U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
|X| Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange
Act of 1934, as amended
For the quarterly period ended March 31, 2006
|_| Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended
For the transition period from _______ to _______
Commission File No. 000-23967
MEDICAL STAFFING SOLUTIONS, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 91-2135006
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
8150 Leesburg Pike, Suite 1200, Vienna, Virginia 22182
(Address of Principal Executive Offices) (Zip Code)
(703) 641-8890
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12B-2 of the Exchange Act). Yes |_| No |X|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
OUTSTANDING SHARES
CLASS May 15, 2006
------------ ------------
Common Stock 178,773,102
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
PART I
ITEM 1. FINANCIAL STATEMENTS
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
INDEX TO CONSENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(UNAUDITED)
PAGE
Balance Sheet as of March 31, 2006 (Unaudited)........................ 2
Statements of Operations for the three (3)
months ended March 31, 2006 and 2005 (Unaudited)...................... 3
Statements of Cash Flows for the three (3) months ended
March 31, 2006 and 2005 (Unaudited)................................... 4
Notes to Financial Statements (Unaudited)............................. 6
F-1
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
March 31, 2006
ASSETS
Current Assets:
Cash and cash equivalents $ 1,315,925
Accounts receivable, net of allowance for doubtful accounts of $84,232 3,782,042
Accounts receivables-other 65,001
Prepaid expenses 57,141
------------
Total Current Assets 5,220,109
------------
Fixed assets, net of depreciation 127,031
Goodwill 2,528,010
Deposits 51,990
------------
TOTAL ASSETS $ 7,927,140
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Note payable, Current portion $ 398,154
Loan payable - factoring agent 2,707,491
Accounts payable and accrued expenses 1,626,354
------------
Total Current Liabilities 4,731,999
------------
Long-term liabilities
Notes payable, net of current 49,655
Loans payable - Officer 88,528
------------
Total Liabilities 4,870,182
------------
STOCKHOLDERS' EQUITY
Preferred Stock, $.001 Par Value; 30,000,000 shares authorized, 4,400,000
designated Series A Convertible, $1 stated value,
4,400,000 shares issued and 4,350,000 shares outstanding at March 31, 2006 4,350
Common Stock, $.001 Par Value; 300,000,000 shares authorized and
177,557,824 shares outstanding at March 31, 2006 177,558
Discount on preferred Series A stock (1,400,000)
Additional Paid-in-Capital 10,195,970
Additional paid-in-Capital-Warrants 1,142,686
Additional paid in Capital- Beneficial conversion 537,600
Deficit (7,601,206)
------------
Total Stockholders' EQUITY 3,056,958
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,927,140
============
The accompanying notes are an integral part of
these condensed consolidated financial statements.
F-2
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE (3) MONTHS ENDED MARCH 31, 2006 AND 2005
2006 2005
------------- -------------
OPERATING REVENUES
Revenue $ 5,182,313 $ 1,646,090
COST OF SALES 3,715,599 1,125,561
------------- -------------
GROSS PROFIT 1,466,714 520,529
------------- -------------
OPERATING EXPENSES
Administrative payroll, benefits and overhead costs 1,171,496 518,266
General and administrative expenses 649,545 267,949
Depreciation and amortization 9,343 18,711
------------- -------------
Total Operating Expenses 1,830,384 804,926
------------- -------------
(LOSS) BEFORE OTHER INCOME (EXPENSES) (363,670) (284,397)
------------- -------------
OTHER INCOME (EXPENSES)
Other Income 85,310 --
Interest income -- 5,118
Interest expense (67,203) (67,385)
------------- -------------
Total Other Income (Expenses) 18,107 (62,267)
------------- -------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (345,563) (346,664)
------------- -------------
Provision for Income Taxes -- --
NET LOSS APPLICABLE TO COMMON SHARES $ (345,563) $ (346,664)
============= =============
NET LOSS PER BASIC AND DILUTED SHARES $ (0.00) $ (0.00)
============= =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 176,815,377 134,732,159
============= =============
The accompanying notes are an integral part of
these condensed consolidated financial statements.
F-3
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE (3) MONTHS ENDED MARCH 31, 2006 AND 2005
2006 2005
----------- -----------
CASH FLOW FROM OPERTING ACTIVIITES
Net loss $ (345,563) $ (346,664)
----------- -----------
Adjustments to reconcile net loss to net cash (used in)
operating activities Depreciation and amortization 9,344 18,711
Common stock issued for interest payments -- 62,142
Changes in assets and liabilities
Decrease in accounts receivable 1,683 247,901
Decrease in prepaid expenses 40,786 22,030
Increase in deposits (1,990) (3,000)
Increase (Decrease) in accounts payable and accrued expenses (378,630) 23,541
----------- -----------
Total adjustments (328,807) 371,325
----------- -----------
Net cash provided by (used in) operating activities (674,370) 24,661
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (19,001) --
Increase (decrease) in amounts due related parties (26,156) (11,659)
Net cash (used in) investing activities (45,157) (11,659)
CASH FLOWS FROM FINANCING ACTIVITIES
Preferred stock issuance for cash 1,400,000 897,666
Issuance costs deducted from equity (191,580) --
Cash contribution from subscription receivable 415,799 --
Proceeds from factoring agent 204,711 --
Proceeds (payments) from convertible debentures - net -- 935,000
Net proceeds from (payments to) officer 924 (2,000)
Net payments on notes payable (90,900) (304,821)
----------- -----------
Net cash provided by financing activities 1,738,954 1,525,845
----------- -----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS 1,019,427 1,538,847
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 296,498 28,348
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,315,925 $ 1,567,195
=========== ===========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
F-4
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE (3) MONTHS ENDED MARCH 31, 2006 AND 2005
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: 2006 2005
-------- --------
CASH PAID DURING THE PERIOD FOR:
Interest expense $ 25,415 $ 34,877
======== ========
Income taxes $ -- $ --
======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Common stock issued for loan commitment fees $ -- $160,000
======== ========
Common stock issued for interest payment $ -- $ 62,142
======== ========
During the three (3) months ended March 31, 2006, 50,000 shares of preferred
stock were exchanged for common shares in accordance to the Investment Agreement
with Cornell Capital Partners, LP dated December 31, 2005. The shares were
exchanged based on the conversion price $0.0217 per share. This equated to
2,304,147 shares of common stock to be issued. The paid-in-capital for both
common and preferred stock was adjusted to reflect the change in value.
F-5
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005 (UNAUDITED)
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 U.S. 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, 2005 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 outstanding. Upon
the merger, MSSI cancelled 9,953,333 of these shares and issued 2,200,000 shares
to acquire TeleScience for one hundred percent (100%) of the outstanding stock
of TeleScience.
Upon the share exchange, the Board of Directors approved a stock split in the
amount of 14 for 1 stock, on September 29, 2003, increasing the outstanding
shares of the Company to 41,200,005. As of March 31, 2005, and March 31,2006 the
Company had 151,788,053 shares and 177,557,824 of common stock issued and
outstanding respectively.
For accounting purposes, the transaction had 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 has expensed
some start-up costs relating to this over 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.
On July 1, 2005, we completed the Asset Purchase Agreement, whereby Medical
Staffing, through our wholly-owned subsidiary, 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 our common stock to Nurses PRN,
LLC to be delivered to the members of Nurses PRN, LLC 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 $365,487note payable issued to Mr.
Jeff Dowling by NPRN; (b) a $250,000 note payable to Mr. Aftab 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. The
acquisition was funded by a promissory note.
F-6
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005 (UNAUDITED)
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.
Revenue and Cost Recognition
Revenue is recognized under the accrual method of accounting when the services
are rendered and customer has been billed, rather than when cash is collected
for the services provided. Specifically, the terms of the contracts call for a
fixed set fees based on an hourly rate per individual. 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 (3) 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 March 31, 2006 the Company had deposits of $ 1,250,000 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.
o Furniture and fixtures five (5) Years
o Office equipment seven (7) Years
Income Taxes
The income tax benefit is computed on the pretax loss based on the current tax
law. Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates.
Advertising
Costs of advertising and marketing are expensed as incurred. Advertising and
marketing costs are included in general and administrative costs in the
condensed consolidated statements of operations for the three (3) months ended
March 31, 2006 and 2005, respectively.
F-7
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005 (UNAUDITED)
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.
