are registering 100,000,000 shares of common
stock for the sale under the Standby Equity Distribution Agreement. Assuming an
offering price of $0.032 per share, we will be able to utilize $3,200,000 of the
$12,785,000 remaining available under the Standby Equity Distribution Agreement.
Based on the limited number of available authorized shares of common stock, the
Company would need to obtain shareholder approval to increase the authorized
shares of common stock to access additional amounts under the Standby Equity
Distribution Agreement. In order to access all funds available to us under the
Standby Equity Distribution Agreement with the 100,000,000 shares being
registered in this offering, the average price of shares issued under the
Standby Equity Distribution Agreement would need to be $0.12785.
On April 30, 2004, Medical Staffing filed a registration statement
registering 75,000,000 shares of common stock in connection with the Standby
Equity Distribution Agreement, among other shares. On May 14, 2004, the SEC
declared the registration statement effective. Through April 11, 2005, Medical
Staffing has made advances totaling $2,215,000, issuing 75,000,000 shares of its
common stock.
There is an inverse relationship between our stock price and the number
of shares to be issued under the Standby Equity Distribution Agreement. That is,
as our stock price declines, we would be required to issue a greater number of
shares under the Standby Equity Distribution Agreement for a given advance. This
inverse relationship is demonstrated by the following table, which shows the
number of shares to be issued under the Standby Equity Distribution Agreement at
a recent price of $0.032 per share and 25%, 50% and 75% discounts to the recent
price.
Purchase Price: $0.032 $0.0240 $0.0160 $0.0080
No. of Shares(1): 100,000,000 100,000,000 100,000,000 100,000,000
Total Outstanding (2): 253,943,803 253,943,803 253,943,803 253,943,803
Percent Outstanding (3): 64.96% 64.96% 64.96% 64.96%
Net Cash to Medical Staffing:(4) $2,995,000 $2,195,000 $1,435,000 $675,000
- ----------
(1) Represents the number of shares of common stock to be issued to Cornell
Capital Partners under the Standby Equity Distribution Agreement at the
prices set forth in the table, assuming sufficient authorized shares are
available.
(2) Represents the total number of shares of common stock outstanding after
the issuance of the shares to Cornell Capital Partners under the Standby
Equity Distribution Agreement.
(3) Represents the shares of common stock to be issued as a percentage of the
total number shares outstanding.
(4) Net cash equals the gross proceeds minus the 5% retainage and $85,000 in
offering expenses.
Proceeds used under the Standby Equity Distribution Agreement will be
used in the manner set forth in the "Use of Proceeds" section of this
prospectus. We cannot predict the total amount of proceeds to be raised in this
transaction because we have not determined the total amount of the advances we
intend to draw. Cornell Capital Partners has the ability to permanently
terminate its obligation to purchase shares of common stock from Medical
Staffing under the Standby Equity Distribution Agreement if there shall occur
any stop order or suspension of the effectiveness of this registration statement
for an aggregate of fifty (50) trading days other than due to acts by Cornell
Capital Partners or if Medical Staffing fails materially to comply with certain
terms of the Standby Equity Distribution Agreement, which remain uncured for
thirty (30) days after notice from Cornell Capital Partners.
All fees and expenses under the Standby Equity Distribution Agreement
will be borne by Medical Staffing. We expect to incur expenses of approximately
$85,000 in connection with this registration, consisting primarily of
professional fees. In connection with the Standby Equity Distribution Agreement,
Cornell Capital Partners received a one-time commitment fee in the form of
750,000 shares of common stock on March 11, 2004. In addition, we issued 10,000
shares of common stock to Newbridge Securities Corporation, an unaffiliated
registered broker-dealer, as compensation for its services as a placement agent.
16
PLAN OF DISTRIBUTION
The selling stockholders have advised us that the sale or distribution
of our common stock owned by the selling stockholders may be effected directly
to purchasers by the selling stockholders as principals or through one or more
underwriters, brokers, dealers or agents from time to time in one or more
transactions (which may involve crosses or block transactions) (i) on the
over-the-counter market or on any other market in which the price of our shares
of common stock are quoted or (ii) in transactions otherwise than on the
over-the-counter market or in any other market on which the price of our shares
of common stock are quoted. Any of such transactions may be effected at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at varying prices determined at the time of sale or at negotiated
or fixed prices, in each case as determined by the selling stockholders or by
agreement between the selling stockholders and underwriters, brokers, dealers or
agents, or purchasers. If the selling stockholders effect such transactions by
selling their shares of common stock to or through underwriters, brokers,
dealers or agents, such underwriters, brokers, dealers or agents may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders or commissions from purchasers of common stock for whom
they may act as agent (which discounts, concessions or commissions as to
particular underwriters, brokers, dealers or agents may be in excess of those
customary in the types of transactions involved).
Cornell Capital Partners is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the sale of common stock under the
Standby Equity Distribution Agreement. Cornell Capital Partners will pay us 100%
of the lowest volume weighted average price of our common stock on the
Over-the-Counter Bulletin Board or other principal trading market on which our
common stock is traded for the five days immediately following the advance date.
In addition, Cornell Capital Partners will retain 5% of the proceeds received by
us under the Standby Equity Distribution Agreement, and, on March 11, 2004,
received a one-time commitment fee in the form of 750,000 shares of common stock
on March 11, 2004. The 5% retainage and the 750,000 shares of common stock are
underwriting discounts. In addition, we engaged Newbridge Securities
Corporation, an unaffiliated registered broker-dealer, to act as our Placement
Agent in connection with the Standby Equity Distribution Agreement.
Cornell Capital Partners was formed in February 2000 as a Delaware
limited partnership. Cornell Capital Partners is a domestic hedge fund in the
business of investing in and financing public companies. Cornell Capital
Partners does not intend to make a market in our stock or to otherwise engage in
stabilizing or other transactions intended to help support the stock price.
Prospective investors should take these factors into consideration before
purchasing our common stock.
Under the securities laws of certain states, the shares of common stock
may be sold in such states only through registered or licensed brokers or
dealers. The selling stockholders are advised to ensure that any underwriters,
brokers, dealers or agents effecting transactions on behalf of the selling
stockholders are registered to sell securities in all fifty states. In addition,
in certain states the shares of common stock may not be sold unless the shares
have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
We will pay all the expenses incident to the registration, offering and
sale of the shares of common stock to the public hereunder other than
commissions, fees and discounts of underwriters, brokers, dealers and agents. If
any of these other expenses exists, Medical Staffing expects the selling
stockholders to pay these expenses. We have agreed to indemnify Cornell Capital
Partners and its controlling persons against certain liabilities, including
liabilities under the Securities Act. We estimate that the expenses of the
offering to be borne by us will be approximately $85,000. The offering expenses
consist of: a SEC registration fee of $319.00, printing expenses of $2,500,
accounting fees of $15,000, legal fees of $50,000 and miscellaneous expenses of
$17,181. We will not receive any proceeds from the sale of any of the shares of
common stock by the selling stockholders. We will, however, receive proceeds
from the sale of common stock under the Standby Equity Distribution Agreement.
The selling stockholders are subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and its regulations, including,
Regulation M. Under Registration M, the selling stockholders or their agents may
not bid for, purchase, or attempt to induce any person to bid for or purchase,
shares of our common stock while such selling stockholders are distributing
shares covered by this prospectus. Pursuant to the requirements of Item 512 of
Regulation S-B and as stated in Part II of this Registration Statement, the
Company must file a post-effective amendment to the accompanying Registration
Statement once informed of a material change from the information set forth with
respect to the Plan of Distribution.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements, and the Notes thereto included
herein. The information contained below includes statements of Medical
Staffing's or management's beliefs, expectations, hopes, goals and plans that,
if not historical, are forward-looking statements subject to certain risks and
uncertainties that could cause actual results to differ materially from those
anticipated in the forward-looking statements. For a discussion on
forward-looking statements, see the information set forth in the Introductory
Note to this Annual Report under the caption "Forward Looking Statements", which
information is incorporated herein by reference.
GOING CONCERN
As reflected in Medical Staffing's financial statements for the twelve
months ended December 31, 2004, Medical Staffing's accumulated deficit of
$5,428,529 and its working capital deficiency of $869,038 raise doubt about its
ability to continue as a going concern. The ability of Medical Staffing to
continue as a going concern is dependent on Medical Staffing's ability to raise
additional debt or capital, including the ability to raise capital under the
Standby Equity Distribution Agreement. The financial statements for December 31,
2004 do not include any adjustments that might be necessary if Medical Staffing
is unable to continue as a going concern.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, or
GAAP. These accounting principles require us to make certain estimates,
judgments and assumptions. We believe that the estimates, judgments and
assumptions upon which we rely are reasonably based upon information available
to us at the time that these estimates, judgments and assumptions are made.
These estimates, judgments and assumptions can affect the reported amounts of
assets and liabilities as of the date of the financial statements, as well as
the reported amounts of revenue and expenses during the periods presented. To
the extent there are material differences between these estimates, judgments and
assumptions and actual results, our financial statements will be affected. The
significant accounting policies that we believe are the most critical to aid in
fully understanding and evaluating our reported financial results include the
following:
o Revenue recognition;
o Allowance for doubtful accounts; and
o Accounting for income taxes.
In many cases, the accounting treatment of a particular transaction is
specifically dictated by GAAP and does not require management's judgment in its
application. There are also areas in which management's judgment in selecting
among available alternatives would not produce a materially different result.
Our senior management has reviewed these critical accounting policies and
related disclosures. See Notes to Consolidated Financial Statements, which
contain additional information regarding our accounting policies and other
disclosures required by GAAP.
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.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
We determine our allowance by considering a number of factors,
including the length of time trade accounts receivable are past due, our
previous loss history, the customer's current ability to pay its obligation to
us, and the condition of the general economy and the industry as a whole. We
make judgments as to our ability to collect outstanding receivables based on
these factors and provide allowances for these receivables when collections
become doubtful. Provisions are made based on specific review of all significant
outstanding balances.
18
ACCOUNTING FOR INCOME TAXES
We account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
Under the asset and liability method of SFAS No. 109, deferred income taxes are
recognized for the expected future tax consequences of temporary differences
between financial statement carrying amounts, and the tax bases of existing
assets and liabilities 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. Any deferred tax asset has been reserved by the Company
with an offsetting valuation allowance adjustment.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004, COMPARED TO THE YEAR
ENDED DECEMBER 31, 2003
Revenues. Revenues for the year ended December 31, 2004, were
approximately $6.7 million, a decrease of $1.7 million, as compared to revenues
of approximately $8.4 million for the year ended December 31, 2003. The 20%
decrease in revenues in 2004 was primarily attributable to the awarding of a
lower percentage of government contracts for the providing of services in the
nursing industry to government facilities below the 2003 contracts that were
still ongoing in 2004. We anticipate revenues to grow in the fiscal year ending
2005 as a result of new contract proposals presently in the bidding process and
pending acquisitions.
Cost of Sales. Cost of sales for the year ended December 31, 2004, was
approximately $5.0 million, or 75% of revenues, as compared to approximately
$5.9 million, or 70% of revenues, for the year ended December 31, 2003. The $0.9
million decrease in cost of sales for the year ended December 31, 2004, was
primarily attributable to the Company's reduced number of contracts and the
increased labor associated with fulfilling the contracts.
Gross profit. Gross profit for the year ended December 31, 2004, was
approximately $1.7 million, or 25% of revenues, a decrease of $0.8 million, as
compared to gross profit of approximately $2.5 million, or 30% of revenues, for
the year ended December 31, 2003. Gross profit was reduced due to lower
revenues, increases in wages per hour and other contract related expenses which
were not passed through to the customer under the contracts.
Operating expenses. Operating expenses for the year ended December 31,
2004, were approximately $3.5 million, or 52% of revenues, as compared to
approximately $2.7 million, or 32% of revenues, for the year ended December 31,
2003. The $0.8 million increase in operating expenses in 2004 was primarily
attributable to professional fees associated with the filings of the required
public reports including the registration statement and annual report and
increased cost of administrative payroll, benefits and overhead costs, an
increase in general and administrative expenses and an increase in depreciation
and amortization.
Other income (expense). Net other expense for the year ended December
31, 2004, was approximately ($0.3) million, an increase of $0.2 million, as
compared to approximately ($0.1) million for the year ended December 31, 2003.
The increase in net other expense in 2004 was due to interest expense increase
and a charge for amortization of discount of conversions.
