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 June 30, 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)
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 July 31, 2007
------------ ------------
Common Stock 182,203,773
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
1
PART I
ITEM 1. FINANCIAL STATEMENTS
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
INDEX TO CONSENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 AND 2006
(UNAUDITED)
PAGE
Balance Sheet as of June 30, 2007 (Unaudited)........................ F-2
Statements of Operations for the six and three
months ended June 30, 2007 and 2006 (Unaudited)...................... F-3
Statements of Cash Flows for the six months ended
June 30, 2007 and 2006 (Unaudited)................................... F-4
Notes to Financial Statements (Unaudited)............................ F-6
F-1
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30, 2007
ASSETS
Current Assets:
Cash and cash equivalents $ 4,704
Accounts receivable, net 1,053,925
Employee advances 8,078
Prepaid expenses 57,057
------------
Total Current Assets 1,123,764
------------
Fixed assets, net of depreciation 80,909
Customer lists, net of amortization 682,669
Deposits 5,068
------------
TOTAL ASSETS $ 1,892,410
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Current Liabilities:
Loan payable, factoring agent $ 636,058
Note payable, current portion 351,309
Accounts payable and accrued expenses 3,327,523
Derivative liability 4,672,058
Warrant liability 119,594
Loans payable, officer 19,700
------------
Total Current Liabilities 9,126,242
------------
Total Liabilities 9,126,242
------------
STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value; 30,000,000 shares authorized, 2,887
4,400,000 designated series A convertible, 4,287,000 shares issued and
outstanding Common stock, $.001 par value; 1,500,000,000 shares authorized,
182,203,773 shares issued and outstanding 182,204
Discount on preferred series A stock
Additional paid-in-capital 6,266,481
Accumulated deficit (13,685,404)
------------
Total Stockholders' Deficit (7,233,832)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,892,410
============
See accompanying notes to the condensed
consolidated financial statements.
F-2
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2007 AND 2006
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
2007 2006(restated) 2007 2006(restated)
------------- ------------- ------------- -------------
OPERATING REVENUES
Revenue $ 4,020,739 $ 10,171,621 $ 1,656,233 $ 4,989,308
COST OF SALES (2,918,585) (7,239,471) (1,207,320) (3,523,872)
------------- ------------- ------------- -------------
GROSS PROFIT 1,102,154 2,932,150 448,913 1,465,436
------------- ------------- ------------- -------------
OPERATING EXPENSES
Administrative payroll, benefits and overhead costs 1,227,034 2,500,225 683,119 1,328,729
General and administrative expenses 464,662 1,378,941 133,092 683,515
Depreciation and amortization 360,106 360,061 180,053 180,046
------------- ------------- ------------- -------------
Total Operating Expenses 2,051,802 4,239,227 996,264 2,192,290
------------- ------------- ------------- -------------
(LOSS) BEFORE OTHER INCOME (EXPENSES) (949,648) (1,307,077) (547,351) (726,854)
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSES)
Other income 85,838 98,066 76,684 12,756
Gain (loss) on fair value derivative and warrant (968,515) (486,162) 793,129 2,967,284
Legal settlement (851,875)
Interest expense (86,042) (425,254) (17,058) (358,231)
------------- ------------- ------------- -------------
Total Other Income (Expenses) (968,719) (1,665,225) 852,755 2,621,809
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES $ (1,918,367) $ (2,972,302) $ 305,404 $ 1,894,955
Provision for Income Taxes
------------- ------------- ------------- -------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES $ (1,918,367) $ (2,972,302) $ 305,404 $ 1,894,955
============= ============= ============= =============
NET INCOME (LOSS) PER BASIC AND DILUTED SHARES $ (.01) $ (0.02) $ .00 $ 0.01
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 182,203,773 177,578,077 182,203,775 178,332,397
============= ============= ============= =============
See accompanying notes to the condensed
consolidated financial statements.
F-3
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
2007 2006
(Restated)
----------- -----------
CASH FLOWS FROM OPERTING ACTIVIITES
Net loss $(1,918,367) $(2,972,302)
----------- -----------
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 360,106 360,061
Loss on fair value of derivative and warrant 968,515 486,162
Changes in assets and liabilities
Decrease in accounts receivable 2,349,611 358,000
Decrease (increase) in prepaid expenses (3,173) 58,974
Decrease(increase) in deposits 42,943 (1,247,730)
Increase (decrease) in accounts payable and accrued expenses (84,740) 229,143
Increase in legal settlement -- 1,128,734
----------- -----------
Total adjustments 3,633,261 1,373,344
----------- -----------
Net cash provided by (used in) operating activities 1,714,894 (1,598,958)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures -- (19,800)
----------- -----------
Net cash used in investing activities -- (19,800)
CASH FLOWS FROM FINANCING ACTIVITIES
Preferred stock issuance for cash -- 1,400,000
Issuance costs deducted from equity -- (150,000)
Proceeds from common stock subscribed -- 415,799
Increase (decrease) in proceeds from factoring agent (1,772,032) (127,391)
(Increase) decrease in amounts due related parties 22,730 (22,564)
Increase in loans payable, officer 19,700 --
Payments on notes payable, net -- (128,400)
----------- -----------
Net cash provided by (used in) financing activities (1,729,602) 1,387,444
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (14,708) (231,314)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 19,412 296,498
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 4,704 $ 65,184
=========== ===========
See accompanying notes to the condensed
consolidated financial statements.
F-4
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: 2007 2006
(Restated)
--------- --------
CASH PAID DURING THE PERIOD FOR:
Interest expense $ 88,042 $140,109
========= ========
Income taxes $ -- $ --
========= ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Common stock issued for loan commitment fees $ -- $ --
========= ========
Common stock issued for interest payment $ -- $ --
========= ========
See accompanying notes to the condensed
consolidated financial statements.
F-5
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 AND 2006 (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, 2006 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 June 30, 2006, and June 30, 2007 the
Company had 178,773,102 shares and 182,203,773 shares 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 and private hospitals. 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.
The Company entered into an asset purchase agreement on June 16, 2005 with
Nurses PRN Acquisition Group. Nurses PRN Acquisition Group had purchased the
assets of Nurses PRN, LLC, a Florida limited liability company. The Company
closed on this transaction on July 1, 2005. The purchase price was $1,600,000 in
cash, 9,500,000 shares of the Company's common stock valued at $285,000, and the
assumption of liabilities in the amount of $363,406.
On December 27, 2006 the Registrant and two of its domestic subsidiaries filed
voluntary petitions for relief under Chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the
Eastern District of Virginia (Alexandria Division)("Bankruptcy Court"). Case
nos.: 06-11822, 06-11821, and 06-11823. Each of the Registrant and each of the
subsidiaries remains in possession of its assets and properties and continues to
operate its business as a "debtor-in-possession" under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of the
Bankruptcy Code and Orders of the Bankruptcy Court.