(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, March 31,
2006 2005
Net Loss ($ 345,563) ($ 346,664)
------------- -------------
Weighted-average common shares outstanding (Basic) 176,815,377 134,732,159
Weighted-average common stock equivalents:
Stock options and warrants -- --
Weighted-average common shares outstanding (Diluted) 176,815,377 134,732,159
============= =============
Option and warrants outstanding to purchase stock were not included in the
computation of diluted EPS because inclusion would have been antidilutive. As
March 31, 2006, there were no options available. However, there were 95,000,000
freestanding warrants, and approximately 120,000,000 common shares available for
conversion in association with the convertible preferred Series A stock.
Reclassifications
Certain amounts for the three (3) months ended March 31, 2005 have been
reclassified to conform to the presentation of the March 31, 2006 amounts. The
reclassifications have no effect on net income for the three (3) months ended
March 31, 2005.
Recent Accounting Pronouncements
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standard No. 123 (Revised 2004),
Shared-Based Payment ("FAS 123R"). FAS 123R requires that compensation cost
related to share-based payment transaction within the scope of FAS 123R include
stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of FAS
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 in assessing of compensation cost in the
financial statements. Management has assessed the implications of this revised
standard, and has determined that it did not materially impact the Company's
results of operations in the first quarter of fiscal year 2006.
F-8
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005 (UNAUDITED)
On December 16, 2004, FASB issued Statement of Financial Accounting Standards
No. 153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29,
Accounting for Non-monetary Transactions ("SFAS 153"). This statement amends APB
Opinion 29 to eliminate the exception for non-monetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. Under SFAS 153, if a
non-monetary exchange of similar productive assets meets a commercial-substance
criterion and fair value is determinable, the transaction must be accounted for
at fair value resulting in recognition of any gain or loss. SFAS 153 is
effective for non-monetary transactions in fiscal periods that begin after June
15, 2005. The Company does not anticipate that the implementation of this
standard will have a material impact on its financial position, results of
operations or cash flows.
In March 2005, the FASB issued Statement of financial Accounting Standards
Interpretation Number 47 ("FIN 47"), Accounting for Conditional Asset Retirement
Obligation." FIN 47 provides clarification regarding the meaning of the term
"conditional asset retirement obligation" as used in SFAS 143, "Accounting for
Asset Retirement Obligations." Fin 47 is effective for the year ended December
31, 2005. The implementation of this standard did not have a material impact on
its financial position, results of operation or cash flows.
In May 2005, the FASB issued FAS 154, "Accounting for Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3".
FAS154 changes the requirements with regard to the accounting for and reporting
a change in an accounting principle. The Provisions of FAS 154 require, unless
impracticable, retrospective application to prior periods presented in financial
statements for all voluntary changes in an accounting principle and changes
required by the adoption of a new accounting pronouncement in the unusual
instance that the new pronouncement does not indicate a specific transition
method. FAS 154 also requires that a change in depreciation, amortization or
depletion method for long-lived, non-financial assets be accounted for as a
change in an accounting estimate, which requires prospective application of new
method. FAS 154 is effective for all changes in an accounting principle made in
the fiscal years beginning after December 15, 2005. The Company has adopted FAS
154 beginning January 1, 2006. Because FAS 154 is directly dependent upon future
events, the Company has not determined what effect, if any, the expected
adoption of FAS 154 will have on its financial condition, results of operations
or cash flows.
In February 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting (FAS) No. 155, Accounting for Certain Hybrid
Financial Instruments. FAS No 155 replaces FAS No 133 Accounting for Derivative
Instruments and Hedging Activities, and FAS No. 140 Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. FAS No. 155
resolves issues in Statement 133 Implementation Issue No. D1, "Application of
Statement 133 to Beneficial Interest in Securitized Financial Assets". This
statement will be effective for all financial instruments acquired or issued
after the beginning of an entity's fiscal year that begins September 15, 2006.
The Company is currently analyzing whether this new standard will have impact on
its financial position and results of operations.
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, 2006,
the Company had $3,782,042 gross due to them for their services. Additionally,
the Company has established an allowance for doubtful accounts of $84,233 at
March 31, 2006.
The accounts receivable are being used as collateral on a line of credit the
Company has with a factor (See Note 8).
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31, 2006:
Furniture, fixtures and equipment $ 298,465
Less: accumulated depreciation 171,434
Net book value
-------------
$ 127,031
=============
F-9
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005 (UNAUDITED)
Depreciation expense for the three (3) months ended March 31, 2006 and 2005 was
$9,344 and $5,586, respectively.
NOTE 5 - DEPOSITS
The Company had deposits with various entities for security purposes. The
balance as of March 31, 2006 was $51,990.
NOTE 6 - GOODWILL
In the acquisition of Nurse PRN (See Note 14), the Company acquired goodwill in
the amount of $ 2,528,010. The Company has performed an analysis of the account
and has determined that no impairment is necessary at March 31, 2006.
NOTE 7 - DUE TO RELATED PARTIES
The Company has outstanding at March 31, 2006 and 2005 $65,001 from related
parties, primarily in the form of employee advances. These amounts have no
specific repayment terms. As such, the amounts are reflected in the condensed
consolidated balance sheet as current assets.
NOTE 8 - LOAN PAYABLE
In July 2005, the Company entered into a line of credit agreement with a factor.
The loan, which is due on demand bears interest at prime plus one percent (1%).
The factor lends up to ninety percent (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, 2006 was $2,707,491. The balance is reflected net of a ten percent (10%)
reserve that the factor has established which is adjusted on each funding.
NOTE 9- 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 $385,000. As of December 31, 2002, the project ceased operations.
Management of the Company has reserved an allowance for the entire amount of the
investment, as the current market value is unknown.
NOTE 10 - 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, 2006, deferred tax assets approximated the following:
Deferred tax assets $ 2,539,480
Less: valuation allowance (2,539,480)
-----------
Net deferred tax assets -0-
===========
F-10
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005 (UNAUDITED)
At March 31, 2006, the Company had accumulated deficits in the approximate
amount of $7,600,000 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.
NOTE 11 - LOAN PAYABLE - OFFICER
The Company was a 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 twelve
percent (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 common stock of the Company in consideration for this liability. As
such, the Company has recorded a loan payable to the President for the unpaid
liability at that time, equal to $875,920. The Company has paid down this
liability and the total amount outstanding at March 31, 2006 was $88,528.
NOTE 12 - COMMITMENTS
The Company established a 401(k) Plan for its employees and agreed to match a
portion of the contribution. Effective January 1, 2004, the Company discontinued
its matching portion of the contribution.
NOTE 13 - NOTE PAYABLE
In connection with the acquisition of Nurses PRN on July 1, 2005, the Company
assumed a note payable with Jeffrey Dowling in the amount of $ 365,487. In
addition, the Company assumed a note payable with Aftabe Adamjee in the amount
of $ 250,000. The note payable to Jeff Dowling is payable in twenty-six (26)
monthly installments with nine percent (9%) interest rate assessed. The note
payable associated with Mr. Adamjee is payable in two (2) installments. The
Company anticipates making full payment in 2006. The balances on these notes at
March 31, 2006 were $197,809 and $ 250,000, respectively.
NOTE 14 - STOCKHOLDERS' EQUITY
The Company has two (2) classes of stock: a preferred class with a par value of
$0.001 and 30,000,000 shares authorized, and a common class with a par value of
$0.001 and 300,000,000 shares authorized.
The Company has 177,557,824 common shares issued and outstanding and 4,400,000
shares of Series A convertible preferred stock issued and 4,350,000 outstanding
as of March 31, 2006.
On December 13, 2005, the Company issued 3,000,000 shares of Series A
convertible preferred stock. The stock was issued in three (3) parts; the first
installment was consummated when Company issued 2,184,201 shares in payment of a
promissory note held by Cornell Capital Partners, LP ("Cornell"). The debt was
in the amount of $2,113,332. plus accrued interest of $70,869. The second
installment was for 400,000 shares in the amount of $400,000. The remaining
shares were advanced two (2) days prior to the Company filing a registration
statement, which was filed on January 31, 2006. In addition, the Company
extended a warrant to Cornell to purchase fifteen million (15,000,000) shares of
common stock at a fixed exercise price of $0.03.
