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 August 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)
NANTUCKET INDUSTRIES, INC.
(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 October 20, 2004, we had
13,095,470 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 six
months ended August 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
August 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-5-8
F-3
Comprehensive Healthcare Solutions ,Inc. and Subsidiaries
(f/k/a Nantucket Industries, Inc. and Subsidiaries)
Amended Condensed Consolidated Balance Sheet
August 31, 2004
---------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 201,106
Accounts receivable, net 123,386
Other current assets 4,815
Total current assets 329,307
Property and equipment, net 66,888
Other assets, net
Goodwill 176,975
Intangible assets 646,668
---------------------
Total Assets $ 1,219,838
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 122,204
Accrued liabilities 9,608
---------------------
Total Current Liabilities 131,812
Revolving line of credit 30,000
Other liabilities 28,748
---------------------
Total Liabilities 190,560
---------------------
Stockholders' equity:
Common stock, $.10 par value: 20,000,000
shares, 12,808,959 shares issued 1,280,896
Additional paid-in capital 14,193,215
Deferred stock-based consulting (100,000)
Accumulated deficit (14,344,833)
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Total stockholders' equity 1,029,278
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Total Liabilities and Stockholders' Equity $ 1,219,838
=====================
See the accompanying notes to the financial statements
F-2
Comprehensive Healthcare Solutins, Inc. and Subsidiaries
(f/k/a Nantucket Industries, Inc. and Subsidiaries)
Amended Condensed Consolidated Statements of Operations
For the Three and Six Months Ended August 31, 2004 and 2003
------------------- ------------------- ----------------- ----------------
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
August 31, 2004 August 31, 2003 August 31, 2004 August 31, 2003
------------------- ------------------- ----------------- ----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $ 101,468 $ 102,704 $ 216,947 $ 206,367
Cost of sales 94,934 75,307 166,846 148,487
------------------- ------------------- ----------------- ----------------
Gross profit 6,534 27,397 50,101 57,880
Selling, general and administrative expenses 255,497 61,117 479,549 115,951
------------------- ------------------- ----------------- ----------------
Loss from operations (248,963) (33,720) (429,448) (58,071)
Other expense:
Interest expense 833 705 2,227 2,625
Depreciation and amortization 12,702 12,147 25,079 23,760
------------------- ------------------- ----------------- ----------------
Total other expense 13,535 12,852 27,306 26,385
------------------- ------------------- ----------------- ----------------
Loss before income taxes (262,498) (46,572) (456,754) (84,456)
Income taxes - - - -
------------------- ------------------- ----------------- ----------------
Net loss $ (262,498) $ (46,572) $ (456,754) $ (84,456)
=================== =================== ================= ================
Loss per share - basic and diluted (0.02) (0.00) (0.04) (0.01)
=================== =================== ================= ================
Weighted average shares outstanding -
basic and diluted 12,684,611 9,888,434 25,035,791 18,719,004
=================== =================== ================= ================
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 theThree and Six Months Ended August 31, 2004 and 2003
--------------- ----------------
Six Months Six Months
Ended Ended
August 31, 2004 August 31, 2003
--------------- ----------------
(Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net loss $ (456,754) $ (84,456)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for bad debt - -
Depreciation and amortization 18,563 19,118
Decrease (increase) in assets:
Accounts receivable 2,068 (2,356)
Inventories - -
Prepaid expenses 4,055 (190,105)
Accounts payable 15,007 (13,266)
--------------- ----------------
Net cash used by operating activities (402,054) (271,065)
--------------- ----------------
Cash Flows from Investing Activities:
Purchases of property and equipment (11,722) (11,388)
Purchase of intangible assets (263,643) -
--------------- ----------------
Net cash used by investing activities (275,365) (11,388)
--------------- ----------------
Cash Flows from Financing Activities
Common stock issued 694,503 247,001
Proceeds from debenture - 100,000
Repayment of loan (5,000) -
Payments on capital lease (834) -
--------------- ----------------
Net cash provided by financing activities 688,669 347,001
--------------- ----------------
Net increase (decrease) in cash and cash equivalents 11,250 64,548
Cash and cash equivalents, beginning of the period 189,856 550
--------------- ----------------
Cash and cash equivalents, end of the period $ 201,106 $ 65,098
=============== ================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 833 $ 833
=============== ================
Income taxes $ - $ -
=============== ================
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
August 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 August
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.
F-5
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
As a result of the acquisition of Comprehensive Network Solutions, Inc.,
headquartered in Austin, Texas we have the changed the focus of our business
plan. We are now focused on specialty health benefits products, including, but
not limited to three levels of provider networks and one limited indemnity
medical insurance plan. Comprehensive Network Solutions' products have been
trademarked as ChiroCare Select, ChiroCare Advantage, ChiroCare Optima and CNS
500 Plan. We have been and will continue to work on expanding our product with
additional benefits and alternative benefit funding options. As a result of the
shift in focus of our business we have decided to change our name to
Comprehensive Healthcare Solutions, Inc. to better reflect our marketing of "The
Solution Card". Both Comprehensive Healthcare Solutions and The Solution Card
were trademarked by us for further protection for our new business operations.