F-6
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 AND 2006 (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 subsidiaries. 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 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 June 30, 2007 and 2006, the Company had no deposits 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 seven (7) Years
o Office equipment five (5) Years
Income Taxes
The income tax benefit is computed on the pretax loss based on the current tax
law. Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates.
Advertising
Costs of advertising and marketing are expensed as incurred. Advertising and
marketing costs are included in general and administrative costs in the
condensed consolidated statements of operations for the six months ended June
30, 2007 and 2006, respectively.
F-7
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 AND 2006 (UNAUDITED)
Fair Value of Financial Instruments
The carrying amount reported in the condensed consolidated balance sheet for
cash and cash equivalents, derivatives, deposits, prepaid expenses, 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 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:
Six months ended-
2007 2006
(restated)
------------ ------------
Net Loss ($ 1,918,367) ($ 2,972,302)
------------ ------------
Weighted-average common shares outstanding (basic) 182,203,773 177,578,077
Weighted-average common stock equivalents:
Stock options and warrants -- --
Weighted-average common shares outstanding (diluted) 182,203,773 177,578,077
============ ============
Net loss per basic and diluted common shares ($0.01) ($0.01)
============ ============
Option and warrants outstanding to purchase stock were not included in the
computation of diluted EPS because inclusion would have been antidilutive. As of
June 30, 2007, there were no options outstanding. However, there were 95,000,000
freestanding warrants, and approximately 1,317,796,227 common shares available
for conversion in association with the convertible preferred Series A stock.
Reclassifications
Certain amounts for the six months ended June 30, 2006 have been reclassified to
conform to the presentation of the June 30, 2007 amounts. The reclassifications
have no effect on net income for the six months ended June 30, 2006.
Recent Accounting Pronouncements
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.
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.
F-8
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 AND 2006 (UNAUDITED)
NOTE 3 - ACCOUNTS RECEIVABLE
The Company's revenues are derived from private hospitals and government
contracts with 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 for doubtful
accounts and often evaluates receivables for collectibility. The Company had
$1,053,925 due to them at June 30, 2007.
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 June 30, 2007:
Furniture, fixtures and equipment $ 299,265
Less: accumulated depreciation 218,365
-------------
Net book value $ 80,909
=============
Depreciation expense for the six months ended June 30, 2007 and 2006 was $18,770
and $18,727, respectively.
F-9
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 AND 2006 (UNAUDITED)
NOTE 5 - DEPOSITS
The Company had deposits with various entities for security purposes. The
balance as of June 30, 2007 was $5,068.
NOTE 6 - CUSTOMER LISTS
In the acquisition of Nurses, PRN, the Company recorded customer lists in the
amount of $2,528,010. In 2005 the Company recognized impairment in the amount of
$400,000 due to Hurricane Katrina, after recognizing $421,335 in amortization
for the six months ended December 31, 2005; the customer lists were acquired
July 1, 2005 and are being amortized over three years. Amortization expense was
$341,336 for the six months ended June 30, 2007.
NOTE 7 - EMPLOYEE ADVANCES
The Company has outstanding at June 30, 2007, $8,078 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, FACTORING AGENT
In February 2007, the Company entered into a line of credit agreement with a
factor. The loan which is due on demand bears fees on accepted accounts
purchased by the factor at 0.043% daily rate for the first 95 days and 0.100%
daily rate thereafter. The factor lends up to 92% of the receivables balance to
the Company, and receives payment directly on the outstanding receivable and the
remaining balance is remitted to the Company. The outstanding balance as of June
30, 2007 was $636,058. The balance is reflected net of an eight percent
(8%)reserve that the factor has established which is adjusted on each funding.
NOTE 9 - PROVISION FOR INCOME TAXES
Deferred income taxes will be determined using the liability method for the
temporary differences between the financial reporting basis and income tax basis
of the Company's assets and liabilities. Deferred income taxes will be measured
based on the tax rates expected to be in effect when the temporary differences
are included in the Company's consolidated tax return. Deferred tax assets and
liabilities are recognized based on anticipated future tax consequences
attributable to differences between financial statement carrying amounts of
assets and liabilities and their respective tax bases.
At June 30, 2007 and 2006, deferred tax assets approximated the following:
2007 2006
(Restated)
----------- -----------
Deferred tax assets $ 4,365,000 $ 4,610,000
Less: valuation allowance (4,365,000) (4,610,000)
----------- -----------
Net deferred tax assets $ -0- $ -0-
============ ===========
F-10
MEDICAL STAFFING SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 AND 2006 (UNAUDITED)
At June 30, 2007 and 2006, the Company had accumulated deficits for tax purposes
in the approximate amounts of $13,685,000 and $10,789,000 available to offset
future taxable income through 2027 and 2026, respectively. The Company
established valuation allowances equal to the full amounts of the deferred tax
assets due to the uncertainty of the utilization of the operating losses in
future periods.
The accumulated deficits for tax purposes have been adjusted for the difference
between GAAP and tax treatment for amortization of the customer lists.
NOTE 10 - LOANS 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 June 30, 2007 was $19,700. This
amount has been included in accounts payable.
NOTE 11- COMMITMENTS AND CONTINGENCIES
The Company had 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.
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 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.
Rent expense was $126,344 for the six months ended June 30, 2007.
NOTE 12- 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 $365,488. In
addition, the Company assumed a note payable with Aftab Adamjee in the amount of
$250,000. The IRS has advised the Company not to pay Adamjee until an IRS
deficiency is satisfied. The note payable to Jeff Dowling is payable in 26
monthly installments with a 9% interest rate. The note payable to Aftabe Adamjee
is payable in two installments. The balances on these notes at June 30, 2007
were $101,309 and $250,000, respectively.
F-11
NOTE 13- STOCKHOLDERS' EQUITY
The Company has two classes of stock; a preferred class with a par value of
$.001 and 30,000,000 shares authorized, and a common class with a par value of
$.001 and 1,000,000,000 shares authorized.
The Company has 182,203,73 common shares issued and outstanding and 4,287,000
shares of Series A shares convertible preferred stock issued and outstanding as
of June 30, 2007.
On December 13, 2005, the Company issued 3,000,000 shares of Series A
convertible preferred stock. The stock was issued in three parts; the first
installment was consummated when the 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 days prior to the Company filing a registration
statement, which was filed January 31, 2006. In addition, the Company extended a
warrant to Cornell to purchase 15,000,000 shares of common stock at a fixed
exercise price of $0.03.