On March 13, 2006, the Company amended and restated its agreement with Cornell
to increase the amount to preferred shares to 4,400,000. The additional funds of
$1,400,000 were advanced on that date. In addition, the Company issued to
Cornell four (4) additional warrants to purchase an aggregate of 80,000,000
shares of the Company's common stock as follows; (i) 30,000,000 shares at an
exercise price of $0.005 per share, (ii) 30,000,000 shares at an exercise price
of $0.01 per share, (iii) 10,000,000 shares at an exercise price of $0.015 per
share, and (iv) 10,000,000 shares at an exercise price of $0.02 per share. All
of the warrants expire five (5) years after the date of issuance, on or about
March 13, 2011.
F-11
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005 (UNAUDITED)
On January 30, 2006, a convertible series A preferred shareholder notified the
Company of their intent to convert 50,000 shares of preferred stock into common
stock, as outlined in the investment agreement. The preferred shares were
converted at a price $0.0217, which translated into 2,304,147 shares common
stock. There were no other transactions involving common stock in the quarter
ended March 31, 2006.
In connection with the conversion of the preferred stock, the total outstanding
preferred shares were decreased by 50,000 shares.
In January 2006, 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.
The Company issued in the first quarter of 2005 1,464,261 shares for the
conversion of the interest costs value at $ 62,142.
NOTE 15 - GOING CONCERN
As shown in the accompanying condensed consolidated financial statements, the
Company incurred substantial net losses for the years ended December 31, 2005
and 2004, and additional losses in the three (3) months ended March 31, 2006.
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 states that they are confident that they can improve operations and
raise the appropriate funds needed through their recent contracts the Company
has entered into in the past few months.
The condensed consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
NOTE 16 - LITIGATION
In October 2004, The Roche Group sued the Company for pecuniary loss in
connection with an ex-dividend date of the Company's stock sued the Company. The
courts have dismissed two (2) of the three (3) counts with prejudice. The
Company is presently in the discovery phase of the trial on the remaining count.
Plaintiffs are seeking $125,000 in damages. The Company feels the case has no
merit, and will be dismissed as well.
On February 16, 2006 the Circuit of Fairfax County, Virginia entered a final
order against TeleScience International, Inc. ("Telescience") a wholly-owned
subsidiary of the Company in the amount of $851,875 with interest at twelve
percent (12%) from the date of October 16, 2003.
In 2003, the Company believed it had settled a claim by the Plaintiff who was a
former officer and investor of TeleScience. In satisfaction of that settlement,
2,655,678 restricted shares of the Company's common stock were delivered to
Plaintiff in November of 2003. The Plaintiff rejected the share tender and
demanded a cash settlement. The Company maintains the tender to have been
sufficient and binding. The parties engaged in legal proceedings in November
2003 and the case went forward for a jury trial. On November 16, 2005, the jury
returned a favorable verdict for TeleScience, and at that time the Plaintiff
petitioned the Court to set aside the jury verdict. The motion was set oral
argument for December 16, 2005, and on February 16, 2006 the Court reversed its
position in favor of the Plaintiff. TeleScience intends to vigorously pursue an
appeal.
As a result of the latest decision in this matter, the Company has placed the
net proceeds obtained in the Amended and Restated Investment Agreement, dated
March 13, 2006, by and between the Company and Cornell Capital Partners, LP in
the amount of $ 1,250,000 in escrow with the Fairfax County Circuit Court of
Appeal. The proceeds will be held in escrow until adjudication of the matter
with the Court of Appeals.
In the event that the Company is successful in its appeal process, Cornell
Capital has the option to redeem 1,400,000 shares of Series A preferred stock in
exchange for the proceeds previously received.
F-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction - Forward Looking Statements
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), Medical Staffing Solutions,
Inc. and its subsidiaries (collectively, the "Company" or "Medical Staffing") is
hereby providing cautionary statements identifying important factors that could
cause the Company's actual results to differ materially from those projected in
forward-looking statements made herein. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions of
future events or performance are not statements of historical facts and may be
forward-looking. These forward-looking statements are based largely on Medical
Staffing's expectations and are subject to a number of risks and uncertainties,
including but not limited to, economic, competitive, regulatory, growth
strategies, available financing and other factors discussed elsewhere in this
report and in documents filed by Medical Staffing with the U.S. Securities and
Exchange Commission ("SEC"). Many of these factors are beyond Medical Staffing's
control. Actual results could differ materially from the forward-looking
statements made. In light of these risks and uncertainties, there can be no
assurance that the results anticipated in the forward-looking information
contained in this report will, in fact, occur.
Any forward-looking statement speaks only as of the date on which such statement
is made, and Medical Staffing undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
Business
MSSI is a provider of specialty medical staffing services throughout the
country. We presently provide, through our wholly-owned subsidiary, 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. Through our
wholly-owned subsidiary, Nurses Onsite Corp, we provide health related staffing
services to private for-profit and non-profit acute care facilities in ten (10)
states. These clients include some of the largest hospital chains in the country
as well as small, single location facilities. We provide Registered Nurses (RN),
Licensed Practical Nurses (LPN), various types of therapists and Certified
Nursing Assistants (CNA's). The majority of our health care workers in the NOC
subsidiary are RN's.
The Nurses Onsite Corp. Business
Nurses Onsite Corp. is a provider of per diem nurses to private hospitals.
Nurses Onsite Corp. maintains a listing of nurses having a variety of skills and
who may be called upon to fill appropriate open shift positions at hospitals.
Nurses Onsite Corp. establishes relationships with various hospitals who call
upon Nurses Onsite Corp. 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.
Revenues have grown as a result of our acquisition of Nurses Onsite Corp., which
has aggregate revenues greater than Medical Staffing. Nurses Onsite Corp. has
substantially increased the Company's operations in the private healthcare
nursing sector. The acquisition has made a positive contribution to overhead and
earnings and has provided us an entry vehicle into the commercial nurse staffing
arena. Cash flow from the operations of the assets of Nurses Onsite Corp. are
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. Nurses
13
Onsite Corp. is presently operating in fourteen (14) staffing locations in eight
(8) states (including Virginia) and has more than 1,000 nurses that it can call
upon to fulfill the needs of over three hundred (300) hospitals it presently
services. Over the next twelve (12) months, Nurses Onsite Corp. plans to
establish operations in several additional states and additional locales within
the states in which it operates.
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.
General
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto included herein. The
information contained below includes statements of the Company'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.
Going Concern
As reflected in the Company's financial statements as of March 31, 2006, the
Company's accumulated deficit is $7,601,206 and its working capital is $488,110.
The ability of the Company to continue as a going concern is dependent on the
Company's ability to raise additional debt or capital, including the ability to
raise capital. The financial statements for March 31, 2006 do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
Critical Accounting Policies And Estimates
Our consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, or GAAP. These
accounting principles require us to make certain estimates, judgments and
assumptions. We believe that the estimates, judgments and assumptions upon which
we rely are reasonably based upon information available to us at the time that
these estimates, judgments and assumptions are made. These estimates, judgments
and assumptions can affect the reported amounts of assets and liabilities as of
the date of the financial statements, as well as the reported amounts of revenue
and expenses during the periods presented. To the extent there are material
differences between these estimates, judgments and assumptions and actual
results, our financial statements will be affected. The significant accounting
policies that we believe are the most critical to aid in fully understanding and
evaluating our reported financial results include the following:
o Revenue recognition;
o Allowance for doubtful accounts; and
o Accounting for income taxes.
In many cases, the accounting treatment of a particular transaction is
specifically dictated by GAAP and does not require management's judgment in its
application. There are also areas in which management's judgment in selecting
among available alternatives would not produce a materially different result.
Our senior management has reviewed these critical accounting policies and
related disclosures. See Notes to 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.
14
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 the Company with an
offsetting valuation allowance adjustment.
Results of Operations
Results Of Operations For The Quarter Ended March 31, 2006, Compared To The
Quarter Ended March 31, 2005
Revenues
Revenues for the quarter ended March 31, 2006 were $5,182,313, an increase of
$3,536,223, as compared to revenues of $1,646,090 for the quarter ended March
31, 2005. The increase in revenues in 2006 was attributable to the acquisition
of Nurses Onsite Corp.
Cost Of Sales
Cost of sales for the quarter ended March 31, 2006 was $3,715,599, or
seventy-two percent (72%) of revenues, as compared to $1,125,561, or sixty-eight
percent (68%) of revenues, for the quarter ended March 31, 2005. This percentage
increase in cost of sales was primarily attributable to cost of sales on the
Nurses Onsite Corp. contracts.