These new expanded products are currently being offered to large employers,
fraternal organizations, union benefit funds, business associations, insurance
companies, municipalities and insurance agencies. The offerings are alternative
cost and quality benefit solutions to prospects and clients who are uninsured or
underinsured. These expanded products are also being offered to groups set forth
above whose medical care costs are covered through existing traditional defined
benefit health plans and have experienced large percentage increases in premiums
as well as shrinking coverage and higher deductibles.
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 90 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
with an early intervention provider to open an additional audiological facility
and has taken delivery of the audiology equipment required to operate the
facility and it is anticipated the facility will commence operations on November
1, 2004. The services provided by this facility 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 expansion in
audiological services will increase revenues and profitability, Management can
not be certain that the result of these efforts will succeed.
3
Management's expectations are that the acquisition of Comprehensive Network
Solutions and the accelerated marketing of the medical health care discount
cards will add to both revenues and profitability. It should be noted that the
expenses related to the sales and marketing of these discount cards have
utilized and will continue to utilize a major portion of the additional working
capital realized in the last six months. (See Outlook)
On June 28, 2004, the Company announced the signing of an agreement to provide
health care savings benefits to the employees of National Home Healthcare, Corp.
based in Scarsdale, NY. Such agreement was subsequently rescinded by the
parties.
THREE MONTHS ENDED AUGUST 31, 2004 COMPARED TO THREE MONTHS ENDED AUGUST 31,
2003
Sales for the third quarter of fiscal year ended 2004 and 2003 were $101,468 and
$102,704, respectively. Management attributes the revenue decrease due to the
summer season which usually creates a lag in revenues as well as the focus on
our new business operations 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 mergers 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.
Cost of sales were $94,934 and $75,307, respectively. The increase was due to
the higher costs of retaining audiological personnel as well as an increase in
product costs.
General and administrative costs were $255,497 and $61,117, respectively. The
difference is attributable to the costs related to the expansion of marketing
and sales operations from the acquisition of Comprehensive Network Solutions,
Inc. which included consulting fees, administration fees, costs of business
travel to the our subsidiary in Austin Texas as well as other related legal and
accounting expenses.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were ($402,054) and ($271,065),
respectively. Cash flows from financing activities were $688,669 and $347,001,
respectively. These changes were due primarily to the issuance of restricted
common stock of $694,503.These proceeds were primarily used to begin marketing
"The Solution Card" the medical care discount family cards of Comprehensive
Network Solutions, Inc. as well as supplying working capital to our Austin Texas
subsidiary.
Working capital totaled $197,495 for the quarter ended August 31, 2004.
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.
4
As a result of the acquisition of Comprehensive Network Solutions, Inc.,
headquartered in Austin, Texas we have the changed the focus of our business
plan. We are now focused on specialty health benefits products, including, but
not limited to threelevels of provider networks and one limited indemnity
medical insurance plan. Comprehensive Healthcare Solutions' products have been
trademarked as ChiroCare Select, ChiroCare Advantage, ChiroCare Optima and CNS
500 Plan. We have been and will continue to work on expanding our product with
additional benefits and alternative benefit funding options. As a result of the
shift in focus of our business we have decided to change our name to
Comprehensive Healthcare Solutions, Inc. to better reflect our marketing of "The
Solution Card". Both Comprehensive Healthcare Solutions and The Solution Card
were trademarked by us for further protection for our new business operations.
These new expanded products are currently being offered to large employers,
fraternal organizations, union benefit funds, business associations, insurance
companies, municipalities and insurance agencies. The offerings are alternative
cost and quality benefit solutions to prospects and clients who are uninsured or
underinsured. These expanded products also are being offered to groups set forth
above whose medical care costs are covered through existing traditional defined
benefit health plans and have experienced large percentage increases in premiums
as well as shrinking coverage and higher deductibles.
Comprehensive Network Solutions, Inc. and its parent, Comprehensive Healthcare
Solutions, Inc. specialize in creating, marketing and distributing value added
healthcare savings programs, services, and products. Together the Company will
give individuals, families, large employers, unions, fraternal and business
organizations access to healthcare providers offering up to 16 major healthcare
services at significantly discounted fees for a low annual charge. It is
intended to market these products in the West, Midwest and Southern United
States predominantly to underserved markets whereindividuals 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.
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 is and will continue to 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 Usual and Customary
------- -------------------
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
ancillary products in the course of the upcoming year.
5
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 $350,000 through private equity offerings. The Form 10-Q for the
period ended May 31, 2004 reflected that we had raised $2,000,000 through
private equity financing. This was an error and the number raised as of such
time was $200,000. 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 and the aggressive
marketing of "The Solution Card" will add significant revenues and profitably
during the upcoming year to the consolidated Comprehensive family of businesses.
The Company changed its name to Comprehensive 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 signed a consulting and employment agreement with Mr. Paul
S. Rothman 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 since May of 2004.
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.
6
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
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
7