On March 13, 2006, the Company amended its agreement with Cornell to increase
the amount of preferred shares to 4,400,000. Additional funds of $1,400,000 were
advanced from Cornell on that date. In addition, the Company issued to Cornell
four warrants to purchase 80,000,000 shares of the Company's common stock as
follows: (i) 30,000,000 shares at an exercise price of $.005 per share, (ii)
30,000,000 shares at an exercise price of $.01 per share, (iii) 10,000,000
shares at an exercise price of $.015 per share, and (iv) 10,000,000 shares at an
exercise price of $.02 per share. The warrants expire five years after the date
of issuance.
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 agreement. The preferred shares were converted at a
price of $.0217, which translated into 2,304,147 shares of common stock.
On May 4, 2006, a convertible series A preferred shareholder notified the
company of their intent to convert 35,000 shares of preferred stock into common
stock, as outlined in the agreement. The preferred shares were converted at a
price of $.0288, which translated into 1,215,278 shares of common stock.
On July 11, 2006 a convertible series A preferred shareholder notified the
company of their intent to convert 20,000 shares of preferred stock into common
stock, as outlined in the agreement. The preferred shares were converted at a
price of $ .0121, which translated into 1,652, 893 shares of common stock.
On December 7, 2006 a convertible series A preferred shareholder notified the
company of their intent to convert 8,000 shares of preferred stock into common
stock, as outlined in the agreement. The preferred shares were converted at
price of $ .0045, which translated into 1,777,778 shares of common stock.
There were no transactions involving common stock in the quarter ended June 30,
2007.
F-12
NOTE 14- GOING CONCERN
As shown in the accompanying condensed consolidated financial statements, the
Company incurred substantial net losses for the years ended December 31, 2006
and 2005, and additional losses in the six months ended June 30, 2007. 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. See note 17 regarding
bankruptcy.
Management is confident that they can improve operations and raise the
appropriate funds needed through contracts into which the Company recently has
entered.
The condensed consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
NOTE 15- LITIGATION
In October 2004, The Roche Group sought action against the Company for pecuniary
loss in connection with an ex-dividend date of the Company's common stock. The
courts have dismissed two of the three counts with prejudice. Plaintiffs are
seeking $125,000 in damages. The parties agreed to mediation in an attempt to
fully resolve the litigation. The matter was settled for $50,000, and a
settlement agreement was executed by the parties on or about December 6, 2006.
This case is subject to an automatic stay of further proceedings.
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. The Plaintiff petitioned the Court
to set aside the jury verdict. The motion was set for oral argument December 16,
2005. On February 16, 2006, the Circuit Court of Fairfax County, Virginia
entered a final order against TeleScience in the amount of $851,875 along with
interest at 12% accruing since October 16, 2003.
As a result of the February 16, 2006, decision, the Company placed $1,250,000 in
escrow with the Fairfax County Circuit Court of Appeals. The proceeds will be
held in escrow until adjudication of the matter with the Court of Appeals. The
final order in the amount $851,875 was recorded as a current liability along
with $319,240 in accrued interest to November 30, 2006.
On September 8, 2006, the Supreme Court of Virginia in the City of Richmond,
upon review of the record and consideration of the argument submitted in support
of and in opposition to the granting of an appeal, refused the Petition.
On November 17, 2006 the Virginia Supreme Court denied Company's petition for
rehearing of its September 8, 2006 ruling denying Company's appeal in this case
against the plaintiff. The amount paid for this case was $1,171,115.
F-13
NOTE 16- DERIVATIVE AND WARRANT LIABILITIES
The Company has outstanding 4,287,000 shares of Series A preferred stock with
conversion rights that contain free-standing warrants and embedded derivative
features (see note 13). The shares were issued pursuant to investment agreements
with Cornell Capital. The Company accounts for these derivatives and warrants in
accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", and EITF Issue No. 00-19, "Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company's Own Stock". In
accordance with the provisions of SFAS No. 133 and EITF Issue No. 00-19, the
embedded derivatives and warrants are required to be bifurcated from the debt
instrument and recorded as a liability at fair value on the consolidated balance
sheet.
As a result of the March 13, 2006 amendment to an agreement with Cornell (see
note 13), warrant and derivative liabilities were recorded that were valued
using the Black and Scholes Option Pricing Model (Black Scholes). The fair value
of the warrant and derivative liabilities exceeded the proceeds received for the
preferred stock and since an amount less than zero cannot be assigned to the
preferred stock, the excess of the liabilities incurred over the proceeds
received is reported as a loss on the transaction, with no amount assigned to
preferred stock.
Changes in the fair value of the derivative and warrant liabilities are recorded
at each reporting period as a gain (loss) on fair value of derivative and
warrant, a separate component of the other income (expense). At December 31,
2005, the 3,000,000 issued and outstanding shares of preferred stock had a
derivative liability with a fair value of $2,294,610 and a warrant liability
with a fair value of $293,425. In March 2006 the Company issued 1,400,000 shares
of preferred stock with an embedded derivative that had a fair value of
$1,462,862 and 80,000,000 warrants with a fair value of $2,637,276, at which
time an immediate loss of $2,700,138 was recognized in accordance with FASB
Statement No. 133 and EITF Issue No. 00-19. In September 2006 the Company issued
3,000,000 options as compensation to its President and CEO with a fair value of
$5,890.
At June 30, 2006, the 4,315,000 issued and outstanding shares of preferred stock
with embedded derivatives and warrants, and the 3,000,000 options had a
derivative liability and warrant liability of $3,213,450 and $1,260,747,
respectively, resulting in a net loss of $486,162 for the six months ended June
30, 2006.
At June 30, 2007, the 4,287,000 issued and outstanding shares of preferred stock
with embedded derivatives and warrants, and the 3,000,000 options had a
derivative liability and warrant liability of $4,672,058 and $119,594,
respectively, resulting in a net loss of $968,515 for the six months ended June
30, 2007.
NOTE 17- BANKRUPTCY
On December 27, 2006 the Registrant and two of its domestic subsidiaries filed
voluntary petitions for relief under Chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the
Eastern District of Virginia (Alexandria Division)("Bankruptcy Court"). Case
nos.: 06-11822, 06-11821, and 06-11823. Each of the Registrant and the
subsidiaries remains in possession of its assets and properties and continues to
operate its business as a "debtor-in-possession" under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of the
Bankruptcy Code and Orders of the Bankruptcy Court.
