SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 TO FORM 10-QSB
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-26715
COMPREHENSIVE HEALTHCARE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-0962699
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45 Ludlow Street, Suite 602
Yonkers, New York 10705
(Address of principal executive offices) (Zip Code)
(914) 375-7591
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 |_|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of July 20, 2004, we had
12,398,959 shares of common stock outstanding, $0.10 par value.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
BASIS OF PRESENTATION
The accompanying unaudited financial statements are presented in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The accompanying statements should be read in
conjunction with the audited financial statements for the year ended February
28, 2004. In the opinion of management, all adjustments (consisting only of
normal occurring accruals) considered necessary in order to make the financial
statements not misleading, have been included. Operating results for the three
months ended May 31, 2004 are not necessarily indicative of results that may be
expected for the year ending February 28, 2005. The financial statements are
presented on the accrual basis.
The Company is filing this amended 10QSB due to the fact that the financial
statements for this period were not audited by an accountant who was registered
with the Public Company Accounting Oversight Board ("PCAOB"). The Company
engaged an accountant registered with the PCAOB in order to file this amended
10QSB with the reviewed financial statements in a timely manner.
2
COMPREHENSIVE HEALTHCARE SOLUTIONS, INC.
(f/k/a NANTUCKET INDUSTRIES, INC. AND SUBSIDIARIES)
AMENDED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2004
TABLE OF CONTENTS
Page
Consolidated Balance Sheet F- 2
Consolidated Statements of Operations F- 3
Consolidated Statements of Cash Flows F- 4
Notes to the Consolidated Financial Statements F- 5 -7
F-1
Comprehensive Healthcare Solutions, Inc. and Subsidiaries
(f/k/a Nantucket Industries, Inc. and Subsidiaries)
Amended Condensed Consolidated Balance Sheet
May 31, 2004
---------------------
ASSETS
Current assets:
Cash and cash equivalents $ 189,856
Accounts receivable, net 139,721
Other current assets 4,125
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Total current assets 333,702
Property and equipment, net 66,429
Other assets, net
Goodwill 176,975
Intangible assets 653,334
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Total Assets $ 1,230,440
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 114,727
Accrued liabilities 21,500
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Total Current Liabilities 136,227
Revolving line of credit 30,000
Other liabilities 22,690
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Total Liabilities 188,917
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Stockholders' equity:
Common stock, $.10 par value: 20,000,000
shares, 12,398,959 shares issued 1,239,896
Additional paid-in capital 14,029,215
Deferred stock - based consulting (185,000)
Accumulated deficit (14,042,588)
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Total stockholders' equity 1,041,523
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Total Liabilities and Stockholders' Equity $ 1,230,440
=====================
See the accompanying notes to the financial statements
F-2
Comprehensive Healthcare Solutions, Inc. and Subsidiaries
(f/k/a Nantucket Industries, Inc. and Subsidiaries)
Amended Condensed Consolidated Statements of Operations
For the Three Months Ended May 31, 2004 and 2003
------------------- ------------------
Three Months Three Months
Ended Ended
May 31, 2004 May 31, 2003
------------------- ------------------
Net sales $ 115,479 $ 103,663
Cost of sales 71,912 73,180
------------------- ------------------
Gross profit 43,567 30,483
Selling, general and administrative expenses 224,052 54,834
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Loss from operations (180,485) (24,351)
Other expense:
Interest expense 1,394 1,920
Depreciation and amortization 12,377 11,613
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Total other expense 13,771 13,533
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Loss before income taxes (194,256) (37,884)
Income taxes - -
------------------- ------------------
Net loss $ (194,256) $ (37,884)
=================== ==================
Loss per share - basic and diluted (0.02) (0.00)
=================== ==================
Weighted average shares outstanding - 12,351,180 8,830,570
=================== ==================
basic and diluted
See the accompanying notes to the financial statements
F-3
Comprehensive Healthcare Solutions, Inc. and Subsidiaries
(f/k/a Nantucket Industries, Inc. and Subsidiaries)
Amended Condensed Consolidated Statements of Cash Flows
For the Three Months Ended May 31, 2004 and 2003
------------------- ------------------
Three Months Three Months
Ended Ended
May 31, 2004 May 31, 2003
------------------- ------------------
Cash Flows from Operating Activities:
Net loss $ (194,256) $ (37,884)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for bad debt 22,500 -
Depreciation and amortization 12,377 11,613
Decrease (increase) in assets:
Accounts receivable (14,267) 5,733
Inventories (255) 850
Prepaid expenses (26,010) -
Other current assets 5,000 (1,000)
Accounts payable 7,959 1,121
------------------- ------------------
Net cash used by operating activities (186,952) (19,567)
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Cash Flows from Investing Activities:
Purchases of property and equipment (288,088) -
Increase in other assets (81,288) -
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Net cash used by investing activities (369,376) -