Gross Profit
Gross profit for the quarter ended March 31, 2006, was $1,466,714, or
twenty-eight percent (28%) of revenues, as compared to gross profit of $520,529,
or thirty two (32%) of revenues, for the quarter ended March 31, 2005.
Operating Expenses
Operating expenses for the quarter ended March 31, 2006 were $1,830,384, or
thirty-five percent (35%) of revenues, as compared to $804,926, or forty-nine
percent (49%) of revenues, for the quarter ended March 31, 2005. The increase in
operating expenses in 2006 was primarily attributable to increased cost of
general administrative expenses resulting mainly from the acquisition of Nurses
Onsite Corp.
Other Income (Expense)
Other income (expense) for the quarter ended March 31, 2006 was $18,107, as
compared to $(62,267) for the quarter ended March 31, 2005. The increase was
from an insurance refund attributed to damage incurred by Hurricane Katrina.
15
Net Loss
The Company had a net loss of $345,563 for the quarter ended March 31, 2006,
compared to a net loss of $346,664 for the quarter ended March 31, 2005. The
decreased loss of $1,101 was mainly attributable to higher margins and decreased
operating expenses.
Liquidity and Capital Resources
The Company'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. The Company incurred a net
loss of $345,563 and $346,664 for the three (3) months ended March 31, 2006 and
2005, respectively, and had an accumulated deficit of $7,601,206 at March 31,
2006. Management recognizes that they must generate additional resources to
enable them 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, no assurances can be given
that the Company will be successful in these activities. Should any of these
events not occur, the accompanying consolidated financial statements will be
materially affected.
The Company is at present meeting its current obligations from its monthly cash
flows and cash proceeds from the sale of equity securities and debt, which
during 2003, 2004, 2005 and to date in 2006 has included cash from operations,
investor capital, loans from related parties and from other lenders. However,
due to insufficient cash generated from operations, the Company currently does
not internally generate cash sufficient to pay all of its incurred expenses and
other liabilities. As a result, the Company is dependent on investor capital and
loans to meet its expenses and obligations. Although investor funds and related
party loans have allowed the Company to meet its obligations in the recent past,
there can be no assurances that the Company's present methods of generating cash
flow will be sufficient to meet future obligations. Historically, the Company
has, from time to time, been able to raise additional capital from sales of its
capital stock, but there can be no assurances that the Company will be able to
raise additional capital in this manner.
Cash used in operating activities was ($674,370) for the three (3) months ended
March 31, 2006, compared to cash provided of $24,661 for the same period in
2005.
Cash used in investing activities was $(45,157) for the three (3) months ended
March 31, 2006, compared to cash used in investing activities of $(11,659) for
the same period in 2005. This increase was principally due to the acquisition of
additional fixed assets.
Net cash provided by financing activities was $1,738,954 for the three (3)
months ended March 31, 2006, compared to $1,525,845 during the same period in
2005. This was mainly due to the funding through Series A convertible preferred
shares, convertible debentures and a now-terminated Standby Equity Distribution
Agreement with Cornell.
In May 2002, the Company entered into a line of credit agreement with a factor.
The loan was fully paid off in June 2005.
On March 11, 2004, the Company entered into a now-terminated Standby Equity
Distribution Agreement with Cornell Capital. Under the agreement, the Company
was to issue and sell to Cornell Capital common stock for a total purchase price
of up to $5,000,000. Cornell Capital received a one-time commitment fee of
750,000 shares of the Company's common stock. 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. This Agreement expired in April 2006. Through March 31, 2006, Medical
Staffing had 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. The proceeds have been utilized to repay principal of the
$1,000,000 promissory note issued to Cornell Capital on June 11, 2004 and the
$315,000 promissory note issued to Cornell Capital on October 18, 2004, and a
portion of the $2,000,000 promissory note issued to Cornell Capital on January
5, 2005 as set forth below.
16
On June 11, 2004, the Company received $1,000,000 in return for a promissory
note to Cornell Capital. As of March 31, 2005, the note has been fully paid. The
Company terminated the Standby Equity Distribution Agreement on January 11, 2006
together with all related transaction documents thereto.
On October 18, 2004, the Company received $315,000 in return for a promissory
note issued to Cornell Capital. 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 a salary of
$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
September 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 which was subsequently amended on June
7, 2005. On April 26, 2005, Medical Staffing received $500,000 in return for a
promissory note issued to Cornell Capital which was amended on June 7, 2005.
These promissory notes have terminated pursuant to that Securities Purchase
Agreement, dated September 2, 2005, with Cornell Capital.
On June 27, 2005, Medical Staffing entered into a factoring agreement (the
"Factoring Agreement") with its wholly-owned subsidiary TeleScience
International, Inc. ("TeleScience"), its wholly-owned subsidiary Nurses PRN
Acquisition Corp. then "NPRN" and now "Nurses Onsite Corp." and SYSTRAN
Financial Service Corporation ("SYSTRAN"), a subsidiary of Textron Financial
Corporation ("Textron"), pursuant to which SYSTRAN established a Five Million
Dollar ($5,000,000) credit facility (the "Facility") with Medical Staffing in
order for Medical Staffing to finance the accounts receivables of TeleScience
and Nurses Onsite Corp. 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. The outstanding balance at March 31, 2006
was $2,707,491.
On July 1, 2005, we completed our Asset Purchase Agreement, whereby Medical
Staffing, through its wholly-owned subsidiary Nurses PRN Acquisition Corp. (then
"NPRN" and now "Nurses Onsite Corp."), 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
the members of Nurses PRN, LLC 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 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 Asset Purchase Agreement. We incurred
professional costs associated with the Asset Purchase Agreement to our lawyers
and accountants in an amount equal to approximately $50,000. The acquisition has
been funded by a promissory note.
Effective August 10, 2005, the Company issued to Cornell Capital a common stock
purchase warrant in connection with a commitment for the now-terminated
$50,000,000 Standby Equity Distribution Agreement and for Ten United States
Dollars ($10.00) and other good a valuable consideration. On December 13, 2006,
the Company and Cornell Capital terminated the Warrant.
17
On September 2, 2005 Medical Staffing entered into a Securities Purchase
Agreement with Cornell Capital whereby the Company issued and sold to Cornell
Capital up to $2,113,332 of secured convertible debentures (the "Convertible
Debenture") which shall be convertible into shares of the Company's common
stock. Of this amount, $1,095,428 (comprised of $1,072,164 in principal and
$23,264 in accrued interest) has been previously funded pursuant to that certain
promissory note dated January 5, 2005, as amended and restated on June 7, 2005,
and $517,903 (comprised of $506,904 in principal and $10,999 in accrued
interest) has been previously funded pursuant to that certain promissory note
dated April 26, 2005, as amended and restated on June 7, 2005. The promissory
notes have simultaneously terminated upon the issuance of the Convertible
Debenture and an additional $500,000 has also been funded pursuant to Securities
Purchase Agreement for a total purchase price of up to $2,113,332. The
Convertible Debenture terminated on December 13, 2005 pursuant to that certain
Investment Agreement with Cornell Capital.
On December 13, 2005 (the "Transaction Date"), Medical Staffing entered into an
Investment Agreement with Cornell Capital pursuant to which the Company issued
and sold to Cornell Capital, and Cornell Capital purchased from the Company,
Three Million Dollars ($3,000,000) of Series A Preferred shares which shall be
convertible into shares of the Company's common stock and which amount shall
solely consist of (a) the surrendering of that certain Convertible Debenture
held by Cornell Capital as of September 2, 2005 equal to $2,184,201 ($2,113,332
in principal plus $70,869 in accrued interest) and (b) an additional cash amount
equal to Eight Hundred Fifteen Thousand Seven Hundred Ninety-Eight Dollars
($815,798), of which Four Hundred Thousand Dollars ($400,000) was funded as of
December 13, 2005 and the remaining Four Hundred Fifteen Thousand Seven Hundred
and Ninety-Eight Dollars ($415,798) shall be funded two (2) business days prior
to the date of the filing of a registration statement with the SEC pursuant to
that certain Investor Registration Rights Agreement dated as of the Transaction
Date.
