10QSB 1 v085635_10-qsb.txt 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
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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
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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
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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