As filed with the Securities and Exchange Commission on August 5, 2005
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO.1 TO FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------
Medical Staffing
Nevada Solutions, Inc. 91-2135006
(State or Other Jurisdiction of (Name of Registrant (I.R.S. Employer
Incorporation or Organization) in Our Charter) Identification No.)
Dr. Brajnandan B. Sahay
8150 Leesburg Pike, Suite 1200 8150 Leesburg Pike, Suite 1200
Vienna, Virginia 22182 Vienna, Virginia 22182
(703) 641-8890 7363 (703) 641-8890
(Address and telephone (Primary Standard (Name, address and
number of Principal Industrial telephone number of
Executive Offices and Classification agent for service)
Principal Place of Business) Code Number)
With copies to:
Clayton E. Parker, Esq. Matthew Ogurick, Esq.
Kirkpatrick & Lockhart Kirkpatrick & Lockhart
Nicholson Graham LLP 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
===========================================================================================================================
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(2)
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001 per share 101,000,000 shares (3) $0.05 $5,050,000 $594.39
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 101,000,000 shares (3) $0.05 $5,050,000 $594.39
===========================================================================================================================
(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 August 1, 2005.
(2) $319.00 of this fee has previously been paid.
(3) 100,000,000 of these shares are being registered under the Standby
Equity Distribution Agreement and 1,000,000 shares are being registered
under the Consultant Service Contract.
-------------
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 August 5, 2005
MEDICAL STAFFING SOLUTIONS, INC.
101,000,000 shares of Common Stock
This prospectus (this "Prospectus") relates to the sale of up to
101,000,000 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"), which
intends to sell up to 100,000,000 shares of common stock and Fitzgerald Galloway
Management, Inc. ("Fitzgerald"), which intends to sell up to 1,000,000 shares of
common stock. Please refer to "Selling Stockholders" beginning on page 15. All
costs associated with this registration will be borne by Medical Staffing.
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 August 1, 2005, the last reported sale price of
our common stock was $0.05 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.
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.
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 8.
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 (24)
months after the accompanying registration statement is declared effective by
the Securities and Exchange Commission. 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 ____ __, 2005.
i
TABLE OF CONTENTS
PROSPECTUS SUMMARY....................................................................................1
THE OFFERING..........................................................................................3
RISK FACTORS..........................................................................................8
FORWARD-LOOKING STATEMENTS...........................................................................14
SELLING STOCKHOLDERS.................................................................................15
USE OF PROCEEDS......................................................................................17
DILUTION.............................................................................................18
STANDBY EQUITY DISTRIBUTION AGREEMENT................................................................19
PLAN OF DISTRIBUTION.................................................................................22
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............................................24
DESCRIPTION OF BUSINESS..............................................................................34
MANAGEMENT...........................................................................................38
PRINCIPAL STOCKHOLDERS...............................................................................41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................................42
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER STOCKHOLDER MATTERS.......43
DESCRIPTION OF SECURITIES............................................................................44
EXPERTS..............................................................................................46
LEGAL MATTERS........................................................................................46
HOW TO GET MORE INFORMATION..........................................................................46
PART II ..........................................................................................II-1
FINANCIAL STATEMENTS................................................................................F-1
i
PROSPECTUS SUMMARY
Introduction
This offering relates to the sale of common stock by Cornell Capital
Partners, who intends to sell up to 100,000,000 shares of common stock under the
Standby Equity Distribution Agreement and by Fitzgerald, who intends to sell up
to 1,000,000 shares of common stock, which were issued to Fitzgerald pursuant to
a ninety (90) day consultant service contract (the "Consultant Service
Contract") dated April 8, 2005. 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.
Overview
Medical Staffing was a developmental stage business and generated no
revenue from its inception in June 2001 until it acquired its wholly-owned
subsidiary, TeleScience International, Inc. ("TeleScience"), in September 2003.
We have now become a small government contracting firm. We presently provide,
through TeleScience, health-related staffing services to Federal and State
governmental clients. These clients include the U.S. Military, Veterans
Administration, Public Health Service and state correctional and health and
welfare facilities. The facilities include hospitals and clinics. The services
include both auxiliary care and professional care staffing. These staffing
positions include personnel in the dental, medical and pharmacy areas.
Occupational areas provided include nurses, nurse practitioners, dental
assistants, pharmacists and physicians. We are currently moving toward providing
similar services, commencing with nursing services, to non-governmental care
facilities. On July 1, 2005 we completed our acquisition of all of the assets,
properties, privileges, rights, interests, business and goodwill belonging to,
and certain liabilities of, Nurses PRN, LLC through our wholly-owned subsidiary,
Nurses PRN Acquisition Corp. ("NPRN" and together with TeleScience and Medical
Staffing, the "Company"). NPRN is a provider of per diem nurses to private
hospitals. NPRN maintains a listing of nurses having a variety of skills who may
be called upon to fill appropriate open shift positions at hospitals. NPRN
establishes relationships with various hospitals who call upon NPRN as they have
needs for nurses due to vacancies created by vacations, increased patient loads
or similar situations as well as for extended periods. We also have a
relationship which we expect will lead to our making re-sales of third party
products to the Federal and state Homeland Security agencies. The initial
products we expect to sell include decontamination products, decontamination
vehicles and supplies such as safety masks, gowns and hoods. Additional products
have not yet been identified and will be a function of governmental needs and
our associates' ability to identify appropriate sources. We have also
established a relationship which we expect will lead to our providing
information technology services to the Federal Government. We are exploring the
prospects of providing these services to the Department of Defense.
Since our inception, we have not been profitable and have lost money on
both a cash and non-cash basis. In addition, future losses are likely to occur,
as we are dependent on spending money to pay for our operations. As such, we may
not be successful in reaching or maintaining profitable operations. Based on our
current budget assessment, and excluding any acquisitions which may occur in the
remaining part of 2005, we believe that we will need to obtain approximately $2
million in additional debt or equity capital from one (1) or more sources to
fund operations for the next twelve (12) months. We plan to receive the
additional $2 million that we need to continue to operate for the next twelve
(12) months from the Standby Equity Distribution Agreement that we have in place
with Cornell Capital Partners.
Medical Staffing is not selling any shares of common stock in this
offering and therefore will not directly receive any proceeds from this
offering. Medical Staffing may, however, receive proceeds from the sale of
common stock under the Standby Equity Distribution Agreement. The Company may
choose to pay down all or a portion of the amounts due under the outstanding
promissory notes issued to Cornell Capital Partners with the proceeds to be
received under the Standy Equity Distribution Agreement.
Illiquid Security
Investors purchasing common stock of Medical Staffing in this offering
may be receiving an illiquid security, as our common stock is approved for
trading on the Over-the-Counter Bulletin Board and the Over-the-Counter Bulletin
Board is generally characterized by low trading volume, thus this may provide a
limited liquidity into the market for our shares. As a result of the foregoing,
our shareholders may be unable to liquidate their shares.
1
Going Concern
For the quarter ended March 31, 2005, Medical Staffing had an
accumulated deficit of $5,775,193 and a working capital deficiency of $240,183.
As reflected in Medical Staffing's audited financial statements for the twelve
(12) months ended December 31, 2004, Medical Staffing's accumulated deficit of
$5,428,529 and its working capital deficiency of $869,038 raise substantial
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. The
address of our website is www.telescience.com. Information on our website is not
part of this Prospectus.
2
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 Medical Staffing who intends to sell up to 1,000,000 shares of
common stock, which were issued to Fitzgerald pursuant to the Consulting
Services Contract dated April 8, 2005.
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 million. The
amount of each advance under the Standby Equity Distribution Agreement is
subject to an aggregate maximum advance amount of $250,000, with no advance
occurring within seven (7) trading days of a prior advance.
The purchase price for the shares of common stock under the Standby
Equity Distribution Agreement is equal to one hundred percent (100%) (or
ninety-five percent (95%) after taking into account the five percent (5%)
underwriting discount to be received in cash and not in shares of common stock)
of the lowest volume weighted average price of the common stock during the five
(5) trading days following the notice date. The daily volume weighted average
price is calculated by totaling the dollar amount traded for every transaction
(selling price multiplied by the shares traded) and then dividing by the total
shares traded for the day.
Prior to this registration statement, Medical Staffing previously made
draws totaling $2,440,000 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 offering price of $0.05 per share, as determined under
the Standby Equity Distribution Agreement, Medical Staffing will be able to
receive $5,000,000 in gross proceeds, assuming the sale of the entire
100,000,000 shares being registered under this registration statement. The
proceeds may first be applied to pay amounts due under the outstanding
promissory notes issued to Cornell Capital Partners, at the sole discretion of
Medical Staffing. If Medical Staffing drew down on the entire $15 million
available under the Standby Equity Distribution Agreement, Cornell Capital
Partners would receive an aggregate underwriting discount equal to $750,000,
exclusive of the one-time commitment fee Cornell Capital Partners received in
the form of 750,000 shares of common stock of Medical Staffing.
The Company would be required to register 151,200,000 additional shares
at this assumed offering price to obtain the balance of $12,560,000 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 are substantial risks to investors as a result of the issuance of
shares of common stock under the Standby Equity Distribution Agreement. These
risks include dilution of shareholders, significant decline in Medical
Staffing's stock price and our inability to draw sufficient funds when needed.
Cornell Capital Partners will be purchasing its shares of common stock
under the Standby Equity Distribution Agreement at a discount to the market
price and will, in turn, sell its shares to investors in the market at the
market price. This will likely cause our stock price to decline, which will
require Medical Staffing to issue increasing numbers of shares to Cornell
Capital Partners to raise the same amount of funds, as our stock price declines.
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 tables, which show the net
cash to be received by Medical Staffing and the number of shares to be issued
under the Standby Equity Distribution Agreement at an assumed offering price of
$0.05 per share and twenty five percent (25%), fifty percent (50%) and seventy
five percent (75%) discounts to the assumed offering price.
3
The outstanding promissory notes issued to Cornell Capital Partners on
January 5, 2005 and April 26, 2005, as amended, accrue interest at twelve
percent (12%) per year and mature on January 5, 2006 and in December 2005,
respectively. The promissory notes are due at maturity, regardless of the
availability of proceeds under the Standby Equity Distribution Agreement, unless
an extension is mutually agreed to by Cornell Capital Partners and Medical
Staffing in writing. Therefore, Medical Staffing may choose whether to pay the
amounts due at maturity with non-Standby Equity Distribution Agreement funds or
to use proceeds from the Standby Equity Distribution Agreement to pay down the
promissory notes. If the promissory notes are not paid in full when due, the
outstanding principal owed thereunder will be due and payable in full together
with interest thereon at the rate of twenty four percent (24%) per year or the
highest permitted by applicable law, if lower. Proceeds from the outstanding
promissory notes were used to fund the acquisition of Nurses PRN, LLC, which was
completed on July 1, 2005.
Net Cash To Medical Staffing:
Purchase Price: $0.05 $0.0375 $0.0250 $0.0125
No. of Shares(1): 100,000,000 100,000,000 100,000,000 100,000,000
Total Outstanding(2): 275,253,677 275,253,677 275,253,677 275,253,677
Percent Outstanding(3): 36.33% 36.33% 36.33% 36.33%
Net Cash to Medical Staffing(4): $4,665,000 $ 3,477,500 $ 2,290,000 $ 1,102,500
(1) Represents the number of shares of common stock registered in the
accompanying registration statement, which could 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 of shares outstanding.
(4) Net cash equals the gross proceeds minus the five percent (5%)
underwriting discount and minus $85,000 in offering expenses. The
proceeds may first be used to pay amounts due under the outstanding
promissory notes issued to Cornell Capital Partners, at the sole
discretion of Medical Staffing.
Number of Shares To Be Issued To Receive Gross Proceeds Of $15 Million:
Purchase Price: $0.05 $0.0375 $0.0250 $0.0125
No. of Shares(1): 300,000,000(2) 400,000,000(2) 600,000,000(2) 1,200,000,000(2)
Total Outstanding(4): 475,253,677(3)(5) 575,253,677(3)(5) 775,253,677(3)(5) 1,375,253,677(3)(5)
Percent Outstanding(6): 63.12% 69.53% 77.39% 87.26%
Gross Proceeds to Medical Staffing(7): $15,000,000 $15,000,000 $15,000,000 $15,000,000
(1) We are only registering 100,000,000 shares of common stock under this
Prospectus pursuant to the Standby Equity Distribution Agreement. We
will need to register additional shares of common stock to obtain the
entire $15 million available under the Standby Equity Distribution
Agreement at these stated purchase prices.
(2) Represents that total number of shares of common stock which would need
to be issued at the stated purchase price.
(3) At the stated purchase price and 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 obtain the entire $15 million available under the
Standby Equity Distribution Agreement.
(4) 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.
(5) Medical Staffing's current Articles of Incorporation, as amended,
authorize the issuance of 300,000,000 shares of common stock.
(6) Represents the shares of common stock to be issued as a percentage of
the total number shares outstanding.
(7) If Medical Staffing drew down on the entire $15 million available under
the Standby Equity Distribution Agreement, Cornell Capital Partners
would receive an aggregate underwriting discount equal to $750,000,
exclusive of the one-time commitment fee Cornell Capital Partners
received in the form of 750,000 shares of common stock of Medical
Staffing.
4
Common Stock Offered 101,000,000 shares by selling stockholders
Offering Price Market price
Common Stock Outstanding Before the Offering(1) 175,253,677 shares as of August 1, 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
and for the payment of amounts outstanding under the
existing promissory notes issued to Cornell Capital
Partners, at the discretion of Medical Staffing. 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
- ---------------
1 Excludes up to 100,000,000 shares of common stock to be issued under
the Standby Equity Distribution Agreement.