F-14
NOTE 18- RESTATEMENT
The June 30, 2006 financial statements have been restated. Additional
amortization of customer lists has been recorded. Derivative and warrant
liabilities were recorded during 2005 and have been revalued at the end of each
reporting period. The effect of the restatement on each affected financial
statement line item is summarized in the following schedule:
June 30, 2006
-------------
Consolidated Balance Sheets:
Customer Lists $(1,162,699)
Total Assets (1,162,699)
Derivative Liability 3,213,450
Warrant Liability 1,260,747
Total Current Liabilities 4,474,197
Total Liabilities 4,474,197
Additional Paid-in Capital (3,929,287)
Additional Paid-in Capital, Beneficial Conversion (537,600)
Additional Paid-in Capital, Warrants (1,142,686)
Deficit (1,425,893)
Total Stockholders' Deficit (5,636,866)
Total Liabilities and Stockholders' Deficit (1,162,669)
Six Months Three months
ended June 30, ended June 30,
2006 2006
-------------- --------------
Consolidated Statements of Operations:
General and Administrative Expenses 41,540 --
Depreciation and Amortization 341,334 170,667
Total Operating Expenses 382,874 170,667
(Loss) Before Other Income (Expenses) (382,874) (170,667)
Gain (Loss) on Fair Value of Derivative and Warrant 486,162 (2,967,284)
Beneficial Conversion Expense (4,341) --
Total Other Income (Expenses) 481,821 (2,967,284)
Net (Loss) Before Provision for Income Taxes (864,695) 2,796,617
Net Loss Applicable to Common Shares (864,695) 2,796,617
Net Loss Per Basis and Diluted Shares (0.00) 0.02
Consolidated Statements of Cash Flows:
Net loss (864,695) N/A
Depreciation and Amortization 341,334 N/A
Gain on fair value of warrants and derivatives 486,162 N/A
Beneficial Conversion Expense (4,341) N/A
Issuance Costs Deducted from Equity 41,580 N/A
F-15
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 eleven (11) 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.
2
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 eleven (11) staffing locations in eight
(8) states (including Virginia) and has more than 500 nurses that it can call
upon to fulfill the needs of over one hundred (100) hospitals it presently
services.
In the first quarter of 2007, Nurses Onsite Corp. lost approximately two-third
of its revenue due to the separation of its dealerships in Florida. To cut
costs, the following regions were closed/merged: Dallas (was merged with
Houston), Phoenix, and two Florida dealership sites. The former corporate West
Palm Beach office was closed. The Virtual Market was merged into Atlanta. Daily
pay was eliminated and replaced with weekly pay. Personnel bonuses were reviewed
and re-structured to be based on profitability. Since the second quarter of
2007, the dormant (since Dec 2006) Las Vegas office was re-invigorated and moved
into a shared office space with another company. Old contracts were renewed in
this market. The Houston Office was closed and set up to run virtually.
Twice-weekly pay was introduced into the Atlanta market to attract more nurses
and serve as a test for other markets.
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 June 30, 2007, the
Company's accumulated deficit is $13,685,404 and the Company has negative
working capital of $8,002,478.
The ability of the Company to continue as a going concern is dependent on the
Company's ability to raise additional debt or capital. The financial statements
for June 30, 2007 do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern.
3
Critical Accounting Policies And Estimates
Our consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, or GAAP. These
accounting principles require us to make certain estimates, judgments and
assumptions. We believe that the estimates, judgments and assumptions upon which
we rely are reasonably based upon information available to us at the time that
these estimates, judgments and assumptions are made. These estimates, judgments
and assumptions can affect the reported amounts of assets and liabilities as of
the date of the financial statements, as well as the reported amounts of revenue
and expenses during the periods presented. To the extent there are material
differences between these estimates, judgments and assumptions and actual
results, our financial statements will be affected. The significant accounting
policies that we believe are the most critical to aid in fully understanding and
evaluating our reported financial results include the following:
o Revenue recognition;
o Allowance for doubtful accounts; and
o Accounting for income taxes.
In many cases, the accounting treatment of a particular transaction is
specifically dictated by GAAP and does not require management's judgment in its
application. There are also areas in which management's judgment in selecting
among available alternatives would not produce a materially different result.
Our senior management has reviewed these critical accounting policies and
related disclosures. See Notes to Condensed Consolidated Financial Statements,
which contain additional information regarding our accounting policies and other
disclosures required by GAAP.
Revenue Recognition
Revenue on time-and-materials contracts is recognized based upon hours incurred
at contract rates plus direct costs. Revenue on fixed-price contracts is
recognized on the percentage-of-completion method based on costs incurred in
relation to total estimated costs. Anticipated losses are recognized as soon as
they become known. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined.
Allowance For Doubtful Accounts
We determine our allowance by considering a number of factors, including the
length of time trade accounts receivable are past due, our previous loss
history, the customer's current ability to pay its obligation to us, and the
condition of the general economy and the industry as a whole. We make judgments
as to our ability to collect outstanding receivables based on these factors and
provide allowances for these receivables when collections become doubtful.
Provisions are made based on specific review of all significant outstanding
balances.
Accounting For Income Taxes
We account for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Under the
asset and liability method of SFAS No. 109, deferred income taxes are recognized
for the expected future tax consequences of temporary differences between
financial statement carrying amounts, and the tax bases of existing assets and
liabilities using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Any deferred tax asset has been reserved by the Company with an
offsetting valuation allowance adjustment.
4
Results of Operations
Results Of Operations For The Quarter Ended June 30, 2007, Compared To The
Quarter Ended June 30, 2006
Revenues
Revenues for the quarter ended June 30, 2007 were $1,656,233, as compared to
revenues of $4,989,308 for the quarter ended June 30, 2006, a decrease of
$3,333,075. The decrease in revenues in 2007 was attributable to the loss by
Nurses Onsite Corp. of certain dealers contracts.
Cost Of Sales
Cost of sales for the quarter ended June 30, 2007 was $1,207,320, or
seventy-three percent (73%) of revenues, as compared to $3,523,872 , or
seventy-one percent (71%) of revenues, for the quarter ended June 30, 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 June 30, 2007, was $448,913, or twenty-seven
percent (27%) of revenues, as compared to gross profit of $1,465,436, or
twenty-nine (29%) of revenues, for the quarter ended June 30, 2006.
Operating Expenses
Operating expenses for the quarter ended June 30, 2007, were $996,264, or sixty
percent (60%) of revenues, as compared to $2,192,290, or forty-four percent
(44%) of revenues, for the quarter ended June 30, 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 June 30, 2007, was $852,755, as
compared to $2,621,809 for the quarter ended June 30, 2006. The decrease was due
primarily to a change in fair value of derivative and warrant liability.
Net Loss
The Company had a net gain of $305,404 for the quarter ended June 30, 2007,
compared to a net gain of $1,894,955 for the quarter ended June 30, 2006. The
net gain of $305,404 was attributable to a gain on fair value of derivative and
warrant liability.
5
Results Of Operations For The Six Months Ended June 30, 2007, Compared To The
Six Months Ended June 30, 2006
Revenues
Revenues for the six (6) months ended June 30, 2007 were $4,020,739, a decrease
of $6,150,882, as compared to revenues of $10,171,621 for the six (6) months
ended June 30, 2006. The decrease in revenues in 2007 was attributable to the
loss by Nurses Onsite Corp. of certain dealer contracts.