RECENT ACCOUNTING PRONOUNCEMENTS
In September 2001, the Financial Accounting Standards Board ("FASB")
issued Statements of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for
fiscal years beginning after December 15, 2001. Under the new rules, the pooling
of interests method of accounting for business combinations are no longer
allowed and goodwill and intangible assets deemed to have indefinite lives will
no longer be amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives. The Company adopted these new standards
effective January 1, 2002.
On October 3, 2001, the FASB issued SFAS Number No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which is
applicable to financial statements issued for fiscal years beginning after
December 15, 2001. The FASB's new rules on asset impairment supersede SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," and portions of Accounting Principles Board Opinion 30,
"Reporting the Results of Operations." This Standard provides a single
accounting model for long-lived assets to be disposed of and significantly
changes the criteria that would have to be met to classify an asset as
held-for-sale. Classification as held-for-sale is an important distinction since
such assets are not depreciated and are stated at the lower of fair value and
carrying amount. This Standard also requires expected future operating losses
from discontinued operations to be displayed in the period (s) in which the
losses are incurred, rather than as of the measurement date as presently
required.
19
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This statement rescinds SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that statement, SFAS No. 44,
Accounting for Intangible Assets of Motor Carriers, and SFAS No. 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This
statement amends SFAS No. 13, Accounting for Leases, to eliminate
inconsistencies between the required accounting for sales-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sales-leaseback transactions.
Also, this statement amends other existing authoritative pronouncements
to make various technical corrections, clarify meanings, or describe their
applicability under changed conditions. Provisions of SFAS No. 145 related to
the rescissions of SFAS No. 4 were effective for the Company on November 1, 2002
and provisions affecting SFAS No. 13 were effective for transactions occurring
after May 15, 2002. The adoption of SFAS No. 145 did not have a significant
impact on the Company's results of operations or financial position.
In June 2003, the FASB issued SFAS Statement No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities" ("SFAS 146"). This statement
covers restructuring type activities beginning with plans initiated after
December 31, 2002. Activities covered by this standard that are entered into
after that date will be recorded in accordance with provisions of SFAS No. 146.
The adoption of SFAS No. 146 did not have a significant impact on the Company's
results of operations or financial position.
In December 2002, the FASB issued SFAS Statement No. 148, "Accounting
for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB
Statement No. 123" ("SFAS 148"). SFAS 148 amends FASB Statement No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation. It also amends the
disclosure provisions of that Statement to require prominent disclosure about
the effects on reported net income of an entity's accounting policy decisions
with respect to stock-based employee compensation. Finally, this Statement
amends Accounting Principles Board ("APB") Opinion No. 28, "Interim Financial
Reporting", to require disclosure about those effects in interim financial
information. SFAS 148 is effective for financial statements for fiscal years
ending after December 15, 2002. The Company will continue to account for
stock-based employee compensation using the intrinsic value method of APB
Opinion No. 25, "Accounting for Stock Issued to Employees," but has adopted the
enhanced disclosure requirements of SFAS 148.
In April 2003, the FASB issued Statement of Financial Accounting
Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities", which amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities under FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement is effective for contracts
entered into or modified after June 30, 2003, except for certain hedging
relationships designated after June 30, 2003. Most provisions of this Statement
should be applied prospectively. The adoption of this statement did not have a
significant impact on the Company's results of operations or financial position.
In May 2003, the FASB issued SFAS Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity". This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This
statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities, if applicable. It is to be
implemented by reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance date of the
Statement and still existing at the beginning of the interim period of adoption.
The adoption of this statement did not have a significant impact on the
Company's results of operations or financial position.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 requires a company, at the
time it issues a guarantee, to recognize an initial liability for the fair value
of obligations assumed under the guarantees and elaborates on existing
disclosure requirements related to guarantees and warranties. The recognition
requirements are effective for guarantees issued or modified after December 31,
2002 for initial recognition and initial measurement provisions. The adoption of
FIN 45 did not have a significant impact on the Company's results of operations
or financial position.
20
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first interim
or annual period beginning after June 15, 2003. The adoption of FIN 46 did not
have a significant impact on the Company' results of operations or financial
position.
LIQUIDITY AND CAPITAL RESOURCES
Medical Staffing's financial statements have been prepared on a going
concern basis that contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. Medical Staffing
incurred a net loss of $2,111,663 and $293,624 for the years ended December 31,
2004 and December 31, 2003, respectively, and has an accumulated deficit of
$5,428,529 and $3,316,866 for the years ended December 31, 2004 and December 31,
2003, respectively. Management recognizes that Medical Staffing must generate
additional resources to enable it to continue operations. Management is planning
to obtain additional capital principally through the sale of equity securities,
including obtaining advances under the Standby Equity Distribution Agreement.
The realization of assets and satisfaction of liabilities in the normal course
of business is dependent upon Medical Staffing obtaining additional equity
capital and ultimately obtaining profitable operations. However, no assurances
can be given that Medical Staffing will be successful in these activities.
Should any of these events not occur, the accompanying consolidated financial
statements will be materially affected.
At present, Medical Staffing is meeting its current obligations from
its monthly cash flows, which during 2002, 2003 and 2004 has included cash from
operations, investor capital, and loans from related parties and from other
lenders. Due to insufficient cash generated from operations, Medical Staffing
currently does not have internally generated cash sufficient to pay all of its
incurred expenses and other liabilities. As a result, Medical Staffing is
dependent on investor capital and loans to meet its expenses and obligations.
Although investor funds and related party loans have allowed Medical Staffing to
meet its obligations in the recent past, Medical Staffing's present methods of
generating cash flow may not be sufficient to meet future obligations.
Historically, Medical Staffing has, from time to time, been able to raise
additional capital from sales of its capital stock, but there can be no
assurances that Medical Staffing will be able to raise additional capital in
this manner.
Cash used in operating activities was $2,431,986 for the year ended
December 31, 2004, compared to $485,378 for year ended December 31, 2003. The
increase in cash used was due primarily to the increased loss from operations of
$1,601,742 and decrease in accounts payable and accrued expenses of $431,635.
Cash provided by investing activities was $7,231 for the year ended
December 31, 2004 compared to cash used in investing activities of $86,789 for
the year ended December 31, 2003. This increase in cash was principally due to a
reduction in Medical Staffing's capital expenditures to $12,435 and an increase
in amounts due to related parties of $19,666.
Cash provided by financing activities was $2,376,035 for the year ended
December 31, 2004 compared to $638,833 for the year ended December 31, 2003.
This increase was mainly due to the funding through the convertible debentures
and promissory notes.
Medical Staffing has incurred losses since inception. Management
believes that it will require approximately $2 million in additional capital to
fund overall Company operations for the next twelve months.
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%. The
factor lends up to 90% of the receivable balance to the Company and receives
payment directly on the outstanding receivables, with the remaining balance
remitted to the Company. The outstanding balance at December 31, 2004 was
$1,069,584. The balance is reflected net of a 10% reserve that the factor has
established and which is adjusted on each funding.
Additionally, the Company maintains a small credit line with a bank.
There was no balance outstanding at December 31, 2004.
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
operations. The note payable was non-interest bearing until May 2003 and bore
interest at 7% thereafter. The note was fully paid in 2004.
21
In 1997, the Company borrowed $300,000 plus interest at 10% from an
individual and had started repayments of that note with interest paying 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. This amount was paid back from a private stock
transaction with the President of the Company in November 2003.
On March 11, 2004, the Company entered into a Securities Purchase
Agreement with Cornell Capital Partners. Under the Securities Purchase
Agreement, Cornell Capital Partners was obligated to purchase $600,000 of
secured convertible debentures from the Company. On March 11, 2004, Cornell
Capital Partners purchased $250,000 of convertible debentures. On May 3, 2004,
Cornell Capital Partners purchased the remaining $350,000 of debentures. These
debentures accrue interest at a rate of 5% per year and mature two years from
the issuance date. The debentures are convertible into the Company's common
stock at the holder's option any time up to maturity at a conversion price equal
to the lower of (i) 115% of the closing bid price of the common stock as of the
closing date or (ii) 85% of the lowest closing bid price of the common stock the
five trading days immediately preceding the conversion date. The debentures are
secured by the assets of the Company. At maturity, the Company has the option to
either pay the holder the outstanding principal balance and accrued interest or
to convert the debentures into shares of common stock at a conversion price
similar to the terms described above. The Company has the right to redeem the
debentures upon fifteen business days notice for 115% of the amount redeemed.
Upon such redemption, the holder shall receive warrants equal to 10,000 shares
of common stock for each $100,000 redeemed with an exercise price equal to 120%
of the closing bid price of the common stock on the closing date. None of the
debentures has been converted to date. During the year ended December 31, 2004,
Cornell Capital Partners converted the entire $600,000 into 19,489,204 shares of
common stock which included conversions of $16,678 in interest and the Company
recognized $108,760 of amortization of discount on the debenture conversions.
On 2004, Medical Staffing entered into a Standby Equity Distribution
Agreement with Cornell Capital Partners. Under the agreement, Medical Staffing
may issue and sell to Cornell Capital Partners common stock for a total purchase
price of up to $15.0 million. The purchase price for the shares is equal to 100%
of the market price, which is defined as the lowest volume weighted average
price of the common stock during the five trading days following the notice
date. The amount of each advance is subject to an aggregate maximum advance
amount of $250,000, with no advance occurring within seven trading days of a
prior advance. Cornell Capital Partners received a one-time commitment fee of
750,000 shares of the Company's common stock. Cornell Capital Partners is
entitled to retain a fee of 5% of each advance. In addition, Medical Staffing
entered into a placement agent agreement with Newbridge Securities Corporation,
a registered broker-dealer. Pursuant to the placement agent agreement, Medical
Staffing paid a one-time placement agent fee of 10,000 restricted shares of
common stock equal to approximately $1,400 based on Medical Staffing's stock
price on March 11, 2004.
Medical Staffing has drawn down $950,000 under the Standby Equity
Distribution Agreement, issuing 26,058,065 shares of common stock through
December 31, 2004. The $950,000 was used to repay the promissory notes issued to
Cornell Capital Partners, described below. Through April 11, 2005, the Company
has made advances under the Standby Equity Distribution Agreement in the amount
of $2,215,000, issuing 64,434,420 shares of common stock. The proceeds obtained
in 2005 were also used to repay the promissory notes described below.
In June 2004, the Company executed a promissory note issued to Cornell
Capital Partners in the amount of $1,000,000. As of December 31, 2004, $200,000
remained outstanding. As of March 16, 2005 the note has been fully paid.
In October 2004, the Company executed a promissory note issued to
Cornell Capital Partners in the amount of $315,000. As of December 31, 2004,
$165,000 remained outstanding. As of March 16, 2005 the note has been fully
paid.
Medical Staffing issued 35,000,000 shares of common stock to the escrow
agent as collateral under these promissory notes. As of December 31, 2004, the
Company used $950,000 of proceeds from the Standby Equity Distribution Agreement
to repay part of the notes. As of December 31, 2004, the balance outstanding
under these notes is $365,000. As of March 16, 2005, these notes have been fully
repaid.
Subsequent to the period covered by this report, on January 5, 2005,
Medical Staffing entered into a third promissory note with Cornell Capital
Partners for $2,000,000 and placed an additional 40,000,000 shares of its common
stock into escrow under this agreement. The principal balance of this promissory
note as of April 11, 2005 is $1,100,000.
Through December 31, 2004, the Company has drawn $950,000 under the
Standby Equity Distribution Agreement issuing 26,058,065 shares of common stock.
The proceeds have been utilized to repay principal of the $1,000,000 promissory
note issued to Cornell Capital Partners on June 11, 2004 and the $315,000
promissory note issued to Cornell Capital Partners on October 18, 2004. Through
April 11, 2005, the Company has made advances under the Standby Equity
Distribution Agreement in the amount of $2,215,000, issuing 52,089,991 shares of
common stock. As set forth above, these proceeds were used to repay a portion of
the promissory notes held by Cornell Capital Partners
22
From time to time, Medical Staffing may evaluate potential acquisitions
involving complementary businesses, content, products or technologies.
Currently, Medical Staffing has entered into non-binding letters of intent to
acquire certain assets of A&T Systems, Inc., Staff Relief, Inc. and Nurses PRN,
LLC. Medical Staffing's future capital requirements will depend on many factors,
such as the success of our operations, economic conditions and other factors
including the results of future operations. If Medical Staffing is unable to
raise sufficient funds to meet its long-term capital needs, there is a risk that
Medical Staffing will be required to cease operations.
PLAN OF OPERATION
Medical Staffing, through its TeleScience subsidiary, will continue to
provide:
o medical staffing services,
o information technology and telecommunications services, and
o homeland security products and services.
TeleScience provides two categories of services:
o Medical Systems, and
o Technology.
