SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
AMENDMENT NO. 1 TO FORM 10-Q
----------------------------------------
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 30, 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)
(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 January 14, 2005, we had
13,435,470 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 three
months ended November 30, 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 10Q due to the fact that the financial
statements for this period were not reviewed by an accountant who was registered
with the Public Company Accounting Oversight Board ("PCAOB"). The accountant has
applied for registration with PCAOB and has not received approval or denial with
regard to its application. In the interim, the Company has engaged an accountant
registered with the PCAOB in the event that the current accountant is not
registered in a timely manner. The Company intends to file an amended 10Q with
the reviewed financial statements as soon as possible.
Comprehensive Healthcare Solutions, Inc.
FORM 10-Q
Table of Contents
Page
----
PART I FINANCIAL INFORMATION................................................. 1
Item 1. Financial Statements................................................ 1
Balance Sheet as of November 30, 2004 and February 29, 2004......... 1
Statement of Operations November 30, 2004 and 2003 ................. 2
Statements of Cash Flow November 30, 2004 and 2003.................. 3
Notes to Financial Statements....................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk ......... 12
Item 4. Controls and Procedures ........................................... 13
PART II. OTHER INFORMATION.................................................. 14
Item 6. Exhibits and Reports on Form 8-K.................................... 14
SIGNATURES................................................................... 14
Comprehensive Healthcare Solutions Inc.
and Subsidiaries
(F/K/A Nantucket Industries, Inc.)
Consolidated Balance Sheets (Unaudited)
=======================================================================================================================
November 30, February 29,
2004 2004
Not reviewed Unaudited
-----------------------------------------------------------------------------------------------------------------------
Assets (1)
Cash and cash equivalents $ 68,462 $ 172,429
Accounts receivable 144,906 147,954
Inventories 4,045 3,870
Prepaid expenses 224,077 73,067
Stock subscription receivable 35,000 160,800
Other current assets -- 5,000
-----------------------------------------------------------------------------------------------------------------------
Total current assets 476,490 563,120
-----------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 63,455 61,027
Other assets, net
Goodwill 176,975 --
Covenant not to compete 300,000 300,000
Customer list 340,002 260,000
Prepaid expenses 259,532 223,750
-----------------------------------------------------------------------------------------------------------------------
$ 1,616,454 $ 1,407,897
=======================================================================================================================
Liabilities and Stockholders' Equity
Accounts payable $ 155,905 $ 106,768
Loans payable, current portion 3,073 15,000
Obligation under capital lease, current portion 2,598 --
Pre-petition taxes 3,964 3,964
-----------------------------------------------------------------------------------------------------------------------
Total current liabilities 165,540 125,732
Line of credit 30,000 30,000
Loan payable, net of current portion 6,927 --
Obligation under capital lease, net of current portion 1,340 --
Pre-petition taxes, net of current portion 19,821 19,821
-----------------------------------------------------------------------------------------------------------------------
Total liabilities 223,628 175,553
-----------------------------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock, $.10 par value; authorized 20,000,000 shares; 1,323,396 1,166,730
issued 13,233,959
Additional paid-in capital 14,363,215 13,534,031
Common stock subscribed 35,000 160,800
Accumulated deficit (14,328,785) (13,629,217)
-----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,392,826 1,232,344
-----------------------------------------------------------------------------------------------------------------------
$ 1,616,454 $ 1,407,897
=======================================================================================================================
(1) Derived from audited financial statements
See accompanying notes to financial statements.
1
Comprehensive Healthcare Solutions Inc.
and Subsidiaries
(F/K/A Nantucket Industries, Inc.)
Consolidated Statements of Operations (Unaudited)
=========================================================================================
Quarters ended November 30, 2004 2003
Not reviewed Not reviewed
-----------------------------------------------------------------------------------------
Net sales $ 135,510 $ 103,086
Cost of sales 100,824 97,946
-----------------------------------------------------------------------------------------
Gross profit 34,686 5,140
Selling, general and administrative expenses 310,573 57,745
-----------------------------------------------------------------------------------------
Loss from operations (275,887) (52,605)
Other expense:
Interest expense 207 4,071
Depreciation and amortization 11,720 22,415
-----------------------------------------------------------------------------------------
Total other expense 11,927 26,486
-----------------------------------------------------------------------------------------
Loss before income taxes (287,814) (79,091)
Income taxes -- --
-----------------------------------------------------------------------------------------
Net loss (287,814) (79,091)
Net loss per share - basic and diluted (.02) (.01)
-----------------------------------------------------------------------------------------
Weighted average common shares outstanding 12,855,167 10,162,114
=========================================================================================
See accompanying notes to financial statements.