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Cash Flows from Financing Activities
Issue of stock for operations 568,350 25,000
Proceeds from capital lease 5,405 -
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Net cash provided by financing activities 573,755 25,000
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Net increase (decrease) in cash and cash equivalents 17,427 5,433
Cash and cash equivalents, beginning of the period 172,429 550
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Cash and cash equivalents, end of the period $ 189,856 $ 5,983
=================== ==================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 1,394 $ 1,920
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Income taxes $ - $ -
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See the accompanying notes to the financial statements
F-4
Comprehensive Healthcare Solutions, Inc. and Subsidiaries
(f/k/a Nantucket Industries, Inc. and Subsidiaries)
Notes to Condensed Consolidated Financial Statements
May 31, 2004
NOTE 1 - ORGANIZATION
Comprehensive Healthcare Solutions, Inc. and its wholly owned subsidiaries
(f/k/a Nantucket Industries, Inc. and Subsidiaries), (the "Company") is engaged
in the business of selling and distributing hearing aids and providing the
related audio logical services.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying interim unaudited financial information has been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
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 management believes that the disclosures are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company as of May 31,
2004 and the related operating results and cash flows for the interim period
presented have been made. The results of operations of such interim period are
not necessarily indicative of the results of the full year. For further
information, refer to the financial statements and footnotes thereto included in
the Company's 10-KSB and Annual Report for the fiscal year ended February 29,
2004.
Use of Estimates
Use of estimates and assumptions by management is required in the preparation of
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates and assumptions.
Earnings Per Share
Basic earnings per share ("EPS") is computed by dividing earnings available to
common shareholders by the weighted-average number of common shares outstanding
for the period as required by the Financial Accounting Standards Board (FASB)
under Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Shares". Diluted EPS reflects the potential dilution of securities that could
share in the earnings.
3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Certain statements contained in this filing are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, such
as statements relating to financial results and plans for future business
development activities, and are thus prospective. Such forward-looking
statements are subject to risks, uncertainties and other factors that could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Potential risks and uncertainties
include, but are not limited to, economic conditions, competition and other
uncertainties detailed from time to time in the Company's filings with the
Securities and Exchange Commission.
The Company is filing this amended 10QSB due to the fact that the financial
statements for this period were not audited by an accountant who was registered
with the Public Company Accounting Oversight Board ("PCAOB"). The Company
engaged an accountant registered with the PCAOB in order to file this amended
10QSB with the reviewed financial statements in a timely manner.
Overview
Currently, net sales substantially refer to fees earned by the provision of
audiological testing in our offices as well as those provided on site in Nursing
Homes, Assisted Living Facilities, Senior Care Facilities and Adult Day Care
Centers as well as the sales and distribution of hearing aids generated in each
of these venues. A majority of our audiology sales have represented
reimbursement from Medicare, Medicaid and third party payors. Generally,
reimbursement from these parties can take as long as 120 to 180 days. With the
implementation of the billing of Medicare payers on-line we have recognized a
shorter time of reimbursement from 120 days to approximately 60 days. Medicaid
reimbursements can only be billed with various paper submissions which are
mailed on a weekly basis. While we have attempted to find a method of expediting
this paper submission process it seems unlikely that we will be able to
accomplish this in our near future. As a result, Medicaid payments, which
constitute approximately 60% of our reimbursement will continue to take 120 to
180 days to be realized.
Management had anticipated a growth in revenues resulting from the prior
acquisition of the audiology practice of Park Avenue. This has not come to
fruition. We believe that this was caused in part by our inability to attract
additional audiologists on a timely basis and insufficient working capital as
well as Management concentration of acquiring new businesses in related medical
fields. Management believes that these revenues will increase in future periods
by the utilization of a portion of our recent increases in working capital This
new capital will allow us to make improvements in the revenues streams and
profitability of our audiology practices. Management has signed a contract to
open an additional audiological facility which will concentrate its efforts on
early intervention child care in the field of audiology and believes that the
reimbursement rates and lower costs at this location will add to both revenues
and profitability. Although Management believes that this intended expansion in
audiological services will increase revenues and profitability, Management can
not be certain that the result of these efforts will succeed.