5
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
FOR QUARTER ENDED FOR YEAR ENDED
STATEMENTS OF OPERATIONS MARCH 31, DECEMBER 31,
2005 2004
----------------- --------------
Revenue $ 1,646,090 $ 6,734,564
Cost of sales 1,125,561 5,018,601
----------------- --------------
Gross profit 520,529 1,715,963
----------------- --------------
Operating expenses:
Administrative payroll, benefits and overhead costs 518,266 2,046,954
General and administrative expenses 267,949 1,371,377
Depreciation and amortization 18,711 61,726
----------------- --------------
TOTAL OPERATING EXPENSES 804,926 3,480,057
----------------- --------------
Total Other Income (Expenses) (62,267) (347,569)
----------------- --------------
Net Loss Applicable to Common Shares $ (346,664) $(2,111,663)
================= ==============
Net Loss Per Basic and Diluted Shares $ (0.00) $ (0.03)
================= ==============
MARCH 31,
BALANCE SHEET DATA 2005
-----------
Cash and cash equivalents $ 1,567,195
Accounts receivable, net of allowance for doubtful accounts of $46,096 1,229,936
Prepaid expenses 31,080
-----------
Total current assets $ 2,828,211
-----------
Fixed assets, net of depreciation 55,103
Loan commitment fees, net 52,500
Deposits 55,643
-----------
TOTAL ASSETS $ 2,991,457
===========
Current liabilities:
Note payable - current portion $ 764,763
Promissory note payable 1,300,000
Due to related parties 83,333
Accounts payable and accrued expenses 857,298
Loan payable - officer / litigation settlement payable 63,000
-----------
Total current liabilities 3,068,394
-----------
Total liabilities 3,068,394
-----------
6
MARCH 31,
BALANCE SHEET DATA 2005
-----------
Stockholders' (deficit)
Preferred stock, $.001 par value; 30,000,000 shares authorized
0 shares issued and outstanding --
Common stock, $.001 par value; 300,000,000 shares authorized
151,788,053 shares issued and outstanding 151,788
Additional paid-in capital 5,546,468
Deficit (5,775,193)
-----------
Total stockholders' (deficit) (76,937)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 2,991,457
===========
7
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 quarter ended March 31, 2005 and the
year ended December 31, 2004, we incurred losses of $346,664 and $2,111,663,
respectively. Our accumulated deficit was $5,775,193 for the quarter ended March
31, 2005, and $5,428,529 for the year ended 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 Medical Staffing 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 substantial 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 (12) months with the cash currently on hand, anticipated from our
operations and from the Standby Equity Distribution Agreement entered into by
Medical Staffing with Cornell Capital Partners on March 11, 2004. Based on our
current budget assessment, and excluding any acquisitions which may occur in the
remaining part of 2005, we believe that we will need to obtain approximately $2
million in additional debt or equity capital from one (1) or more sources to
fund operations for the next twelve (12) 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 March 31, 2005 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 $240,183 at March 31, 2005, which
means that our current liabilities as of that date exceeded our current assets
on March 31, 2005 by $240,183. Current assets are assets that are expected to be
converted to cash within one (1) year and, therefore, may be used to pay current
liabilities as they become due. Our working capital deficit means that our
current assets on March 31, 2005 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.
8
The Terms Of The Standby Equity Distribution Agreement May Restrict Our Ability
To Obtain Necessary Financing And Could Impede Us From Using Our Securities As
Consideration In Contracts Related To Our Operations
Under the Standby Equity Distribution Agreement, we are restricted,
during the commitment period of the Standby Equity Distribution Agreement, from
issuing or selling any of our common stock without consideration or for
consideration per share less than the bid price of a share of our common stock
on the date of issuance. In addition, we are restricted from granting additional
security interests in our assets. We are also restricted from issuing or selling
any derivative security or other security granting the holder the right to
acquire our common stock without consideration or for consideration per share
less than the bid price of a share of common stock on the date of issuance.
These restrictions could impede us from using our securities as consideration in
contracts related to our operations, including, but not limited to, common stock
issued to consultants and vendors and obtaining additional financing. This may
force us to use our limited cash to pay third parties as opposed to issue our
securities and may also lead to certain parties deciding to not enter into
contracts with us an provide us with necessary financing. If we have difficulty
in entering into contracts related to our operations or obtaining additional
financing, we may be forced to curtail or cease our business operations.
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 factors may
negatively impact shareholders' ability to sell shares of Medical Staffing's
common stock.
Our Common Stock May Be Affected By Sales Of Short Sellers, Which May Affect
Shareholders' Ability To Sell Shares Of Our Common Stock
As stated above, our common stock has experienced, and is likely to
experience in the future, significant price and volume fluctuations. These
fluctuations could 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 and the sale of
our common stock may negatively impact shareholders' ability to sell shares of
Medical Staffing's common stock.
In addition, the significant downward pressure on the price of the
common stock as Cornell Capital Partners sells material amounts of common stock
could further encourage short sales by third parties. This could place further
downward pressure on the price of our 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
(3) years) or $10.0 million (if in continuous operation for
less than three (3) years), or with average revenues of less
than $6.0 million for the last three (3) years.
9
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 Dr. Brajnandan B. Sahay, our Chairman of the Board,
President, Chief Executive Officer and Acting Principal Financial Officer. The
loss of the services of Dr. 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 Dr. 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.
10
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 175,253,677 shares of common stock outstanding as of August 1, 2005, zero
(0) shares are, or will be, freely tradable without restriction, unless held by
our "affiliates" 64,460,067 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 August 1, 2005 at an assumed offering price of $0.05 per
share, as determined under the Standby Equity Distribution Agreement, the new
stockholders would experience an immediate dilution in the net tangible book
value of $0.0318 per share. Dilution per share at prices of $0.0375, $0.0250 and
$0.0125 per share would be $0.0240, $0.0162 and $0.0084, 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 (5) days immediately following the notice date of an advance. In addition,
Cornell Capital Partners will receive a five percent (5%) underwriting discount
from each advance in cash. These discounted sales could cause the price of our
common stock to decline.
Cornell Capital Partners will be purchasing its shares of common stock
under the Standby Equity Distribution Agreement at a discount to the market
price and will, in turn, sell its shares to investors in the market at the
market price. As a result, the lower the stock price around the time Cornell
Capital Partners is issued shares, the greater likelihood that Cornell Capital
Partners will get more shares. This will likely cause our stock price to
decline, which will require Medical Staffing to issue increasing numbers of
shares to Cornell Capital Partners to raise the same amount of funds, as our
stock price declines. This could result in substantial dilution to the interests
of other holders of common stock.
Cornell Capital Partners Will Pay Less Than The Then-Prevailing Market Price And
Will Have An Incentive To Sell Its Shares
Cornell Capital Partners will purchase shares of our common stock
pursuant to the Standby Equity Distribution Agreement at a purchase price that
is less than the then-prevailing market price of our common stock. Cornell
Capital Partners will have an incentive to sell any shares of our common stock
that it purchases pursuant to the Standby Equity Distribution Agreement to
realize a gain on the difference between the purchase price and the
then-prevailing market price of our common stock. 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.
In addition, Cornell Capital Partners is deemed to beneficially own the
shares of common stock corresponding to a particular advance on the date that we
deliver an advance notice to Cornell Capital Partners, which is prior to the
date the stock is delivered to Cornell Capital Partners. Cornell Capital
Partners may sell such shares any time after we deliver an advance notice.
Accordingly, Cornell Capital Partners may sell such shares during the pricing
period. Such sales may cause our stock price to decline.
11
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
101,000,000 shares of common stock being registered in this offering. That means
that up to 101,000,000 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 Securities and Exchange Commission will continue
to be subject to the provisions of various insider trading and Rule 144
regulations.
If our stock price declines, Medical Staffing will be required to issue
increasing numbers of shares to Cornell Capital Partners under the Standby
Equity Distribution Agreement to raise the same amount of funds.
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 sold into the market exceed the market's desire to
purchase 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. 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 (i.e. sellers who do not actually own our
shares at the time of their sale) 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, which, in turn, may cause current owners of our stock to sell
their shares; thereby contributing to sales of stock in the market. If there are
more investors selling our stock then there are investors desiring to purchase
our stock, the market for our stock the price will necessarily decline.
It is not possible to predict the circumstances whereby short sales
could materialize or the price to which our stock price could drop. In some
companies that have been subjected to short sales, the stock price dropped to
near zero (0). 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. We
anticipate that a portion of our financing needs will be funded through a
factoring agreement we entered into with SYSTRAN Financial Service Corporation
on June 27, 2005, and a portion of our financing needs will be provided by the
Standby Equity Distribution Agreement. No assurances can be given that our
Standby Equity Distribution Agreement 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 (7) 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 $0.05 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 offering price, we will be able
to draw $5,000,000 with the 100,000,000 shares being registered. Medical
Staffing would be required to register 151,200,000 additional shares at this
assumed offering price to obtain the remaining $12,560,000 available under the
Standby Equity Distribution Agreement. Further, we may repay the promissory
notes issued to Cornell Capital Partners with the proceeds received under the
Standby Equity Distribution Agreement, which will prevent us from using these
proceeds for our current financing needs.
12
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. Although Cornell Capital
Partners may not hold more than 9.9% of the then-outstanding common stock of
Medical Staffing at any one time, this restriction does not prevent Cornell
Capital Partners from selling some of its holdings and then receiving additional
shares. Therefore, Cornell Capital Partners has, and may, sell more than these
limits while never holding more than those limits. Currently, Cornell Capital
Partners has beneficial ownership of zero percent (0%) 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.
Cornell Capital Partners May Sell Shares Of Our Common Stock During An
Applicable Pricing Period Under the Standby Equity Distribution Agreement Which
Could Contribute To The Decline Of Our Stock Price
The sale of common stock to be acquired by Cornell Capital Partners
pursuant to an advance request made by Medical Staffing under the Standby Equity
Distribution Agreement during an applicable pricing period could cause downward
pressure on the price of our common stock and, therefore, contribute to the
decline of our stock price.
13
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.
14
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 0 0% 100,000,000 36.33% 100,000,000(2) 0%
Consultants and Others
Fitzgerald Galloway
Management, Inc. 1,000,000 * -- -- 1,000,000(3) 0%
--------- --------- ----------- ----- ----------- ------
Total 1,000,000 * 100,000,000 36.33% 101,000,000 0%
--------- --------- ----------- ----- ----------- ------
- ---------------
* Less than one percent (1%).
(1) Applicable percentage of ownership is based on 175,253,677 shares of
common stock outstanding as of August 1, 2005, together with securities
exercisable or convertible into shares of common stock within sixty
(60) days of August 1, 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 sixty (60) days of
August 1, 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 that may be acquired by Cornell Capital
Partners under the Standby Equity Distribution Agreement.
(3) Includes the 1,000,000 shares issued by Medical Staffing on April 4,
2005.
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 ("Yorkville Advisors"). Mr. 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 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 million. We are registering
100,000,000 shares in this offering which may be issued to
Cornell Capital Partners pursuant to the Standby Equity
Distribution Agreement.
15
Fitzgerald Galloway Management, Inc. On April 8, 2005, Medical Staffing
and Fitzgerald entered into a ninety (90) days Consulting Services Contract,
pursuant to which Fitzgerald is to provide public/media relations services to
Medical Staffing. In exchange for these services, Fitzgerald is to receive
1,000,000 shares of common stock from Medical Staffing which were previously
issued to Fitzgerald. We are registering the 1,000,000 shares of common stock
that were previously issued to Fitzgerald in this offering. Mr. 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 are
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 has access to sufficient information regarding Medical
Staffing so as to make an informed investment decision. More specifically,
Medical Staffing has a reasonable basis to believe that each purchaser is an
"accredited investor" as defined in Regulation D of the 1933 Act and otherwise
has the requisite sophistication to make an investment in Medical Staffing's
securities.
16
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 may receive proceeds from the sale of shares of common stock to
Cornell Capital Partners under the Standby Equity Distribution Agreement,
assuming amounts due under the outstanding promissory notes issued to Cornell
Capital Partners are not paid from the use of proceeds from the Standby Equity
Distribution Agreement. The purchase price of the shares purchased under the
Standby Equity Distribution Agreement will be equal to one hundred percent
(100%) (or ninety five percent (95%) after taking into account the underwriting
discount of five percent (5%)) of the lowest volume weighted average price of
our common stock on the Over-the-Counter Bulletin Board for the five (5) days
immediately following the notice date. Medical Staffing will pay Cornell Capital
Partners five percent (5%) of each advance as an underwriting discount.
Pursuant to the Standby Equity Distribution Agreement, Medical Staffing
cannot draw more than $250,000 every seven (7) trading days or more than $15
million over twenty four (24) months. Based on Medical Staffing's prior draws,
there is $12,560,000 remaining available under the Standby Equity Distribution
Agreement.
We anticipate that the proceeds received under the Standby Equity
Distribution Agreement will be utilized for general corporate purposes and that
a portion of the proceeds received may be used to repay the promissory note
issued to Cornell Capital Partners. 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 a five percent (5%)
underwriting discount payable to Cornell Capital Partners in cash 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 $ 2,500,000 $ 5,000,000 $ 12,560,000(1)
Net proceeds 2,290,000 $ 4,665,000 $ 11,847,000
Number of shares to be issued under the Standby Equity
Distribution Agreement 50,000,000 100,000,000 251,200,000
- ------------------------------------------------------------------------------------------------------------
USE OF PROCEEDS: AMOUNT AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------
General Working Capital $ 710,932 $ 3,085,932 $ 10,267,932
Repayment of Outstanding Promissory Notes to Cornell
Capital(2) $ 1,579,068 $ 1,579,068 $ 1,579,068
Total $ 2,290,000 $ 4,665,000 $ 11,847,000
============ ============ ============
(1) Medical Staffing would need to register 151,200,000 additional shares
of common stock to access this amount of gross proceeds under the
Standby Equity Distribution Agreement at an assumed offering price of
$0.05.