The Medical Systems operation specializes in the long-term staffing of
medical personnel, including physicians, nurses, technicians, and dental
assistants, for various federal and state government medical facilities
throughout the country. In 2005, we will be expanding to provide long-term
staffing of nurses (RNs and LPNs) to private hospitals in the tri-state area
(Virginia, Maryland and Washington D.C.), as well as parts of Pennsylvania. The
Company is planning to do this through acquisitions in the private healthcare
field.
The Technology operation specializes in long-term professional
consulting and staffing of experienced and qualified information technology (IT)
personnel in the government and private sectors. We provide systems integration
and information technology services. We also serve homeland security efforts
with emergency equipment, decontamination products, vehicles, and supplies
within the federal government, particularly the Department of Defense and the
Veteran's Administration.
In May 2002, Medical Staffing was awarded a three-year, $2.6 million
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 awarded by
Medical Staffing. This contract expires in May 2005 and the Company intends to
participate in the re-competition of the contract.
In October 2003, Medical Staffing extended its agreement with the
California State Department of Corrections for Contract Nursing Staff. This
agreement has an annual estimated value of $2.5 million dollars.
In September 2004, Medical Staffing signed new master contracts with
the California State Department of Corrections for Contract Nursing Staff. These
contracts, multiple award vendor, have estimated ceiling values of $50 million
and $6.1 million respectively and are effective for three years starting October
1, 2004. These contracts allow the Company to compete for this amount of
business. The Company has not made any sales pursuant to the contracts.
During 2004, Medical Staffing was awarded an extension of contracts for
medical services that Medical Staffing holds on a number of Air Force Bases.
MANAGEMENT STRATEGY
Medical Staffing's management has taken several initiatives to grow and
expand its current businesses of medical and technology services and to develop
and market its homeland security business.
23
MANAGEMENT'S STRATEGIC PLAN FOR FUTURE GROWTH & EXPANSION.
The Management's strategic plan for future growth and expansion is
fourfold: 1) expand its medical services into the private sector; 2) enhance
recruitment; 3) develop a homeland security marketing plan; and 4) acquire
suitable companies.
Expansion of Medical Services into the Private Sector. In January 2004,
the Company hired a seasoned executive to direct the Company's expansion of its
medical services into the private health care sector. This expansion will
provide long-term part-time staffing of registered nurses and licensed
professional nurses to private health care facilities in the tri-state area
(Virginia, Maryland and Washington, D.C.), as well as parts of Pennsylvania.
Examples of such facilities are hospitals, nursing homes, private clinics, and
assisted living centers.
Enhancing Recruitment. The Company is embarking on a long-range plan
for recruiting ancillary and professional level staff for medical contracts.
This plan is geared toward expanding the business of Medical Staffing's most
active services, the Medical Systems operations. The Medical Systems operations
presently provide long-term medical staffing services for a wide array of
military, federal, and state government health care facilities, such as
hospitals and clinics. Medical Staffing is also moving towards entering into
similar staffing arrangements with its private sector clients. The long-range
recruiting plans will support both of these initiatives. These initiatives arise
from the recognition of the opportunities provided by the well known and chronic
shortage of health care professionals -especially registered nurses in the
United States.
Overseas Recruiting of Registered Nurses. The largest shortage in terms
of vacancies and intractability of recruiting domestic personnel exists in the
nursing profession. This profession, historically dominated by women, is
experiencing nurse shortages that are closely related to the opening of many
alternative career fields to a younger generation of women. This situation is
unlikely to change, leading to the intractability of attracting a large number
of American women into nursing. Medical Staffing perceives an opportunity in
this situation, which can provide business expansion for many years. It is
Medical Staffing's plan to aggressively recruit nurses from suitable countries
overseas over the next few years.
Domestic Recruiting of Health Care Professionals. Medical Staffing has
a constant need for recruiting medical and non-medical professionals for filling
positions created by newly won contracts or for filling vacancies caused by
turnover, terminations, or relocations. Medical Staffing is in the process of
establishing a national recruiting center in Vienna, Virginia, upon completion
of its pending asset acquisition of Nurses PRN, LLC ("Nurses PRN"), for the
recruitment of health care professionals to meet such needs on a regular basis,
as well as its future contract requirements on a proactive basis. However, the
pending acquisition of Nurse PRN may not close. Currently, the Company uses
newspaper and internet media extensively for this purpose. Medical Staffing's
website was updated in 2004 to attract these professionals to apply for jobs
directly for open or future upcoming positions.
Acquisition of Suitable Companies. On December 1, 2004, Medical
Staffing entered into a non-binding letter of intent with Nurses PRN and the
shareholders of Nurses PRN. Pursuant to the letter of intent and upon the
consummation of a definitive agreement, Nurses PRN was to become a 100%
wholly-owned subsidiary of the Company. However, this transaction has now been
restructured as an asset purchase transaction. On December 30, 2004, Medical
Staffing entered into a non-binding letter of intent with A&T Systems, Inc.
("A&T"). Pursuant to the letter of intent and upon the consummation of a
definitive agreement, the Company will acquire certain assets of A&T. There can
be no assurance that a definitive agreement will be entered into with A&T or
Nurses PRN.
DEVELOP A HOMELAND SECURITY MARKETING PLAN.
Medical Staffing views this market sector as an opportunity for rapid
growth. The Company has invested significant resources to build an
infrastructure and to generate an initial presence in this sector. During the
first quarter of 2004, Medical Staffing formed a strategic alliance with Mobile
Healthcare Solutions, a provider of deployable, mobile medical treatment
facilities. The two companies intend to partner for joint bidding on select
projects in homeland security arenas that fit their combined expertise. Medical
Staffing's initial marketing plan in the homeland security arena is to utilize
the power and expertise of its alliances to market its decontamination products.
This marketing plan further extends marketing of emergency equipment,
decontamination products, vehicles, and personal protective equipment to
federal, state, and local governments. The Company was named as one of the
participants in a $1,000,000,000 IDIQ (or indefinite delivery indefinite
quantity) contract in the homeland security area with the state of Pennsylvania,
and this contract has recently been renewed for another year, through June 30,
2006. The Company has not yet made any sales pursuant to these contracts.
24
DESCRIPTION OF BUSINESS
INTRODUCTION
Medical Staffing was a developmental stage business and generated no
revenue from its inception, in June 2001, until it acquired its subsidiary,
TeleScience International, Inc., ("TeleScience") in September 2003. Under the
terms of the share exchange agreement, Medical Staffing acquired 100% of the
stock of TeleScience, in exchange for 80% of the outstanding shares of Medical
Staffing. Control of Medical Staffing was transferred to TeleScience and the
current President and Chief Executive Officer of TeleScience has become the
Chairman, President, and Chief Executive Officer of Medical Staffing.
We have now become a small government contracting firm which provides,
through its wholly-owned subsidiary, TeleScience, services such as long-term
staffing of professionals to government clients in the medical and information
technology areas and anticipates making sales of products in the medical and
homeland security areas, also primarily to government clients.
BUSINESS STRATEGY AND SERVICES
Medical Staffing's strategy is to provide an array of services to the
government market, primarily in the areas of medical staffing, homeland
security, and health care information technology.
Our ability to successfully expand requires significant revenue growth
from increased services performed for existing and new clients, as well as the
potential for strategic acquisitions and/or mergers. The realization of these
events depends on many factors, including successful strategic sales and
marketing efforts and the identification and acquisition of appropriate
businesses. Any difficulties encountered in the expansion of the Company through
successful sales and marketing efforts and/or acquisitions could have an adverse
impact on our revenues and operating results.
CLIENTS
Our client base consists predominantly of federal and state government
agencies with medical staffing needs. Federal clients include all branches of
the armed services, the Veteran's Administration, and the Public Health Service.
State clients include California and Pennsylvania, where the Company places
contract employees with the corrections or health and human services
departments. We have experience and expertise in the successful completion of
projects in the medical staffing and information technology areas, and this is
where we are concentrating our marketing efforts. However, since September 2003,
we also have formed business alliances with manufacturers and distributors of
decontamination products to serve the homeland security needs of government
agencies.
Historically we have derived, and believe that in the immediate future
we will derive, the greatest percentage of our total revenues from medical
staffing. We are planning to expand this effort into the private health care
area and hired a key employee in January 2004 for this purpose. We are also
attempting to increase the percentage of revenue derived from the information
technology and homeland security areas to provide diversity and stability to our
business. For this reason, we have engaged consultants and entered into several
strategic business alliances and are contemplating acquisitions of suitable
small businesses.
MARKETING AND SALES
We focus our sales and marketing efforts on the government sector. The
majority of our revenues for 2004 were derived from contracts and projects with
state and federal government agencies in the area of medical staffing.
We market our solutions through our direct sales force, and alliances
with several strategic partnerships in certain industries. The direct sales
force is responsible for providing responsive, quality service and ensuring
client satisfaction with our services. Our strategic partnerships and alliances
provide the Company with additional access to potential clients.
25
COMPETITION
The market for the medical staffing services that we provide is highly
competitive, includes a large number of competitors, and is subject to change.
This is offset by the increasing demand for medical professionals, especially
nurses, so that we believe there will be continued growth in this area. However,
due to the existing nursing shortage, we may require creative methods to attract
new hires and we have a long-term plan in place for such recruiting.
The market for the information technology services that we provide is
also highly competitive, includes a large number of competitors, and is subject
to rapid change. Our strategy for these operations are to market to existing
customers, to take advantage of existing alliances, to develop niche markets,
and to provide the custom solutions and flexibility that our small size allows.
Our Federal Supply schedule contract with the federal government and
our presence on the vendor lists in California and Pennsylvania, provides
additional opportunities for the Company.
INTELLECTUAL PROPERTY
Our intellectual property primarily consists of methodologies developed
for use in recruiting and staffing and in application development and systems
integration solutions. We do not have any patents and rely upon a combination of
trade secrets and contractual restrictions to establish and protect our
ownership of our proprietary methodologies. We generally enter into
nondisclosure and confidentiality agreements with our employees, partners,
consultants, independent sales agents and clients. As the number of competitors
providing services similar to the services of the Company increases, the
likelihood of similar methodologies being used by competitors increases.
Although our methodologies have never been subject to an infringement
claim, there can be no assurance that third parties will not assert infringement
claims against us in the future, that the assertion of such claims will not
result in litigation, or that we would prevail in such litigation or be able to
obtain the license for the use of any allegedly infringed intellectual property
from a third party on commercially reasonable terms. Further, litigation,
regardless of its outcome, could result in substantial cost to the Company and
divert management's attention from our operations.
Although we are not aware of any basis upon which a third party could
assert an infringement claim, any infringement claim or litigation against us
could materially adversely affect our business, operating results and financial
condition.
PERSONNEL
As of December 31, 2004, Medical Staffing had 103 full time employees
and a total of 178 employees (full and part-time) working for the Company and
located in twenty-one states and the District of Columbia. The Company also
engaged three consultants. The principal (but not all) job categories are
physicians (2), registered nurses (RNs) (50), licensed vocational nurses or
licenses practical nurses (LPNs) (30), dental assistants (26), certified nursing
assistants (16), pharmacist technicians (10), and management (12). The principal
(but not all) locations are California (62), Louisiana (30), Virginia (17),
Pennsylvania (11), Oklahoma (7), and Nevada (6). ). (The numbers within
parentheses in this paragraph refer to the number of employees in the category
or location.) The Company also periodically employs additional consultants and
additional temporary employees.
We believe that our future success will depend in part on our continued
ability to attract and retain highly skilled managerial, marketing, and support
personnel. There can be no assurance that we will be able to continue to attract
and retain personnel necessary for the development of its business. We generally
do not have employment contracts with our key employees. However, we do have
confidentiality and non-disclosure agreements with many of our key employees.
None of our employees is subject to a collective bargaining agreement, except
for those employees situated in Louisiana who elected to be represented by the
Service Employees International Union. We believe that our relations with our
employees are good.
LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings.
However, in 2003, we thought we had settled a claim against the Company from an
individual who was a former officer and investor. In satisfaction of that
settlement, 2,655,678 restricted shares of Medical Staffing common stock were
delivered to the individual in November of 2003. The individual subsequently
decided to attempt to reject the share tender and demand a cash settlement. The
Company believes its tender to have been sufficient and binding. The parties are
26
engaged in legal proceedings to determine the issue and a trial date is
presently set for November 2005. The Company has been advised by counsel that
its position should prevail, however, a possibility exists that we could be
unsuccessful in these proceedings. The individual is demanding a payment of
$899,000 not including attorney's fees and collection costs.