The Series A Preferred shares have the designations, preferences and rights set
forth in the amended and restated Certificate of Designation as filed with the
Secretary of State for the State of Nevada on March 13, 2006. The holders of
Series A Preferred shares have the sole right and discretion to elect conversion
at any time and from time to time into such number of fully paid and
non-assessable shares of common stock equal to the quotient of the Liquidation
Amount ($1.00) divided by the Conversion Price, subject to certain adjustments
as is more fully set forth in the Certificate of Designation. However, no holder
of Series A Preferred shares shall be entitled to convert the Series A Preferred
shares to the extent, but only to the extent, that such conversion would, upon
giving effect to such conversion, cause the aggregate number of shares of common
stock beneficially owned by such holder to exceed 4.99% of the outstanding
shares of common stock following such conversion (which provision may be waived
by such holder by written notice from such holder to the Company, which notice
shall be effective sixty-one (61) days after the date of such notice). The
Conversion Price is equal to ninety-five percent (95%) of the lowest volume
weighted average of the common stock for the thirty (30) trading days
immediately preceding the date of conversion, as quoted by Bloomberg LP. The
holders of Series A Preferred shares shall vote with the holders of common stock
on an as converted basis as of the time a vote is taken and not as separate
classes.
On December 13, 2005, the Company issued to Cornell Capital a common stock
purchase warrant (the "December Warrant") whereby Cornell Capital is entitled to
purchase from the Company, upon surrender of the December Warrant, Fifteen
Million (15,000,000) fully paid and nonassessable shares of our common stock at
an exercise price of $0.03 per share (or as subsequently adjusted pursuant to
the terms of the December Warrant). The December Warrant has "piggy back"
registration rights and expires five (5) years from the date of issuance, on or
about December 13, 2010.
Effective January 1, 2006, Dr. L. Carl Jacobsen was appointed to serve as Vice
President - General Counsel of the Company. Prior to his appointment, Dr.
Jacobsen served as Vice President of Human Resources & Administration for the
Company since September 25, 2003. Dr. Jacobsen is presently responsible for all
legal matters and he also serves as an advisor to the Board of Directors. Dr.
Jacobsen earned his JD degree from Antioch School of Law and his PhD in
linguistics from UCLA.
Effective January 1, 2006, Ms. Reeba Magulick has been appointed to serve as
Vice President - Corporate Marketing of the Company. Prior to her appointment,
Ms. Magulick served as Assistant Vice President, Medical Systems Division for
TeleScience and as Vice President of Operations for Nurses Onsite Corp. Ms.
Magulick also performed the function of Investor Relations coordinator with
Medical Staffing's shareholders. Prior to joining Medical Staffing in February
2004, Ms. Magulick completed a five (5) year tenure at Ford Motor Company, where
she succeeded in driving sales, market share, customer satisfaction and
profitability performance within her market area. Ms. Magulick earned her
Bachelor of Science degree in Commerce with a Marketing Concentration from the
University of Virginia's McIntire School of Commerce and she earned an MBA from
the University of Maryland's Robert H. Smith School of Business.
18
On March 13, 2006, Medical Staffing entered into an Amended and Restated
Investment Agreement with Cornell Capital pursuant to which the Company issued
and sold to Cornell Capital, and Cornell Capital purchased from the Company,
Four Million Four Hundred Thousand Dollars ($4,400,000) of Series A Preferred
shares which shall be convertible into shares of the Company's common stock, of
which Three Million Dollars ($3,000,000) was previously funded pursuant to that
certain Investment Agreement, dated as of December 13, 2005, by and between the
Parties and the remaining One Million Four Hundred Thousand Dollars ($1,400,000)
was funded on March 13, 2006. The Series A Preferred shares shall be convertible
into shares of the Company's common stock, which will be registered pursuant to
that certain Amended and Restated Investor Registration Rights Agreement dated
as of March 13, 2006.
On March 13, 2006, the Company issued to Cornell Capital four (4) warrants (the
"March Warrants") to purchase an aggregate of Eighty Million (80,000,000) shares
of the Company's common stock as follows: (i) a warrant to purchase Thirty
Million (30,000,000) shares of the Company's Common Stock for a period of five
(5) years at an exercise price of $0.005 per share; (ii) a warrant to purchase
Thirty Million (30,000,000) shares of the Company's Common Stock for a period of
five (5) years at an exercise price of $0.01 per share; (iii) a warrant to
purchase Ten Million (10,000,000) shares of the Company's Common Stock for a
period of five (5) years at an exercise price of $0.015 per share; and (iv) a
warrant to purchase Ten Million (10,000,000) shares of the Company's common
stock for a period of five (5) years at an exercise price of $0.02 per share.
The shares of the Company's common stock issuable upon exercise of the March
Warrants shall have "piggy-back" and demand registration rights and expire five
(5) years from the date of issuance, on or about March 14, 2011.
On March 13, 2006, the Company and Cornell Capital entered into a Termination
Agreement pursuant to which the parties terminated that certain Escrow
Agreement, dated December 13, 2005, by and among the Parties and David Gonzalez,
Esq., as escrow agent.
From time to time, the Company may evaluate potential acquisitions involving
complementary businesses, content, products or technologies. We currently do not
have any planned acquisitions. The Company's future capital requirements will
depend on many factors, including the success of our operations, economic
conditions and other factors including the results of future operations. If the
Company is unable to raise sufficient funds to meet its long-term capital needs,
there is a risk that the Company will be required to cease operations.
Plan Of Operations
Medical Staffing (through our wholly-owned subsidiary, Nurses Onsite Corp.)
provides:
o long-term per diem staffing of nurses (RNs, LPNs, CNAs and RTs) to
provider hospitals in Virginia, Maryland, D.C., Florida, Texas,
Nevada, Arizona, Louisiana, Georgia and California.
Medical Staffing (through our wholly-owned subsidiary, TeleScience) provides:
o medical staffing services to government facilities. The contracts
for these services are typically awarded to the provider deemed most
capable by the various government branches involved and usually last
for a year or more.
Management Strategy
Medical Staffing's management has taken several initiatives to grow and expand
its current businesses of medical staffing services.
19
Management's Strategic Plan for Future Growth & Expansion
The Management's strategic plan for future growth and expansion is threefold:
(1) continue to expand its medical services into the private sector; (2) enhance
recruitment; and (3) acquire suitable companies.
Expansion of Medical Services into the Private 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 acquisition of Nurses PRN, LLC
(hereinafter "Nurses Onsite Corp.") which was completed on July 1, 2005. Over
the next twelve (12) months Nurses Onsite Corp. plans to establish operations in
several additional states and additional locales within the states in which it
operates.
Enhancing Recruitment. The Company is embarking on a long-range plan for
recruiting ancillary and professional-level staff for medical contracts. 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 has also
significantly increased its number of contracts with private non-government
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. Subsequent to our acquisition of Nurses
Onsite Corp., the Company opened a national recruiting office and is also
recruiting through the Nurses Onsite Corp. office.
Overseas Recruiting of Registered Nurses. One of the largest shortages 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. MSSI is currently in the process of searching
for a suitable overseas partner that would provide the sourcing screening and
training of foreign nurses for placement at one of our client facilities.
Domestic Recruiting of Health Care Professionals. Medical Staffing has a
constant need for recruiting medical and non-medical professionals for filling
positions created by newly won contracts or for filling vacancies caused by
turnover, terminations, or relocations. Medical Staffing has established a
recruiting division 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. NOC's website was
recently enhanced to provide for online applications for jobs open or for future
upcoming positions.
Acquisition of Suitable Companies. The Company currently does not have any
planned acquisitions. Medical Staffing is investigating other potential
acquisitions and co-ventures, and any such future engagements will be subject to
available financing.
Growth in Virtual Markets
The Company has successfully established contracts in four markets where it does
not have offices. These virtual markets are San Antonio (TX), Atlantic City
(NJ), Richmond (VA) and Floyd (GA). The Company has deployed its recruiting
resources into these markets to generate sufficient applicant activity. We are
optimistic regarding our future growth in virtual markets as they do not require
the typical initial investment necessary to establish a physical presence. The
company plans to continue expansion into these markets by bolstering its
recruitment team through its centralized model.
20
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"), 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.
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.
21
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 October
31, 2003, except for certain hedging relationships designated after October 31,
2003. Most provisions of this Statement should be applied prospectively. The
adoption of this statement did not have a significant impact on the Company's
results of operations or financial position.