Management's expectations are that the acquisition of Comprehensive Network
Solutions and the marketing of the medical health care discount cards will
significantly add to both revenues and profitability. It should be noted that
the expenses related to the sales and marketing of these discount cards will
initially utilize major portions of the additional working capital realized in
the last six months. (See Outlook)
THREE MONTHS ENDED MAY 31, 2004 COMPARED TO THREE MONTHS ENDED MAY 31, 2003
Sales for the first quarter of fiscal year ended 2004 and 2003 were $115,479 and
$103,663, respectively. Management attributes the revenue increase to be due to
recognition of revenues from Comprehensive Network Solutions, Inc. which was
acquired March 1, 2004. Revenues from the audiological segment of the business
have not increased as anticipated by management. This can be attributed to
management being actively involved in pursuing potential merger and/or
acquisition candidates in related fields, which have diminished marketing
efforts by the company to attempt to increase the number of facilities being
serviced and therefore adding to our revenue base.
4
Cost of sales was $71,912 and $73,280, respectively. The minimal increase was
due to the fact that revenues also increased in approximately the same
proportions and management attempts to contain costs in the audiological portion
of the business.
General and administrative costs were $201,552 and $54,843, respectively. The
difference is attributable to the costs related to the purchase of Comprehensive
Network Solutions, Inc. which included consulting fees, administration fees and
other related legal and accounting expenses. For the most part the increase was
due to consulting fees which are currently being amortized and which were
substantially paid for by the issuance of our restricted common stock.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $(186,952) and $19,567, respectively.
Cash flows from financing activities were $573,755 and $25,000, respectively.
These changes were due primarily to the issuance of restricted common stock for
the acquisition of Comprehensive Network Solutions, Inc. totaling $405,050 and
proceeds from the sale of restricted common stock in the amount of $163,300 as
well as the proceeds from a capital lease of $5,405.
Working capital totaled $504,052 and $24,305, respectively for the quarter ended
May 31, 2004 and May 31, 2003, respectively. The increase is working capital was
attributable to an increase in cash of $183,873, an increase in accounts
receivable of $35,630; an increase in prepaid expenses of $91,010; and an
increase in stock subscription receivables of $174,000. For the most part,
management believes that these increase were due to its ability to raise
additional capital based upon interest generated by the acquisition of
Comprehensive Network Solutions, Inc. and its medical care discount card. We
anticipate that this medical care discount card will be marketed by
Comprehensive as well as Nantucket.
Outlook
On March 1, 2004 pursuant to a Stock Purchase Agreement, we acquired one hundred
percent (100%) of the issued and outstanding shares of common stock of
Comprehensive Network Solutions, Inc. based in Austin, Texas from the
Comprehensive shareholders in consideration for the issuance of a total of
250,000 restricted shares of our common stock to the Comprehensive shareholders.
Pursuant to the Agreement, Comprehensive became our wholly owned subsidiary.
Additional consideration of $60,000 was also paid to Comprehensive to be used as
working capital and we assumed a liability of $25,000 for marketing services
performed by an individual. Such liability was satisfied through the issuance of
25,000 shares of our restricted common stock to such individual. All shares
issued in this transaction have a holding period of two years.
Comprehensive Network Solutions, Inc. was organized in June 2002 with
headquarters in Austin, Texas. The company has been focused on specialty health
benefits products, including three levels of provider networks and one limited
indemnity medical insurance plan. These products have been trademarked as
ChiroCare Select, ChiroCare Advantage, ChiroCare Optima and CNS 500 Plan. The
company is currently working on expanding its product with additional benefits
and alternative benefit funding options. These new expanded products will be
offered through a captive retail sales operation to individuals and small
employers; and customized private label versions of the products through its
broker and consultant relationships to associations, unions political
subdivisions and large employers. The offerings are alternative cost and quality
benefit solutions to prospects and clients who are uninsured or underinsured
through existing traditional defined benefit health plans.
Comprehensive Network Solutions, Inc. and its parent, Nantucket Industries will
specialize in creating, marketing and distributing value added healthcare
savings programs, services, and products. Together the Company will give
individuals and families access to healthcare providers offering up to 16 major
healthcare services at significantly discounted fees for a low annual fee. It is
intended to market these products predominantly to underserved markets where
individuals either have limited health benefits, or no insurance. These markets
may vary widely from senior populations with Medicare (no prescription
benefits), part-time employees, to some of the over 40 million uninsured in the
United States looking for lower cost medical services and access to providers.