(2) This assumes that Medical Staffing will choose to repay the outstanding
promissory notes at or before maturity with non-Standby Equity
Distribution Agreement funds. These figures represent the total amount
due on the promissory notes at June 7, 2005, including all interest
accrued to that date. The $2,000,000 and $500,000 promissory notes were
issued on January 5, 2005 and April 26, 2005, respectively, accrue
interest at twelve percent (12%) per year and mature on January 5, 2006
and in December 2005, respectively. The promissory notes are due at
maturity, regardless of the availability of proceeds under the Standby
Equity Distribution Agreement, unless an extension is mutually agreed
to by Cornell Capital Partners and Medical Staffing in writing. If the
promissory notes are not paid in full when due, the outstanding
principal owed thereunder will be due and payable in full together with
interest thereon at the rate of twenty four percent (24%) per year or
the highest permitted by applicable law, if lower. Proceeds from the
outstanding promissory notes were used to fund the acquisition of
Nurses PRN, LLC which was completed on July 1, 2005.
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.
17
DILUTION
The net tangible book value of Medical Staffing as of March 31, 2005
was a deficit of ($76,937) or ($0.0005) 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
assumed offering price of $0.05 per share.
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 $0.05 per share (i.e., the number of shares registered in
this offering under the Standby Equity Distribution Agreement), less a retainage
fee of five percent (5%) and offering expenses of $85,000, our net tangible book
value as of March 31, 2005 would have been $4,588,063 or $0.0182 per share. Such
an offering would represent an immediate increase in net tangible book value to
existing stockholders of $0.0187 per share and an immediate dilution to new
stockholders of $0.0318 per share. The following table illustrates the per share
dilution:
Assumed public offering price per share $ 0.05
Net tangible book value per share before this offering ($0.0005)
Increase attributable to new investors $0.0187
--------
Net tangible book value per share after this offering $0.0182
-------
Dilution per share to new stockholders $0.0318
=======
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 (1) TO NEW INVESTORS
-------------- ------------------- ----------------
$0.0500 100,000,000 $0.0318
$0.0375 100,000,000 $0.0240
$0.0250 100,000,000 $0.0162
$0.0125 100,000,000 $0.0084
(1) This represents the maximum number of shares of common stock that are
being registered under the Standby Equity Distribution Agreement at
this time.
18
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
million. For each share of common stock purchased under the Standby Equity
Distribution Agreement, Cornell Capital Partners will pay one hundred percent
(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 (5) 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 receive five
percent (5%) of each advance under the Standby Equity Distribution Agreement as
an underwriting discount. Cornell Capital Partners is a private limited
partnership whose business operations are conducted through its general partner,
Yorkville Advisors. 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 our 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 Securities and Exchange Commission ("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 $2,440,000 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
$12,560,000 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 (7) 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 Medical Staffing for
any of the draws other than that Medical Staffing has filed its periodic and
other reports with the SEC, has delivered the stock for an advance, the trading
of Medical Staffing's common stock has not been suspended. We may request
advances under the Standby Equity Distribution Agreement until Cornell Capital
Partners has advanced $15 million or on May 14, 2006, whichever occurs first. It
is unlikely that we will be able to draw the entire remaining amount of
$12,560,000 before May 14, 2006, given the limitations on the size and frequency
with which we may request advances from Cornell Capital Partners, unless our
stock price increases significantly.
The amount of each advance is subject to a maximum amount of $250,000,
and we may not submit an advance within seven (7) 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. Cornell Capital Partners'
current beneficial ownership of Medical Staffing common stock is zero percent
(0%). 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.
19
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 an assumed offering price of $0.05 per share, as
determined under the Standby Equity Distribution Agreement, we would issue
100,000,000 shares of common stock to Cornell Capital Partners for gross
proceeds of $5,000,000. These shares would represent approximately 57.06% of our
outstanding common stock upon issuance (such outstanding shares do not include
the 1,000,000 being registered to Fitzgerald under the Consultant Service
Contract). We are registering 100,000,000 shares of common stock for the sale
under the Standby Equity Distribution Agreement. Assuming an offering price of
$0.05 per share, we will be able to utilize $5,000,000 of the $12,560,000
remaining available under the Standby Equity Distribution Agreement, which may
be used to pay amounts due under outstanding the promissory note issued to
Cornell Capital Partners. 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. Medical Staffing would
be required to register 151,200,000 additional shares at the assumed offering
price of $0.05 per share to obtain the remaining $12,560,000 available 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 $0.15 or an approximately
three (3) times our stock price as of the most recent practical date.
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 August 1, 2005, Medical
Staffing has made advances totaling $2,440,000, issuing 74,744,294 shares of its
common stock. If Medical Staffing drew down on the entire $15 million available
under the Standby Equity Distribution Agreement, Cornell Capital Partners would
receive an aggregate underwriting discount equal to $750,000, exclusive of the
one-time commitment fee Cornell Capital Partners received in the form of 750,000
shares of common stock of Medical Staffing.
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 tables, which show the net
cash to be received by Medical Staffing and the number of shares to be issued
under the Standby Equity Distribution Agreement at an assumed offering price, as
determined under the Standby Equity Distribution Agreement, of $0.05 per share
and twenty five percent (25%), fifty percent (50%) and seventy five percent
(75%) discounts to the assumed offering price.
Net Cash To Medical Staffing:
Purchase Price: $0.05 $0.0375 $0.0250 $0.0125
No. of Shares(1): 100,000,000 100,000,000 100,000,000 100,000,000
Total Outstanding(2): 275,253,677 275,253,677 275,253,677 275,253,677
Percent Outstanding(3): 36.33% 36.33% 36.33% 36.33%
Net Cash to Medical Staffing(4): $4,665,000 $3,477,500 $2,290,000 $1,102,500
(1) Represents the number of shares of common stock registered in the
accompanying registration statement, which could 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 of shares outstanding.
(4) Net cash equals the gross proceeds minus the five percent (5%)
underwriting discount and minus $85,000 in offering expenses. The
proceeds may first be used to pay amounts due under the outstanding
promissory notes issued to Cornell Capital Partners, at the sole
discretion of Medical Staffing.
20
Number of Shares To Be Issued To Receive Gross Proceeds Of $15 Million:
Purchase Price: $0.05 $0.0375 $0.0250 $0.0125
No. of Shares(1): 300,000,000(2) 400,000,000(2) 600,000,000(2) 1,200,000,000(2)
Total Outstanding(4): 475,253,677(3)(5) 575,253,677(3)(5) 775,253,677(3)(5) 1,375,253,677(3)(5)
Percent Outstanding(6): 63.12% 69.53% 77.39% 87.26%
Gross Proceeds to Medical Staffing(7): $15,000,000 $15,000,000 $15,000,000 $15,000,000
(1) We are only registering 100,000,000 shares of common stock under this
Prospectus pursuant to the Standby Equity Distribution Agreement. We
will need to register additional shares of common stock to obtain the
entire $15 million available under the Standby Equity Distribution
Agreement at these stated purchase prices.
(2) Represents that total number of shares of common stock which would need
to be issued at the stated purchase price.
(3) At the stated purchase price and 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 obtain the entire $15 million available under the
Standby Equity Distribution Agreement.
(4) 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.
(5) Medical Staffing's current Articles of Incorporation, as amended,
authorize the issuance of 300,000,000 shares of common stock.
(6) Represents the shares of common stock to be issued as a percentage of
the total number shares outstanding.
(7) If Medical Staffing drew down on the entire $15 million available under
the Standby Equity Distribution Agreement, Cornell Capital Partners
would receive an aggregate underwriting discount equal to $750,000,
exclusive of the one-time commitment fee Cornell Capital Partners
received in the form of 750,000 shares of common stock of Medical
Staffing.
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 our placement
agent in connection with the Standby Equity Distribution Agreement.
21
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 (1) 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 one
hundred percent (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 (5) days immediately following
the advance date. In addition, Cornell Capital Partners will receive cash equal
to five percent (5%) of the proceeds received by us under the Standby Equity
Distribution Agreement, as an underwriting discount, 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 five percent (5%) total discount and the 750,000 shares
of common stock are underwriting discounts. If Medical Staffing drew down on the
entire $15 million available under the Standby Equity Distribution Agreement,
Cornell Capital Partners would receive an aggregate underwriting discount equal
to $750,000, exclusive of commitment fee shares. 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. Newbridge Securities Corporation is not participating in the
distribution of our common stock.
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 (50) 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 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. These offering
expenses are estimated to consist of: a Securities and Exchange Commission
registration fee of $594.39, printing expenses of $2,500, accounting fees of
$15,000, legal fees of $50,000 and miscellaneous expenses of $16,905.61. We will
not receive any proceeds from the sale of any of the shares of common stock by
the selling stockholders. We may, however, receive proceeds from the sale of
common stock under the Standby Equity Distribution Agreement, assuming no
amounts are used to repay the outstanding promissory note issued to Cornell
Capital Partners.
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, Medical
Staffing 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.
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
Medical Staffing is a government contracting firm. We presently
provide, through our wholly-owned subsidiary, TeleScience, health related
staffing services to federal and state government clients. These clients include
U.S. Military, Veterans Administration, Public Health Service and state
correctional and health and welfare facilities. The facilities include hospitals
and clinics. The services include both auxiliary care and professional care
staffing. These staffing positions include personnel in the dental, medical and
pharmacy areas. Occupational areas provided include nurses, nurse practitioners,
dental assistants, pharmacists and physicians. We are currently moving toward
providing similar services, commencing with nursing services, to non-government
care facilities. On July 1, 2005 we completed our acquisition of the business of
Nurses PRN, LLC, a provider of per diem nurses to private hospitals (hereinafter
referred to as "NPRN"). NPRN maintains a listing of nurses having a variety of
skills who may be call upon to fill appropriate open shift positions at
hospitals. NPRN establishes relationships with various hospitals who call upon
NPRN to fulfill their needs for nurses due to vacancies created by vacations,
increased patient loads or similar situations as well as for extended periods.
We also have a relationship which we expect will lead to our making re-sales of
third party products to the Federal and state Homeland Security agencies. The
initial products we expect to sell include: decontamination products,
decontamination vehicles, and supplies such as safety masks, gowns, and hoods.
Additional products have not yet been identified and will be a function of
government needs and our associate's ability to identify appropriate sources. We
have also established a relationship which we expect will lead to our providing
information technology services to the Federal Government. We are initially
exploring providing these services to the Department of Defense.
We attempt to price our contracts so that we can receive a reasonable
profit. In the competitive market in which we operate we have constraints at
both ends of our contract equation. If we price our services too high we either
will not win the contract or even if we are awarded the contract, since there
are often several successful awardees, our services will not be utilized since
they could be more expensive than the offerings of other successful awardees. At
the same time, if we price our contract too low, we will not have sufficient
revenues to attract the talent we need to provide the services while being
profitable under the contract. Without this talent we cannot achieve revenues
with profits.
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
For the quarter ended March 31, 2005, Medical Staffing had an
accumulated deficit of $5,775,193 and a working capital deficiency of $240,183.
As reflected in Medical Staffing's audited financial statements for the twelve
(12) months ended December 31, 2004, Medical Staffing's accumulated deficit of
$5,428,529 and its working capital deficiency of $869,038 raise substantial
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.
23
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 Condensed Consolidated Financial Statements,
which contain additional information regarding our accounting policies and other
disclosures required by GAAP.
Revenue Recognition
Revenue on time-and-materials contracts is recognized based upon hours
incurred at contract rates plus direct costs. Revenue on fixed-price contracts
is recognized on the percentage-of-completion method based on costs incurred in
relation to total estimated costs. Anticipated losses are recognized as soon as
they become known. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined.
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.
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 Medical
Staffing with an offsetting valuation allowance adjustment.
Results Of Operations For The Quarter Ended March 31, 2005, Compared To Quarter
Ended March 31, 2004
Revenues. Revenues for the quarter ended March 31, 2005, were
$1,646,090, a decrease of $38,926 as compared to revenues of $1,685,016 for the
quarter ended March 31, 2004. The decrease in revenues for the quarter ended
March 31, 2005 was primarily attributable to the completion of a significant
government contracts for the providing of services in the nursing industry to
government facilities.
Cost of Sales. Cost of sales for the quarter ended March 31, 2005 was
approximately $1.13 million, or approximately sixty eight percent (68%) of
revenues, as compared to approximately $1.32 million, or approximately seventy
eight percent (78%) of revenues, for the quarter ended March 31, 2004. The
percentage decrease in cost of sales for the quarter ended March 31, 2005, was
primarily attributable to the fact that some labor cost was incurred and
recognized in prior periods (vacation and sick leave), but billed (and
respectively revenue recognized) in the first quarter of 2005.
Gross Profit. Gross profit for the quarter ended March 31, 2005, was
$520,529, or thirty two percent (32%) of revenues, as compared to gross profit
of $369,388, or twenty two percent (22%) of revenues, for the quarter ended
March 31, 2004.
Operating Expenses. Operating expenses for the quarter ended March 31,
2005, were $804,926, or forty nine percent (49%) of revenues, as compared to
$802,223, or forty eight percent (48%) of revenues, for the quarter ended March
31, 2004. The increase in operating expenses for the quarter ended March 31,
2005 was primarily attributable to increased cost of general and administrative
expenses and depreciation and amortization.