In May 2003, the FASB issued SFAS Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This
statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities, if applicable. It is to be
implemented by reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance date of the
Statement and still existing at the beginning of the interim period of adoption.
The adoption of this statement did not have a significant impact on the
Company's results of operations or financial position.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN 45 requires a company, at the time it
issues a guarantee, to recognize an initial liability for the fair value of
obligations assumed under the guarantees and elaborates on existing disclosure
requirements related to guarantees and warranties. The recognition requirements
are effective for guarantees issued or modified after December 31, 2002 for
initial recognition and initial measurement provisions. The adoption of FIN 45
did not have a significant impact on the Company's results of operations or
financial position.
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.
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standard No. 123 (Revised 2004),
Shared-Based Payment ("FAS 123R"). FAS 123R requires that compensation cost
related to share-based payment transaction within the scope of FAS 123R include
stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of FAS
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 in assessing of compensation cost in the
financial statements. Management has assessed the implications of this revised
standard, and has determined that it did not materially impact the Company's
results of operations in the first quarter of fiscal year 2006.
On December 16, 2004, FASB issued Statement of Financial Accounting Standards
No. 153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29,
Accounting for Non-monetary Transactions ("SFAS 153"). This statement amends APB
Opinion 29 to eliminate the exception for non-monetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. Under SFAS 153, if a
non-monetary exchange of similar productive assets meets a commercial-substance
criterion and fair value is determinable, the transaction must be accounted for
at fair value resulting in recognition of any gain or loss. SFAS 153 is
effective for non-monetary transactions in fiscal periods that begin after June
15, 2005. The Company does not anticipate that the implementation of this
standard will have a material impact on its financial position, results of
operations or cash flows.
22
In March 2005, the FASB issued Statement of financial Accounting Standards
Interpretation Number 47 ("FIN 47"), Accounting for Conditional Asset Retirement
Obligation." FIN 47 provides clarification regarding the meaning of the term
"conditional asset retirement obligation" as used in SFAS 143, "Accounting for
Asset Retirement Obligations." Fin 47 is effective for the year ended December
31, 2005. The implementation of this standard did not have a material impact on
its financial position, results of operation or cash flows.
In May 2005, the FASB issued FAS 154, "Accounting for Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3."
FAS154 changes the requirements with regard to the accounting for and reporting
a change in an accounting principle. The Provisions of FAS 154 require, unless
impracticable, retrospective application to prior periods presented in financial
statements for all voluntary changes in an accounting principle and changes
required by the adoption of a new accounting pronouncement in the unusual
instance that the new pronouncement does not indicate a specific transition
method. FAS 154 also requires that a change in depreciation, amortization or
depletion method for long-lived, non-financial assets be accounted for as a
change in an accounting estimate, which requires prospective application of new
method. FAS 154 is effective for all changes in an accounting principle made in
fiscal years beginning after December 15, 2005. The Company plans to adopt FAS
154 beginning January 1, 2006. Because FAS 154 is directly dependent upon future
events, the Company cannot determine what effect, if any, the expected adoption
of FAS 154 will have on its financial condition, results of operations or cash
flows.
In February 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting (FAS) No. 155, Accounting for Certain Hybrid
Financial Instruments. FAS No 155 replaces FAS No 133 Accounting for Derivative
Instruments and Hedging Activities, and FAS No. 140 Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. FAS No. 155
resolves issues in Statement 133 Implementation Issue No. DI, "Application of
Statement 133 to Beneficial Interest in Securitized Financial Assets,", This
statement will be effective for all financial instruments acquired or issued
after the beginning of an entity's fiscal year that begins September 15, 2006.
The Company is currently analyzing whether this new standard will have impact on
its financial position and results of operations.
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.
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, 2006 and the quarter
ended March 31, 2005, we incurred losses of $345,563 and $346,664, respectively.
Our accumulated deficit was $7,601,206 for the quarter ended March 31, 2006, and
$5,775,193 for the quarter ended March 31, 2005. 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 March 31, 2006 and March
31, 2005, 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, 2005 and December 31, 2004, 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 sale of the securities, such as preferred series A
stock. 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.
23
We Have Been Subject To A Working Capital Deficit Which Means That Our Current
Assets Are Not Sufficient To Satisfy Our Current Liabilities And, Therefore Our
Abilities To Continue Operations Is At Risk.
We have had a working capital deficit in the past, which means that our current
liabilities have exceeded our current assets. However, the company realized a
positive working capital of $488,110 at March 31, 2006, as compared to a
negative working capital of $240,183 at March 31, 2005.
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.
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 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, as amended. 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:
24
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
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.
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 and Mr. Robert Murphy,
our Chief Operating Officer. The loss of the services of Dr. Sahay or Mr. Murphy
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 or Mr. Murphy. 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.
ITEM 3. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure that
information required to be disclosed in reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized,
accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.
Based upon their evaluation as of the end of the period covered by this report,
the Company's Chief Executive Officer/Chief Financial Officer has concluded
that, the Company's disclosure controls and procedures are not effective to
ensure that information required to be included in the Company's periodic SEC
filings is recorded, processed, summarized and reported within the time periods
specified in the SEC rules and forms.
A material weakness is a significant deficiency or a combination of significant
deficiencies that result in a more than remote likelihood than a material
misstatement of the annual or interim financial statements will not be prevented
or detected.
Bagell, Josephs, Levine and Company, LLC, our independent registered public
accounting firm, has advised management and the Board of Directors that it had
identified the following material weaknesses in our internal controls:
A material weakness exists as of March 31, 2006, with regard to insufficient
personnel in the accounting and financial reporting function due to the size of
the Company which prevents the ability to employ sufficient resources to have
adequate segregation of duties within the internal control system. This material
weakness affects management's ability to effectively review and analyze elements
of the financial statement closing process and prepare consolidated financial
statements in accordance with U.S. GAAP.
In addition, a material weakness exists as of March 31, 2006, in controls over
closing procedures due to a number of adjustments made at the end of the
three-month period. There were deficiencies in the analysis and reconciliation
of equity accounts, which were indicative of a material weakness in controls
over the accounting and reporting of capital transactions.
25
In order to remediate this material weakness in our internal control over
financial reporting, management is in the process of designing and implementing
and continuing to enhance controls to aid in the correct preparation, review,
presentation and disclosures of our Consolidated Financial Statements. We are
continuing to monitor, evaluate and test the operating effectiveness of these
controls.
Other than indicated above, there were no changes in the Company's internal
control over financial reporting that occurred during the last fiscal quarter
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.
Limitations on the Effectiveness of Controls
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
26
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 16, 2006 the Circuit Court of Fairfax County, Virginia (the "Court")
entered a Final Order in favor of plaintiff Azmat Ali (the "Plaintiff") against
the Company's wholly-owned subsidiary TeleScience, Dr. Brajnandan B. Sahay and
Mrs. Rupa Sahay (TeleScience, Dr. Sahay and Mrs. Sahay are collectively referred
to herein as the "Defendant"), in the matter Azmat Ali v. TeleScience
International, Inc., et al. (At Law No. 218574). This matter came to be heard on
December 16, 2005, upon the Plaintiff's motion to set aside the jury verdict
entered in favor of the Defendants on November 16, 2005. For reasons set forth
in the Court's Opinion Letter, the Court entered a judgment in favor of the
Plaintiff in the amount of $851,875 with interest at twelve percent (12%) from
the date of October 16, 2003.
In 2003, the Company believed it had settled a claim by the Plaintiff who was a
former officer and investor of TeleScience. In satisfaction of that settlement,
2,655,678 restricted shares of Company's common stock were delivered to
Plaintiff in November of 2003. The Plaintiff rejected the share tender and
demanded a cash settlement. The Company maintains the tender to have been
sufficient and binding. The parties engaged in legal proceedings in November
2003 and the case went forward for a jury trial. On November 16, 2005, the jury
returned a verdict in favor of TeleScience, and at that time, the Plaintiff
moved the Court to set aside the jury verdict. The motion was set for oral
argument for December 16, 2005, and on February 16, 2006 the Court ruled in
favor of the Plaintiff. TeleScience intends to vigorously pursue an appeal.
As a result of the latest decision in this matter, the Company has placed the
net proceeds obtained in the revised Investment Agreement in the amount of
$1,250,000 in escrow with the Fairfax County Circuit Court of Appeal. The
proceeds will be held in escrow until adjudication of the matter with the Court
of Appeals.