TeleScience was sued by Medsense LA, LLC for an outstanding balance
owed for nursing services provided on behalf of TeleScience. The matter was
fully settled by a payment of $30,000 and dismissed with prejudice in February
2005.
The Company may become involved in litigation, from time to time, in
the ordinary course of business.
PROPERTIES
Our principal executive office is located at 8150 Leesburg Pike, Suite
1200, Vienna, Virginia. The space is subleased by the Company through August
2007. Through the end of 2004, the space consisted of approximately 4,687 square
feet and was leased for approximately $7,616 per month. Our rent in 2004 for
this office was approximately $91,392. Effective January 1, 2005, we increased
the square footage of the space to a total of 8,504 square feet at the same rent
per foot. The monthly rental for this space during 2005 will be approximately
$13,819 per month.
We also lease a branch office located at 2573 Greenwood Avenue, Morro
Bay, California. We pay a portion of the rent, amounting to $575 per month. Our
annual rent in 2004 for this branch office was approximately $6,900.
We also lease a branch office in Suite 107, located at 2090 Linglestown
Road, Harrisburg, Pennsylvania, for $225 per month. Our annual rent in 2004 for
this branch office was approximately $2,625.
We believe that we can obtain additional facilities required to
accommodate our projected needs without difficulty and at commercially
reasonable prices, although no assurance can be given that it will be able to do
so.
27
MANAGEMENT
The directors and executive officers of Medical Staffing, their age,
positions in Medical Staffing, the dates of their initial election or
appointment as directors or executive officers, and the expiration of the terms
are as follows:
NAME OF DIRECTOR/
EXECUTIVE OFFICER AGE POSITION PERIOD SERVED
- ------------------- --- -------------------------------- --------------------------
Brajnandan B. Sahay 60 Chairman of the Board of September 25, 2003 to Date
Directors, President, Chief
Executive Officer and Principal
Financial Officer
L. Carl Jacobsen 62 Vice President - Human Resources September 25, 2003 to Date
and Administration
Since B.B. Sahay is the sole director of Medical Staffing, there are no
family relationships between or among the directors, executive officers or any
other person. B.B. Sahay is not a director of any company that files reports
with the SEC, nor has he been involved in any bankruptcy proceedings, criminal
proceedings, any proceeding involving any possibility of enjoining or suspending
B.B. Sahay from engaging in any business, securities or banking activities, and
has not been found to have violated, nor been accused of having violated, any
federal or state securities or commodities laws.
Medical Staffing's directors are elected at the annual meeting of
stockholders and hold office until their successors are elected. Medical
Staffing's officers are appointed by the Board of Directors and serve at the
pleasure of the Board and are subject to employment agreements, if any, approved
and ratified by the Board.
Medical Staffing does not currently have an audit committee, and the
Board of Directors serves this function. Further, the Board does not have a
financial expert, as defined by Regulation S-B Item 401. Medical Staffing has
not been able to attract a financial expert to serve on its Board of Directors
since the date of the share exchange transaction due to the lack of necessary
capital. Medical Staffing intends to seek a candidate to serve in this role.
BRAJNANDAN B. SAHAY
Brajnandan B. Sahay earned his doctorate in 1973 in Control Systems,
Science, and Engineering from Washington University (St. Louis, Missouri). Dr.
Sahay founded TeleScience in 1987, which began operations in 1992. Prior to
1992, Dr. Sahay held various engineering, management and advisory positions with
Contel, IBM Satellite Business Systems, MCI, and MITRE Corporation. Since 1992,
he has been with TeleScience, as chairman and chief executive officer. On
September 25, 2003, he became Chairman of the Board, President and Chief
Executive Officer of Medical Staffing.
L. CARL JACOBSEN
L. Carl Jacobsen earned his JD degree from Anticoh School of Law and
PhD in linguistics from UCLA. He joined TeleScience in 1993 and has served the
Company by drafting or reviewing its contracts and overseeing its legal matters.
On September 25, 2003, Mr. Jacobsen became the Vice President of Human Resources
and Administration for Medical Staffing. He is presently responsible for the
personnel, insurance, and administrative areas of the Company's operations and
serves as an advisor to the Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and the rules
there under require Medical Staffing's officers and directors, and persons who
beneficially own more than ten percent of a registered class of Medical
Staffing's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and to furnish Medical
Staffing with copies.
28
Based on its reviews of the copies of the Section 16(a) forms received
by it, or written representations from certain reporting persons, Medical
Staffing believes that, during the last fiscal year, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with and filed timely.
CODE OF ETHICS
On March 29, 2004, the Board of Directors of the Company adopted a
written Code of Ethics designed to deter wrongdoing and promote honest and
ethical conduct, full, fair and accurate disclosure, compliance with laws,
prompt internal reporting and accountability to adherence to the Code of Ethics.
This Code of Ethics has been filed with the Securities and Exchange Commission.
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal year ended December 31,
2004, 2003, and 2002, certain information regarding the compensation earned by
Medical Staffing's Chief Executive Officer and each of Medical Staffing's most
highly compensated executive officers whose aggregate annual salary and bonus
for fiscal 2004 exceeds $100,000, (the "Named Executive Officers"), with respect
to services rendered by such persons to Medical Staffing and its subsidiaries.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- ------------------------------------------------
NAME AND OTHER RESTRICTED UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS COMPENSATION
- -------------------- ---- ---------- ------- --------------- -------------- ------------- --------------
Brajnandan B. Sahay 2004 $185,836(1) -- -- -- -- --
2003 $159,984 -- -- -- -- --
2002 $149,083 $45,582 -- -- -- --
- ----------
(1) $28,920 of this amount has been deferred.
OPTION GRANTS
The Company has no outstanding options. However, pursuant to the
Company's Employment Agreement with Brajnandan B. Sahay, the Company is
obligated to grant 3,000,000 options to purchase common stock of the Company to
Brajnandan B. Sahay. Upon the adoption of a stock option plan, the Company will
issue these options to Brajnandan B. Sahay.
COMPENSATION OF DIRECTORS
Medical Staffing did not issue any shares of common stock as
compensation to any director in 2004.
EMPLOYMENT AGREEMENTS
As of December 31, 2004, he Company did not have any existing
employment agreements. On January 1, 2005, the Company and Brajnandan B. Sahay
entered into a five-year employment agreement, with an option to renew for
additional one-year period. Pursuant to the Employment Agreement, Brajnandan B.
Sahay will serve as Medical Staffing's President and Chief Executive Officer or
other executive officer of the Company. B.B. Sahay will receive $250,000 per
year, four weeks paid vacation, a car allowance and will be reimbursed for
business expenses. B.B. Sahay will receive additional consideration of 3,000,000
options to purchase common stock of the Company for the fiscal year 2005 at an
exercise price of $0.06 per share. For each year after 2005 and during the term
of the Employment Agreement, B.B. Sahay shall be entitled to receive 3,000,000
options to purchase common stock of the Company at an exercise price equal to
the average of the closing price of the Company's common stock for the 10 days
immediately preceding June 30 of the applicable year.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN
The Company adopted a 2004 Stock Plan in January 2004, authorizing
4,000,000 shares under the plan. On each of January 22, 2004 and February 18,
2004, the Company issued 2,000,000 shares under the plan to certain employees
and consultants of the Company. On January 15, 2004, the Company filed a Form
S-8 registering all 4,000,000 shares under the Plan.
29
The Company currently has no outstanding employee option plans.
However, pursuant to the Company's Employment Agreement with Brajnandan B.
Sahay, the Company is obligated to grant 3,000,000 options to purchase common
stock of the Company to Brajnandan B. Sahay. Upon the adoption of a stock option
plan, the Company will issue these options to Brajnandan B. Sahay.
The following table sets forth the securities that have been authorized
under equity compensation plans as of December 31, 2004
NUMBER OF
SECURITIES
REMAINING
AVAILABLE FOR
NUMBER OF FUTURE ISSUANCE
SECURITIES TO UNDER EQUITY
BE ISSUED UPON WEIGHTED-AVERAGE COMPENSATION
EXERCISE OF EXERCISE PRICE PLANS
OUTSTANDING OF OUTSTANDING (EXCLUDING
OPTIONS, OPTIONS, SECURITIES
WARRANTS AND WARRANTS AND REFLECTED IN
RIGHTS RIGHTS COLUMN (A))
-------------- ---------------- --------------
(A) (B) (C)
Equity compensation plans approved by security holders 0 $ -- 0
Equity compensation plans not approved by security holders 0 $ -- 0
-------------- ---------------- --------------
TOTAL 0 $ -- 0
============== ================ ==============
30
PRINCIPAL STOCKHOLDERS
The table below sets forth information with respect of the beneficial
ownership as of April 11, 2005 for any person who is known to Medical Staffing
to be the beneficial owner of more than 5% of Medical Staffing's common stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENTAGE
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS (1)
- ---------------- ------------------------------- -------------------- ------------
Common B. B. Sahay 47,362,722 30.77%
8150 Leesburg Pike, Suite 1200
Vienna, Virginia 22182
TOTAL 47,362,722 30.77%
SECURITY OWNERSHIP OF MANAGEMENT
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENTAGE
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS (1)
- -------------- ---------------------------------------------- -------------------- ------------
Common B. B. Sahay 47,362,722 30.77%
Chairman, President, Acting Principal
Financial Officer and Chief Executive Officer
8150 Leesburg Pike, Suite 1200
Vienna, Virginia 22182
Common Carl Jacobsen 40,000 *
Vice President - Human Resources &
Administration
8150 Leesburg Pike, Suite 1200
Vienna, Virginia 22182
Common Reeba Magulick 442,822 *
Assistant Vice President
8150 Leesburg Pike, Suite 1200
Vienna, Virginia 22182
ALL OFFICERS AND DIRECTORS
AS A GROUP (1 PERSON) 47,845,544 31.08%
- ----------
* Less than 1%
(1) Applicable percentage of ownership is based on 153,943,803 shares of
common stock outstanding as of April 11, 2005 for each stockholder.
Beneficial ownership is determined in accordance within the rules of the
Commission and generally includes voting of investment power with respect
to securities. Shares of common stock subject to securities exercisable or
convertible into shares of common stock that are currently exercisable or
exercisable within 60 days of April 11, 2005 are deemed to be beneficially
owned by the person holding such options for the purpose of computing the
percentage of ownership of such persons, but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.
31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past two (2) years, Medical Staffing has not entered into a
transaction with a value in excess of $60,000 with a director, officer, or
beneficial owner of 5% or more of Medical Staffing's common stock, except as
disclosed in the following paragraphs.
The Company has outstanding at December 31, 2004, $105,333 of
non-interest bearing note payable to related parties. These amounts have no
specific repayment terms, and were provided to the Company to cover some of the
costs of completing the merger. These amounts are reflected in the consolidated
balance sheet as current liabilities.
The Company has also advanced related parties certain amounts, mostly
in the form of non-executive employee advances. The balance at December 31,
2004, was $10,341. These amounts are anticipated to be repaid within the next
year and have been classified as current assets on the consolidated balance
sheet.
The Company had advances from an officer of the Company to help fund
operations in the amount of $71,379 at December 31, 2002. The officer had not
been charging interest, and the amounts were classified as current liabilities
as they were due on demand. These amounts were repaid by the Company in 2003.
The Company was 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 included attorney's fees. The payout of this
settlement was to be over forty-two months in semi-monthly installments of
$12,500 commencing February 2003. The settlement accrued 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 Company had paid $216,236 of this
amount, as of October 2003 and in November 2003, by means of a private stock
transaction, the President of the Company, signed over personal shares of
Medical Staffing, stock in consideration for the remaining liability. As such,
the Company has recorded a loan payable to the President for the unpaid
liability at that time, $875,920. The Company made additional payments of
$25,000 in 2004 then converted $850,920 into 17,048,400 shares of stock pursuant
to a board resolution on December 30, 2004.
Medical Staffing did not give anything of value to, or receive anything
of value from, any promoter during fiscal year 2004 or 2003.
32
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
Medical Staffing's common stock currently trades on the
Over-The-Counter ("OTC") Bulletin Board under the trading symbol "MSSI." Our
shares of common stock trade have traded on the NASD OTC Bulletin Board since
May 19, 2000. The OTC Bulletin Board is a network of security dealers who buy
and sell stock. A computer network that provides information on current "bids"
and "asks", as well as volume information, connects the dealers.
The following table sets forth the highest and lowest bid prices for
the common stock for each calendar quarter and subsequent interim period since
January 1, 2003, as reported by the National Quotation Bureau. It represents
inter-dealer quotations, without retail markup, markdown or commission and may
not be reflective of actual transactions.
