U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
|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, 2007
|_| 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)
Prior to this amendment, this filing mistakenly reported that revenues on fixed
price contracts are recognized on the percentage-of completion method based on
costs incurred in related to total estimated costs. This disclosure has been
amended to reflect that revenues are recognized when services have been supplied
and the customer has been invoiced. This disclosure appears on page 3.
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
Medical Staffing is a provider of specialty medical staffing services throughout
the country. We presently provide, through our wholly-owned SUBSIDIARIES,
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 SUBSIDIARIES, 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 (CAN's). the
majority of our health care workers in the NOC SUBSIDIARIES 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.
1
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 and has
provided us an entry vehicle into the commercial nurse staffing arena. Nurses
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 two hundred (200) hospitals it presently
services.
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, 2007, the
Company's accumulated deficit is $13,990,808 and the Company has negative
working capital of $8,530,877. 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, 2007 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.
2
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. The terms of our contracts call for he
Company to invoice for a fixed set fee based on an hourly rate per individual.
Each period, the Company invoices the customer for the amount of services
rendered for said period. The Company records revenue when the services have
been supplied and the customer has been invoiced. Anticipated losses are
recognized as soon as they become known. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined.
Allowance For Doubtful Accounts
We determine our allowance by considering a number of factors, including the
length of time trade accounts receivable are past due, our previous loss
history, the customer's current ability to pay its obligation to us, and the
condition of the general economy and the industry as a whole. We make judgments
as to our ability to collect outstanding receivables based on these factors and
provide allowances for these receivables when collections become doubtful.
Provisions are made based on specific review of all significant outstanding
balances.
Accounting For Income Taxes
We account for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Under the
asset and liability method of SFAS No. 109, deferred income taxes are recognized
for the expected future tax consequences of temporary differences between
financial statement carrying amounts, and the tax bases of existing assets and
liabilities using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Any deferred tax asset has been reserved by the Company with an
offsetting valuation allowance adjustment.
Results of Operations
Results Of Operations For The Quarter Ended March 31, 2007, Compared To The
Quarter Ended March 31, 2006
3
Revenues
Revenues for the quarter ended March 31, 2007 were $2,373,660, as compared to
revenues of $5,182,313 for the quarter ended March 31, 2006, a decrease of
$2,808,653. The decrease in revenues in 2006 was attributable to the loss by
Nurses Onsite Corp. of certain dealers contracts.
Cost Of Sales
Cost of sales for the quarter ended March 31, 2007 was $1,711,265, or
seventy-two percent (72%) of revenues, as compared to $3,715,599 , or
seventy-one percent (71%) of revenues, for the quarter ended March 31, 2006.
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, 2007, was $662,395, or twenty-eight
percent (28%) of revenues, as compared to gross profit of $1,466,714, or
twenty-eight (28%) of revenues, for the quarter ended March 31, 2006.
Operating Expenses
Operating expenses for the quarter ended March 31, 2007, were $1,053,538, or
forty-four percent (44%) of revenues, as compared to $2,001,052, or thirty-nine
percent (39%) of revenues, for the quarter ended March 31, 2006. The increase in
operating expenses in 2007 was primarily attributable to increased cost of
general administrative expenses resulting from remaining general and
administrative expenses from Nurses Onsite Corp., and a restatement of the 2006
financial statements.
Other Income (Expense)
Other income (expense) for the quarter ended March 31, 2007, was ($1,832,628),
as compared to ($4,259,012) for the quarter ended March 31, 2006. The increase
was due to a restatement of the financial statements from 2006.
Net Loss
The Company had a net loss of $2,223,771 for the quarter ended March 31, 2007,
compared to a net loss of $4,793,350 for the quarter ended March 31, 2006. The
decreased loss of $2,569,579 was attributable to a restatement of the Company's
financial statements for 2006.
Liquidity and Capital Resources
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.
On January 5, 2005, Medical Staffing received $2,000,000 in return for a
promissory note issued to Cornell Capital Partners which was subsequently
amended on June 7, 2005. On April 26, 2005, Medical Staffing received $500,000
in return for a promissory note issued to Cornell Capital Partners which was
amended on June 7, 2005. These promissory notes terminated on September 2, 2005
upon the issuance and sale to Cornell Capital Partners of the Convertible
Debenture as is more fully described below.