Cost Of Sales
Cost of sales for the six (6) months ended June 30, 2007 was $2,918,585, or
seventy-three percent (73%) of revenues, as compared to $7,239,471, or
seventy-one percent (71%) of revenues, for the six (6) months ended June 30,
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 six (6) months ended June 30, 2007, was $1,102,154 or
twenty-seven percent (27%) of revenues, as compared to gross profit of
$2,932,150, or twenty-nine (29%) of revenues, for the six (6) months ended June
30, 2006.
Operating Expenses
Operating expenses for the six (6) months ended June 30, 2007 were $2,051,802,
or fifty-one percent (51%) of revenues, as compared to $4,239,227 or forty-two
percent (42%) of revenues, for the six (6) months ended June 30, 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 statement.
Other Income (Expense)
Other income (expense) for the six (6) months ended June 30, 2007 was ($968,719)
as compared to ($1,665,225) for the six (6) months ended June 30, 2007. The
decrease was due primarily to a change in fair value of derivatives and warrant
liability.
Net Loss
The Company had a net loss of $1,918,367 for the six (6) months ended June 30,
2007, compared to a net loss of $2,972,302 for the six (6) months ended June 30,
2006. The decreased loss of $1,053,975 was attributable to a loss on fair value
of derivates and warrant liability.
6
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.
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.
7
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).
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.
8
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.
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., Texas, Louisiana, Georgia and
California.
9
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").
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.
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.
10
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 taken initiatives
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.
Recent Accounting Pronouncements
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.
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.
11
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.
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 June 30, 2007 and the quarter
ended June 30, 2006, we incurred gains of $305,404 and $1,894,955, respectively.
Our accumulated deficit was $13,685,404 for the quarter ended June 30, 2007, and
$9,363,250 for the quarter ended June 30, 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 June 30, 2007 and June
30, 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 has 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 and anticipated from our operations.
12
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 $8,002,478 at June 30, 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
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.
13
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.
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.
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.
14
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 June 30, 2007, 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 June 30, 2007, in controls over
closing procedures due to a number of adjustments made at the end of the
six-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.
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 as 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.
15
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than as noted below, Medical Staffing is not currently involved in any
material legal proceedings.
Further, we understand that by virtue of our bankruptcy filing, all cases are
subject to the automatic stay of further proceedings.
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 Registrant common stock were delivered to
Plaintiff in November of 2003. The Plaintiff rejected the share tender and
demanded a cash settlement. The Registrant 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.
In October 2004, The Roche Group sought action against the Company for pecuniary
loss in connection with an ex-dividend date of the Company's common stock. The
courts have dismissed two of the three 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 parties agreed to mediation in an attempt
to fully resolve the litigation. The metter was settled for $50,000, and a
settlement agreement was executed by the parties on or about December 6, 2006.
In June 2006, Mirza W. Ahmed and Asra Ahmed (together, the "Plaintiff") filed
suit against the Company and the Company's subsidiary Nurses Onsite (together,
the "Defendants") for failure to pay under a note which such note had allegedly
been assigned to Plaintiff by the original beneficiary, Aftab Adamjee
("Adamjee"). Plaintiff is seeking $250,000 plus accrued interest and expenses
including attorney's fees. Nurses Onsite has been advised by the Internal
Revenue Service (IRS) that the original beneficiary was liable to the IRS for an
amount in excess of the note amount and that payment to a third party should not
be made until the IRS deficiency is satisfied. The Company believes the attempt
to assign the note was an attempt to defraud the IRS. On or about July 19, 2006,
Defendants filed an Answer and Affirmative Defenses. Defendants deny the key
allegations of the Complaint and assert that they are not liable to Plaintiffs
for a variety of affirmative defenses including, but not limited to, Plaintiff's
lack of standing to assert the claims raised and that the note was made
fraudulently to avoid Nurses Onsite's restrictions on paying said note.
Plaintiff replied to the affirmative defenses denying the same. The attorneys
are not able to assess the likelihood of success on the merits for these claims
at this stage, but the Company does intend to defend them vigorously.
In June 2006, Contemporary Nursing Solutions, Inc. (CNS) filed an amended
complaint in a lawsuit involving the Company and its subsidiaries and asked for
unjunctive and other relief for hhiring a former employee of CNS. The Company is
presently in the discovery phase of the proceedings. The Company believes the
case is without merit, and, if necessary, intends to vigorously defend.
On February 16, 2006, the Circuit Court of Fairfax County, Virginia (the "Trial
Court") entered a Final Order in favor of plaintiff Azmat Ali against
TeleScience, a wholly-owned SUBSIDIARIES of the Company, Dr. Brajnandan B. Sahay
and Mrs. Rupa Sahay (TeleScience, Dr. Sahay and Mrs. Sahay are collectively
referred to herein as the "Defendant-Appellant"), in the matter Azmat Ali v.
TeleScience International, Inc., et al. (At Law No. 218574) as is more fully set
forth in the Company's Current Report on Form 8-K as filed with the SEC on March
6, 2006. 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, and 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 response to the Trial Court's ruling, Defendant-Appellant
made a petition for appeal (the "Petition") with the Supreme Court of Virginia
in the City of Richmond (the "Supreme Court"). On September 8, 2006, the Supreme
Court, upon review of the record and consideration of the argument submitted in
support of and in opposition to the granting of an appeal, refused the Petition.
On November 17, 2006 the Virginia Supreme Court denied the Company's petition
for rehearing of its September 8, 2006 ruling denying the Company's appeal in
this case against the plaintiff.
16
On January 19, 2007, the Company filed an adversary proceeding under its Chapter
11 against Robert Murphy and others seeking enforcement of a repayment provision
in the asset purchase agreement involving Nurses PRN, LLC. The Company may
become involved in litigation, from time to time, in the ordinary course of
business.
On January 24, 2007, the Company filed an adversary proceeding under its Chapter
11 against Medical Staff Management, Inc., seeking damages and a permanent
injunction to prevent the misappropriation of Company's intellectual property.
This case was settled and dismissed on July 10, 2007.
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 preferred stock into common
stock, as outlined in the agreement. The preferred shares were converted at a
price of $.0217, which translated into 2,304,147 shares of common stock.
On March 13, 2006, the Company amended its agreement with Cornell to increase
the amount of preferred shares to 4,400,000. Additional funds of $1,400,000 were
advanced from Cornell on that date. In addition, the Company issued to Cornell
four warrants to purchase 80,000,000 shares of the Company's common stock as
follows: (i) 30,000,000 shares at an exercise price of $.005 per share, (ii)
30,000,000 shares at an exercise price of $.01 per share, (iii) 10,000,000
shares at an exercise price of $.015 per share, and (iv) 10,000,000 shares at an
exercise price of $.02 per share. The warrants expire five years after the date
of issuance.