2
Comprehensive Healthcare Solutions Inc.
and Subsidiaries
(F/K/A Nantucket Industries, Inc.)
Consolidated Statements of Cash Flows (Unaudited)
===========================================================================================================
Quarters ended November 30, 2004 2003
Not reviewed Not reviewed
-------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(287,814) $ (79,091)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 11,720 22,415
Decrease (increase) in assets:
Accounts receivable 980 (24,259)
Inventories 770 (3,175)
Prepaid expenses (102,247) (125,000)
(Decrease) increase in liabilities:
Accounts payable 33,701 3,300
-------------------------------------------------------------------------------------------------------------
Net cash used by operating activities (342,890) (205,810)
-------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (1,621) --
-------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Issue of stock for operations 212,500 115,000
Proceeds from debenture -- 50,000
Payment on capital leases (633) --
-------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 211,867 175,000
-------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (132,644) (30,810)
Cash and cash equivalents, beginning of period 201,106 65,098
-------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 68,462 $ 34,288
=============================================================================================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 207 $ 4,071
Income taxes $ -- $ --
See accompanying notes to financial statements.
3
Nantucket Industries, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
1. Summary of Significant Accounting Policies
a. The Company
Nantucket Industries, Inc. and its wholly owned subsidiaries (the
"Company") were inactive from October 1999 until January 26, 2002. At that
date a reverse merger with Accutone Inc. and Subsidiary occurred. (See note
1) Accutone Inc. is engaged in the business of selling and distributing
hearing aids and providing the related audio logical services.
b. Principles of Consolidation
The consolidated financial statements include the accounts of Nantucket
Industries, Inc. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
As a result of the above described acquisition, Nantucket Industries, Inc.
(together with Accutone's wholly-owned subsidiary) has no business or
assets other than those which it acquired through its acquisition of
Accutone.
c. Accounts Receivable
An allowance for doubtful accounts is provided based upon historical bad
debt experience and periodic evaluations of the aging of the accounts. No
allowance was considered necessary since to date there has been no bad debt
expense.
d. Property, Plant and Equipment
Property and equipment are stated at cost. Depreciation is computed for
financial statement purposes, using the straight-line method over the
estimated useful life. For income tax purposes, depreciation is computed
using statutory rates.
e. Inventories
Inventories are stated at the lower of costs (first-in, first-out method)
or market.
f. Intangible Assets
Intangible assets include customer lists, which are stated at cost.
Amortization is computed for financial statement and tax purposes using the
straight-line method over 15 years.
g. Income Taxes
The Company and its wholly owned subsidiaries file a consolidated federal
income tax return. Deferred income taxes arise as a result of differences
between financial statement and income tax reporting
4
Nantucket Industries, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
h. Earnings (Loss) Per Common Share
In fiscal year 1998, the Company adopted Statement of Financial Accounting
Standards No. 128 (SFAS No. 128), Earnings Per Share, which requires public
companies to present earnings per share and, if applicable, diluted
earnings per share. All comparative periods must be restated as of February
28, 1998 in accordance with SFAS No. 128. Basic earnings per share are
based on the weighted average number of common shares outstanding without
consideration of potential common share equivalents. Diluted earnings per
share are based on the weighted average number of common and potential
common shares outstanding. The calculation takes into account the shares
that may be issued upon exercise of stock options, if any, reduced by the
shares that may be repurchased with the funds received from the exercise,
based on the average price during the year.
i. Reporting Comprehensive Income
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130 (SFAS No. 130),
Reporting Comprehensive Income, which is effective for the Company's year
ending February 27, 1999. SFAS No. 130 addresses the reporting and
displaying of comprehensive income and its components. Earnings (loss) per
share will only be reported for net earnings (loss), and not for
comprehensive income. Adoption of SFAS No. 130 relates to disclosure within
the financial statements and is not expected to have a material effect on
the Company's financial statements.
j. Segment Information
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131 (SFAS No. 131), Disclosure About Segments of an
Enterprise and Related Information, which is effective for the Company's
year ending February 27, 1999. SFAS No. 131 changes the way public
companies report information about segments of their business in their
financial statements and requires them to report selected segment
information in their quarterly reports. Adoption of SFAS No. 131 relates to
disclosure within the financial statements and is not expected to have a
material effect on the Company's financial statements.
k. Fiscal Year The Company's fiscal year ends February 28.