BID PRICES
---------------------
HIGH LOW
----- ----
2003
First Quarter $0.15 $0.10
Second Quarter $0.10 $0.05
Third Quarter $0.07 $0.07
Fourth Quarter $1.70 $0.07
2004
First Quarter $0.27 $0.12
Second Quarter $0.38 $0.08
Third Quarter $0.03 $0.02
Fourth Quarter $0.10 $0.03
2005
First Quarter $0.06 $0.03
Medical Staffing presently is authorized to issue 300,000,000 shares of
common stock with $0.001 par value. As of April 11, 2005, there were 134 holders
of record of Medical Staffing's common stock and 153,943,803 shares issued and
outstanding.
Medical Staffing is authorized to issue 30,000,000 shares of $0.001 par
value preferred stock, none of which is outstanding. The preferred stock, which
is commonly known as "blank check preferred," may be issued by the Board of
Directors with rights, designations, preferences and other terms, as may be
determined by the Directors in their sole discretion, at the time of issuance.
DIVIDENDS
Medical Staffing has not declared or paid cash dividends on its common
stock since its inception and does not anticipate paying such dividends in the
foreseeable future. The payment of dividends may be made at the discretion of
the Board of Directors and will depend upon, among other factors, Medical
Staffing's operations, its capital requirements, and its overall financial
condition.
33
DESCRIPTION OF SECURITIES
GENERAL
Medical Staffing's authorized capital consists of 300,000,000 shares of
common stock, par value $0.001 per share and 30,000,000 shares of preferred
stock, par value $0.001 per share. As of April 11, 2005, there were 153,943,803
outstanding shares of common stock. None of the shares of the preferred stock
have been issued and none are outstanding. Set forth below is a description of
certain provisions relating to Medical Staffing's capital stock.
COMMON STOCK
Each outstanding share of common stock has one vote on all matters
requiring a vote of the stockholders. There is no right to cumulative voting;
thus, the holder of fifty percent or more of the shares outstanding can, if they
choose to do so, elect all of the directors. In the event of a voluntary of
involuntary liquidation, all stockholders are entitled to a pro rata
distribution after payment of liabilities and after provision has been made for
each class of stock, if any, having preference over the common stock. The
holders of the common stock have no preemptive rights with respect to future
offerings of shares of common stock. Holders of common stock are entitled to
dividends if, as and when declared by the Board out of the funds legally
available therefore. It is Medical Staffing's present intention to retain
earnings, if any, for use in its business. The payment of dividends on the
common stock are, therefore, unlikely in the foreseeable future.
PREFERRED STOCK
Medical Staffing is authorized to issue 30,000,000 shares of $0.01 par
value preferred stock, none of which is outstanding. The preferred stock, which
is commonly known as "blank check preferred", may be issued by the Board of
Directors with rights, designations, preferences and other terms, as may be
determined by the Directors in their sole discretion, at the time of issuance.
WARRANTS
Medical Staffing has not issued any warrants since inception.
OPTIONS
The Company has no outstanding options. However, pursuant to the
Company's Employment Agreement with Brajnandan B. Sahay, the Company is
obligated to grant 3,000,000 options to purchase common stock of the Company to
Brajnandan B. Sahay. Upon the adoption of a stock option plan, the Company will
issue these options to Brajnandan B. Sahay.
LIMITATION OF LIABILITY: INDEMNIFICATION
Our Articles of Incorporation include an indemnification provision
under which we have agreed to indemnify directors and officers of Medical
Staffing from and against certain claims arising from or related to future acts
or omissions as a director or officer of Medical Staffing. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of Medical Staffing
pursuant to the foregoing, or otherwise, Medical Staffing has been advised that
in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
TRANSFER AGENT
The transfer agent for Medical Staffing common stock is Holladay Stock
Transfer Inc. Its address is 2939 North 67th Place, Scottsdale, Arizona, 85251
and its telephone number is (480) 481-3940.
34
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION
AUTHORIZED AND UNISSUED STOCK
The authorized but unissued shares of our common are available for
future issuance without our stockholders' approval. These additional shares may
be utilized for a variety of corporate purposes including but not limited to
future public or direct offerings to raise additional capital, corporate
acquisitions and employee incentive plans. The issuance of such shares may also
be used to deter a potential takeover of Medical Staffing that may otherwise be
beneficial to stockholders by diluting the shares held by a potential suitor or
issuing shares to a stockholder that will vote in accordance with Medical
Staffing's Board of Directors' desires. A takeover may be beneficial to
stockholders because, among other reasons, a potential suitor may offer
stockholders a premium for their shares of stock compared to the then-existing
market price.
The existence of authorized but unissued and unreserved shares of
preferred stock may enable the Board of Directors to issue shares to persons
friendly to current management which would render more difficult or discourage
an attempt to obtain control of our Company by means of a proxy contest, tender
offer, merger or otherwise, and thereby protect the continuity of our Company's
management.
35
EXPERTS
The consolidated financial statements for the years ended December 31,
2004 and December 31, 2003 included in this prospectus, and incorporated by
reference in the Registration Statement, have been audited by Bagell, Josephs &
Company, L.L.C., independent auditors, as stated in their report appearing with
the financial statements herein and incorporated by reference in the
Registration Statement, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares offered herein will be opined on for us by
Burton, Bartlett & Glogovac, which has acted as our outside legal counsel in
relation to certain, restricted tasks.
HOW TO GET MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2 under the Securities Act with respect to the
securities offered by this prospectus. This prospectus, which forms a part of
the registration statement, does not contain all the information set forth in
the registration statement, as permitted by the rules and regulations of the
Commission. For further information with respect to us and the securities
offered by this prospectus, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document that we have filed as an exhibit to the registration statement
are qualified in their entirety by reference to the to the exhibits for a
complete statement of their terms and conditions. The registration statement and
other information may be read and copied at the Commission's Public Reference
Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the
Commission.
36
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report.................................................F-2
Balance Sheet as of December 31, 2004........................................F-3
Statements of Operations for the Years Ended December 31, 2004 and 2003......F-4
Statements of Changes in Stockholder's Equity (Deficit)
for the Years Ended December 31, 2004 and 2003............................F-5
Statements of Cash Flows for the Years Ended December 31, 2004 and 2003......F-6
Notes to Financial Statements................................................F-7
F-1
INDEPENDENT AUDITORS' REPORT
To the Stockholders' of
Medical Staffing Solutions, Inc. and Subsidiary
Vienna, VA
We have audited the accompanying consolidated balance sheets of Medical Staffing
Solutions, Inc. and Subsidiary (the "Company") as of December 31, 2004 and 2003
and the related consolidated statements of operations, changes in stockholders'
(deficit), and cash flows for the years then ended. These consolidated financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with standards established by the Public
Company Accounting Oversight Board (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. 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 provide a reasonable basis for our opinion.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 15 to the
consolidated 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 15. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Medical Staffing
Solutions, Inc. and Subsidiary as of December 31, 2004 and 2003, and the results
of its statements of operations, changes in stockholders' (deficit), and cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
/s/ BAGELL, JOSEPHS & COMPANY, L.L.C.
BAGELL, JOSEPHS & COMPANY, L.L.C.
Gibbsboro, New Jersey
February 25, 2005
F-2
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
2004 2003
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 28,348 $ 77,068
Accounts receivable, net of allowance for doubtful accounts of $36,642
and $55,070 in 2004 and 2003, respectively 1,477,837 1,423,719
Due from related parties 10,341 30,007
Prepaid expenses 53,110 54,976
----------- -----------
Total Current Assets 1,569,636 1,585,770
----------- -----------
Fixed assets, net of depreciation 60,689 70,605
Loan commitment fees 65,625 --
Deposits 52,643 27,643
----------- -----------
TOTAL ASSETS $ 1,748,593 $ 1,684,018
=========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
LIABILITIES
Current Liabilities:
Note payable - current portion $ 1,069,584 $ 1,032,106
Promissory note payable/Standby Equity Distribution Agreement 365,000 --
Due to related parties 105,333 130,000
Accounts payable and accrued expenses 833,757 1,265,392
Loan payable - officer / Litigation settlement payable 65,000 875,920
----------- -----------
Total Current Liabilities 2,438,674 3,303,418
----------- -----------
Note payable, net of current portion -- 220,000
----------- -----------
TOTAL LIABILITIES 2,438,674 3,523,418
----------- -----------
STOCKHOLDERS' (DEFICIT)
Preferred Stock, $.001 Par Value; 30,000,000 and 5,000,000 shares authorized
0 shares issued and outstanding at December 31, 2004 and 2003 -- --
Common Stock, $.001 Par Value; 300,000,000 and 50,000,000 shares authorized
122,509,383 and 41,200,005 shares issued, 8,941,935 and 0 held in escrow,
and
113,567,448 and 41,200,005 outstanding at December 31, 2004 and 2003 122,509 41,200
Additional Paid-in Capital 4,615,939 1,436,266
Deficit (5,428,529) (3,316,866)
----------- -----------
TOTAL STOCKHOLDERS' (DEFICIT) (690,081) (1,839,400)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 1,748,593 $ 1,684,018
=========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
------------ ------------
OPERATING REVENUES
Revenue $ 6,734,564 $ 8,385,675
COST OF SALES 5,018,601 5,886,077
------------ ------------
GROSS PROFIT 1,715,963 2,499,598
------------ ------------
OPERATING EXPENSES
Administrative commissions and payroll 2,046,954 1,700,120
General and administrative expenses 1,371,377 946,401
Depreciation and amortization 61,726 15,429
------------ ------------
TOTAL OPERATING EXPENSES 3,480,057 2,661,950
------------ ------------
INCOME (LOSS) BEFORE OTHER (EXPENSES) (1,764,094) (162,352)
OTHER INCOME (EXPENSES)
Amortization of discount on conversions (108,760) --
Interest income 1,450 6,526
Interest expense (240,259) (137,798)
------------ ------------
TOTAL OTHER INCOME (EXPENSES) (347,569) (131,272)
------------ ------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES $ (2,111,663) $ (293,624)
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET LOSS APPLICABLE TO COMMON SHARES $ (2,111,663) $ (293,624)
============ ============
NET LOSS PER BASIC AND DILUTED SHARES $ (0.03320) $ (0.00713)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 63,610,459 41,200,000
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
F-4
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
ADDITIONAL
COMMON STOCK PAID-IN SUBSCRIPTION
DESCRIPTION SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
- ----------- ------------ --------- ----------- ---------- ----------- -----------
Balance, December 31, 2002 10,499,333 $ 10,500 $ 34,500 $ (8,729) $ (33,604) $ 2,667
Reverse merger with TeleScience International 2,200,000 2,200 1,165,412 8,729 (2,989,638) (1,813,297)
Cancellation of shares due to reverse merger (9,953,333) (9,954) 9,954 -- -- --
14 to 1 stock split 38,454,005 38,454 (36,000) -- -- 2,454
Contribution of capital -- -- 262,400 -- -- 262,400
Net loss for the year -- -- -- -- (293,624) (293,624)
------------------------------------------------------------------------ -----------
Balance, December 31, 2003 41,200,005 41,200 1,436,266 -- (3,316,866) (1,839,400)
Shares issued for cash 9,041,774 9,042 619,182 -- -- 628,224
Shares issued for services 10,000 10 1,390 -- -- 1,400
Shares issued for loan commitment fee 750,000 750 104,250 -- -- 105,000
Shares issued for conversion of debentures 19,489,204 19,489 705,949 -- -- 725,438
Shares issued in escrow under SEDA 35,000,000 35,000 915,000 -- -- 950,000
Shares issued in conversion of loan payable -
officer 17,018,400 17,018 833,902 -- -- 850,920
Net loss for the year -- -- -- -- (2,111,663) (2,111,663)
------------------------------------------------------------------------ -----------
122,509,383 $ 122,509 $ 4,615,939 $ -- $(5,428,529) $ (690,081)
====================================================================================
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
----------- -----------
CASH FLOW FROM OPERTING ACTIVIITES
Net loss $(2,111,663) $ (293,624)
----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 61,726 15,429
Amortization of discount on conversions 108,760 --
Conversion of interest on convertible debentures 16,678 --
Common stock issued for services 1,400 --
Allowance for doubtful accounts (18,428) 55,070
CHANGES IN ASSETS AND LIABILITIES
(Increase) in accounts receivable (35,690) (242,996)
(Increase) decrease in prepaid expenses 1,866 (33,152)
(Increase) in deposits (25,000) (16,233)
Increase (decrease) in accounts payable and
and accrued expenses (431,635) 30,128
----------- -----------
Total adjustments (320,323) (191,754)
----------- -----------
NET CASH (USED IN) OPERATING ACTIVITIES (2,431,986) (485,378)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (12,435) (56,782)
(Decrease) in amounts due related parties 19,666 (30,007)
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 7,231 (86,789)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITES
Capital contributions/common stock issuance for cash
and subscriptions receivable 628,224 496,100
Proceeds from convertible debentures 600,000 --
Proceeds from standby equity distribution agreement /
promissory note, net of repayments 1,315,000 --
Increase (decrease) in amounts due related parties, net (24,667) (71,379)
Net proceeds (payments) from loan payable - officer / litigation
settlement payable 40,000 (216,236)
Net proceeds (payments) of notes payable (182,522) 430,348
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,376,035 638,833
----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (48,720) 66,666
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR 77,068 10,402
----------- -----------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 28,348 $ 77,068
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest expense $ 162,543 $ 137,798
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INFORMATION:
Common stock issued for services $ 1,400 $ --
=========== ===========
Common stock issued for loan commitment fees $ 105,000 $ --
=========== ===========
Common stock issued for conversion of debt $ 1,550,000 $ --
=========== ===========
Amortization of discount on conversions $ 108,760 $ --
=========== ===========
Common stock issued for conversion of interest expense $ 16,678 $ --
=========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
F-6
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Medical Staffing Solutions, Inc. (the "Company") ("MSSI"), was
incorporated in the State of Nevada on June 21, 2001. The
Company had no revenues, operations and was considered a
development stage company until September 26, 2003 when they
entered into a reverse share exchange with TeleScience
International, Inc. ("TeleScience") and its sole shareholder.