On May 4, 2006, a convertible series A preferred shareholder notified the
company of their intent to convert 35,000 shares of preferred stock into common
stock, as outlined in the agreement. The preferred shares were converted at a
price of $.0288, which translated into 1,215,278 shares of common stock.
On July 11, 2006 a convertible series A preferred shareholder notified the
company of their intent to convert 20,000 shares of preferred stock into common
stock, as outlined in the agreement. The preferred shares were converted at a
price of $ .0121, which translated into 1,652, 893 shares of common stock.
On December 7, 2006 a convertible series A preferred shareholder notified the
company of their intent to convert 8,000 shares of preferred stock into common
stock, as outlined in the agreement. The preferred shares were converted at
price of $ .0045, which translated into 1,777,778 shares of common stock.
17
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
(A)
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
Incorporation Company's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on March 27, 2003
EXHIBIT NO.
- --------------------------------------------------------------------------------------------------------------------
3.4 Certificate of Amendment to Articles of Incorporated by reference to Exhibit 3 to the
Incorporation Company's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on March 27, 2003
5.1 Opinion of Burton, Bartlett & Glogovac Provided herewith
10.1 Sublease Agreement, dated December 23, 2002, by Incorporated by reference to Exhibit 10.1 to the
and among InterAmerica Technologies, Inc., Company's Annual Report on Form 10-KSB as filed with
Kemron Environmental Services and Telescience the United States Securities and Exchange Commission
International, Inc. on April 9, 2004
10.2 Promissory Note in the principal amount of Incorporated by reference to Exhibit 10.2 to the
$875,920 made by the Company in favor of Company's Annual Report on Form 10-KSB as filed with
Dr. B.B. Sahay the United States Securities and Exchange Commission
on April 9, 2004
10.3 Memorandum of Understanding, dated March 10, Incorporated by reference to Exhibit 10.3 to the
2004, by and between Silver Star Technologies, Company's Annual Report on Form 10-KSB as filed with
Inc. and TeleScience International, Inc. the United States
Securities and Exchange Commission on April 9, 2004
10.4 Memorandum of Understanding, by and between Incorporated by reference to Exhibit 10.4 to the
Telescience International, Inc. and Chesapeake Company's Annual Report on Form 10-KSB as filed with
Government Technologies, Inc. the United States Securities and Exchange Commission
on April 9, 2004
10.5 Proposal, dated January 7, 2004, from Incorporated by reference to Exhibit 10.5 to the
Professional Nursing Resources, Inc. to Company's Annual Report on Form 10-KSB as filed with
Telescience International, Inc. the United States Securities and Exchange Commission
on April 9, 2004
10.6 Standby Equity Distribution Agreement, dated Incorporated by reference to Exhibit 10.6 to the
March 11, 2004, by and between Medical Staffing Company's Annual Report on Form 10-KSB as filed with
Solutions, Inc. and Cornell Capital Partners, LP the United States Securities and Exchange Commission
on April 9, 2004
10.7 Registration Rights Agreement, dated March 11, Incorporated by reference to Exhibit 10.7 to the
2004 between Medical Staffing and Cornell Company's Annual Report on Form 10-KSB as filed with
Capital Partners, LP the United States Securities and Exchange Commission
on April 9, 2004
10.8 Escrow Agreement, dated March 11, 2004 among Incorporated by reference to Exhibit 10.8 to the
Medical Staffing, Cornell Capital Partners LP, Company's Annual Report on Form 10-KSB as filed with
and Butler Gonzalez, LP the United States Securities and Exchange Commission
on April 9, 2004
10.9 Securities Purchase Agreement, dated March 11, Incorporated by reference to Exhibit 10.9 to the
2004, by and among Medical Staffing Solutions, Company's Annual Report on Form 10-KSB as filed with
Inc. and the Buyers listed therein the United States Securities and Exchange Commission
on April 9, 2004
10.10 Escrow Agreement, dated March 11, 2004, among Incorporated by reference to Exhibit 10.10 to the
Medical Staffing Solutions, Inc., Butler Company's Annual Report on Form 10-KSB as filed with
Gonzalez, LP and the Buyers listed therein the United States Securities and Exchange Commission
on April 9, 2004
18
EXHIBIT NO.
- --------------------------------------------------------------------------------------------------------------------
10.11 $250,000 Convertible Debenture, dated March 11, Incorporated by reference to Exhibit 10.11 to the
2004, issued by Medical Staffing Solutions, Inc. Company's Annual Report on Form 10-KSB as filed with
to Cornell Capital Partners, LP the United States Securities and Exchange Commission
on April 9, 2004
10.12 Investors Registration Rights Agreement, dated Incorporated by reference to Exhibit 10.12 to the
March 11, 2004, by and between Medical Staffing Company's Annual Report on Form 10-KSB as filed with
Solutions, Inc. and the Investors listed therein the United States Securities and Exchange Commission
on April 9, 2004
10.13 Placement Agent Agreement, dated March 11, 2004, Incorporated by reference to Exhibit 10.13 to the
by and among Medical Staffing Solutions, Inc., Company's Annual Report on Form 10-KSB as filed with
Newbridge Securities Corporation and Cornell the United States Securities and Exchange Commission
Capital Partners, LP on April 9, 2004
10.14 Renewal Agreement, dated February 5, 2004, from Incorporated by reference to Exhibit 10.14 to the
Commonwealth of Pennsylvania to Telescience Company's Annual Report on Form 10-KSB as filed with
International, Inc. regarding Contract 2550-09 the United States Securities and Exchange Commission
(Personal Protection Equipment PPE) on April 9, 2004
10.15 Memorandum of Understanding, dated February 23, Incorporated by reference to Exhibit 10.15 to the
2004, by and between Mobile Healthcare Company's Annual Report on Form 10-KSB as filed with
Solutions, Inc. and Telescience International, the United States Securities and Exchange Commission
Inc. on April 9, 2004
10.16 Master Contract, dated April 1, 2004, by and Incorporated by reference to Exhibit 10.17 to the
between Telescience International, Inc. and Company's Annual Report on Form 10-KSB as filed with
State of California Department of Corrections the United States Securities and Exchange Commission
on April 9, 2004
10.17 Memorandum, dated March 26, 2003, regarding Incorporated by reference to Exhibit 10.20 to the
Branch Office Location Company's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on April 9, 2004
10.18 $1,000,000 Promissory Note, dated June 8, 2004, Incorporated by reference to Exhibit 10.18 to the
issued by Medical Staffing Solutions, Inc. to Company's Annual Report on Form 10-KSB as filed with
Cornell Capital Partners, LP the United States Securities and Exchange Commission
on March 31, 2005
10.19 $315,000 Promissory Note, dated October 6, 2004 Incorporated by reference to Exhibit 10.19 to the
by Medical Staffing Solutions, Inc. to Cornell Company's Annual Report on Form 10-KSB as filed with
Capital Partners, LP the United States Securities and Exchange Commission
on March 31, 2005
10.20 Amended and Restated Promissory Note, issued to Incorporated by reference to Exhibit 10.25 to the
Cornell Capital Partners, LP by Medical Staffing Company's Amended Registration Statement on Form
Solutions, Inc. on January 5, 2005 and amended SB-2 as filed with the United States Securities and
on June 7, 2005 Exchange Commission on August 5, 2005
10.21 Employment Agreement, dated January 1, 2005, by Incorporated by reference to Exhibit 10.21 to the
and between Medical Staffing Solutions, Inc. and Company's Annual Report on Form 10-KSB as filed with
Dr. Brajnandan B. Sahay the United States Securities and Exchange Commission
on March 31, 2005
19
EXHIBIT NO.