5
Nantucket Industries, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
l. Reclassification
Certain prior year amounts have been reclassified in order to conform to
the current year's presentation.
m. Use of Estimates
In preparing the Company's financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure 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.
n. Impairment of Long-Lived Assets
The Company applies Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of. Accordingly, when indicators of impairment are
present, the Company periodically evaluates the carrying value of property,
plant and equipment and intangibles in relation to the operating
performance and future undiscounted cash flows of the underlying business.
The Company adjusts carrying amount of the respective assets if the
expected future undiscounted cash flows are less than their book values. No
impairment loss was required in fiscal year 2004.
o. Fair Value of Financial Instruments
Based on borrowing rates currently available to the Company for debt with
similar terms and maturities, the fair value of the company's long-term
debt approximate the carrying value. The carrying value of all other
financial instruments potentially subject to valuation risk, principally
cash, accounts receivable and accounts payable, also approximate fair
value.
p. Goodwill and Other Intangible Assets
The Company applies Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" (SFAS 142). Accordingly, the Company
ceased amortization of certain intangible assets i.e. the covenant not to
compete, effective at the beginning of its February 28, 2003 fiscal year.
An intangible asset with an indefinite useful life should be tested for
impairment in accordance with the guidance in SFAS 142. A impairment loss
would be recorded for any intangible that is determined to be impaired. No
impairment loss was required in fiscal year 2004.
6
Nantucket Industries, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
q. Advertising Costs
Costs for newspaper and other media advertising are expensed as incurred
and were $18,147, $1,686 and $0 in 2003, 2002 and 2001, respectively.
r. Sales return policy
The Company provides to all patients purchasing hearing aids a specific
return period, a minimum of 45 days, if the patient is dissatisfied with
the product. The Company does not provide an allowance in accrued expenses
for returns since actual returns for this fiscal year were less than 2%.
The return period can be extended an additional 15 days at the discretion
of the dispensing audiologist. All the manufacturers that supply the
Company accept all returns back for full credit within these return
periods.
2. Concentration of Risk
Currently approximately 70% of the reorganized Company's business is based
on contracts with The New York State Medical Assistance Program (Medicaid)
and Empire Medicare Service (Medicare).
3. Acquisition of Audiology Practice
On February 28, 2002 the Company executed a contract with Park Avenue
Medical Practice Associates, P.C. and Park Avenue Health Care Management,
Inc. The Park Avenue Group directly employs medical professional personnel,
including physicians in both general and specialty practices and other
health care professionals such as podiatrists, audiologists, psychologists
and psychotherapists.
Nursing homes and long term care facilities contract with Park Avenue for
the services of Park Avenue's medical professionals, on a pre-determined
schedule or on an as-needed basis. Pursuant to the terms of the agreement
Park Avenue contributed its entire audiology practice to the Company. The
contract also calls for Brad I. Markowitz, the president of Park Avenue
Management to join the Company's Board of Directors. Mr. Markowitz is a
banker by trade and has been with Park Avenue since 1995. At that time Park
Avenue was servicing approximately seven nursing homes. Under his tutelage
Park Avenue has grown to service over seventy long term care facilities. In
addition, Mr. Markowitz serves on the Board of Trustees of several private
companies.
The Company issued 1,200,000 shares of restricted common stock to acquire
the audiology practice of Park Avenue Medical Associates P.C. Under the
agreement the Company gained access to approximately 70 nursing homes to
provide complete audiology services. As of February 28, 2004 the Company
has entered into contracts with approximately 38 of these nursing homes. In
addition, Park Avenue will continue to provide additional access to any new
nursing homes they have contact with.
7
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 10Q due to the fact that the financial
statements for this period were not reviewed by an accountant who was registered
with the Public Company Accounting Oversight Board ("PCAOB"). The accountant has
applied for registration with PCAOB and has not received approval or denial with
regard to its application. In the interim, the Company has engaged an accountant
registered with the PCAOB in the event that the current accountant is not
registered in a timely manner. The Company intends to file an amended 10Q with
the reviewed financial statements as soon as possible.