Prior to the transaction, MSSI had 10,499,333 shares of common
stock. Upon the share exchange, MSSI cancelled 9,953,333 of
these shares and issued 2,200,000 shares to acquire
TeleScience for 100% of the outstanding stock of TeleScience.
Upon the share exchange, the Board of Directors approved a
stock dividend in the amount of 14 for 1 stock or 1400% on
September 29, 2003, increasing the outstanding shares of the
Company to 41,200,000. As of December 31, 2003, the Company
had 41,200,000 shares of common stock issued and outstanding.
For accounting purposes, the transaction was been accounted
for as a reverse acquisition under the purchase method of
accounting. Accordingly, TeleScience will be treated as the
continuing entity for accounting purposes, and the
consolidated financial statements presented herein are those
of TeleScience.
The Company is a provider of medical personnel to state and
federal government agencies, primarily hospital and medical
facilities. The Company's business plan anticipates
diversification into building up a technology division
specifically concentrating on Homeland Security. The Company
has expensed some start-up costs relating to this in the past
year.
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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
F-7
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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
F-8
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 are included in general and
administrative costs in the consolidated statements of
operations for the years ended December 31, 2004 and 2003,
respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the consolidated balance sheet
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 its costs
relating to the start-up of its Homeland Security division in
the period in which those costs related to. The Company has
expensed approximately $200,000 as of December 31, 2003, and
these costs are included in the accompanying consolidated
statements of operations.
DEFERRED FINANCING FEES
In March 2004, the Company issued 750,000 shares of common
stock valued at $105,000 in connection with the Standby Equity
Distribution Agreement. The Standby Equity Distribution
Agreement is for a period of 24-months, and commencing April
2004, the Company began amortizing this deferred financing fee
at the rate of $4,375 per month. Amortization expense for the
years ended December 31, 2004 is $39,375.
F-9
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(LOSS) PER SHARE OF COMMON STOCK
Historical net (loss) per common share is computed using the
weighted average number of common shares outstanding. Diluted
earnings per share (EPS) includes additional dilution from
common stock equivalents, such as stock issuable pursuant to
the exercise of stock options and warrants. Common stock
equivalents are not included in the computation of diluted
earnings per share when the Company reports a loss because to
do so would be antidilutive for the periods presented.
The following is a reconciliation of the computation for basic
and diluted EPS:
December 31, December 31,
2004 2003
---- ----
Net Loss ($2,111,663) ($293,624)
----------- -----------
Weighted-average common shares
outstanding (Basic) 63,610,459 41,200,005
Weighted-average common stock
equivalents:
Stock options and warrants -- --
Weighted-average common shares
outstanding (Diluted) 63,610,459 41,200,005
========== ==========
Options and warrants outstanding to purchase stock were not
included in the computation of diluted EPS because inclusion
would have been antidilutive.
RECLASSIFICATIONS
Certain amounts for the year ended December 31, 2003 have been
reclassified to conform to the presentation of the December
31, 2004 amounts. The reclassifications have no effect on net
loss for the year ended December 31, 2003.
F-10
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In September 2001, the Financial Accounting Standards Board
(the "FASB") issued Statements of Financial Accounting
Standards No. 141, "Business Combinations", and No. 142,
"Goodwill and Other Intangible Assets", effective for fiscal
years beginning after December 15, 2001. Under the new rules,
the pooling of interests method of accounting for business
combinations are no longer allowed and goodwill and intangible
assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives. The Company
adopted these new standards effective January 1, 2002.
On October 3, 2001, the FASB issued Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" ("SFAS 144"), that is
applicable to financial statements issued for fiscal years
beginning after December 15, 2001. The FASB's new rules on
asset impairment supersede SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," and portions of Accounting Principles Board
Opinion 30, "Reporting the Results of Operations." This
Standard provides a single accounting model for long-lived
assets to be disposed of and significantly changes the
criteria that would have to be met to classify an asset as
held-for-sale. Classification as held-for-sale is an important
distinction since such assets are not depreciated and are
stated at the lower of fair value and carrying amount. This
Standard also requires expected future operating losses from
discontinued operations to be displayed in the period (s) in
which the losses are incurred, rather than as of the
measurement date as presently required.
In April 2002, the FASB issued SFAS No. 145, Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections. This statement rescinds
SFAS No. 4, Reporting Gains and Losses from Extinguishment of
Debt, and an amendment of that statement, SFAS No. 44,
Accounting for Intangible Assets of Motor Carriers, and SFAS
No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. This statement amends SFAS No. 13, Accounting
for Leases, to eliminate inconsistencies between the required
accounting for sales-leaseback transactions and the required
accounting for certain lease modifications that have economic
effects that are similar to sales-leaseback transactions.
F-11
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
Also, this statement amends other existing authoritative
pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed
conditions. Provisions of SFAS No. 145 related to the
rescissions of SFAS No. 4 were effective for the Company on
November 1, 2002 and provisions affecting SFAS No. 13 were
effective for transactions occurring after May 15, 2002. The
adoption of SFAS No. 145 did not have a significant impact on
the Company's results of operations or financial position.
In June 2003, the FASB issued SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities". This
statement covers restructuring type activities beginning with
plans initiated after December 31, 2002. Activities covered by
this standard that are entered into after that date will be
recorded in accordance with provisions of SFAS No. 146. The
adoption of SFAS No. 146 did not have a significant impact on
the Company's results of operations or financial position.
In December 2002, the FASB issued Statement No. 148,
"Accounting for Stock-Based Compensation-Transition and
Disclosure, an amendment of FASB Statement No. 123" ("SFAS
148"). SFAS 148 amends FASB Statement No. 123, "Accounting for
Stock-Based Compensation," to provide alternative methods of
transition for an entity that voluntarily changes to the fair
value based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of that
Statement to require prominent disclosure about the effects on
reported net income of an entity's accounting policy decisions
with respect to stock-based employee compensation. Finally,
this Statement amends Accounting Principles Board ("APB")
Opinion No. 28, "Interim Financial Reporting", to require
disclosure about those effects in interim financial
information. SFAS 148 is effective for financial statements
for fiscal years ending after December 15, 2002. The Company
will continue to account for stock-based employee compensation
using the intrinsic value method of APB Opinion No. 25,
"Accounting for Stock Issued to Employees," but has adopted
the enhanced disclosure requirements of SFAS 148.
F-12
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In April 2003, the FASB issued SFAS Statement No. 149,
"Amendment of Statement 133 on Derivative Instruments and
Hedging Activities", which amends and clarifies financial
accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement
is effective for contracts entered into or modified after June
30, 2003, except for certain hedging relationships designated
after June 30, 2003. Most provisions of this Statement should
be applied prospectively. The adoption of this statement did
not have a significant impact on the Company's results of
operations or financial position.
In May 2003, the FASB issued SFAS Statement No. 150,
"Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity". This
Statement establishes standards for how an issuer classifies
and measures certain financial instruments with
characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within
its scope as a liability (or an asset in some circumstances).
This statement is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatory redeemable
financial instruments of nonpublic entities, if applicable. It
is to be implemented by reporting the cumulative effect of a
change in an accounting principle for financial instruments
created before the issuance date of the Statement and still
existing at the beginning of the interim period of adoption.
The adoption of this statement did not have a significant
impact on the Company's results of operations or financial
position.
In November 2002, the FASB issued Interpretation No. 45 ("FIN
45"), "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others". FIN 45 requires a company, at the time it issues a
guarantee, to recognize an initial liability for the fair
value of obligations assumed under the guarantees and
elaborates on existing disclosure requirements related to
guarantees and warranties. The recognition requirements are
effective for guarantees issued or modified after December 31,
2002 for initial recognition and initial measurement
provisions. The adoption of FIN 45 did not have a significant
impact on the Company's results of operations or financial
position.
F-13
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In January 2003, the FASB issued FASB Interpretation No. 46
("FIN 46"), "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51". FIN 46 requires certain
variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the
entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk
for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or
acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or
annual period beginning after June 15, 2003. The adoption of
FIN 46 did not have a significant impact on the Company's
results of operations or financial position.
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 provide for an
allowance of doubtful accounts and often evaluates receivables
for collectibility. At December 31, 2004 and 2003, the Company
has $1,477,837 and $1,423,719, respectively due to it for its
services. Additionally, the Company has established an
allowance for doubtful accounts of $36,642 and $55,070 at
December 31, 2004 and 2003, respectively.
The accounts receivable are being used as collateral on a line
of credit the Company has with a factor (See Note 5).
F-14
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 4- PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December
31, 2004 and 2003:
2004 2003
---- ----
Furniture, fixtures and equipment $153,066 $140,631
Less: accumulated depreciation (92,377) (70,026)
-------- --------
Net book value $ 60,689 $ 70,605
======== ========
Depreciation expense for the years ended December 31, 2004 and
2003 was $22,351 and $15,429, 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%. 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, 2004 and 2003 was $1,069,584 and $1,018,065,
respectively. The balance is reflected net of a 10% reserve
that the factor has established which is adjusted on each
funding.
Additionally, the Company maintains a small credit line with a
bank. The balance outstanding at December 31, 2003 was
$14,041. There were no amounts outstanding under this line at
December 31, 2004.
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, 2004
and 2003, the balance outstanding was $0 and $220,000. The
loan was paid back in 2004.
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 (see Note 11). This amount was paid back from a private
stock transaction by the officer in November 2003.
F-15
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 6- CONVERTIBLE DEBENTURES
On March 11, 2004, the Company entered into a Securities
Purchase Agreement with Cornell Capital Partners. Under the
Securities Purchase Agreement, Cornell Capital Partners was
obligated to purchase $600,000 of secured convertible
debentures from the Company.
On March 11, 2004, Cornell Capital Partners purchased $250,000
of convertible debentures and purchased $350,000 additional
debentures on May 3, 2004. These debentures accrue interest at
a rate of 5% per year and mature two years from the issuance
date. The debentures are convertible into the Company's common
stock at the holders' option any time up to maturity at a
conversion price equal to the lower of (i) 115% of the closing
bid price of the common stock as of the closing date or (ii)
85% of the lowest closing bid price of the common stock the
five trading days immediately preceding the conversion date.
The debentures are secured by the assets of the Company. At
maturity, the Company has the option to either pay the holder
the outstanding principal balance and accrued interest or to
convert the debentures into shares of common stock at a
conversion price similar to the terms described above. The
Company has the right to redeem the debentures upon fifteen
(15) business days notice for 115% of the amount redeemed.
Upon such redemption, the holder shall receive warrants equal
to 10,000 shares of common stock for each $100,000 redeemed
with an exercise price equal to 120% of the closing bid price
of the common stock on the closing date. During the year ended
December 31, 2004, Cornell converted the entire $600,000 into
19,489,204 shares of common stock which included conversions
of $16,678 in interest and the Company recognized $108,760 of
amortization of discount on the debenture conversions.
NOTE 7- INVESTMENT
Beginning in 2001, the Company started investing in a private
airstrip in Branson, Missouri. The project ran out of funding
after the Company funded approximately $387,269 as of December
31, 2002, 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.