24
Other Expense. Other expense for the quarter ended March 31, 2005, was
$62,267, as compared to $34,278 for the quarter ended March 31, 2004. The
increase in other expense was due to an increase in interest expense.
Net Loss. Medical Staffing had a net loss of $346,664 for the three
months ended March 31, 2005, as compared to a net loss of $467,113 for the three
months ended March 31, 2004. The decrease of $120,449 was mainly attributable to
the reduced cost of sales.
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 twenty
percent (20%) decrease in revenues in 2004 was primarily attributable to the
awarding to us of a lower number of government contracts for the providing of
services in the nursing industry to government facilities than we completed.
This was exacerbated by the completion of two (2) major contracts which were not
re-competed. Additionally, there was reduced utilization of our services under
some of the ongoing contracts. While we cannot be certain why a contract was or
was not awarded, it is often a result of the pricing of the contract versus the
pricing of our competitors for the contract. Determinations of award are made by
the government contracting authority in charge of the award. We determined to
assure that we would receive an appropriate return at the risk of not being
awarded a contract, and in the face of anticipated increases in labor costs.
We anticipate revenues to grow in the fiscal year ending 2005 as a
result of awarding to us of new contracts, the proposals for which are presently
in the bidding and bid award process. As of June 30, 2005, we had five (5)
contract bids outstanding with an aggregate value of $15,554,313 and eleven (11)
contract bids which have been awarded to us with an aggregate value of
$1,512,100. Medical Staffing was also named as one of seven (7) successful
bidders in a $1,000,000,000 IDIQ (indefinite delivery indefinite quantity)
contract in the Homeland Security area with the State of Pennsylvania, and this
contract had been recently renewed through June 30, 2006.
We also anticipate revenues to grow as a result of our acquisition of
Nurses PRN, LLC, which has aggregate revenues greater than Medical Staffing.
NPRN will substantially increase the Company's operations in the private
healthcare nursing sector. The acquisition which will more than triple the
Company's sales revenue, is anticipated to make a positive contribution to
overhead and earnings and will provide us an entry vehicle into the commercial
nurse staffing arena. Cash flow from the operations of the assets of NPRN is
anticipated to be utilized in the growth of the business and reduction of
present cash shortfalls as well as debt reduction. We anticipate that we will
recognize economies of scale in areas, such as California, where we are both
operating. NPRN is presently operating in eight (8) states and has more than
1,232 nurses that it can call upon to fulfill the needs of the 262 hospitals it
presently services. Over the next twelve (12) months, NPRN plans to establish
operations in several additional states and additional locales within the states
in which it operates.
Cost of Sales. Cost of sales for the year ended December 31, 2004, was
approximately $5.0 million, or seventy five percent (75%) of revenues, as
compared to approximately $5.9 million, or seventy percent (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 (at the end of 2004 we had forty nine (49)
contracts and at the end of 2003 we had fifty five (55) contracts) which reduced
labor costs, but this was partially offset by the increased wages and costs
associated with fulfilling the contracts. All of our contracts are for the
provision of health related staffing. Unlike many companies, our results are
substantially a direct result of our hourly labor wages versus our hourly
reimbursement for providing those hourly health related employees necessary to
provide the labor, these costs increased during 2004.
Gross profit. Gross profit for the year ended December 31, 2004, was
approximately $1.7 million, or twenty five (25%) of revenues, a decrease of $0.8
million, as compared to gross profit of approximately $2.5 million, or thirty
percent (30%) of revenues, for the year ended December 31, 2003. Gross profit
was reduced due to the lower revenues, increases in wages per hour and other
contract related expenses (including subcontractor expenses) which could not be
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 fifty two percent (52%) of revenues,
as compared to approximately $2.7 million, or thirty two percent (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. Our general and
professional liability insurance and our health insurance substantially in
creased. The increase in these expenses have reflected the increase in costs
generally in the economy and impacted on our performance since they had to be
absorbed by a lower revenue base. We anticipate continued increases in operating
expenses, in line with the economy, and will have continuing expenses associated
with being a public company.
25
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. As interest rates
increase in 2005 this expense will increase and adversely affect our results. As
we are able to raise additional equity we anticipate reducing the debt principal
outstanding which will reduce the aggregate interest payments we are required to
make.
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. Medical Staffing 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.
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 Medical Staffing 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 Medical Staffing'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 Medical
Staffing'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. Medical Staffing 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.
26
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 in this
registration statement should be applied prospectively. The adoption of this
registration statement did not have a significant impact on Medical Staffing'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 Medical
Staffing'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 Medical Staffing's results of
operations or financial position.
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 Medical Staffing' results of operations or
financial position.
Liquidity And Capital Resources
As of March 31, 2005, Medical Staffing had a working capital deficit of
$240,183, which means that our current liabilities as of that date exceeded our
current assets on March 31, 2005 by $240,183. Current assets are assets that are
expected to be converted to cash within one (1) year and, therefore, may be used
to pay current liabilities as they become due. Our working capital deficit means
that our current assets on March 31, 2005, 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 has outstanding debt obligations with respect to (a) the
Cornell Capital Partners promissory notes equal to $1,579,068 plus accrued
interest since June 7, 2005, (b) factored receivables equaling $614,206 as of
June 22, 2005, (c) debt to related parties equal to $83,333, (d) accounts
payable equal to $857,298 and (e) loan payable/litigation settlements payable
equal to $63,000.
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 $346,664 and $467,113 for the three (3) months ended
March 31, 2005 and 2004, respectively, and had an accumulated deficit of
$5,775,193 at March 31, 2005. 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. 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, Medical Staffing may not be successful in these activities. Should any
of these events not occur, the accompanying consolidated financial statements
will be materially affected.
27
Medical Staffing is at present meeting its current obligations in
excess of cash from operations from sale of equity securities and debt, which
during 2003, 2004 and to date in 2005 has primarily included investor capital,
loans from related parties and from other lenders. Due to insufficient cash
generated from operations, Medical Staffing currently does not internally
generate 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, there can be no assurances that Medical Staffing's present methods of
generating cash flow will 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.
Medical Staffing continues to (a) refine its operations and strategy of
increasing its bidding activity, (b) proceed with its acquisition strategy and
(c) increase its scope of operations through strategic relationships. There is
no certainty that the results of these efforts will result in the achievement of
profitability and the removal of the auditor's going concern opinion. Management
is expecting that Medical Staffing will be operating at break even by the
January 1, 2006. As previously mentioned, the financing to enable us to continue
to operate is expected to be received from the Standby Equity Distribution
Agreement. At this time we do not have any other financing plans other than that
certain Factoring Agreement with SYSTRAN, dated June 27, 2005.
Cash Flows - Three Months Ended March 31, 2005
Cash provided by operating activities was $24,661 for the three (3)
months ended March 31, 2005, as compared to cash used in operating activities of
$353,847 for the same period in 2004. The decrease in cash used was due
primarily to the decreased loss from operations and the decrease in accounts
receivable.
Cash used in investing activities was $11,659 for the three (3) months
ended March 31, 2005, as compared to cash provided by investing activities of
$26,585 for the same period in 2004. The decrease in cash used for investing
activities was principally due to a decrease in amounts funded to related
parties in the first quarter of 2005.
Cash provided by financing activities was $1,525,845 for the quarter
ended March 31, 2005, as compared to $253,703 during the same period in 2004.
This increase in cash provided by financing activities was mainly due to the
increase in common stock issuances and proceeds from convertible debentures.
Cash Flows - Year Ended December 31, 2004
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 (12) months.
In May 2002, Medical Staffing entered into a line of credit agreement
with a factor. The loan had interest at prime plus one percent (1%). The factor
lent up to ninety percent (90%) of the receivable balance to Medical Staffing,
received payments directly on the outstanding receivables and the remaining
balance was remitted to Medical Staffing. On June 30, 2005, the remaining
balance of $551,764.81 was paid off in full.
28
Additionally, Medical Staffing maintains a small credit line with a
bank. There was no balance outstanding as of August 1, 2005.
In May 2002, Medical Staffing borrowed $220,000 from an individual to
be used in developing Medical Staffing's business plan, including the Homeland
Security operations. The note payable was non-interest bearing until May 2003
and bore interest at seven percent (7%) going forward. The note was fully paid
in May 2004.
On March 11, 2004, Medical Staffing entered into a securities purchase
agreement with Cornell Capital Partners, the (the "Securities Purchase
Agreement") pursuant to which Cornell Capital Partners was obligated to purchase
$600,000 of secured convertible debentures from Medical Staffing. On March 11,
2004, Cornell Capital Partners purchased $250,000 of convertible debentures. In
April 2004, Cornell Capital Partners purchased $350,000 of additional
debentures. These debentures accrued interest at a rate of five percent (5%) per
year and were to mature two (2) years from the issuance date. The debentures
were convertible into Medical Staffing's common stock at the holders' option any
time up to maturity at a conversion price equal to the lower of (i) one hundred
fifteen percent (115%) of the closing bid price of the common stock as of the
closing date or (ii) eighty five percent (85%) of the lowest closing bid price
of the common stock the five (5) trading days immediately preceding the
conversion date. The debentures were secured by the assets of Medical Staffing.
During the year ended December 31, 2004, Cornell Capital Partners converted the
entire $600,000 in convertible debentures into 19,489,204 shares of common
stock, which included conversions of $16,678 in accrued interest and Medical
Staffing recognized $108,760 of amortization of discount on the debenture
conversions.
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 $15.0 million. The
purchase price for the shares is equal to one hundred percent (100%) of the
lowest volume weighted average price of the common stock during the five (5)
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 (7) trading days of a prior advance. Cornell Capital Partners
received a one-time commitment fee of 750,000 shares of Medical Staffing's
common stock. Cornell Capital Partners is entitled to receive a fee of five
percent (5%) of each advance as an underwriting discount. 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.
On June 11, 2004, Medical Staffing received $1,000,000 in return for a
promissory note issued to Cornell Capital Partners. As of March 31, 2005 the
note has been fully paid.
On October 18, 2004, Medical Staffing received $315,000 in return for a
promissory note issued to Cornell Capital Partners. As of March 31, 2005 the
note has been fully paid.
On January 1, 2005, Medical Staffing and Dr. Brajnandan B. Sahay
entered into a five (5) year employment agreement. Pursuant to the employment
agreement, Dr. Sahay shall serve as Medical Staffing's President and Chief
Executive Officer or other executive officer of Medical Staffing. Dr. Sahay will
receive $250,000 per year, four (4) weeks paid vacation, a car allowance and
will be reimbursed for business expenses. Dr. Sahay will receive additional
consideration of 3,000,000 options to purchase common stock of Medical Staffing
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, Dr. Sahay shall be
entitled to receive 3,000,000 options to purchase common stock of Medical
Staffing at an exercise price equal to the average of the closing price of
Medical Staffing's common stock for the ten (10) days immediately preceding June
30 of the applicable year. The obligations of Medical Staffing pursuant to the
employment agreement will have a significant impact on Medical Staffing's
liquidity and results of operations.
On January 5, 2005, Medical Staffing received $2,000,000 in return for
a promissory note issued to Cornell Capital Partners which was subsequently
amended on June 7, 2005. The promissory note, as amended, accrues interest at
twelve percent (12%) per year and matures on January 5, 2006. The promissory
notes are due at maturity, regardless of the availability of proceeds under the
Standby Equity Distribution Agreement, unless an extension is mutually agreed to
by Cornell Capital Partners and Medical Staffing in writing. If the note is not
paid in full when due, the outstanding principal owed thereunder will be due and
payable in full together with interest thereon at the rate of twenty four
percent (24%) per year or the highest permitted by applicable law, if lower. On
April 26, 2005, Medical Staffing received $500,000 in return for a promissory
note issued to Cornell Capital Partners which was amended on June 7, 2005. The
promissory note, as amended, accrues interest at twelve percent (12%) per year
and matures in December 2005. The note is payable either out of the net proceeds
to be received by Medical Staffing under the Standby Equity Distribution
Agreement or Medical Staffing is to pay all amounts due at maturity, regardless
of the availability of proceeds under the Standby Equity Distribution Agreement,
unless an extension is mutually agreed to by Cornell Capital and Medical
Staffing in writing. If the note is not paid in full when due, the outstanding
principal owed thereunder will be due and payable in full together with interest
thereon at the rate of twenty four percent (24%) per year or the highest
permitted by applicable law, if lower. As of June 7, 2005, $1,579,068 plus
accrued interest as of that date remain outstanding on all promissory notes
issued to Cornell Capital Partners.
29
Through March 31, 2005, Medical Staffing has drawn $1,300,000 under the
Standby Equity Distribution Agreement issuing 55,336,744 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, and the
$2,000,000 promissory note issued to Cornell Capital Partners on January 5,
2005. Through August 1, 2005, Medical Staffing has drawn down $2,440,000 under
the Standby Equity Distribution Agreement and Medical Staffing has issued
74,744,294 shares of common stock to Cornell Capital Partners. As set forth
above, these proceeds were used to repay a portion of the promissory notes held
by Cornell Capital Partners.
