f10qsb0507_chsi.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________________
FORM
10-QSB
___________________________
|x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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For
the quarterly period ended May 31, 2007
OR
|o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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Commission
file number 0-26715
COMPREHENSIVE
HEALTHCARE SOLUTIONS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
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58-0962699
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer Identification No.)
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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 |_|
The
Registrant is a shell company. 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 13, 2007, we had
17,577,109 shares of common stock outstanding, $0.10 par
value.
Item
1. Financial Statements
Comprehensive
Healthcare Solutions, Inc. and Subsidiaries
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Condensed
Consolidated Balance Sheet
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(Unaudited)
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May
31,
2007
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ASSETS
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Cash
and cash equivalents
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Property
and equipment, net
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LIABILITIES
AND STOCKHOLDERS’ DEFICIT
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Accounts
payable and accrued expenses
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Convertible
debentures, short term
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Total
current liabilities
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Convertible
debentures and notes, long term
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Preferred
stock, no par value; 5,000 shares
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authorized and no shares issued and outstanding -
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-
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Common
stock, $.10 par value: 50,000,000
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shares, 17,577,109 shares issued
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Additional
paid-in capital
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Total
stockholders’ deficit
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Total
liabilities and stockholders’ deficit
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The
accompanying notes are an integral part of these condensed consolidated
financial statements.
Comprehensive
Healthcare Solutions, Inc. and Subsidiaries
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Condensed
Consolidated Statements of Operations
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For
the Three Months Ended May 31,
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(Unaudited)
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2007
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2006
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Selling,
general and administrative expenses
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Gain
on derivative liabilities
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Total
other income (expense)
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Loss
before provision for income taxes
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Net
loss from continuing operations
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Discontinued
operations, net of tax
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Loss
per share - basic and diluted
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Weighted
average shares outstanding -
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The
accompanying notes are an integral part of these condensed consolidated
financial statements.
Comprehensive
Healthcare Solutions, Inc. and Subsidiaries
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Condensed
Consolidated Statements of Cash Flows
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For
the Three Months Ended May 31,
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(Unaudited)
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2007
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2006
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Cash
Flows from Operating Activities:
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$ |
(66,666 |
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$ |
(73,874 |
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Adjustments
to reconcile net loss to net cash
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used
in operating activities:
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Depreciation
and amortization
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Gain
on derivative liabilities
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(13,903 |
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(43,782 |
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Amortization
of debt discount
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Expense
for shares and warrants issued for services rendered
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Changes
in current assets and liabilities:
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(10,194 |
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Accounts
payable and accrued expenses
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Net
cash used in operating activities
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(12,060 |
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(82,810 |
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Cash
Flows from Financing Activities:
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Proceeds
from issuance of convertible debentures and notes
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Proceeds
from loans from related party
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Net
cash provided by financing activities
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Net
(decrease) increase in cash and cash equivalents
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(3,537 |
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Cash
and cash equivalents, beginning of the period
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Cash
and cash equivalents, end of period
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$ |
668
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$ |
52,842
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Supplemental
Disclosure of Cash Flow Information:
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Cash
paid during the period for:
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$ |
-
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$ |
15
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$ |
-
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$ |
-
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Non-cash
Investing and Financing Activities:
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Derivative
liability recorded
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$ |
(13,903 |
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$ |
(43,782 |
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Common
stock issued for services rendered
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$ |
50,000
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$ |
7,887
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The
accompanying notes are an integral part of these condensed consolidated
financial statements.
Comprehensive
Healthcare Solutions, Inc. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
NOTE
1 - ORGANIZATION
Comprehensive
Healthcare Solutions, Inc. and its wholly owned subsidiaries
(Company) was in the business of selling and distributing medical care discount
cards, hearing aids and providing audiological services. On January
3, 2007, the Company conveyed its interest in Accutone, Inc., a wholly owned
subsidiary, to Larry A. Brand. On January 3, 2007 Accutone entered
into an agreement with John Treglia, the Company’s Chief Executive Officer to
take title to the stock of Interstate Hearing Aid, Inc., a wholly owned
subsidiary of Accutone. See note 4.
NOTE
2 – GOING CONCERN
The
accompanying interim unaudited condensed consolidated financial statements
have
been prepared in conformity with accounting principles generally accepted in
the
United States of America which contemplate continuation of the Company as a
going concern. The Company has losses from operations for the three
months ended May 31, 2007. Further, the Company has inadequate
working capital to maintain or develop its operations, and is dependent upon
funds from private investors and the support of certain
stockholders.
These
factors raise substantial doubt about the ability of the Company to continue
as
a going concern. The financial statements do not include any
adjustments that might result from the outcome of these
uncertainties. In this regard, Management is proposing to raise any
necessary additional funds through loans and additional sales of its common
stock. There is no assurance that the Company will be successful in raising
additional capital.
NOTE
3 – BASIS OF PRESENTATION
The
unaudited condensed consolidated financial statements of the Company,
included in this Form 10-QSB have been prepared in accordance with accounting
principles generally accepted in the United States and the instructions to
Form
10-QSB and consequently do not include all disclosures required by Form 10-KSB.
Additional information may be obtained by referring to the Company’s Form 10-KSB
for the year ended February 28, 2007. In the opinion of management, all
adjustments (consisting only of normal recurring items) necessary for a fair
presentation of the financial information for the interim periods reported
in
this Form 10-QSB have been made.