Overview
As a result of the acquisition of Comprehensive Network Solutions, Inc.,
headquartered in Austin, Texas on March 1, 2004 we 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
line with additional benefits and alternative benefit funding options. As a
result of the shift in focus of our business we changed our name to
Comprehensive Healthcare Solutions, Inc. to better reflect the marketing of our
line of medical care discount cards. 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 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 the
groups set forth above whose medical care costs are covered through existing
traditional defined benefit health plans and who have experienced large
percentage increases in premiums as well as shrinking coverage and higher
deductibles.
Marketing efforts during this period resulted in management recognizing the need
to have a strong, structured and defined working relationship with organizations
experienced in the sales, distribution and administration of membership
healthcare discount savings programs. Additionally, management recognized the
need for structured and defined access agreements with quality healthcare
professionals through national preferred provider organizations.
Management believes the core of our needs have been met with the finalization of
a joint venture agreement with Alliance HealthCard, inc. (ALHC) on December 18,
2004. Alliance HealthCard, Inc. creates, markets and distributes membership
discount savings programs to predominantly underserved markets, where
individuals have either limited or no health benefits. These programs allow
members to obtain substantial discounts in 16 areas of health care services
including physician visits, hospital stays, pharmacy, dental, vision, patient
advocacy and alternative medicine among others. The company offers third-party
organizations self-branded or private-label healthcare discount savings programs
through its existing provider network agreements and systems. Founded in 1998 by
health care and finance experts, Alliance HealthCard now provides access to a
network of over 600,000 healthcare professionals for the over 800,000
individuals covered by the Alliance HealthCard. Alliance HealthCard, inc. is
based in Norcross, GA.
On January 3, 2005 the CMHS/ Alliance HealthCard, Inc, joint venture signed an
agreement with Financial Independence Company (FIC), a wholly owned subsidiary
of National Financial Partners (NFP). Under this agreement, FIC will focus its
marketing and sales efforts for our instant prescription discount card and the
dental and vision discount card to the Cendant Corporation companies. FIC will
also market similar healthcare discount savings cards to their other clients and
prospects. Initial marketing through this agreement is scheduled to begin mid
January 2005.
8
In addition, the joint venture with Alliance Healthcard, we entered into a joint
marketing agreement on November 22, 2004 with Thesco Benefits, LLC to strengthen
our sales operations. Thesco is the 10th largest U.S. benefit specialist company
according to the 2004 listing of Business Insurance and specializes as an
employee benefit broker and consultant. Joint marketing efforts are expected to
begin during February 2005.
Management believes these joint ventures and marketing agreements will add to
our revenues and potential profitability. These agreements allow us to develop
product pricing unique to the healthcare discount savings market. Management
acknowledges that these agreements are positive steps but cannot guarantee that
the results of these efforts will succeed.
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 portion 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 and Medicare payments, which constitute
approximately 40% of our reimbursement will continue to take 90 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 our concentration on acquiring new businesses in related and unrelated
medical fields. We believe that these revenues should 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. It was anticipated that the facility would commence operations in
November of 2004, however, actual operations commenced in late December 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 we believe that this expansion in audiological
services will increase revenues and profitability, we can not be certain that
the result of these efforts will succeed or that we will have sufficient
operating capital to continue to this expansion of our services.
Our expectations are that the recently signed joint venture agreement with
Alliance Healthcard, Inc. as well as the acquisition of Comprehensive Network
Solutions combined with accelerated marketing of the medical health care
discount cards will add to both the Company's 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 any
additional working capital realized in the last six months or that they will
achieve the required sales volume to generate anticipate profitability.
THREE MONTHS ENDED NOVEMBER 30, 2004 COMPARED TO THREE MONTHS ENDED NOVEMBER 30,
2003
Sales for the third quarter of fiscal year ended 2004 and 2003 were $135,510 and
$103,086, respectively. Although not material to our overall profit or loss,
management attributes the revenue increase to higher pricing of private sales
and hearing aids and related products.
Revenues from the audiological segment of the business have not significantly.
This can be attributed to management being actively involved in pursuing
potential mergers and/or acquisition candidates in related and unrelated 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.
9
Cost of sales were $100,824 and $97,946, respectively. The increase was due to
the higher costs of retaining audiological personnel as well as an increase in
sales and related product costs.
Selling, general and administrative costs were $310,573 and $57,745,
respectively. The difference is attributable to the costs related to the
expansion of marketing and sales operations as well as additional costs directly
attributable to the operations of Comprehensive Network Solutions, Inc. These
costs include consulting fees administration fees and additional costs of
business related to the medical care discount card product.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $(342,890) and $(205,810),
respectively. Cash flows from financing activities were $211,867 and $175,000,
respectively. These changes were due primarily to the issuance of restricted
common stock of $212,500. These proceeds were primarily used to begin marketing
"The Solution Card" the medical care discount family cards of the company as
well as our subsidiary, Comprehensive Network Solutions, Inc., including
supplying working capital to our Austin Texas subsidiary.