On June 27, 2005, Medical Staffing entered into a factoring agreement
(the "Factoring Agreement"), by and among TeleScience, NPRN, SYSTRAN Financial
Service Corporation ("SYSTRAN"), a subsidiary of Textron Financial Corporation
("Textron") and its Company pursuant to which SYSTRAN established a $5,000,000
credit facility (the "Facility") with Medical Staffing in order for Medical
Staffing to finance the account receivables of NPRN and TeleScience. The
Factoring Agreement shall commence its term on the date Medical Staffing first
receives funds pursuant to the Facility, and shall continue through twelve (12)
months, with twelve (12) month renewal periods. Medical Staffing shall pay
interest on any outstanding balance at the Wells Fargo Bank Prime Rate plus one
half of one percent (0.50%), and pay a discount fee of one half of one percent
(0.50%) of the face amount of all unbilled invoices and bills purchased by
SYSTRAN. SYSTRAN shall have a first and only security interest in all of Medical
Staffing's present and future accounts, deposit accounts, chattel paper,
contract rights (including insurance contracts and insurance proceeds), general
intangibles, choses in action, instruments and documents, whether owned as of
the date of the Factoring Agreement or acquired thereafter, and the proceeds of
each of the foregoing. Upon the request of Medical Staffing, the Facility shall
be reviewed for conversion to a Textron asset-based revolving credit facility.
On July 1, 2005 we completed our asset purchase agreement (the
"Purchase Agreement"), whereby Medical Staffing, through its wholly-owned
subsidiary Nurses PRN Acquisition Corp. ("NPRN"), acquired the business of
Nurses PRN, LLC. As consideration for the purchased assets, Medical Staffing
agreed to issue and deliver 9,500,000 shares of common stock to Nurses PRN, LLC
to be delivered to Nurses PRN, LLC's members and 2,500,000 shares to a creditor.
NPRN paid Nurses PRN, LLC $1,600,000 as a cash consideration and agreed to pay a
contingent payment based on NPRN's achievement of certain financial targets
which shall not exceed $500,000. Medical Staffing also assumed certain assumed
liabilities including: (a) a $365,487.50 note payable issued to Mr. Jeff Dowling
by NPRN; (b) a $250,000 note payable to Mr. Aftabe Adamjee by NPRN and (c)
certain general payables as set forth in the Purchase Agreement. We incurred
professional costs associated with the Purchase Agreement to our lawyers and
accountants in an amount equal to approximately $50,000.00. The acquisition has
been funded by the Standby Equity Distribution Agreement, the assumption of debt
and the issuance of restricted shares of Medical Staffing.
From time to time, the Company may evaluate potential acquisitions
involving complementary businesses, content, products or technologies. 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, Medical Staffing was to have acquired
certain assets of A&T. The A&T letter of intent expired on April 14, 2005. We
also entered into a non-binding letter of intent dated January 11, 2005 to
acquire Staff Relief, Inc. ("Relief"). Medical Staffing anticipates moving
forward with Relief. Medical Staffing is planning to evaluate other potential
acquisitions, subject to available financing.
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 our wholly-owned subsidiary, TeleScience)
provides:
o medical staffing services,
30
o information technology ("IT") and telecommunications services and
o homeland security ("Homeland Security") products and services.
TeleScience provides two categories of services:
o medical systems ("Medical Systems") and
o technology ("Technology").
Medical Staffing (through our wholly-owned subsidiary, NPRN) will
provide:
o long-term per diem staffing of nurses (RN and LPNs) to provider
hospitals in Virginia, Maryland and D.C., as well as sections of
Pennsylvania.
The Medical Systems operations specialize 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, the Company intends to expand to provide
long-term staffing of nurses (RNs and LPNs) to private hospitals. This expansion
has been accelerated by our purchase of Nurses PRN, LLC which we completed on
July 1, 2005.
The Technology operations specialize in long-term professional
consulting and staffing of experienced and qualified IT personnel in the
government and private sectors. We provide systems integration and IT 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 Veterans Administration. Medical
Staffing is planning to do this through acquisitions in the private healthcare
field.
In May 2002, the Company was awarded a three (3) year $2.6 million
dollar contract with the U.S. 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. This contract expires in September 2005 and the Company
intends to participate in the re-competition of the contract.
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 September 2004, the Company signed new master contracts with the
California State Department of Corrections for Contract Nursing Staff. These
contracts, each a multiple award vendor award have estimated ceiling values of
$50 million and $4.11 million, respectively, and are effective for three (3)
years starting October 1, 2004. These contracts allow the Company to compete for
this amount of business. The Company has not yet made any sales pursuant to
these contracts.
During 2004 the Company was awarded an extension of contracts for
medical services that the Company holds on a number of U.S. Air Force bases and
on which it has performed during the period ending March 31, 2005.
In July 2005, Medical Staffing completed its acquisition of all of the
assets, properties, rights, interests, business and goodwill belonging to, and
certain liabilities of, Nurses PRN, LLC (hereinafter "NPRN"), a per diem nurses
provider to private hospitals. NPRN extends the Company's operations into the
private healthcare nursing sector. NPRN will more than triple the Company's
sales revenue.
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.
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.
31
Expansion of Medical Services into the Private Sector. In January 2004,
Medical Staffing hired a seasoned executive to direct Medical Staffing'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 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. This expansion has been accelerated by our purchase of Nurses
PRN, LLC, which was completed on July 1, 2005. Over the next twelve (12) months
NPRN plans to establish operations in several additional states and additional
locales within the states which it operates.
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. During the calendar year 2004, the
Company hired ninety one (91) new employees and one hundred eleven (111)
employees left the Company. Medical Staffing has established a national
recruiting center in Vienna, Virginia for the recruitment of health care
professionals to rectify such turnover and to meet such employment needs on a
regular basis, as well as its future contract requirements on a proactive basis.
The Company also 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 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, Medical Staffing was to have acquired certain assets of
A&T. The A&T letter of intent expired on April 14, 2005. We also entered into a
non-binding LOI to acquire Staff Relief, Inc. Medical Staffing anticipates
moving forward with Relief. Medical Staffing is planning to evaluate other
potential acquisitions, subject to available financing.
Develop a Homeland Security Marketing Plan
We view this market sector as an opportunity for growth. The Company
has invested approximately $200,000 to build an infrastructure and to generate
an initial presence in this sector. The initial managers of this segment of the
business were unable to produce as expected and have been replaced by a new
director of marketing and sales. During the first quarter of 2004, Medical
Staffing formed a strategic alliance with Mobile Healthcare Solutions, a
provider of deployable, mobile medical treatment facilities. Both companies
intend to partner for joint bidding on select projects in homeland security
arenas that fit their combined expertise. To date the companies have not
collaborated on any bids. The specific relationship of the parties to one
another will be determined at the time of each bid. Medical Staffing's present
marketing plan in the homeland security arena is to utilize the power and
expertise of its alliances and its own sales force to market decontamination
products. The alliances are with several minority owned businesses that have
disabled veteran owner status. This marketing plan further extends marketing of
emergency equipment, decontamination products (mobile decontamination trailer),
vehicles and personal protective equipment to federal, state, and local
governments. The Company was named as one of seven (7) successful bidders 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 through June 30, 2006. The successful bidders have the
opportunity to provide the equipment to be ordered by the State when and if the
State determines to purchase such equipment. It provides the Company the
opportunity, but not the guaranty, to make sales to Pennsylvania. The Company
has not received any revenues under the IDIQ contract. The Company has not yet
made any sales pursuant to these contracts.
32
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 wholly-owned
subsidiary TeleScience in September 2003. Under the terms of the share exchange
agreement, Medical Staffing acquired one hundred percent (100%) of the stock of
TeleScience in exchange for eighty percent (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.
Medical Staffing is now a government contracting firm. We presently
provide, through TeleScience, health related staffing services to federal and
state government clients. These clients include the U.S. Military, Veterans
Administration, Public Health Service and state correctional and health and
welfare facilities. The facilities include hospitals and clinics. The services
include both auxiliary care and professional care staffing. These staffing
positions include personnel in the dental, medical and pharmacy areas.
Occupational areas provided include nurses, nurse practitioners, dental
assistants, pharmacists and physicians. We are currently moving toward providing
similar services, commencing with nursing services, to non-government care
facilities. On July 1, 2005 we completed, through our wholly-owned subsidiary
NPRN, the acquisition of the business of Nurses PRN, LLC (hereinafter referred
to as "NPRN"). NPRN is a provider of per diem nurses to private hospitals. NPRN
maintains a listing of nurses having a variety of skills who may be called upon
to fill appropriate open shift positions at hospitals. NPRN establishes
relationships with various hospitals who call upon NPRN to fulfill their needs
for nurses due to vacancies created by vacations, increased patient loads or
similar need situations as well as for extended periods.
We also have a relationship which we expect will lead to our making
re-sales of third party products to the Federal and state Homeland Security
agencies. The initial products we expect to sell include decontamination
products, decontamination vehicles, and supplies such as safety masks, gowns,
and hoods. Additional products have not yet been identified and will be a
function of government needs and our associate's ability to identify appropriate
sources. We have also established a relationship which we expect will lead to
our providing Information Technology services to the Federal Government. We are
initially exploring the prospects of providing these services to the Department
of Defense.
The address of our website is www.telescience.com. Information on our
website is not part of this prospectus.
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. We intend to focus on the contract
opportunities for the medical personnel services and the homeland security
products including emergency equipment, decontamination products (mobile
decontamination trailer), vehicles, and personal protective equipment previously
mentioned. We intend to take advantage of other opportunities we may deem
desirable.
Our ability to successfully expand requires significant revenue growth
from increased services performed for existing and new clients, as well as
strategic acquisitions and/or mergers and/or strategic relationships. 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
Until the acquisition of the business of Nurses PRN, LLC, our client
base constituted predominantly of Federal and State government agencies with
medical staffing needs. Federal clients include all branches of the U.S. Armed
Services, the Veterans 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 distributors of decontamination products to serve
the U.S. Department of Homeland Security and state homeland security agencies.
33
Historically we have derived in excess of ninety five percent (95%) of
our revenues and believe that in the immediate future we will continue to derive
the greatest percentage of our total revenues from medical staffing. We have
expanded this effort into the private health care area and have completed our
acquisition of all of the assets, properties, rights, interests, business and
goodwill belonging to, and certain liabilities of Nurses PRN, LLC on July 1,
2005 for this purpose. The main medical staffing services we provide are
nursing, dental assistants technicians, therapists, pharmacists and doctors. 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.
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.
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 provide
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
Immediately prior to the completion of our acquisition of Nurses PRN,
LLC on July 1, 2005, we had 103 full time employees and a total of 178 employees
(full and part-time) working for the Company and located in twenty one (21)
states and the District of Columbia. During the calendar year 2004, the Company
hired ninety one (91) new employees and one hundred eleven (111) employees left
the Company. The Company's 2004 employee hires broken down by month are: January
(6), February (8), March (9), April (4), May (11), June (15), July (5), August
(12), September (5), October (5), November (5), and December (6). The Company's
2004 employee terminations broken down by month are: January (4), February (4),
March (10), April (10), May (10), June (14), July (16), August (8), September
(14), October (5), November (11), and December (5). The length of service for
these terminated employees ranged from 0 to 8.7 years with an average of 1.2
years.
34
The Company also engaged three (3) 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.
As of August 1, 2005, the Company had employed an additional twenty
eight (28) employees in connection with the acquisition of Nurses PRN, LLC in
ten (10) active offices nationwide. These NPRN employees include four (4)
employees in the Atlanta, Georgia branch office, four (4) employees in the West
Palm Beach, Florida office, two (2) employees in the Dallas, Texas office, one
(1) employee in the Houston, Texas office, two (2) employees in the Las Vegas,
Nevada office, one (1) employee in the Modesto, California office, one (1)
employee in Phoenix, Arizona, two (2) employees in the New Orleans, Louisiana
office, one (1) employee in the Oakland, California office, four (4) nurse
recruiters, three (3) oncall coordinators and (3) employees who work in Medical
Staffing's Vienna, Virginia office. NPRN has a branch office in Campbell,
California that is in the process of becoming activated.
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
Medical Staffing is not currently involved in any material legal
proceedings. However, in 2003, we thought we had settled a claim against Medical
Staffing 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. Medical Staffing believes its tender to have been sufficient
and binding. The parties are engaged in legal proceedings to determine the issue
and a trial date is presently set for November 2005. Medical Staffing 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.
On January 21, 2005, Professional Registry for the Northside, Inc.
("Plaintiff") filed a civil action in the United States District Court for the
Northern District of Georgia, Atlanta Division (File No-1:05-cv-00186-WSD),
against Nurses PRN, LLC (hereinafter "NPRN"), our now wholly-owned subsidiary,
claiming rights to the "PRN" mark. This claim is covered under NPRN's general
liability policy and NPRN's insurance carrier has assigned counsel. As of July
26, 2005, NPRN has made an offer to settle the claim and, as of that date, NPRN
has not received any responses to said offer or additional demands for
documents.
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 Medical Staffing 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. NPRN pays partial rent on this space equal to
approximately $4,500 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.
35
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.
NPRN has eleven (11) offices located in eight (8) states including
Virginia. NPRN's principal corporate office is located at 2260 Palm Beach Lakes
Boulvard, West Palm Beach, Florida 33412. The rent is approximately $2,383 per
month. The annual rent in 2004 was approximately $28,560.
NPRN also leases a branch office at the Hammond Center, 1155 Hammond
Drive, Atlanta, Georgia 30328. The rent is approximately $2,186 per month. The
annual rent in 2004 was approximately $25,332.
NPRN also leases a branch office in the Oakbrook Plaza, 1555 West
Mockingbird Lane, Suite 202, Dallas, Texas 75235. The monthly rent is
approximately $1,241 and the annual rent in 2004 was approximately $14,892.
NPRN also leases a branch office at Suite 116, 5373 West Alabama,
Houston, Texas, 77056. The monthly base rent is approximately $681 and the
annual rent in 2004 was approximately $11,280.
NPRN also leases a branch office at Flamingo Executive Park, Suite
W-151, 1050 East Flamingo Road, Las Vegas, Nevada 89119. The monthly rent is
approximately $1,155, and the annual rent in 2004 was approximately $13,475.