4
On July 1, 2005 we completed the Asset Purchase Agreement, whereby Medical
Staffing, through our wholly-owned SUBSIDIARIES, 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 $365,487.50 note 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 $50,000.00. The
acquisition was funded by a promissory note.
Effective August 10, 2005, the Company issued to Cornell Capital Partners a
common stock purchase warrant (the "August Warrant") in connection with a
commitment for the $50,000,000 Standby Equity Distribution Agreement. The
Company and Cornell Capital Partners simultaneously terminated the August
Warrant upon the Company issuing the December Warrant on December 13, 2005, as
is more fully described herein below.
On September 2, 2005, the Company entered into a Securities Purchase Agreement
with Cornell Capital Partners whereby the Company issued and sold to Cornell
Capital Partners up to $2,113,332.11 of secured convertible debentures
(collectively, the "Convertible Debenture") which were convertible into shares
of the Company's common stock. The Convertible Debenture was fully paid off upon
entering into the Investment Agreement with Cornell Capital Partners on December
13, 2005.
On December 13, 2005, the Company entered into an Investment Agreement with
Cornell Capital Partners pursuant to which the Company issued and sold to
Cornell Capital Partners and Cornell Capital Partners 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 $2,184,201.11
($2,113,332.11 in principal plus $70,869.00 in accrued interest) and (b) an
additional cash amount equal to Eight Hundred Fifteen Thousand Seven Hundred
Ninety-Eight Dollars and Eighty-Nine Cents ($815,798.89), of which Four Hundred
Thousand Dollars ($400,000) has been funded as of December 13, 2005 and the
remaining Four Hundred Fifteen Thousand Seven Hundred and Ninety-Eight Dollars
and Eighty-Nine Cents ($415,798.89) has been funded as of January 27, 2006
pursuant to the Investor Registration Rights Agreement dated as of December 13,
2005.
The Series A Preferred shares have the designations, preferences and rights set
forth in the Certificate of Designation as filed with the Secretary of State for
the State of Nevada on December 16, 2005. 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 $1.00 per share divided by the Conversion
Price (as defined herein below), 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).
5
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. At a
recent stock price of $0.025 per share, we would have to issue 126,315,790
shares of common stock if Cornell Capital Partners elected to convert the entire
3,000,000 shares of convertible Series A Preferred stock held by Cornell Capital
Partners pursuant to the Investment Agreement. However, our current Articles of
Incorporation authorize us to issue 300,000,000 shares of common stock. We are
registering 114,000,000 shares of our common stock pursuant to the Investment
Agreement. If we need to issue more than the 114,000,000 shares in order to
satisfy Cornell Capital Partner's election to convert the 3,000,000 shares of
Series A Preferred stock, we will have to obtain shareholder approval to amend
our Articles of Incorporation to increase our authorized common stock and we
will have to file a new registration statement covering any additional shares.
At the option of the holders if there are outstanding Series A Preferred shares
on December 13, 2008, each Series A Preferred share shall convert into shares of
common stock at the Conversion Price then in effect on December 13, 2008. 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 Partners a common
stock purchase warrant (the "December Warrant") whereby Cornell Capital Partners
is entitled to purchase from the Company, upon exercise 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 (or as subsequently adjusted pursuant to the
terms of the December Warrant). The December Warrant has "piggyback"
registration rights and expires five (5) years from the date of issuance, on or
about December 13, 2010. Upon issuing the December Warrant on December 13, 2005
the Company and Cornell Capital Partners simultaneously terminated the August
Warrant.
On March 13, 2006 (the "Transaction Date"), the Company entered into an Amended
and Restated Investment Agreement with Cornell Capital Partners, LP ("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 Company and Carnell
Capital and the remaining One Million Four Hundred Thousand Dollars ($1,400,000)
was funded on the Transaction Date. 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 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 effective 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 (as defined herein below),
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 Prices" 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.
6
On March 13, 2006, the Company issued to Cornell Capital four (4) 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 Buyer's Warrant shall have
"piggy-back" and demand registration rights and expire five (5) years from the
date of issuance, on or about March 13, 2011.