- --------------------------------------------------------------------------------------------------------------------
10.22 Contract, dated December 6, 2004, by and between Incorporated by reference to Exhibit 10.22 to the
Telescience International, Inc. and State of Company's Annual Report on Form 10-KSB as filed with
California Department of Corrections the United States Securities and Exchange Commission
on March 31, 2005
10.23 Master Contract, dated December 19, 2004, by and Incorporated by reference to Exhibit 10.23 to the
between Telescience International, Inc. and Company's Annual Report on Form 10-KSB as filed with
State of California Department of Corrections the United States Securities and Exchange Commission
on March 31, 2005
10.24 Consulting Services Contract Incorporated by reference to 5.1 to the Company's
Registration Statement on Form SB-2 as filed with
the United States Securities and Exchange Commission
on April 13, 2005
10.25 Asset Purchase Agreement, effective as of Incorporated by reference to Exhibit 99.1 to the
June 16, 2005, by and among Medical Staffing Company's Amended Form 8-K as filed with the United
Solutions, Inc., Nurses PRN Acquisition Corp., States Securities and Exchange Commission on
Nurses PRN, LLC and the Members listed therein July 14, 2005
10.26 $250,000 Promissory Note, effective June 16, Incorporated by reference to Exhibit 99.2 to the
2005, by Nurses PRN Acquisition Corp., Inc. Company's Amended Form 8-K as filed with the United
issued to Mr. Aftab Adamjee States Securities and Exchange Commission on July
14, 2005
10.27 Executive Employment Agreement, dated June 16, Incorporated by reference to Exhibit 99.3 to the
2005, by and between Nurses PRN Acquisition Company's Amended Form 8-K as filed with the United
Corp. and Mr. Robert Murphy States Securities and Exchange Commission on July
14, 2005
10.28 Executive Employment Agreement, dated June 16, Incorporated by reference to Exhibit 99.4 to the
2005, by and between Nurses PRN Acquisition Company's Amended Form 8-K as filed with the United
Corp. and Ms. Linda Romano States Securities and Exchange Commission on July
14, 2005
10.29 Release, dated June 16, 2005, by Mr. Aftab Incorporated by reference to Exhibit 99.5 to the
Adamjee releasing all claims against Nurses PRN, Company's Amended Form 8-K as filed with the United
LLC, Mr. Robert Murphy and Ms. Linda Romano States Securities and Exchange Commission on July
14, 2005
10.30 Release, dated May 26, 2005, by Mr. Phil Dodge Incorporated by reference to Exhibit 99.6 to the
releasing all claims against Nurses PRN, LLC Company's Amended Form 8-K as filed with the United
States Securities and Exchange Commission on July
14, 2005
10.31 Release, dated June 16, 2005, by Mr. Robert Incorporated by reference to Exhibit 99.7 to the
Murphy releasing all claims against Nurses PRN, Company's Amended Form 8-K as filed with the United
LLC States Securities and Exchange Commission on July
14, 2005
10.32 Release, dated June 16, 2005, by Ms. Linda Incorporated by reference to Exhibit 99.8 to the
Romano releasing all claims against Nurses PRN, Company's Amended Form 8-K as filed with the United
LLC States Securities and Exchange Commission on July
14, 2005
20
EXHIBIT NO.
- --------------------------------------------------------------------------------------------------------------------
10.33 Assumption Agreement, dated June 16, 2005, by Incorporated by reference to Exhibit 99.9 to the
and among Nurses PRN, LLC, Nurses PRN Company's Amended Form 8-K as filed with the United
Acquisition Corp. and Mr. Jeffrey T. Dowling States Securities and Exchange Commission on July
14, 2005
10.34 Pledge Agreement, dated June 16, 2005, by and Incorporated by reference to Exhibit 99.10 to the
between Mr. Robert Murphy and Ms. Linda J. Company's Amended Form 8-K as filed with the United
Romano as Pledgor and Mr. Jeffrey T. Dowling as States Securities and Exchange Commission on July
Pledgee 14, 2005
10.35 Indemnity and Guaranty Agreement, dated June 16, Incorporated by reference to Exhibit 99.11 to the
2005, by and among Mr. Aftab Adamjee, Mr. Robert Company's Amended Form 8-K as filed with the United
Murphy and Ms. Linda Romano as Indemnitors and States Securities and Exchange Commission on July
Nurses PRN, LLC 14, 2005
10.36 Guaranty of Payment, dated June 16, 2005, by Incorporated by reference to Exhibit 99.12 to the
Medical Staffing Solutions, Inc. with respect to Company's Amended Form 8-K as filed with the United
Mr. Jeffrey T. Dowling States Securities and Exchange Commission on July
14, 2005
10.37 Form of Guaranty of Payment, by Medical Staffing Incorporated by reference to Exhibit 99.13 to the
Solutions, Inc. with respect to Mr. Aftab Company's Amended Form 8-K as filed with the United
Adamjee States Securities and Exchange Commission on July
14, 2005
10.38 Guaranty, dated June 16, 2005, by Mr. Robert Incorporated by reference to Exhibit 99.14 to the
Murphy and Ms. Linda Romano with respect to Company's Amended Form 8-K as filed with the United
Jeffrey T. Dowling and the payment of all States Securities and Exchange Commission on July
indebtedness of Nurses PRN, LLC 14, 2005
10.39 Bill of Sale, undated, by and between Nurses Incorporated by reference to Exhibit 99.15 to the
PRN, LLC and Nurses PRN Acquisition Corp. Company's Amended Form 8-K as filed with the United
States Securities and Exchange Commission on July
14, 2005
10.40 Assignment and Assumption Agreement, dated Incorporated by reference to Exhibit 99.16 to the
June 16, 2005, by and between Nurses PRN, LLC Company's Amended Form 8-K as filed with the United
and Nurses PRN Acquisition Corp. States Securities and Exchange Commission on July
14, 2005
10.41 Joinder, dated June 10, 2005, by and between Mr. Incorporated by reference to Exhibit 99.17 to the
Aftab Adamjee and Mr. Jeffrey T. Dowling Company's Amended Form 8-K as filed with the United
States Securities and Exchange Commission on July
14, 2005
10.42 Amended and Restated Promissory Note issued to Incorporated by reference to Exhibit 10.25 to the
Cornell Capital Partners, LP by Medical Staffing Company's Amended Form SB-2 as filed with the United
on April 26, 2005 and amended on June 7, 2005 States Securities and Exchange Commission on August
5, 2005
10.43 SYSTRAN Financial Services Corporation Factoring Incorporated by reference to Exhibit 99.1 to the
Agreement, dated as of June 30, 2005, by and Company's Form 8-K as filed with the United States
between Medical Staffing Solutions, Inc., Securities and Exchange Commission on July 14, 2005
TeleScience International, Inc., Nurses PRN
Acquisition Corp. and SYSTRAN Financial Service
Corporation
21
EXHIBIT NO.