F-16
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 8- DUE TO RELATED PARTIES
The Company has outstanding at December 31, 2004 and 2003,
$105,333 and $130,000 non-interest bearing to related parties.
These amounts have no specific repayment terms, and were
provided to the Company to cover some of the costs of
completing the merger. These amounts are reflected in the
consolidated balance sheets as current liabilities.
The Company has also advanced related parties certain amounts,
mostly in the form of employee advances. The balance at
December 31, 2004 and 2003 were $10,341 and $30,007,
respectively.
NOTE 9- 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.
At December 31, 2004 and 2003, deferred tax assets
approximated the following:
2004 2003
----------- -----------
Net operating loss carryforwards $ 1,855,243 $ 1,150,406
Less: valuation allowance (1,855,243) (1,150,406)
----------- -----------
$ -0- $ -0-
=========== ===========
At December 31, 2004 and 2003, the Company had accumulated
deficits approximating $5,456,596 and $3,316,866, respectively
available to offset future taxable income through 2024. 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.
F-17
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 10- STOCKHOLDERS' (DEFICIT)
The Company has two classes of stock; a preferred class with a
par value of $.001 and 30,000,000 and 5,000,000 shares
authorized, respectively at December 31, 2004 and 2003 and a
common class with a par value of $.001 and 300,000,000 and
50,000,000 shares authorized, respectively at December 31,
2004 and 2003.
The Company has not issued any shares of preferred stock.
The Company has 122,509,383 and 41,200,005 common shares
issued, 8,941,935 and 0 common shares held in escrow, and
113,567,448 and 41,200,005 common shares outstanding as of
December 31, 2004 and 2003, respectively.
Upon the merger, the Company cancelled 9,953,333 of the
10,499,333 shares then issued and outstanding and issued
2,200,000 shares to acquire 100% of the outstanding stock of
TeleScience.
Upon the share exchange, the Board of Directors of the
Registrant approved a stock dividend in the amount of 14 for 1
or 1400% on September 29, 2003, increasing the outstanding
shares of the Company to 41,200,005.
On January 27, 2004 and February 18, 2004, the Company issued
2,000,000 S-8 shares on each date for a total of 4,000,000
shares. The price of these shares ranged between $.10 and $.16
for a total value of $480,000.
The Company paid a one-time placement agent fee of 10,000
restricted shares of common stock equal to approximately
$1,400 based on the Company's stock price on March 11, 2004.
The Company issued 2,416,667 shares of common stock for
$75,017 in the first quarter of 2004 to investors and
employees.
The Company issued 750,000 shares of common stock in March
2004 to Cornell Capital Partners, L.P. as a commitment fee for
the Standby Equity Distribution Agreement. The value of these
shares is $105,000 and has been reflected as loan commitment
fee (net of amortization) in the consolidated balance sheet at
December 31, 2004.
F-18
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 10- STOCKHOLDERS' (DEFICIT) (CONTINUED)
The Company has issued 2,625,107 shares of common stock for
cash of $73,206 in the second quarter of 2004 to investors and
employees.
The Company issued 35,000,000 shares of common stock to the
escrow agent for Cornell as collateral under the promissory
note the Company entered into with Cornell Capital (see Note
14). The Company received $1,315,000 under two separate notes.
The Company issued 19,489,204 shares in conversion of $600,000
in convertible debentures, and $16,678 of accrued interest.
The Company recognized $108,760 in amortization of discount on
these conversions during 2004.
The Company on December 30, 2004 pursuant to a board
resolution issued 17,018,400 shares of common stock in
conversion of $850,920 loan payable to an officer of the
Company (See Note 11).
NOTE 11- LOAN PAYABLE - OFFICER / LITIGATION
The Company had advances from an officer of the Company to
help fund operations in the amount of $71,379 at December 31,
2002. The officer has not been charging interest, and the
amounts were classified as current liabilities as they are due
on demand. These amounts were repaid by the Company in 2003.
The Company was 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 included attorney's fees. The
payout of this settlement was to be over forty-two months in
semi-monthly installments of $12,500 commencing February 2003.
The settlement accrued 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 Company paid
$216,236 of this amount, and then 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 has recorded a loan payable to the President for the
unpaid liability at that time, $875,920. The Company made
additional payments of $25,000 in 2004 then converted $850,920
into 17,048,400 shares of stock pursuant to a board resolution
on December 30, 2004.
F-19
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 12- COMMITMENTS
The Company has established a 401(k) Plan for its employees.
The expense for the Company for the years ended December 31,
2003 and 2002 were $26,830 and $23,505, respectively. The
Company has dropped the matching portion of the contribution
effective January 1, 2004.
In October 2003, the Company extended their agreement with the
California State Department of Corrections for Contract
Nursing Staff. This agreement has 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.
The Company entered into a non-binding letter of intent on
December 1, 2004 with Nurses PRN, LLC to acquire it.
The Company entered into a non-binding letter of intent on
July 15, 2004 with Physicians Informatics, Inc. d.b.a.
Practice One, a Virginia corporation. This letter of intent
was terminated on December 3, 2004.
On December 30, 2004, the Company entered into a non-binding
letter of intent with A&T Systems, Inc. to acquire certain
assets of A&T Systems, Inc..
On January 11, 2005, the Company entered into a non-binding
letter of intent with Staff Relief, Inc. to acquire it.
The Company's subsidiary TeleScience was sued by Medsense LA,
LLC for an outstanding balance owed for nursing services
provided on behalf of TeleScience. The principal amount sought
in the suit was $24,592. By default judgment dated October 6,
2004, Medsense was awarded the principal amount plus
contractual interest and attorney's fees. TeleScience appealed
the default judgment on December 16, 2004. During the appeal,
TeleScience settled the matter with Medsense and Medsense
signed a settlement agreement effective January 21, 2005. The
judgment is in the process of being marked satisfied and the
appeal dismissed with prejudice. The amount paid in January
and accrued by the Company as of December 31, 2004 for this
matter was $30,000.
F-20
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 13- STANDBY EQUITY DISTRIBUTION AGREEMENT
On March 11, 2004, the Company entered into a Standby Equity
Distribution Agreement with Cornell Capital Partners. Under
the agreement, the Company may issue and sell to Cornell
Capital Partners common stock for a total purchase price of up
to $15.0 million. The purchase price for the shares is equal
to 100% of the market price, which is defined as the lowest
volume weighted average price of the common stock during the
five trading days following the notice date.
Cornell Capital Partners received a one-time commitment fee of
750,000 shares of the Company's common stock, valued at
$105,000 on March 11, 2004.
Cornell Capital Partners is entitled to retain a fee of 5% of
each advance. In addition, the Company entered into a
placement agent agreement with Newbridge Securities
Corporation, a registered broker-dealer. Pursuant to the
placement agent agreement, the Company paid a one-time
placement agent fee of 10,000 restricted shares of common
stock equal to approximately $1,400 based on the Company's
stock price on March 11, 2004.
During the fiscal year ended 2004, the Company has received
the gross amount of $950,000 pursuant to the Standby Equity
Distribution Agreement, issuing 26,058,065 shares of common
stock. The Company has used the $950,000 obtained under the
Standby Equity Distribution Agreement to repay the promissory
notes issued to Cornell Capital Partners (See Note 14). The
Company has not used all of the available shares of registered
common stock under the Standby Equity Distribution Agreement,
and therefore may still make advances Standby Equity
Distribution Agreement without filing an additional
registration statement for shares issuable under the Standby
Equity Distribution Agreement.
NOTE 14- PROMISSORY NOTE
On June 11, 2004 and October 18, 2004, the Company entered
into promissory notes in the amount of $1,000,000 and $315,000
with Cornell Capital. The Company issued 35,000,000 shares of
common stock to the escrow agent as collateral under these
note agreements. As of December 31, 2004 the Company has drawn
down $950,000 of the Standby Equity Distribution Agreement to
repay part of the notes. As of December 31, 2004, the balance
outstanding under these notes is $365,000.
F-21
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 15- GOING CONCERN
As shown in the accompanying consolidated financial
statements, the Company incurred substantial net losses for
the years ended December 31, 2004 and 2003. The Company may
not be able to generate enough revenue and/or raise capital to
support its operations. This raises doubt about the Company's
ability to continue as a going concern.
Management believes that they can improve operations and raise
the appropriate funds needed through recent contracts the
Company has entered into in the past few months, as well as
the completed reverse merger with which the Company now has
the ability to raise money in the public markets.
On March 11, 2004, the Company entered into a Standby Equity
Distribution Agreement. Under this agreement, and upon an
effective registration of the shares, the Company may issue
and sell to Cornell Capital Partners, L.P. shares of common
stock for a total purchase price of $15,000,000. The Company
has obtained an effective registration statement for
124,408,774 shares of common stock under the Standby Equity
Distribution Agreement, and has issued 26,058,065 shares to
Cornell Capital Partners through December 31, 2004.
In addition to the Standby Equity Distribution Agreement, on
March 11, 2004, the Company entered into a Convertible
Debenture agreement for $600,000. Cornell has advanced all
$600,000 of this amount.
With the proceeds of the Standby Equity Distribution Agreement
for up to 15 million dollars, the Company should be able to
grow and acquire companies that will contribute to the
development of providing nurses to the private sector as well
as government contracts. The Company received $1,315,000 from
Cornell Capital on June 11, 2004 and October 18, 2004 pursuant
to the promissory notes. The Company intends to repay the
promissory notes with cash proceeds received under the Standby
Equity Distribution Agreement. The Company has entered into a
letter of intent to acquire a few companies and is in the due
diligence phase of these acquisitions.
The consolidated financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.
F-22
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
NOTE 16- SUBSEQUENT EVENTS
On January 11, 2005, the Company entered into a non-binding
letter of intent with Staff Relief, Inc. to acquire them.
On January 1, 2005, the Company entered into a five-year
employment agreement with their President.
On January 5, 2005, the Company entered into a third
promissory note for $2,000,000 with Cornell Capital Partners,
L.P. and placed an additional 40,000,000 shares of common
stock into escrow under this agreement.
Subsequent to December 31, 2004, and through March 16, 2005,
the Company has issued 14,068,843 shares of common stock under
the Standby Equity Distribution Agreement to Cornell Capital
Partners.
F-23
WE HAVE NOT AUTHORIZED ANY DEALER,
SALESPERSON OR OTHER PERSON TO PROVIDE
ANY INFORMATION OR MAKE ANY
REPRESENTATIONS ABOUT MEDICAL STAFFING
SOLUTIONS, INC., EXCEPT THE INFORMATION
OR REPRESENTATIONS CONTAINED IN THIS
PROSPECTUS. YOU SHOULD NOT RELY ON ANY
ADDITIONAL INFORMATION OR
REPRESENTATIONS IF MADE.
-----------------------
This prospectus does not constitute an
offer to sell, or a solicitation of an
offer to buy any securities:
----------
PROSPECTUS
----------
|_| except the common stock offered by
this prospectus;
|_| in any jurisdiction in which the
offer or solicitation is not
authorized;
|_| in any jurisdiction where the 102,000,000 SHARES OF COMMON STOCK
dealer or other salesperson is not
qualified to make the offer or
solicitation;
|_| to any person to whom it is
unlawful to make the offer or MEDICAL STAFFING SOLUTIONS, INC.
solicitation; or
|_| to any person who is not a United
States resident or who is outside
the jurisdiction of the United
States. ________________ __, 2005
The delivery of this prospectus or any
accompanying sale does not imply that:
|_| there have been no changes in the
affairs of Medical Staffing
Solutions after the date of this
prospectus; or
|_| the information contained in this
prospectus is correct after the
date of this prospectus.
-----------------------
Until _________, 2005, all dealers
effecting transactions in the registered
securities, whether or not participating
in this distribution, may be required to
deliver a prospectus. This is in
addition to the obligation of dealers to
deliver a prospectus when acting as
underwriters.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation include an indemnification provision
under which we have agreed to indemnify directors and officers of Medical
Staffing from and against certain claims arising from or related to future acts
or omissions as a director or officer of Medical Staffing. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of Medical Staffing
pursuant to the foregoing, or otherwise, Medical Staffing has been advised that
in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth estimated expenses expected to be
incurred in connection with the issuance and distribution of the securities
being registered. Medical Staffing will pay all expenses in connection with this
offering.