On March 13, 2006, the Parties 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. Medical Staffing is investigating other potential
acquisitions and co-ventures, and any such future engagements will be subject to
available financing.
Medical Staffing's future capital requirements will depend on many factors, such
as the success of our operations, economic conditions and other factors
including the results of future operations. If Medical Staffing is unable to
raise sufficient funds to meet its long-term capital needs, there is a risk that
Medical Staffing will be required to cease operations.
Plan Of Operations
Medical Staffing (through our wholly-owned SUBSIDIARIES, 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 SUBSIDIARIES, TeleScience) provides:
o medical staffing services, and
o information technology ("IT") and telecommunications services.
TeleScience provides two (2) categories of services:
o medical systems ("Medical Systems") and
o technology ("Technology").
7
The Medical Systems operations specialize in the long-term staffing of medical
personnel, including physicians, nurses, technicians, and dental assistants, for
various federal and state government medical facilities throughout the country.
The Company expanded its operations in 2005 to provide long-term staffing of
nurses (RNs and LPNs) to private hospitals. This expansion was accelerated by
our acquisition of Nurses PRN, LLC, which we completed on July 1, 2005.
The Technology operations specialize in long-term professional consulting and
staffing of experienced and qualified IT personnel in the government and private
sectors. We also provide systems integration and IT services.
Management Strategy
Medical Staffing's management has taken several initiatives to grow and expand
its current businesses of medical and technology services.
Management's Strategic Plan for Future Growth & Expansion
The Management's strategic plan for future growth and expansion is threefold:
(1) expand its medical services into the private sector; (2) enhance
recruitment; and (3) acquire suitable companies. Although the Company is a party
to that certain IDIQ Contract with Commonwealth of Pennsylvania for supplying
homeland security products and equipments, we are not actively pursuing such
business at this time. There have been zero(0) sales made pursuant to such IDIQ
Contract.
Expansion of Medical Services into the Private Sector. In January 2004, Medical
Staffing hired a seasoned executive to direct Medical Staffing's expansion of
its medical services into the private health care sector. This expansion will
provide long-term part-time staffing of registered nurses and licensed
professional nurses to private health care facilities in Virginia, Maryland and
Washington, D.C., as well as parts of Pennsylvania. Examples of such facilities
are hospitals, nursing homes, private clinics, and assisted living centers.
Enhancing Recruitment. The Company is embarking on a long-range plan for
recruiting ancillary and professional-level staff for medical contracts. This
plan is geared toward expanding the business of Medical Staffing's most active
services, the Medical Systems operations. The Medical Systems operations
presently provide long-term medical staffing services for a wide array of
military, federal, and state government health care facilities, such as
hospitals and clinics. Medical Staffing is also moving towards entering into
similar staffing arrangements with its private sector clients. The long-range
recruiting plans will support both of these initiatives. These initiatives arise
from the recognition of the opportunities provided by the well known and chronic
shortage of health care professionals -especially registered nurses in the
United States. 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.
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.
8
Recent Accounting Pronouncements
In December, 2004, FASB issued Financial Accounting Standards No. 153, Exchanges
of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for
Non-monetary Transactions ("FAS 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 FAS 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. FAS 153 is effective for
non-monetary transactions in fiscal periods that begin after June 15, 2005. The
implementation of this standard did not 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 Obligations." 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 operations 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." FAS
154 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 the
new method. FAS 154 is effective for all changes in an accounting principles
made in 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 FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments, an amendment of FASB Statements No. 133 and 140." SFAS
No. 155 resolves issues addressed in SFAS No. 133 Implementation Issue No. D1,
"Application of Statement 133 to Beneficial Interests in Securitized Financial
Assets," and permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require
bifurcation, clarifies which interest-only strips and principal-only strips are
not subject to the requirements of SFAS No. 133, establishes a requirement to
evaluate interests in securitized financial assets to identify interests that
are freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation, clarifies that
concentrations of credit risk in the form of subordination are not embedded
derivatives and amends SFAS No. 140 to eliminate the prohibition on a qualifying
special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial
instrument. SFAS No. 155 is effective for all financial instruments acquired or
issued after the beginning of the first fiscal year that begins after September
15, 2006. The adoption of SFAS No. 155 did not have a material impact on the
Company's financial position, results of operations, or cash flows.