In the event that the Company is successful in its appeal process, Cornell
Capital has the option to redeem the 1,400,000 shares of Series A preferred
stock in exchange for the proceeds previously received.
In October 2004, The Roche Group sued the Company for pecuniary loss in
connection with an ex-dividend date of the Company's stock. The courts have
dismissed two (2) of the three (3) counts with prejudice. The Company is
presently in the discovery phase of the trial on the remaining count. Plaintiffs
are seeking $125,000 in damages. The Company believes the case is without merit
and intends to vigorously defend.
The Company may become involved in litigation, from time to time, in the
ordinary course of business.
ITEM 2. CHANGES IN SECURITIES
On January 30, 2006, a convertible Series A preferred shareholder notified the
Company of their intent to convert 50,000 shares of Series A preferred stock
into common stock, as outlined in the investment agreement. The Series A
preferred shares were converted at a price $0.0217, which translated into
2,304,147 shares common stock. There were no other transactions involving common
stock in the quarter ended March 31, 2006.
In connection with the conversion of the Series A preferred stock, total
outstanding preferred shares were decreased by 50,000 shares.
In January 2006, 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.
On March 13, 2006, the Company amended and restated its agreement with Cornell
Capital to increase the amount of Series A preferred shares to 4,400,000. The
additional funds of $1,400,000 were advanced on that date. In addition, the
Company issued to Cornell Capital four (4) additional March Warrants to purchase
an aggregate of 80,000,000 shares of the Company's common stock as follows; (i)
30,000,000 shares at an exercise price of $0.005 per share, (ii) 30,000,000
shares at an exercise price of $0.01 per share, (iii) 10,000,000 shares at an
exercise price of $0.015 per share and (iv) 10,000,000 shares at an exercise
price of $0.02 per share. All of the March Warrants expire five (5) years after
the date of issuance.
II-1
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
EXHIBIT NO.
3.1 Articles of Incorporation, as amended Incorporated by reference to Exhibit 3(a) to the Company's Registration
Statement on Form SB-2 as filed with the United States Securities and
Exchange Commission on October 9, 2001
3.2 Bylaws Incorporated by reference to Exhibit 3(b) to the Company's Registration
Statement on Form SB-2 as filed with the United States Securities and
Exchange Commission on October 9, 2001
3.3 Certificate of Amendment to Articles of Incorporated by reference to Exhibit 3 to the Company's Annual Report on
Incorporation 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 the Company's Annual Report on
Incorporation Form 10-KSB as filed with the United States Securities and Exchange
Commission on March 27, 2003
4.1 Certificate of Designation of Series A Incorporated by reference to Exhibit 4.1 to the Company's Form 8-K as filed
Preferred Stock, as filed with the Secretary with the SEC on January 18, 2006
of State of the State of Nevada on December
16, 2005
4.2 Amended and Restated Certificate of Incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed
Designation of Series A Preferred Stock with the SEC on March 17, 2006
as filed with the Secretary of State for
the State of Nevada on March 13, 2006
10.1 Sublease Agreement dated December 23, 2002 by Incorporated by reference to Exhibit 10.1 to the Company's Annual Report
and among InterAmerica Technologies, Inc., on Form 10-KSB as filed with the United States Securities and Exchange
Kemron Environmental Services and Telescience Commission on April 9, 2004
International, Inc.
10.2 Promissory Note in the principal amount of Incorporated by reference to Exhibit 10.2 to the Company's Annual Report on
$875,920 made by the Company in favor of Dr. Form 10-KSB as filed with the United States Securities and Exchange
B.B. Sahay Commission on April 9, 2004
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10.3 Memorandum of Understanding dated March 10, Incorporated by reference to Exhibit 10.3 to the Company's Annual Report on
2004, by and between Silver Star Form 10-KSB as filed with the United States Securities and Exchange
Technologies, Inc. and TeleScience Commission on April 9, 2004
International, Inc.
10.4 Memorandum of Understanding by and between Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on
Telescience International, Inc. and Form 10-KSB as filed with the United States Securities and Exchange
Chesapeake Government Technologies, Inc. Commission on April 9, 2004
10.5 Proposal dated January 7, 2004 from Incorporated by reference to Exhibit 10.5 to the Company's Annual Report on
Professional Nursing Resources, Inc. to Form 10-KSB as filed with the United States Securities and Exchange
Telescience International, Inc. Commission on April 9, 2004
10.6 Renewal Agreement dated February 5, 2004, Incorporated by reference to Exhibit 10.14 to the Company's Annual Report on
from Commonwealth of Pennsylvania to Form 10-KSB as filed with the United States Securities and Exchange
Telescience International, Inc. regarding Commission on April 9, 2004
Contract 2550-09 Personal Protection
Equipment PPE
10.7 Memorandum of Understanding dated February Incorporated by reference to Exhibit 10.15 to the Company's Annual Report on
23, 2004, to Mobile Healthcare Solutions, Form 10-KSB as filed with the United States Securities and Exchange
Inc. from Telescience International, Inc. Commission on April 9, 2004
10.8 Master Contract dated April 1, 2004, by and Incorporated by reference to Exhibit 10.17 to the Company's Annual Report on
between Telescience International, Inc. and Form 10-KSB as filed with the United States Securities and Exchange
State of California Department of Corrections Commission on April 9, 2004
10.9 Memorandum dated March 26, 2003 regarding Incorporated by reference to Exhibit 10.20 to the Company's Annual Report on
Branch Office Location Form 10-KSB as filed with the United States Securities and Exchange
Commission on April 9, 2004
10.10 $1,000,000 Promissory Note issued to Cornell Incorporated by reference to Exhibit 10.18 to Medical Staffing's Annual
Capital Partners, LP by Medical Staffing on Report on Form 10-KSB as filed with the United States Securities and
June 8, 2004 Exchange Commission on March 31, 2005
10.11 $315,000 Promissory Note issued to Cornell Incorporated by reference to Exhibit 10.19 to Medical Staffing's Annual
Capital Partners, LP by Medical Staffing on Report on Form 10-KSB as filed with the United States Securities and
October 6, 2004 Exchange Commission on March 31, 2005
10.12 Amended and Restated Promissory Note issued Incorporated by reference to Exhibit 10.25 to Medical Staffing's Amended
to Cornell Capital Partners, LP by Medical Form SB-2 as filed with the United States Securities and Exchange Commission
Staffing on January 5, 2005 and amended on on August 5, 2005
June 7, 2005
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10.13 Employment Agreement between Medical Staffing Incorporated by reference to Exhibit 10.21 to Medical Staffing's Annual
and Brajnandan B. Sahay dated January 1, 2005 Report on Form 10-KSB as filed with the United States Securities and
Exchange Commission on March 31, 2005
10.14 Contract dated December 6, 2004, by and Incorporated by reference to Exhibit 10.22 to Medical Staffing's Annual
between Telescience International, Inc. and Report on Form 10-KSB as filed with the United States Securities and
State of California Department of Corrections Exchange Commission on March 31, 2005
10.15 Master Contract dated December 19, 2004, by Incorporated by reference to Exhibit 10.23 to Medical Staffing's Annual
and between Telescience International, Inc. Report on Form 10-KSB as filed with the United States Securities and
and State of California Department of Exchange Commission on March 31, 2005
Corrections
10.16 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
10.17 Amended and Restated Promissory Note issued Incorporated by reference to Exhibit 10.25 to Medical Staffing's Amended
to Cornell Capital Partners, LP by Medical Form SB-2 as filed with the United States Securities and Exchange Commission
Staffing on April 26, 2005 and amended on on August 5, 2005
June 7, 2005
10.18 SYSTRAN Financial Services Corporation Incorporated by reference to Exhibit 99.1 to Medical Staffing's Form 8-K as
Factoring Agreement, dated as of October 31, filed with the United States Securities and Exchange Commission on
2005, by and between Medical Staffing July 14, 2005
Solutions, Inc., TeleScience International,