- --------------------------------------------------------------------------------------------------------------------
10.44 Form of Addendum to the SYSTRAN Financial Incorporated by reference to Exhibit 99.2 to the
Services Corporation Factoring Agreement Company's Form 8-K as filed with the United States
Securities and Exchange Commission on July 14, 2005
10.45 Form of Continuing Guaranty Incorporated by reference to Exhibit 99.3 to the
Company's Form 8-K as filed with the United States
Securities and Exchange Commission on July 14, 2005
10.46 Form of Letter to SYSTRAN Credit and Operations Incorporated by reference to Exhibit 99.4 to the
Departments Company's Form 8-K as filed with the United States
Securities and Exchange Commission on July 14, 2005
10.47 Securities Purchase Agreement, dated September Incorporated by reference to Exhibit 99.1 to the
2, 2005, by and between Medical Staffing Company's Form 8-K as filed with the United States
Solutions, Inc. and Cornell Capital Partners, LP Securities and Exchange Commission on October 3, 2005
10.48 Secured Convertible Debenture, dated September Incorporated by reference to Exhibit 99.2 to the
2, 2005, issued by Medical Staffing Solutions, Company's Form 8-K as filed with the United States
Inc. to Cornell Capital Partners, LP Securities and Exchange Commission on October 3, 2005
10.49 Investor Registration Rights Agreement, dated Incorporated by reference to Exhibit 99.3 to the
September 2, 2005, by and between Medical Company's Form 8-K as filed with the United States
Staffing Solutions, Inc. and Cornell Capital Securities and Exchange Commission on October 3, 2005
Partners, LP
10.50 Escrow Agreement, dated September 2, 2005, by Incorporated by reference to Exhibit 99.4 to the
and between Medical Staffing Solutions, Inc., Company's Form 8-K as filed with the United States
Cornell Capital Partners, LP and David Gonzalez, Securities and Exchange Commission on October 3,
Esq., as Escrow Agent 2005
10.51 Security Agreement, dated September 2, 2005, by Incorporated by reference to Exhibit 99.5 to the
and between Medical Staffing Solutions, Inc. and Company's Form 8-K as filed with the United States
Cornell Capital Partners, LP Securities and Exchange Commission on October 3, 2005
10.52 Irrevocable Transfer Agent Instructions, dated Incorporated by reference to Exhibit 99.6 to the
September 2, 2005 Company's Form 8-K as filed with the United States
Securities and Exchange Commission on October 3, 2005
10.53 Warrant, effective August 10, 2005, issued by Incorporated by reference to Exhibit 99.7 to the
Medical Staffing Solutions, Inc. to Cornell Company's Form 8-K as filed with the United States
Capital Partners, LP Securities and Exchange Commission on October 3, 2005
10.54 Investment Agreement, dated December 13, 2005, Incorporated by reference to Exhibit 10.1 to the
by and between Medical Staffing Solutions, Inc. Company's Current Report on Form 8-K as filed with
and Cornell Capital Partners, LP the United States Securities and Exchange Commission
on January 18, 2006
22
EXHIBIT NO.
- --------------------------------------------------------------------------------------------------------------------
10.55 Certificate of Designation of Series A Preferred Incorporated by reference to Exhibit 10.2 to the
Shares, as filed with the Secretary of State for Company's Current Report on Form 8-K as filed with
the State of Nevada on December 16, 2005 the United States Securities and Exchange Commission
on January 18, 2006
10.56 Investor Registration Rights Agreement, dated Incorporated by reference to Exhibit 10.3 to the
December 13, 2005, by and between Medical Company's Current Report on Form 8-K as filed with
Staffing Solutions, Inc. and Cornell Capital the United States Securities and Exchange Commission
Partners, LP on January 18, 2006
10.57 Escrow Agreement, dated December 13, 2005, by Incorporated by reference to Exhibit 10.4 to the
and among Medical Staffing Solutions, Inc., Company's Current Report on Form 8-K as filed with
Cornell Capital Partners, LP and David Gonzalez, the United States Securities and Exchange Commission
Esq., as Escrow Agent on January 18, 2006
10.58 Irrevocable Transfer Agent Instructions, dated Incorporated by reference to Exhibit 10.5 to the
December 13, 2005, by and among Medical Staffing Company's Current Report on Form 8-K as filed with
Solutions, Inc., David Gonzalez, Esq. and the United States Securities and Exchange Commission
Holladay Stock Transfer, Inc. on January 18, 2006
10.59 Warrant, dated December 13, 2005, issued by Incorporated by reference to Exhibit 10.6 to the
Medical Staffing Solutions, Inc. to Cornell Company's Current Report on Form 8-K as filed with
Capital Partners, LP the United States Securities and Exchange Commission
on January 18, 2006
14.1 Code of Ethics Incorporated by reference to Exhibit 14.1 to the
Company's Annual Report on Form 10-KSB as filed with
the United States Securities and Exchange Commission
on April 9, 2004
31.1 Certification pursuant to 15 U.S.C. Section Provided herewith
7241, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section Provided herewith
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
matter of Azmat Ali v. TeleScience Current Report on Form 8-K as filed with the SEC on
International, Inc., et al. (At Law No. March 6, 2006
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
the matter of Azmat Ali v. TeleScience Current Report on Form 8-K as filed with the SEC on
International, Inc., et al. (At Law No. March 6, 2006
288574) in the Circuit Court of Fairfax
County, Virginia
23
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.
August 20, 2007 MEDICAL STAFFING SOLUTIONS, INC.
By: /s/ Brajnandan B. Sahay
-----------------------------------------------
Name: Brajnandan B. Sahay,
Title: President, Chief Executive Officer and Director
24