Securities and Exchange Commission Registration Fee $ 319.00
Printing and Engraving Expenses $ 2,500.00
Accounting Fees and Expenses $ 15,000.00
Legal Fees and Expenses $ 50,000.00
Miscellaneous $ 17,181.00
---------------
TOTAL $ 85,000.00
===============
ITEM 26. SALES OF UNREGISTERED SECURITIES
During the past three years the registrant has issued the following
securities without registration under the Securities Act of 1933:
Prior to the Share Exchange Agreement, B.B. Sahay owned 100% of the
outstanding shares of TeleScience. Subsequent to the Share Exchange Agreement,
Medical Staffing has issued the following unregistered securities.
Immediately prior to the Share Exchange transaction, the Company had
10,499,333 shares of common stock. Upon the consummation of the Shares Exchange
transaction, the Company canceled 9,953,333 of the outstanding shares and issued
2,200,000 shares of common stock to the holders of the common stock of
TeleScience for 100% of the outstanding stock of TeleScience. On September 29,
2003, the Company approved a 14-for-1 stock dividend.
On January 27, 2004 and February 18, 2004, the Company issued 2,000,000
S-8 shares on each date for a total of 4,000,000 shares. The price of these
shares ranged between $.10 and $.16 for a total value of $505,000.
On March 11, 2004, the Company entered into a Securities Purchase
Agreement with Cornell Capital Partners. Under the Securities Purchase
Agreement, Cornell Capital Partners was obligated to purchase $600,000 of
secured convertible debentures from the Company. On March 11, 2004, Cornell
Capital Partners purchased $250,000 of convertible debentures and purchased the
remaining $350,000 of debentures on May 3, 2004. During the year ended December
31, 2004, Cornell Capital Partners converted the entire $600,000 into 19,489,204
shares of common stock which included conversions of $16,678 in interest.
On March 11, 2004, Medical Staffing entered into a Standby Equity
Distribution Agreement with Cornell Capital Partners. Under the agreement,
Medical Staffing may issue and sell to Cornell Capital Partners common stock for
a total purchase price of up to $15.0 million. The purchase price for the shares
is equal to 100% of the market price, which is defined as the lowest volume
weighted average price of the common stock during the five trading days
following the notice date. The amount of each advance is subject to an aggregate
maximum advance amount of $250,000, with no advance occurring within seven
trading days of a prior advance. On March 11, 2004, Cornell Capital Partners
received a one-time commitment fee of 750,000 shares of the Company's common
stock. Cornell Capital Partners is entitled to retain a fee of 5% of each
II-1
advance. In addition, Medical Staffing entered into a placement agent agreement
with Newbridge Securities Corporation, a registered broker-dealer. Pursuant to
the placement agent agreement, Medical Staffing paid a one-time placement agent
fee of 10,000 restricted shares of common stock equal to approximately $1,400
based on Medical Staffing's stock price on March 11, 2004. Through December 31,
2004, the Company has drawn $950,000 under the Standby Equity Distribution
Agreement issuing 26,058,065 shares of common stock. Through April 11, 2005, the
Company has made advances under the Standby Equity Distribution Agreement in the
amount of $2,215,000, issuing 64,434,420shares of common stock.
The Company issued 2,416,667 shares of common stock for $75,017 in the
first quarter of 2004 to investors and employees.
The Company has issued 2,625,107 shares of common stock for cash of
$73,206 in the second quarter of 2004 to investors and employees.
On December 30, 2004, the Company, pursuant to a board resolution,
converted a $850,920 loan payable to the Company's President and Chief Executive
Officer, B.B. Sahay into 17,048,400 shares of common stock.
On April 8, 2005, the Company entered into a 90 Days Consulting
Services Contract (the "Contract") with Fitzgerald Galloway Management, Inc.
Pursuant to the Contract, Fitzgerald is to receive 2,000,000 shares of common
stock of the Company, 1,000,000 of which were received on April 4, 2005 and the
remaining 1,000,000 shares are being held in escrow and will be received in the
beginning of July 2005 upon the completion of the consulting services to be
provided to the Company and at the conclusion of the 90-day contract expiration
period.
With respect to the sale of unregistered securities referenced above,
all transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 (the "1933 Act"), and Regulation D promulgated under the
1933 Act. In each instance, the purchaser had access to sufficient information
regarding Medical Staffing so as to make an informed investment decision. More
specifically, Medical Staffing had a reasonable basis to believe that each
purchaser was an "accredited investor" as defined in Regulation D of the 1933
Act and otherwise had the requisite sophistication to make an investment in the
Company's securities.
ITEM 27. EXHIBITS
EXHIBIT NO.
2.1 Articles of Incorporation, as amended Incorporated by reference to Exhibit 3(a) to the
Company's Registration Statement on Form SB-2 as filed
with the United States Securities and Exchange
Commission on October 9, 2001
3.1 By-laws Incorporated by reference to Exhibit 3(b) to the
Company's Registration Statement on Form SB-2 as filed
with the United States Securities and Exchange
Commission on October 9, 2001
3.2 Certificate of Amendment to Articles of Incorporated by reference to Exhibit 3 to the
Incorporation Company's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on March 27, 2003
3.3 Certificate of Amendment to Articles of Incorporated by reference to Exhibit 3 to the
Incorporation Company's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on April 9, 2004
5.1 Opinion of Burton, Bartlett & Glogovac Provided herewith
II-2
EXHIBIT NO.
10.1 Sublease Agreement dated December 23, 2002 by and Incorporated by reference to Exhibit 10.1 to the
among InterAmerica Technologies, Inc., Kemron Company's Annual Report on Form 10-KSB as filed with
Environmental Services and Telescience the United States Securities and Exchange Commission
International, Inc. on April 9, 2004
10.2 Promissory Note in the principal amount of Incorporated by reference to Exhibit 10.2 to the
$875,920 made by the Company in favor of B. B. Company's Annual Report on Form 10-KSB as filed with
Sahay the United States Securities and Exchange Commission
on April 9, 2004
10.3 Memorandum of Understanding dated March 10, 2004, Incorporated by reference to Exhibit 10.3 to the
by and between Silver Star Technologies, Inc. and Company's Annual Report on Form 10-KSB as filed with
TeleScience International, Inc. the United States Securities and Exchange Commission
on April 9, 2004
10.4 Memorandum of Understanding by and between Incorporated by reference to Exhibit 10.4 to the
Telescience International, Inc. and Chesapeake Company's Annual Report on Form 10-KSB as filed with
Government Technologies, Inc. the United States Securities and Exchange Commission
on April 9, 2004
10.5 Proposal dated January 7, 2004 from Professional Incorporated by reference to Exhibit 10.5 to the
Nursing Resources, Inc. to Telescience Company's Annual Report on Form 10-KSB as filed with
International, Inc. the United States Securities and Exchange Commission
on April 9, 2004
10.6 Standby Equity Distribution Agreement dated Incorporated by reference to Exhibit 10.6 to the
March 11, 2004 between Medical Staffing and Company's Annual Report on Form 10-KSB as filed with
Cornell Capital Partners, LP the United States Securities and Exchange Commission
on April 9, 2004
10.7 Registration Rights Agreement dated March 11, Incorporated by reference to Exhibit 10.7 to the
2004 between Medical Staffing and Cornell Capital Company's Annual Report on Form 10-KSB as filed with
Partners, LP the United States Securities and Exchange Commission
on April 9, 2004
10.8 Escrow Agreement dated March 11, 2004 among Incorporated by reference to Exhibit 10.8 to the
Medical Staffing, Cornell Capital Partners, LP Company's Annual Report on Form 10-KSB as filed with
and Butler Gonzalez the United States Securities and Exchange Commission
on April 9, 2004
10.9 Securities Purchase Agreement dated March 11, Incorporated by reference to Exhibit 10.9 to the
2004 among Medical Staffing and the Buyers Company's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on April 9, 2004
10.10 Escrow Agreement dated March 11, 2004 among Incorporated by reference to Exhibit 10.10 to the
Medical Staffing, the Buyers and Butler Gonzalez, Company's Annual Report on Form 10-KSB as filed with
LP the United States Securities and Exchange Commission
on April 9, 2004
10.11 $250,000 Convertible Debenture dated March 11, Incorporated by reference to Exhibit 10.11 to the
2004 between Medical Staffing and Cornell Capital Company's Annual Report on Form 10-KSB as filed with
Partners, LP the United States Securities and Exchange Commission
on April 9, 2004
II-3
EXHIBIT NO.
10.12 Investor Registration Rights Agreement dated Incorporated by reference to Exhibit 10.12 to the
March 11, 2004 between Medical Staffing and the Company's Annual Report on Form 10-KSB as filed with
Investors the United States Securities and Exchange Commission
on April 9, 2004
10.13 Placement Agent Agreement dated March 11, 2004 Incorporated by reference to Exhibit 10.13 to the
among Medical Staffing, Newbridge Securities Company's Annual Report on Form 10-KSB as filed with
Corporation and Cornell Capital Partners, LP the United States Securities and Exchange Commission
on April 9, 2004
10.14 Renewal Agreement dated February 5, 2004, from Incorporated by reference to Exhibit 10.14 to the
Commonwealth of Pennsylvania to Telescience Company's Annual Report on Form 10-KSB as filed with
International, Inc. regarding Contract 2550-09 the United States Securities and Exchange Commission
Personal Protection Equipment PPE on April 9, 2004
10.15 Memorandum of Understanding dated February 23, Incorporated by reference to Exhibit 10.15 to the
2004, to Mobile Healthcare Solutions, Inc. from Company's Annual Report on Form 10-KSB as filed with
Telescience International, Inc. the United States Securities and Exchange Commission
on April 9, 2004
10.16 Master Contract dated April 1, 2004, by and Incorporated by reference to Exhibit 10.17 to the
between Telescience International, Inc. and Company's Annual Report on Form 10-KSB as filed with
State of California Department of Corrections the United States Securities and Exchange Commission
on April 9, 2004
10.17 Memorandum dated March 26, 2003 regarding Branch Incorporated by reference to Exhibit 10.20 to the
Office Location Company's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on April 9, 2004
10.18 $1,000,000 Promissory Note issued to Cornell Incorporated by reference to Exhibit 10.18 to the
Capital Partners, LP by Medical Staffing on June Company's Annual Report on Form 10-KSB as filed with
8, 2004 the United States Securities and Exchange Commission
on March 31, 2005
10.19 $315,000 Promissory Note issued to Cornell Incorporated by reference to Exhibit 10.19 to the
Capital Partners, LP by Medical Staffing on Company's Annual Report on Form 10-KSB as filed with
October 6, 2004 the United States Securities and Exchange Commission
on March 31, 2005
10.20 $2,000,0000 Promissory Note issued to Cornell Incorporated by reference to Exhibit 10.20 to the
Capital Partners, LP by Medical Staffing on Company's Annual Report on Form 10-KSB as filed with
January 6, 2005 the United States Securities and Exchange Commission
on March 31, 2005
10.21 Employment Agreement between Medical Staffing and Incorporated by reference to Exhibit 10.21 to the
Brajnandan B. Sahay dated January 1, 2005 Company's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on March 31, 2005
10.22 Contract dated December 6, 2004, by and between Incorporated by reference to Exhibit 10.22 to the
Telescience International, Inc. and State of Company's Annual Report on Form 10-KSB as filed with
California Department of Corrections the United States Securities and Exchange Commission
on March 31, 2005
II-4
EXHIBIT NO.
10.23 Master Contract dated December 19, 2004, by and Incorporated by reference to Exhibit 10.23 to the
between Telescience International, Inc. and State Company's Annual Report on Form 10-KSB as filed with
of California Department of Corrections the United States Securities and Exchange Commission
on March 31, 2005
10.24 90 Days Consulting Services Contract Provided herewith
14.1 Code of Ethics Incorporated by reference to Exhibit 14.1 to the
Company's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on April 9, 2004
23.1 Consent of Burton, Bartlett & Glogovac Incorporated by reference to Exhibit 5.1
23.2 Consent of Bagell, Josephs & Company, L.L.C. Provided herewith
II-5
UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Sections 10(a)(3) of
the Securities Act of 1933 (the "Act");
(ii) Reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
(iii) Include any additional or changed material information
on the plan of distribution;
(2) That, for the purpose of determining any liability under the
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on our behalf by the undersigned, on April 12, 2005.
Date: April 12, 2005 MEDICAL STAFFING SOLUTIONS, INC.
By: /s/ Brajnandan B. Sahay
-----------------------------------
Name: Brajnandan B. Sahay
Title: President, Chief Executive
Officer and Principal Financial
Officer
In accordance with the Securities Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------------------- ---------------------------------- ---------------------
By: /s/ Brajnandan B. Sahay Chairman of the Board of Directors Date: April 12, 2005
-----------------------
Brajnandan B. Sahay
II-7