NPRN also leases a branch office at Suite C, 4260 Sisk Road, Modesto,
California 95356. The monthly rent is approximately $525 and the annual rent in
2004 was approximately $6,300.
NPRN also leases a branch office at 400 29th Street, Suite 403,
Oakland, California 94609. The monthly rent is approximately $870 and the annual
rent in 2004 was approximately $10,440.
NPRN also leases a branch office at the Pruneyard Tower I, Suite 1160,
1901 South Bascom Avenue, Campbell, California. The monthly base rent is
approximately $1,012 and the annual rent in 2004 was approximately $12,144.
NPRN also leases a branch office at 3027 North Causeway Boulvard,
Metairie, Louisiania 70002. The monthly rent is approximately $880 and the
annual rent in 2004 was approximately $10,560.
As of August 2005, NPRN also leases a branch office at 5350 North 16th
Street, Suite 101, Phoenix, Arizona 85106 at a rate of approximately $840 per
month.
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.
36
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 September 25, 2003 to Date
Resources and Administration
Robert Murphy 47 President, NPRN July 1, 2005 to Date (as of date
of Medical Staffing's acquisition
of Nurses PRN, LLC)
Since Dr. Sahay is the sole director of Medical Staffing, there are no
family relationships between or among the Directors, executive officers or any
other person. Dr. Sahay is not Director of any company that files reports with
the Securities and Exchange Commission, nor has he been involved in any
bankruptcy proceedings, criminal proceedings, any proceeding involving any
possibility of enjoining or suspending Dr. 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 (the "Board") 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 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 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 Medical Staffing's operations
and serves as an advisor to the Board of Directors.
37
Robert Murphy
Robert Murphy has served as President of NPRN since the completion of
NPRN's acquisition of Nurses PRN, LLC on July 1, 2005. From July 2002 through
June 30, 2005 Mr. Murphy had been Chief Executive Officer of Nurses PRN, LLC.
From 1996 to 2001, Mr. Murphy served as founder and president of Staff Force, a
traditional staffing and recruiting firm located in South Florida which he sold
to Teleforce, LLC, a south Florida call center staffing company. Prior to Staff
Force, Mr. Murphy was vice president of operations for National Health Care
Affiliates ("NHCA"), a $136 million temporary nurse staffing and long-term care
provider headquartered in Buffalo, New York. He was appointed to this position
after selling his own health staffing company to NHCA in 1994. Mr. Murphy built
his prior health-staffing firm into one of the largest medical staffing agencies
in South Florida from 1987 to when he sold it in 1994. Mr. Murphy held various
positions of increasing responsibility in health care recruiting and staffing
from 1982 to 1987. He attended the University of Miami and majored in Business
Administration.
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.
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
(10%) beneficial owners were complied with and filed timely.
Code of Ethics
On March 29, 2004, the Board 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 PRINCIPAL OTHER RESTRICTED UNDERLYING OTHER
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
Medical Staffing has no outstanding options. However, pursuant to
Medical Staffing's employment agreement with Dr. Sahay, Medical Staffing is
obligated to grant 3,000,000 options to purchase common stock of Medical
Staffing to Dr. Sahay. Upon the adoption of a stock option plan, Medical
Staffing will issue these options to Dr. Sahay.
38
Compensation Of Directors
Medical Staffing did not issue any shares of common stock as
compensation to any director in 2004.
Employment Agreements
On January 1, 2005, Medical Staffing and Dr. Sahay entered into a five
(5)-year employment agreement. Pursuant to the employment agreement, Dr. Sahay
will serve as Medical Staffing's President and Chief Executive Officer or other
executive officer of Medical Staffing. Dr. Sahay will receive $250,000 per year,
four (4) weeks paid vacation, a car allowance and will be reimbursed for
business expenses. Dr. Sahay will receive additional consideration of 3,000,000
options to purchase common stock of Medical Staffing 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, Dr. Sahay shall be entitled to receive
3,000,000 options to purchase common stock of Medical Staffing at an exercise
price equal to the average of the closing price of Medical Staffing's common
stock for the ten (10) days immediately preceding June 30 of the applicable
year.
NPRN and Robert Murphy entered into a three (3) year executive
employment agreement in connection with the completion of the acquisition by
NPRN of Nurses PRN, LLC on July 1, 2005. Pursuant to the employment agreement,
Mr. Murphy shall serve as NPRN's President or other executive officer. Mr.
Murphy will receive: (a) $120,000 per year; (b) a bonus equal to five percent
(5%) of NPRN's net income after taxes for each fiscal year Mr. Murphy is
employed with NPRN; (c) reimbursement for all reasonable business expenses; (d)
health, life, dental and disability coverage; (e) entitlement to participate in
all incentive, savings and retirement plans, policies and programs; and (f)
fifteen (15) days of paid vacation annually.
Securities Authorized For Issuance Under Equity Compensation Plan
Medical Staffing adopted a 2004 Stock Plan (the "Stock Plan") in
January 2004, authorizing 4,000,000 shares under the Stock Plan. On each of
January 22, 2004 and February 18, 2004, Medical Staffing issued 2,000,000 shares
under the Stock Plan to certain employees and consultants of Medical Staffing.
On January 15, 2004, Medical Staffing filed a Form S-8 registering all 4,000,000
shares under the Plan.
Medical Staffing currently has no outstanding employee option plans.
However, pursuant to Medical Staffing's employment agreement with Dr. Sahay,
Medical Staffing is obligated to grant 3,000,000 options to purchase common
stock of Medical Staffing to Dr. Sahay. Upon the adoption of a stock option
plan, Medical Staffing will issue these options to Dr. 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
============== ================ ==============
39
PRINCIPAL STOCKHOLDERS
The table below sets forth information with respect of the beneficial
ownership as of August 1, 2005 for any person who is known to Medical Staffing
to be the beneficial owner of more than five percent (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 Brajnandan B. Sahay 47,362,722 27.03%
8150 Leesburg Pike, Suite 1200
Vienna, Virginia 22182
Total 47,362,722 27.03%
- ---------------------------------------------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF MANAGEMENT
- ---------------------------------------------------------------------------------------------------------------------------
Name and address Amount and Nature of Percentage
Title of Class of Beneficial Owner Beneficial Ownership of Class (1)
- -------------- ------------------- -------------------- ------------
Common Brajnandan B. Sahay 47,362,722 27.03%
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 27.30%
* Less than one percent (1%).
(1) Applicable percentage of ownership is based on 175,253,677 shares of
common stock outstanding at August 1, 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 sixty (60) days of August
1, 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.
40
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 five percent (5%) or more of Medical Staffing's common
stock, except as disclosed in the following paragraphs.
Medical Staffing 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 Medical Staffing to cover some of
the costs of completing the merger. These amounts are reflected in the
consolidated balance sheet as current liabilities.
Medical Staffing 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.
Medical Staffing had advances from an officer of Medical Staffing 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 Medical
Staffing in 2003.
Medical Staffing was party to a claim pursuant to which an individual
was seeking damages under an agreement Medical Staffing entered into in 2002.
Medical Staffing 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 twelve percent (12%) upon any default of the agreement. As part of
this agreement the individual can seek no further damages against Medical
Staffing. Medical Staffing 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
Medical Staffing, signed over personal shares of Medical Staffing, stock in
consideration for the remaining liability. As such, Medical Staffing has
recorded a loan payable to the President for the unpaid liability at that time,
$875,920. Medical Staffing 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.
41
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 August 1, 2005, there were one hundred
thirty seven (137) holders of record of Medical Staffing's common stock and
175,253,677 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 with
rights, designations, preferences and other terms, as may be determined by the
Board 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 and will depend upon, among other factors, Medical Staffing's
operations, its capital requirements, and its overall financial condition.
42
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 August 1, 2005, there were 175,253,677
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 (1) vote on all matters
requiring a vote of the stockholders. There is no right to cumulative voting;
thus, the holder of fifty percent (50%) 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 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 its inception.
Options
Medical Staffing has no outstanding options. However, pursuant to
Medical Staffing's employment agreement with Dr. Sahay, Medical Staffing is
obligated to grant 3,000,000 options to purchase common stock of Medical
Staffing to Dr. Sahay. Upon the adoption of a stock option plan, Medical
Staffing will issue these options to Dr. 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 Securities and Exchange Commission 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.
43
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 the desires of
the Board . 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 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.
44
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
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 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.
45
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets as of December 31, 2004 and 2003 F-3
Consolidated Statements of Operations for the Years Ended December 31, 2004 and 2003 F-4
Consolidated Statements of Changes in Stockholder's Equity (Deficit) for the Years Ended December 31, 2004 F-5
and 2003
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004 and 2003 F-6
Notes to Consolidated Financial Statements F-7 - F-22
Condensed Consolidated Balance Sheet (unaudited) as of March 31, 2005 F-23
Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2005 and 2004 F-24
Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2005 and 2004 F-25
Notes to Condensed Consolidated Financial Statements F-26 - F-42
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 substantial 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.
As noted in Note 16, the Company had amended its previously issued consolidated
financial statements for the years ended December 31, 2004 and 2003. The Company
had amended these consolidated financial statements to reflect a change in the
weighted average shares outstanding, and to expand certain accounting policy
footnotes to enhance the disclosures.
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 and Note 16 which is dated July 20, 2005
F-2
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
ASSETS
------
2004 2003
----------- -----------
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
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 15,426
------------ ------------
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 $ (0.03) $ (0.01)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 62,372,351 41,200,000
============ ============
The accompanying notes are an integral part of the
consolidated financial statements.
F-4
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
COMMON STOCK ADDITIONAL SUBSCRIPTION
DESCRIPTION SHARES AMOUNT PAID -IN 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 203
2004 2003
------------ ------------
CASH FLOW FROM OPERATING ACTIVITIES
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 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)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
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 1,680,000 --
(Payments) on standby equity distribution agreement/promissory note (365,000) --
(Decrease) in amounts due related parties (24,667) (101,386)
Advances from related parties 19,666 --
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 2,395,701 608,826
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 expenses $ 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
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.
Specifically, the Company records the contract revenue on the gross basis,
whereby the revenue is recorded when billed to the customer for the services
performed.
Cost is recorded on the accrual basis as well, when the services are incurred
rather than paid. The Company provides for reimbursement of costs through the
use of a voucher system. Any out -of-pocket expenses incurred on behalf of the
company must be accompanied by a corresponding receipt and related voucher.
F-8
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
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-9
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 ("SEDA").
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. The Company's policy as it relates to commitment
fees is to capitalize and amortize those expenditures over the life of the
financial instrument. Other fees and costs associated with the SEDA are expensed
as incurred.
Stock-Based Compensation
Employee stock awards under the Company's compensation plans are accounted for
in accordance with Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees", and related interpretations. The
Company provides the disclosure requirements of SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), and related interpretations. Stock-based
awards to non-employees are accounted for under the provisions of SFAS 123 and
the Company adopted the enhanced disclosure provisions of SFAS No. 148
"Accounting for Stock-Based Compensation- Transition and Disclosure," an
amendment of SFAS No. 123.
The Company measures compensation expense for its employee stock-based
compensation using the intrinsic-value method. Under the intrinsic-value method
of accounting for stock-based compensation, when the exercise price of options
granted to employees is less than the estimated fair value of the underlying
stock on the date of grant, deferred compensation is recognized and is amortized
to compensation expense over the applicable vesting period.
F-10
The Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board (FASB) Emerging
Issues Task Force (EITF) Issue No. 96-18, "Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services". The fair value of the option issued is used to
measure the transaction, as this is more reliable than the fair value of the
services received. Fair value is measured as the value of the Company's common
stock on the date that the commitment for performance by the counterparty has
been reached or the counterparty's performance is complete. The fair value of
the equity instrument is charged directly to compensation expense and additional
paid-in capital.
F-11
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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) 62,372,351 41,200,005
Weighted-average common stock equivalents:
Stock options and warrants - -
Weighted-average common shares
outstanding (Diluted) 62,372,351 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-12
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-13
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-14
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-15
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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).
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.
F-16
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
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.
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-17
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-18
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-19
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-20
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. This contract expires in September 2005 and the Company intends to
participate in the re-competition of the contract.
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-21
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-22
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 substantial 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.
NOTE 16- AMENDMENTS AND RESTATEMENT
The Company has amended and restated its previously issued consolidated
financial statements for the years ended December 31, 2004 and 2003 on its
report dated February 25, 2005. The restatement was due to the correction of the
weighted average shares outstanding calculation. The amendments were related to
extended documentation on certain accounting policies, specifically revenue
recognition, deferred financing fees, stock based compensation, and going
concern.