Working capital totaled $310,950 and $153,175, respectively for the quarter
ended November 30, 2004 and November 30, 2003, respectively. The increase in
working capital was primarily attributable to an increase in cash of $34,174, an
increase in prepaid expenses of $151,010; and an increase in stock subscription
receivables of $35,000. 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 the
development of the "Solution Card", the Company's newly developed and expanded
medical care discount card.
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.
As a result of the acquisition of Comprehensive Network Solutions, Inc.,
headquartered in Austin, Texas we 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 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 changed our name to Comprehensive Healthcare Solutions,
Inc. to better reflect our marketing of our Line of medical care discount cards.
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.
Although we do 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. Our 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.
10
As a result of our marketing efforts during this period, we recognized the need
to have a strong, structured and defined working relationship with organizations
experienced in the sales, distribution and administration of membership
healthcare discount savings programs. Additionally, we recognized the need for
structured and defined access agreements with quality healthcare professionals
through national preferred provider organizations.
We believe the core of those needs has been met with the finalization of a joint
venture agreement with Alliance HealthCard, Inc. and a joint marketing agreement
with Thesco Benefits, LLC. Alliance HealthCard, Inc. creates, markets and
distributes membership discount savings programs to predominantly underserved
markets, where individuals have either limited or no health benefits. Joint
marketing and sales efforts commenced in late December 2004. Thesco is the 10th
largest U.S. benefit specialist company according to the 2004 listing of
Business Insurance and specializes as an employee benefit broker and consultant.
Joint marketing efforts are expected to begin during February 2005.
On January 3, 2005 the CMHS/ Alliance HealthCard, Inc, joint venture signed an
agreement with Financial Independence Company (FIC), a wholly owned subsidiary
of National Financial Partners (NFP). Under this agreement, FIC will focus its
marketing and sales efforts for our instant prescription discount card and the
dental and vision discount card to the Cendant Corporation companies. FIC
additionally agrees to market similar healthcare discount savings cards to their
other clients and prospects. Initial marketing through this agreement is
scheduled to begin mid January 2005.
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.
11
Our goal is to implement our 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. In addition, in order to implement our business model we have
entered into the joint venture agreement with Alliance Healthcard, Inc.
and a joint marketing agreement with Thesco Benefits, LLC. We have already met
with and presented our various discount health care products and services to one
Fortune 500 Company as well as various unions, fraternal organizations and large
employer groups. We estimate that in order to achieve our goals, we will require
financing from sources other than cash flow, within the next twelve months, in
an amount ranging from $750,000 to $1,000,000. Since the acquisition of
Comprehensive, we have been successful in raising approximately $450,000 through
private equity offerings. Although we have previously been moderately successful
in raising capital, we believe that the current financial market upturn as well
as the benefits of the acquisition of Comprehensive Network Solutions, Inc. and
the joint venture with Alliance Healthcard and the joint marketing with Thesco
will assist us in potentially raising additional capital. Management believes
that the acquisition of Comprehensive and the aggressive marketing of our line
of medical care discount cards will add significant revenues and profitably
during the upcoming year to the consolidated Comprehensive family of businesses.
There are no assurances that we will be able to raise the funds necessary to
expand our business operations or that these business operations will be
profitable.
We changed our name to Comprehensive HealthCare Solutions, Inc. in order to
better reflect the direction that the Company was taking in expanding our
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 remained 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 2004.
We believe the joint venture agreement with Alliance Healthcard and the joint
marketing agreement with Thesco will add to our revenues and potential
profitability. These agreements allow us to develop product pricing unique to
the healthcare discount savings market. While we believe that these agreements
are positive steps they cannot guarantee that the results of these efforts will
succeed.
In order for us to be successful with our business plan, we will require
financing in a minimum amount of $500,000 during the next six months. We intend
to use our best efforts to raise between $750,000 and $1,000,000 in equity or
convertible debt financing from a private placement of our securities within the
next three to six months. At this time, we are unable to state what the terms of
the anticipated private placement will be or the amount of shareholder dilution
which will result from the intended financing.
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.
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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.
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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
Chief Executive Officer and
Chief Financial Officer
Dated: February 28, 2005
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