Inc., Nurses PRN Acquisition Corp. and
SYSTRAN Financial Service Corporation
10.19 Form of Addendum to the SYSTRAN Financial Incorporated by reference to Exhibit 99.2 to Medical Staffing's Form 8-K as
Services Corporation Factoring Agreement filed with the United States Securities and Exchange Commission on
July 14, 2005
10.20 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
10.21 Form of Letter to SYSTRAN Credit and Incorporated by reference to Exhibit 99.4 to Medical Staffing's Form 8-K as
Operations Departments filed with the United States Securities and Exchange Commission on
July 14, 2005
10.22 Securities Purchase Agreement, dated Incorporated by reference to Exhibit 99.1 to Medical Staffing's Form 8-K as
September 2, 2005, by and between Medical filed with the United States Securities and Exchange Commission on
Staffing Solutions, Inc. and Cornell Capital October 3, 2005
Partners, LP
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10.23 Secured Convertible Debenture, dated Incorporated by reference to Exhibit 99.2 to Medical Staffing's Form 8-K as
September 2, 2005, issued by Medical Staffing filed with the United States Securities and Exchange Commission on
Solutions, Inc. to Cornell Capital Partners, October 3, 2005
LP
10.24 Investor Registration Rights Agreement, dated Incorporated by reference to Exhibit 99.3 to Medical Staffing's Form 8-K as
September 2, 2005, by and between Medical filed with the United States Securities and Exchange Commission on
Staffing Solutions, Inc. and Cornell Capital October 3, 2005
Partners, LP 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 October 3, 2005
10.25 Escrow Agreement, dated September 2, 2005, by Incorporated by reference to Exhibit 99.4 to Medical Staffing's Form 8-K as
and between Medical Staffing Solutions, Inc., filed with the United States Securities and Exchange Commission on
Cornell Capital Partners, LP and David October 3, 2005
Gonzalez, Esq., as Escrow Agent
10.26 Security Agreement, dated September 2, 2005, Incorporated by reference to Exhibit 99.5 to Medical Staffing's Form 8-K as
by and between Medical Staffing Solutions, filed with the United States Securities and Exchange Commission on
Inc. and Cornell Capital Partners, LP October 3, 2005
10.27 Irrevocable Transfer Agent Instructions, Incorporated by reference to Exhibit 99.6 to Medical Staffing's Form 8-K as
dated September 2, 2005 filed with the United States Securities and Exchange Commission on
October 3, 2005
10.28 Warrant, effective August 10, 2005, issued by Incorporated by reference to Exhibit 99.7 to Medical Staffing's Form 8-K as
Medical Staffing Solutions, Inc. to Cornell filed with the United States Securities and Exchange Commission on
Capital Partners, LP October 3, 2005
10.29 Investment Agreement, dated December 13, Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K as filed
2005, by and between Medical Staffing with the SEC on January 18, 2006
Solutions, Inc. and Cornell Capital Partners,
LP
10.30 Investor Registration Rights Agreement, dated Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K as filed
December 13, 2005, by and between Medical with the SEC on January 18, 2006
Staffing Solutions, Inc. and Cornell Capital
Partners, LP
10.31 Escrow Agreement, dated December 13, 2005, by Incorporated by reference to Exhibit 10.3 to the Company's Form 8-K as filed
and among Medical Staffing Solutions, Inc., with the SEC on January 18, 2006
Cornell Capital Partners, LP and David
Gonzalez, Esq. as Escrow Agent
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10.32 Irrevocable Transfer Agent Instructions, Incorporated by reference to Exhibit 10.4 to the Company's Form 8-K as filed
dated December 13, 2005, by and among Medical with the SEC on January 18, 2006
Staffing Solutions, Inc., David Gonzalez,
Esq. and Holladay Stock Transfer, Inc.
10.33 Warrant, dated December 13, 2005, issued by Incorporated by reference to Exhibit 10.5 to the Company's Form 8-K as filed
Medical Staffing Solutions, Inc. to Cornell with the SEC on January 18, 2006
Capital Partners, LP
10.34 Amended and Restated Investment Agreement, Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed
dated March 13, 2006, by and between Medical with the SEC on March 17, 2006
Staffing Solutions, Inc. and Cornell Capital
Partners, LP
10.35 Amended and Restated Investor Registration Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed
Rights Agreement, dated March 13, 2006, by with the SEC on March 17, 2006
and between Medical Staffing Solutions, Inc.
and Cornell Capital Partners, LP
10.36 Irrevocable Transfer Agent Instructions, Incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed
dated March 13, 2006, by and among Medical with the SEC on March 17, 2006
Staffing Solutions, Inc., David Gonzalez,
Esq. and Holladay Stock Transfer, Inc.
10.37 Warrant CCP 2, dated March 13, 2006, issued Incorporated by reference to Exhibit 10.4 to the Company's Form 8-K filed
by Medical Staffing Solutions, Inc. to with the SEC on March 17, 2006
Cornell Capital Partners, LP
10.38 Warrant CCP 3, dated March 13, 2006, issued Incorporated by reference to Exhibit 10.5 to the Company's Form 8-K filed
by Medical Staffing Solutions, Inc. to with the SEC on March 17, 2006
Cornell Capital Partners, LP
10.39 Warrant CCP 4, dated March 13, 2006, issued Incorporated by reference to Exhibit 10.6 to the Company's Form 8-K filed
by Medical Staffing Solutions, Inc. to with the SEC on March 17, 2006
Cornell Capital Partners, LP
10.40 Warrant CCP 5 dated March 13, 2006, issued by Incorporated by reference to Exhibit 10.7 to the Company's Form 8-K filed
Medical Staffing Solutions, Inc. to Cornell with the SEC on March 17, 2006
Capital Partners, LP
10.41 Termination Agreement dated March 13, 2006, Incorporated by reference to Exhibit 10.8 to the Company's Form 8-K filed
by and among Medical Staffing Solutions, with the SEC on March 17, 2006
inc., Cornell Capital Partners, LP and David
Gonzalez, Esq.
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14.1 Code of Ethics Incorporated by reference to Exhibit 14.1 to the Company's Annual Report on
Form 10-KSB as filed with the SEC on April 9, 2004
31.1 Certification by Chief Executive Provided herewith
Officer/Principal Financial Officer pursuant
to 15 U.S.C. Section 7241, as adopted
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32.1 Certification by Chief Executive Officer and Provided herewith
Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
99.1 Final Order, dated February 16, 2006, in the Incorporated by reference to Exhibit 99.1 to the Company's Current Report on
matter of Azmat Ali v. TeleScience Form 8-K as filed with the SEC on March 6, 2006
International, Inc., et al. (At Law No.
218574) in the Circuit Court of Fairfax
County, Virginia
99.2 Opinion Letter, dated February 16, 2006, in Incorporated by reference to Exhibit 99.2 to the Company's Current Report on
the matter of Azmat Ali v. TeleScience Form 8-K as filed with the SEC on March 6, 2006
International, Inc., et al. (At Law No.
288574) in the Circuit Court of Fairfax
County, Virginia
(B) Current Reports on Form 8-K Filed During the Quarter Ended March 31, 2006:
On January 18, 2006, the Company filed a Current Report on Form 8-K with the SEC
disclosing that it had (a) entered into an Investment Agreement with Cornell
Capital, (b) issued the December Warrant to Cornell Capital, (c) appointed Dr.
Jacobsen as General Counsel to the Company and Ms. Magulick as Vice President -
Corporate Marketing and (d) terminated its Standby Equity Distribution Agreement
with Cornell Capital.
On March 6, 2006, the Company filed a Current Report on Form 8-K with the SEC
disclosing that the Circuit Court of Fairfax County, Virginia entered a Final
Order on February 16, 2006 against TeleScience, Dr. Sahay and Mrs. Rupa Sahay in
the matter Azmat Ali v. TeleScience International, Inc., et al. (At Law No.
218574).
On March 17, 2006 the Company filed a Current Report on Form 8-K with the SEC
disclosing that it had (a) entered into an Amended and Restated Investment
Agreement with Cornell Capital, (c) issued four (4) March Warrants to Cornell
Capital and (c) terminated an Escrow Agreement with Cornell Capital and David
Gonzalez, Esq., as escrow agent.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, Medical Staffing has duly caused this Quarterly Report
to be signed on its behalf by the undersigned, thereunto duly authorized May 22,
2006, as amended.
May 22, 2006 MEDICAL STAFFING SOLUTIONS, INC.
By: /s/ Brajnandan B. Sahay
-----------------------------------------------
Name: Brajnandan B. Sahay,
Title: President, Chief Executive Officer and Director
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