NOTE 17- 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
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 2005
ASSETS
------
Current Assets:
Cash and cash equivalents $ 1,567,195
Accounts receivable, net of allowance
for doubtful accounts of $46,096 1,229,936
Prepaid expenses 31,080
-----------
Total Current Assets 2,828,211
-----------
Fixed assets, net of depreciation 55,103
Loan commitment fees, net 52,500
Deposits 55,643
-----------
TOTAL ASSETS $ 2,991,457
===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
LIABILITIES
Current Liabilities:
Note payable - current portion $ 764,763
Prommissory note - Standby Equity Distribution Agreement 1,300,000
Due to related parties 83,333
Accounts payable and accrued expenses 857,298
Loan payable - Officer / Litigation settlement payable 63,000
-----------
Total Current Liabilities 3,068,394
-----------
TOTAL LIABILITIES 3,068,394
-----------
STOCKHOLDERS' (DEFICIT)
Preferred Stock, $.001 Par Value; 30,000,000 shares authorized
0 shares issued and outstanding --
Common Stock, $.001 Par Value; 300,000,000 shares authorized
151,788,053 shares issued and outstanding 151,788
Additional Paid-in-Capital 5,546,468
Deficit (5,775,193)
-----------
TOTAL STOCKHOLDERS' (DEFICIT) (76,937)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 2,991,457
===========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
F-24
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
2005 2004
------------- ------------
OPERATING REVENUES
Revenue $ 1,646,090 $ 1,685,016
COST OF SALES 1,125,561 1,315,628
------------- ------------
GROSS PROFIT 520,529 369,388
------------- ------------
OPERATING EXPENSES
Administrative payroll, benefits and overhead costs 518,266 561,784
General and administrative expenses 267,949 237,038
Depreciation and amortization 18,711 3,401
------------- ------------
TOTAL OPERATING EXPENSES 804,926 802,223
------------- ------------
(LOSS) BEFORE OTHER INCOME (EXPENSES) (284,397) (432,835)
OTHER INCOME (EXPENSES)
Interest income 5,118 599
Interest expense (67,385) (34,877)
------------- ------------
TOTAL OTHER INCOME (EXPENSES) (62,267) (34,278)
------------- ------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES $ (346,664) $ (467,113)
PROVISION FOR INCOME TAXES -- --
------------- ------------
NET LOSS APPLICABLE TO COMMON SHARES $ (346,664) $ (467,113)
============= ============
NET LOSS PER BASIC AND DILUTED SHARES $ (0.00257) $ (0.01072)
============= ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 134,732,159 43,592,227
============= ============
The accompanying notes are an integral part of the
condensed consolidated financial statements.
F-25
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
2005 2004
----------- ---------
CASH FLOW FROM OPERTING ACTIVIITES
Net loss $ (346,664) $(467,113)
----------- ---------
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 18,711 3,401
Common stock issued for services -- 1,400
Common stock issued for interest payments 62,142 --
CHANGES IN ASSETS AND LIABILITIES
Decrease in accounts receivable 247,901 48,451
(Increase) decrease in prepaid expenses 22,030 (40,567)
(Increase) in deposits (3,000) --
Increase in accounts payable and
and accrued expenses 23,541 100,581
----------- ---------
Total adjustments 371,325 113,266
----------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 24,661 (353,847)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures -- (3,422)
(Increase) decrease in amounts due related parties (11,659) 30,007
----------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (11,659) 26,585
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITES
Common stock issuances for cash - net of expenses 897,666 75,017
Proceeds (payments) from convertible debentures - net 935,000 250,000
Net payments from loan payable - officer / litigation
settlement payable (2,000) (25,000)
Net proceeds (payments) of notes payable (304,821) (46,314)
----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,525,845 253,703
----------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 1,538,847 (73,559)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 28,348 77,068
----------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,567,195 $ 3,509
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest expense $ 53,954 $ 34,877
=========== =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Common stock issued for services $ -- $ 1,400
=========== =========
Common stock issued for loan commitment fees $ 160,000 $ 105,000
=========== =========
Common stock issued for interest payment $ 62,142 $ --
=========== =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-26
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The condensed consolidated unaudited interim financial statements included
herein have been prepared, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). The condensed consolidated
financial statements and notes are presented as permitted on Form 10-QSB and do
not contain information included in the Company's annual consolidated statements
and notes. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the December 31, 2004 audited financial statements and the
accompanying notes thereto. While management believes the procedures followed in
preparing these condensed consolidated financial statements are reasonable, the
accuracy of the amounts are in some respects dependent upon the facts that will
exist, and procedures that will be accomplished by the Company later in the
year.
These condensed consolidated unaudited financial statements reflect all
adjustments, including normal recurring adjustments which, in the opinion of
management, are necessary to present fairly the consolidated operations and cash
flows for the periods presented.
Medical Staffing Solutions, Inc. (the "Company" or "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 merger with TeleScience International, Inc. Prior to
the transaction, MSSI had 10,499,333 shares of common stock. Upon the merger,
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 41,200,005. As of March 31, 2005, the
Company had 151,788,053 shares of common stock issued and outstanding.
F-27
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
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
condensed 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, which
includes developing a Homeland Security subdivision. The Company expensed some
start-up costs relating to this in 2003.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant inter-company accounts
and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
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.
F-28
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. As of March 31, 2005, the Company had deposits of $1,510,914 in excess
of the insured limits.
Fixed Assets
Fixed assets are stated at cost. Depreciation is computed primarily using the
straight-line method over the estimated useful life of the assets.
Furniture and fixtures 7 Years
Office equipment 5 Years
Income Taxes
The income tax benefit is computed on the pretax loss based on the current tax
law. Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates.
F-29
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising
Costs of advertising and marketing are expensed as incurred. Advertising and
marketing costs are included in general and administrative costs in the
condensed consolidated statements of operations for the three months ended March
31, 2005 and 2004, respectively.
Fair Value of Financial Instruments
The carrying amount reported in the condensed 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 their costs relating to the start-up of their
Homeland Security division in the period in which those costs related to. The
Company expensed approximately $0, $0 and $200,000 as of March 31, 2005, 2004
and 2003, respectively, and these costs are included in the accompanying
condensed consolidated statements of operations.
Deferred Financing Fees
In March 2004, the Company issued 750,000 shares of common stock valued at
$105,000 as a commitment fee 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 for the three months
ended March 31, 2005 and 2004 is $13,125 and $0, respectively.
F-30
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings (Loss) Per Share of Common Stock
Historical net income (loss) per common share is computed using the weighted
average number of common shares outstanding. Diluted earnings per share (EPS)
include additional dilution from common stock equivalents, such as stock
issuable pursuant to the exercise of stock options and warrants. Common stock
equivalents are not included in the computation of diluted earnings per share
when the Company reports a loss because to do so would be antidilutive for the
periods presented.
The following is a reconciliation of the computation for basic and diluted EPS:
March 31, 2005 March 31, 2004
-------------- --------------
Net Loss ($ 346,664) ($ 467,113)
-------------- --------------
Weighted-average common shares outstanding
(Basic) 134,732,159 43,592,227
Weighted-average common stock equivalents:
Stock options and warrants -- --
-------------- --------------
Weighted-average common shares outstanding
(Diluted) 134,732,159 43,592,227
============== ==============
Options and warrants outstanding to purchase stock were not included in the
computation of diluted EPS because inclusion would have been antidilutive. As of
March 31, 2005, there were no outstanding options or warrants available.
Reclassifications
Certain amounts for the three months ended March 31, 2004 have been reclassified
to conform to the presentation of the March 31, 2005 amounts. The
reclassifications had no effect on net income for the three months ended
March 31, 2004.
F-31
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements
In September 2001, the Financial Accounting Standards Board 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"), 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.
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.
F-32
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
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 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.
F-33
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
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 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 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.
F-34
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
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.
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.
F-35
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standards No. 123 (Revised 2004),
Share-Based Payment ("SFAS 123R"). SFAS 123R requires that compensation cost
related to share-based payment transactions within the scope of SFAS 123R
include stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of SFAS
123R are effective for small business issuers as of the first interim period
that begins after December 15, 2005. Accordingly, the Company will implement the
revised standard in the fourth quarter of fiscal year 2005. Currently, the
company accounts for its share-based payment transactions under the provision of
APB 25, which does not necessarily require the recognition of compensation cost
in the financial statements. Management is assessing the implications of this
revised standard, which may materially impact the Company's results of
operations in the fourth quarter of fiscal year 2005 and thereafter.
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, payments 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 March 31, 2005,
the Company has $1,276,032 due to them for their services. Additionally, the
Company has established an allowance for doubtful accounts of $46,096 at March
31, 2005.
The accounts receivable are being used as collateral on a line of credit the
Company has with a factor (See Note 5).
F-36
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 4- PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31, 2005:
Furniture, fixtures and equipment $ 153,065
Less: accumulated depreciation 97,962
----------
Net book value $ 55,103
==========
Depreciation expense for the three months ended March 31, 2005 and 2004 was
$5,586 and $3,401, 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 March 31, 2005 was $764,763. The balance
is reflected net of a 10% reserve that the factor has established which is
adjusted on each funding.
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 was non-interest bearing until May 2003 and now bears
interest at 7%. The note is due on demand. At March 31, 2005, the balance had
been paid off.
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). The amount was paid back through a private
stock transaction by the officer in November 2003.
F-37
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 6- INVESTMENT
Beginning in 2001, the Company started investing in a private airstrip in
Branson, Missouri. The project, after the Company funded approximately $387,269
as of March 31, 2004, ran out of funding, and the project has since ceased.
Management has reserved an allowance for the entire amount, as the investment
value is not known.
NOTE 7- DUE TO RELATED PARTIES
The Company had outstanding at March 31, 2005, $83,333 in non-interest bearing
amounts 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 condensed consolidated balance sheet
as current liabilities.
The Company has also advanced related parties certain amounts, mostly in the
form of employee advances. There was $10,050 due at March 31, 2005 for these
advances. These amounts have been included in the accounts receivable.
NOTE 8- PROVISION FOR INCOME TAXES
Deferred income taxes will be determined using the liability method for the
temporary differences between the financial reporting basis and income tax basis
of the Company's assets and liabilities. Deferred income taxes will be measured
based on the tax rates expected to be in effect when the temporary differences
are included in the Company's consolidated tax return. Deferred tax assets and
liabilities are recognized based on anticipated future tax consequences
attributable to differences between financial statement carrying amounts of
assets and liabilities and their respective tax bases.
At March 31, 2005, deferred tax assets approximated the following:
Deferred tax assets $ 1,744,000
Less: valuation allowance (1,744,000)
----------
Net deferred tax assets $-0-
==========
F-38
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 8- PROVISION FOR INCOME TAXES (Continued)
At March 31, 2005, the Company had an accumulated deficit in the amount of
$5,775,193, available to offset future taxable income through 2023. The Company
established valuation allowances equal to the full amount of the deferred tax
assets due to the uncertainty of the utilization of the operating losses in
future periods.
NOTE 9- STOCKHOLDERS' EQUITY (DEFICIT)
The Company has two classes of stock; a preferred class with a par value of
$.001 and 30,000,000 shares authorized, and a common class with a par value of
$.001 and 300,000,000 shares authorized. These levels were increased by the
Board of Directors on March 9, 2004 from 5,000,000 and 50,000,000, respectively.
The Company has not issued any shares of preferred stock.
The Company has 151,788,053 common shares issued and outstanding as of March 31,
2005.
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 $505,000, which was reflected
as a subscription receivable and was collected in the second quarter of 2004.
F-39
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 9- STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
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 $362,500 in the first
quarter of 2004.
The Company issued shares in March 2004 to Cornell Capital Partners, LP 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 fees in the
condensed consolidated balance sheet at March 31, 2005. Since the effective date
of the registration statement, the Company has recognized $52,500 of
amortization.
The Company issued 27,814,409 shares of common stock for $1,065,000 and
1,464,261 shares for the conversion of interest costs in the amount of $62,142.
NOTE 10- LOAN PAYABLE - OFFICER
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.
F-40
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 10- LOAN PAYABLE - OFFICER (Continued)
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 has paid down this
liability and the total outstanding at March 31, 2005 is $63,000.
NOTE 11- COMMITMENTS
The Company had established a 401(k) Plan for its employees and agreed to match
a portion of the contribution. The expense for the Company for the three months
ended March 31, 2003 was $26,830. Effective January 1, 2004, the Company
discontinued its matching portion of the contribution.
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. This contract expires in September 2005 and the Company intends to
participate in the re-competition of the contract.
NOTE 12- 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.
F-41
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 12- STANDBY EQUITY DISTRIBUTION AGREEMENT (Continued)
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, 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.
In January 2005, the Company incurred additional financing fees valued at
$160,000. The Company charged the financing fees and associated legal fees
against paid-in-capital in connection with the equity financing agreement.
NOTE 13- GOING CONCERN
As shown in the accompanying condensed consolidated financial statements, the
Company incurred substantial net losses for the years ended December 31, 2004
and 2003, and additional losses in the three months ended March 31, 2005. There
is no guarantee whether the Company will be able to generate enough revenue
and/or raise capital to support those operations. This raises substantial doubt
about the Company's ability to continue as a going concern.
Management also states that they believe that they can improve operations and
raise the appropriate funds needed through their recent contracts the Company
has entered into in the past few months.
F-42
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
NOTE 13- GOING CONCERN (Continued)
On January 15, 2004, the Company received a term sheet from Cornell Capital
Partners, LP regarding a Standby Equity Distribution Agreement. Under this
agreement, and upon an effective registration of the shares, Cornell Capital
Partners will commit to purchase up to 15 million dollars of the Company stock
pursuant to the terms agreed upon.
Cornell Capital Partners, LP and the Company entered into a Convertible
Debenture Agreement in the first quarter 2004 for $600,000. Cornell Capital
Partners had originally advanced $250,000 of this amount at closing and advanced
the remaining $350,000 upon the filing of the registration statement, which
occurred in April 2004. The Company also negotiated a promissory note in the
amount of $2,000,000 during the first quarter of 2005. The balance due at March
31, 2005 was $1,300,000. For the three months ended March 31, 2005, the Company
issued 1,464,261 shares of common stock to Cornell Capital Partners under the
Standby Equity Distribution Agreement, the proceeds of which were used to
satisfy $62,142 of interest due under promissory notes outstanding.
On January 5, 2005, the Company entered into a third promissory note for
$2,000,000 with Cornell Capital Partners and placed 40,000,000 shares of common
stock into escrow, per the promissory note. As of March 31, 2005, 19,663,256
shares still remain in escrow.