9
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140." SFAS No. 156 requires
an entity to recognize a servicing asset or liability each time it undertakes an
obligation to service a financial asset by entering into a servicing contract
under a transfer of the servicer's financial assets that meets the requirements
for sale accounting, a transfer of the servicer's financial assets to a
qualified special-purpose entity in a guaranteed mortgage securitization in
which the transferor retains all of the resulting securities and classifies them
as either available-for-sale or trading securities in accordance with SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities" and an
acquisition or assumption of an obligation to service a financial asset that
does not relate to financial assets of the servicer or its consolidated
affiliates. Additionally, SFAS No. 156 requires all separately recognized
servicing assets and servicing liabilities to be initially measured at fair
value, permits an entity to choose either the use of an amortization or fair
value method for subsequent measurements, permits at initial adoption a one-time
reclassification of available-for-sale securities to trading securities by
entities with recognized servicing rights and requires separate presentation of
servicing assets and liabilities subsequently measured at fair value and
additional disclosures for all separately recognized servicing assets and
liabilities. SFAS No. 156 is effective for transactions entered into after the
beginning of the first fiscal year that begins after September 15, 2006. The
adoption of SFAS No. 156 did not have a material impact on the Company's
financial position, results of operations, or cash flows.
In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, Fair Value Measurements,("FAS 157"). This Standard defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. FAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years. The
adoption of FAS 157 is not expected to have a material impact on the Company's
financial position, results of operations or cash flows.
The FASB also issued in September 2006 Statement of Financial Accounting
Standards No. 158, Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans -- an amendment of FASB Statement No. 87, 88, 106 and
132(R), ("FAS 158") . This Standard requires recognition of the funded status of
a benefit plan in the statement of financial position. The Standard also
requires recognition in other comprehensive income certain gains and losses that
arise during the period but are deferred under pension accounting rules, as well
as modifies the timing of reporting and adds certain disclosures. FAS 158
provides recognition and disclosure elements to be effective as of the end of
the fiscal year after December 15, 2006 and measurement elements to be effective
for fiscal years ending after December 15, 2008. The Company has not yet
analyzed the impact FAS 158 will have on its financial condition, results of
operations, cash flows or disclosures.
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.
10
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, 2007 and the quarter
ended March 31, 2006, we incurred losses of $2,223,771 and $4,793,350,
respectively. Our accumulated deficit was $13,990,808 for the quarter ended
March 31, 2007, and $12,048,993 for the quarter ended March 31, 2006. 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, 2007 and March
31, 2006, From Our Independent Registered Public Accounting Firm, Which Means
That We May Not Be Able To Continue Operations Unless We Can Become Profitable
Or Obtain Additional Funding
Our independent registered public accounting firm have added an explanatory
paragraph to their audit opinions issued in connection with our financial
statements for the years ended December 31, 2006 and December 31, 2005, 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 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. The company realized a negative
working capital of $8,530,877 at March 31, 2007.
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
11
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:
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.
12
We Could Fail To Attract Or Retain Key Personnel, Which Could Be Detrimental To
Our Operations
Our success largely depends on the efforts and abilities of key executives,
including Dr. Brajnandan B. Sahay, our Chairman of the Board, President, Chief
Executive Officer and Acting Principal Financial Officer. The loss of the
services of Dr. Sahay could materially harm our business because of the cost and
time necessary to replace and train a replacement. Such a loss would also divert
management attention away from operational issues. We do not presently maintain
key-man life insurance policies on Dr. Sahay. We also have other key employees
who manage our operations and if we were to lose their services, senior
management would be required to expend time and energy to replace and train
replacements. To the extent that we are smaller than our competitors and have
fewer resources we may not be able to attract the sufficient number and quality
of staff.
13
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.
June 6, 2007 MEDICAL STAFFING SOLUTIONS, INC.
By: /s/ Brajnandan B. Sahay
--------------------------------------------------
Name: Brajnandan B. Sahay,
Title: President, Chief Executive Officer and Director
14