5
Although the Company does not sell insured plans the discounts realized by its
members through its programs typically range from 10% to 75% off providers'
usual and customary fees. The Company's programs require members to pay the
provider at the time of service, thereby eliminating the need for any insurance
claims filing. These discounts, which are similar to managed care discounts,
typically save the individual more than the cost of the program itself.
Membership Service Programs
The Company will initially offer memberships to individuals, large employers,
unions, union benefits funds, associations and insurance companies.
Cardholders will be offered discounts for products and services ranging from 10%
to 75% depending on the area of coverage and the specific procedures. Below are
examples of the range of discounts in the major service categories:
Discount
Off
Service Retail
------- ------
Dental Care 10-45%
Vision Care
Prescription eyeglasses 10-60%
Contact Lenses 10-60%
Sunglasses 20-50%
Lasik (vision correction) 10-30%
Hearing Aids 15-40%
Prescription Drugs 10-50%
Chiropractic Care 25%
Orthodontics 23-35%
Physical Therapy 15-20%
Fitness Centers Preferred
Rate
Acupuncture 25%
Physicians 20%-40%
Hospitals 20%-50%
The Company anticipates that it will be adding additional medical services and
products in the course of the upcoming year.
Our goal is to implement the Comprehensive business model initially in the North
East and then expand nationwide. In order to implement these goals, we are
interviewing potential qualified candidates to fill various positions of sales,
marketing and administration. To date, we have already met with and presented
our various discount health care products and services. We estimate that in
order to achieve these goals, we will require financing from sources other than
cash flow, within the next eighteen months, in an amount ranging from $750,000
to $1,000,000. Since the acquisition, we have been successful in raising
approximately $2,000,000 through private equity offerings. Although we have
previously been unsuccessful in raising significant capital, our management
believes that the current financial market upturn as well as the benefits of the
acquisition of Comprehensive Network Solutions, Inc. will assist us in
potentially raising additional capital. Management believes that the acquisition
of Comprehensive will add significant revenues and profitably during the
upcoming year to the consolidated Nantucket family of businesses.
The Company anticipates that it will change its name in the next quarter to
HealthCare Solutions, Inc. in order to better reflect the direction that the
Company is taking in expanding its marketing efforts in various segments of the
healthcare industry. In addition, the Company expects to sign an employment
agreement with Mr. Paul S. Rothman in the next quarter to become the President
of the Company. John Treglia will remain in his other current positions with the
Company. Mr. Rothman has been assisting the Company in the acquisition of
Comprehensive Network Solutions, Inc. and the development and implementation of
its new marketing concepts.
6
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may impact our financial position,
results of operations or cash flows due to adverse changes in market prices and
rates. Our short-term debt bears interest at fixed rates; therefore our results
of operations would not be affected by interest rate changes.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
Our principal executive officer and principal financial officer evaluated our
disclosure controls and procedures (as defined in rule 13a-14(c) and 15d-14(c)
under the Securities Exchange Act of 1934, as amended) as of a date within 90
days before the filing of this annual report (the Evaluation Date). Based on
that evaluation, our principal executive officer and principal financial officer
concluded that, as of the Evaluation Date, the disclosure controls and
procedures in place were adequate to ensure that information required to be
disclosed by us, including our consolidated subsidiaries, in reports that we
file or submit under the Exchange Act, is recorded, processed, summarized and
reported on a timely basis in accordance with applicable rules and regulations.
Although our principal executive officer and principal financial officer
believes our existing disclosure controls and procedures are adequate to enable
us to comply with our disclosure obligations, we intend to formalize and
document the procedures already in place and establish a disclosure committee.
Changes in internal controls
We have not made any significant changes to our internal controls subsequent to
the Evaluation Date. We have not identified any significant deficiencies or
material weaknesses or other factors that could significantly affect these
controls, and therefore, no corrective action was taken.
7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
a. Exhibits
b. Reports on Form 8-K
On March 16, 2004 we filed a Form 8-K with the SEC to disclose
the acquisition of Comprehensive Network Solutions, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPREHENSIVE HEALTHCARE SOLUTIONS, INC.
By: /s/ John H. Treglia
--------------------
JOHN H. TREGLIA
CEO, CFO and President
Dated: April 1, 2005
8