The condensed consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
F-43
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:
o except the common stock offered by this prospectus;
o in any jurisdiction in which the offer or solicitation is not
authorized;
o in any jurisdiction where the dealer or other salesperson is not
qualified to make the offer or solicitation;
o to any person to whom it is unlawful to make the offer or
solicitation; or
o to any person who is not a United States resident or who is
outside the jurisdiction of the United States.
The delivery of this prospectus or any accompanying sale does not imply that:
o there have been no changes in the affairs of Medical Staffing
Solutions after the date of this prospectus; or
o 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.
----------------------
PROSPECTUS
---------------------
101,000,000 Shares of Common Stock
MEDICAL STAFFING SOLUTIONS, INC.
________________ __, 2005
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 $ 594.39
Printing and Engraving Expenses $ 2,500.00
Accounting Fees and Expenses $ 15,000.00
Legal Fees and Expenses $ 50,000.00
Miscellaneous $ 16,905.61
TOTAL $ 85,000.00
ITEM 26. SALES OF UNREGISTERED SECURITIES
During the past three (3) years the registrant has issued the following
securities without registration under the Securities Act of 1933:
Prior to the Share Exchange Agreement, Dr. Sahay owned one hundred
percent (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, Medical Staffing
had 10,499,333 shares of common stock. Upon the consummation of the Shares
Exchange transaction, Medical Staffing 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 one hundred percent (100%) of the outstanding stock of
TeleScience. On September 29, 2003, Medical Staffing approved a 14-for-1 stock
dividend.
On March 11, 2004, Medical Staffing 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 Medical Staffing. 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 one hundred percent (100%) of the lowest volume weighted average price
of the common stock during the five (5) 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 (7) trading days of a prior
advance. On March 11, 2004, Cornell Capital Partners received a one-time
commitment fee of 750,000 shares of Medical Staffing's common stock. Cornell
Capital Partners is entitled to receive in cash five percent (5%) of each
advance as an underwriting discount. 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 August 1, 2005, Medical Staffing has made advances under the
Standby Equity Distribution Agreement in the amount of $2,440,000, issuing
74,744,294 shares of its common stock.
II-1
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 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, Medical Staffing, pursuant to a board resolution,
converted a $850,920 loan payable to Medical Staffing's President and Chief
Executive Officer, Dr. Sahay into 17,048,400 shares of common stock.
On April 8, 2005, Medical Staffing entered into a 90 Days Consulting
Services Contract with Fitzgerald Galloway Management, Inc. Pursuant to the
Consulting Services Contract, Fitzgerald received 1,000,000 shares of common
stock of Medical Staffing.
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
Medical Staffing's securities.
ITEM 27. EXHIBITS
EXHIBIT NO.
- -----------
3.1 Articles of Incorporation, as amended Incorporated by reference to Exhibit 3(a) to Medical
Staffing's Registration Statement on Form SB-2 as
filed with the United States Securities and Exchange
Commission on October 9, 2001
3.2 By-laws Incorporated by reference to Exhibit 3(b) to Medical
Staffing's Registration Statement on Form SB-2 as
filed with the United States Securities and Exchange
Commission on October 9, 2001
3.3 Certificate of Amendment to Articles of Incorporated by reference to Exhibit 3 to Medical
Incorporation Staffing's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on March 27, 2003
3.4 Certificate of Amendment to Articles of Incorporated by reference to Exhibit 3 to Medical
Incorporation Staffing'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
10.1 Sublease Agreement dated December 23, 2002 by and Incorporated by reference to Exhibit 10.1 to Medical
among InterAmerica Technologies, Inc., Kemron Staffing'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
II-2
EXHIBIT NO.
- -----------
10.2 Promissory Note in the principal amount of Incorporated by reference to Exhibit 10.2 to Medical
$875,920 made by Medical Staffing in favor of B. Staffing's Annual Report on Form 10-KSB as filed with
B. 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 Medical
by and between Silver Star Technologies, Inc. and Staffing'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 Medical
Telescience International, Inc. and Chesapeake Staffing'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 Medical
Nursing Resources, Inc. to Telescience Staffing'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 Medical
March 11, 2004 between Medical Staffing and Staffing'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 Medical
2004 between Medical Staffing and Cornell Capital Staffing'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 Medical
Medical Staffing, Cornell Capital Partners, LP Staffing'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 Medical
2004 among Medical Staffing and the Buyers Staffing'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 Medical
Medical Staffing, the Buyers and Butler Gonzalez, Staffing'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 Medical
2004 between Medical Staffing and Cornell Capital Staffing's Annual Report on Form 10-KSB as filed with
Partners, LP the United States Securities and Exchange Commission
on April 9, 2004
10.12 Investor Registration Rights Agreement dated Incorporated by reference to Exhibit 10.12 to Medical
March 11, 2004 between Medical Staffing and the Staffing's Annual Report on Form 10-KSB as filed with
Investors the United States Securities and Exchange Commission
on April 9, 2004
II-3
EXHIBIT NO.
- -----------
10.13 Placement Agent Agreement dated March 11, 2004 Incorporated by reference to Exhibit 10.13 to Medical
among Medical Staffing, Newbridge Securities Staffing'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 Medical
Commonwealth of Pennsylvania to Telescience Staffing'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 Medical
2004, to Mobile Healthcare Solutions, Inc. from Staffing'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 Medical
between Telescience International, Inc. and Staffing'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 Medical
Office Location Staffing'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 Medical
Capital Partners, LP by Medical Staffing on June Staffing'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 Medical
Capital Partners, LP by Medical Staffing on Staffing'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 Form of Amended and Restated Promissory Note Provided herewith
issued to Cornell Capital Partners, LP by Medical
Staffing on January 5, 2005 and amended on
June 7, 2005
10.21 Employment Agreement between Medical Staffing and Incorporated by reference to Exhibit 10.21 to Medical
Brajnandan B. Sahay dated January 1, 2005 Staffing'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 Medical
Telescience International, Inc. and State of Staffing'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
10.23 Master Contract dated December 19, 2004, by and Incorporated by reference to Exhibit 10.23 to Medical
between Telescience International, Inc. and State Staffing'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
II-4
EXHIBIT NO.
- -----------
10.24 90 Days Consulting Services Contract Incorporated by reference to 5.1 to Medical Staffing's
Form SB-2 as filed with the United States Securities
and Exchange Commission on April 13, 2005
10.25 Form of Amended and Restated Promissory Note Provided herewith
issued to Cornell Capital Partners, LP by
Medical Staffing on April 26, 2005 and amended
on June 7, 2005
10.26 Asset Purchase Agreement, effective as of June Incorporated by reference to Exhibit 99.1 to Medical
16, 2005, by and among MSSI, Nurses PRN Staffing's Amended Form 8-K as filed with the United
Acquisition Corp., Nurses PRN, LLC and the States Securities and Exchange Commission on July 14,
Members listed therein 2005
10.27 $250,000 Promissory Note, effective June 16, Incorporated by reference to Exhibit 99.2 to Medical
2005, by Nurses PRN Acquisition Corp., Inc. Staffing's Amended Form 8-K as filed with the United
issued to Mr. Aftab Adamjee States Securities and Exchange Commission on July 14,
2005
10.28 Executive Employment Agreement, dated June 16, Incorporated by reference to Exhibit 99.3 to Medical
2005, by and between Nurses PRN Acquisition Corp. Staffing's Amended Form 8-K as filed with the United
and Mr. Robert Murphy States Securities and Exchange Commission on July 14,
2005
10.29 Executive Employment Agreement, dated June 16, Incorporated by reference to Exhibit 99.4 to Medical
2005, by and between Nurses PRN Acquisition Corp. Staffing's Amended Form 8-K as filed with the United
and Ms. Linda Romano States Securities and Exchange Commission on July 14,
2005
10.30 Release, dated June 16, 2005, by Mr. Aftab Incorporated by reference to Exhibit 99.5 to Medical
Adamjee releasing all claims against Nurses PRN, Staffing's Amended Form 8-K as filed with the United
LLC, Mr. Robert Murphy and Ms. Linda Romano States Securities and Exchange Commission on July 14,
2005
10.31 Release, dated May 26, 2005, by Mr. Phil Dodge Incorporated by reference to Exhibit 99.6 to Medical
releasing all claims against Nurses PRN, LLC Staffing's Amended Form 8-K as filed with the United
States Securities and Exchange Commission on July 14,
2005
10.32 Release, dated June 16, 2005, by Mr. Robert Incorporated by reference to Exhibit 99.7 to Medical
Murphy releasing all claims against Nurses PRN, Staffing's Amended Form 8-K as filed with the United
LLC States Securities and Exchange Commission on July 14,
2005
10.33 Release, dated June 16, 2005, by Ms. Linda Romano Incorporated by reference to Exhibit 99.8 to Medical
releasing all claims against Nurses PRN, LLC Staffing's Amended Form 8-K as filed with the United
States Securities and Exchange Commission on July 14,
2005
10.34 Assumption Agreement, dated June 16, 2005, by and Incorporated by reference to Exhibit 99.9 to Medical
among Nurses PRN, LLC, Nurses PRN Acquisition Staffing's Amended Form 8-K as filed with the United
Corp. and Mr. Jeffrey T. Dowling States Securities and Exchange Commission on July 14,
2005
II-5
EXHIBIT NO.
- -----------
10.35 Pledge Agreement, dated June 16, 2005, by and Incorporated by reference to Exhibit 99.10 to Medical
between Mr. Robert Murphy and Ms. Linda J. Romano Staffing's Amended Form 8-K as filed with the United
as Pledgor and Mr. Jeffrey T. Dowling as Pledgee States Securities and Exchange Commission on July 14,
2005
10.36 Indemnity and Guaranty Agreement, dated June 16, Incorporated by reference to Exhibit 99.11 to Medical
2005, by and among Mr. Aftab Adamjee, Mr. Robert Staffing's Amended Form 8-K as filed with the United
Murphy and Ms. Linda Romano as Indemnitors and States Securities and Exchange Commission on July 14,
Nurses PRN, LLC 2005
10.37 Guaranty of Payment, dated June 16, 2005, by Incorporated by reference to Exhibit 99.12 to Medical
Medical Staffing Solutions, Inc. with respect to Staffing's Amended Form 8-K as filed with the United
Mr. Jeffrey T. Dowling States Securities and Exchange Commission on July 14,
2005
10.38 Form of Guaranty of Payment, by Medical Staffing Incorporated by reference to Exhibit 99.13 to Medical
Solutions, Inc. with respect to Mr. Aftab Adamjee Staffing's Amended Form 8-K as filed with the United
States Securities and Exchange Commission on July 14,
2005
10.39 Guaranty, dated June 16, 2005, by Mr. Robert Incorporated by reference to Exhibit 99.14 to Medical
Murphy and Ms. Linda Romano with respect to Staffing's Amended Form 8-K as filed with the United
Jeffrey T. Dowling and the payment of all States Securities and Exchange Commission on July 14,
indebtedness of Nurses PRN, LLC 2005
10.40 Bill of Sale, undated, by and between Nurses PRN, Incorporated by reference to Exhibit 99.15 to Medical
LLC and Nurses PRN Acquisition Corp. Staffing's Amended Form 8-K as filed with the United
States Securities and Exchange Commission on July 14,
2005
10.41 Assignment and Assumption Agreement, dated June Incorporated by reference to Exhibit 99.16 to Medical
16, 2005, by and between Nurses PRN, LLC and Staffing's Amended Form 8-K as filed with the United
Nurses PRN Acquisition Corp. States Securities and Exchange Commission on July 14,
2005
10.42 Joinder, dated June 10, 2005, by and between Mr. Incorporated by reference to Exhibit 99.17 to Medical
Aftab Adamjee and Mr. Jeffrey T. Dowling Staffing's Amended Form 8-K as filed with the United
States Securities and Exchange Commission on July 14,
2005
10.43 Confirmation of Closing in Escrow, dated June 16, Incorporated by reference to Exhibit 99.18 to Medical
2005, by and between attorneys for MSSI, Nurses Staffing's Amended Form 8-K as filed with the United
PRN Acquisition Corp. and Nurses PRN, LLC States Securities and Exchange Commission on July 14,
2005
10.44 SYSTRAN Financial Services Corporation Factoring Incorporated by reference to Exhibit 99.1 to Medical
Agreement, dated as of June 30, 2005, by and Staffing's Form 8-K as filed with the United States
between Medical Staffing Solutions, Inc., Securities and Exchange Commission on July 14, 2005
TeleScience International, Inc., Nurses PRN
Acquisition Corp. and SYSTRAN Financial Service
Corporation
II-6
EXHIBIT NO.
- -----------
10.45 Form of Addendum to the SYSTRAN Financial Incorporated by reference to Exhibit 99.2 to Medical
Services Corporation Factoring Agreement Staffing's Form 8-K as filed with the United States
Securities and Exchange Commission on July 14, 2005
10.46 Form of Continuing Guaranty Incorporated by reference to Exhibit 99.3 to Medical
Staffing's Form 8-K as filed with the United States
Securities and Exchange Commission on July 14, 2005
10.47 Form of Letter to SYSTRAN Credit and Operations Incorporated by reference to Exhibit 99.4 to Medical
Departments Staffing's Form 8-K as filed with the United States
Securities and Exchange Commission on July 14, 2005
14.1 Code of Ethics Incorporated by reference to Exhibit 14.1 to Medical
Staffing'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 herewith
23.2 Consent of Bagell, Josephs & Company, L.L.C. Provided herewith
II-7
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 which,
individually or together, 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 a 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 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 initial bona fide offering
thereof.
(3) To file a post-effective amendment to remove from
registration 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.
II-8
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 August 5, 2005.
Date: August 5, 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: August 5, 2005
-----------------------
Brajnandan B. Sahay
II-9