The
accounting policies followed for quarterly financial reporting are the same
as
those disclosed in the Notes to Consolidated Financial Statements included
in
the Company’s Form 10-KSB filed with the Securities and Exchange Commission for
the fiscal year ended February 28, 2007. Certain amounts in the prior period
have been reclassified to conform to the current presentation.
NOTE
4 - DISCONTINUED OPERATIONS
On
January 3, 2007, the Company entered into an agreement to convey the Company’s
interest in Accutone, Inc., (Accutone). (Accutone), a 100% wholly owned
subsidiary, to a third party in consideration for the cancellation of a $218,500
loan issued by the third party on June 6, 2005 and accrued interest on the
loan. Accutone is a Pennsylvania corporation in the business of selling hearing
aid products.
On
January 3, 2007, Accutone entered into an agreement with John Treglia, the
Company’s Chief Executive Officer to take title to the stock of Interstate
Hearing Aid, Inc. (Interstate), a wholly owned subsidiary. Interstate is a
Pennsylvania corporation, which is insolvent, and which owes, among other
obligations, in excess of $350,000, primarily for federal and state withholding
taxes.
The
accompanying unaudited condensed consolidated financial statements and notes
reflect the operations of Accutone and Interstate as
discontinued operations for the three months ended May 31, 2006. There were
no
cash flows from investing or financing activities for discontinued operations
for the three months ended May 31, 2006.
Revenues
for Accutone and Interstate for the three months ended May 31, 2006 were $68,314
and $45,544, respectively.
COMPREHENSIVE
HEALTHCARE SOLUTIONS, INC. and SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
5- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue
Recognition
In
accordance with Emerging Issues Task Force (“EITF”) 00-21, we have determined
that certain of our contractual arrangements contain multiple deliverables
which
represent separate units of accounting, specifically, the initial hearing
screening and the subsequent delivery of the hearing aid and any follow up
services necessary. Revenue related to initial screening services is recognized
upon delivery of the screening services as there is no further obligation to
provide subsequent service, objective and reliable evidence of the fair value
of
these services exists and the delivery of these services have value to the
customer on a stand-alone basis. Revenue is recognized on the delivery of
hearing aids in accordance with Financial Accounting Standards Board Statement
of Financial Accounting Standards (“SFAS”) No. 48: Revenue Recognition When
Right of Return Exists when delivery of the product has occurred and follow
up service is completed assuming that collectibility is reasonably assured.
If
collection is doubtful, no revenue is recognized until such receivables are
collected. Generally, customers have a 45 day period in which to either return
the product or request follow up service; we therefore recognize revenue for
products delivered only upon expiration of the 45 day return
period.
Reporting
Comprehensive Income
Comprehensive
income approximates net income for all periods presented.
Earnings
(Loss) Per Common Share
Basic
earning (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares outstanding during the period. Diluted earning
per share is computed assuming the exercise of stock options, warrants and
convertible debentures, if any, under the treasury stock method and the related
income tax effects if not anti-dilutive. For loss periods, common share
equivalents are excluded from the calculation, as their effect would be
anti-dilutive.
Use
of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and 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.
Accounting
for Convertible Debentures, Warrants and Derivative Instruments
Statement
of Financial Accounting Standard (“SFAS”) No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended, requires all derivatives to be
recorded on the balance sheet at fair value. These derivatives, including
embedded derivatives in the Company’s structured borrowings, are separately
valued and accounted for on the Company’s balance sheet. Fair values for
exchange-traded securities and derivatives are based on quoted market prices.
Where market prices are not readily available, fair values are determined using
market based pricing models incorporating readily observable market data and
requiring judgment and estimates.
The
pricing model the Company uses for determining fair values of the Company’s
derivatives is the Black Scholes Pricing Model. Valuations derived from this
model are subject to ongoing internal and external verification and review.
The
model uses market-sourced inputs such as interest rates, exchange rates and
option volatilities. Selection of these inputs involves management’s judgment
and may impact net income.
In
particular, the Company uses volatility rates for a time period similar to
the
length of the underlying convertible instrument based upon the closing stock
price of the Company’s common. However, we do not use stock price information
prior to February 2002 when the Company emerged from bankruptcy. The Company
determined that share prices prior to this period do not reflect the ongoing
business valuation of the Company’s current operations. The Company uses a
risk-free interest rate, which is the U. S. Treasury bill rate, for a security
with a maturity that approximates the estimated expected life of our
derivative or security. The Company uses the closing market price of the
Company’s common stock on the date of issuance of a derivative or at the end of
a quarter when a derivative is valued at fair value. The volatility factor
used
in Black Scholes has a significant effect on the resulting valuation of the
derivative liabilities on the Company’s balance sheet. The initial volatility
for the calculation of the embedded and freestanding derivatives ranged from
115% to 190%, this volatility-rate will likely change in the future. The
Company’s stock price will also change in the future. To the extent that the
Company’s stock price increases or decreases, the Company’s derivative
liabilities will also increase or decrease, absent any change in volatility
rates.
In
September 2000, the Emerging Issues Task Force issued EITF 00-19, “Accounting
for Derivative Financial Instruments Indexed to and Potentially Settled in,
a
Company’s Own Stock,” (“EITF 00-19”) which requires freestanding contracts that
are settled in a company’s own stock, including common stock warrants, to be
designated as an equity instrument, asset or a liability. Under the provisions
of EITF 00-19, a contract designated as an asset or a liability must be carried
at fair value on a company’s balance sheet, with any changes in fair value
recorded in the company’s results of operations. A contract designated as an
equity instrument must be
COMPREHENSIVE
HEALTHCARE SOLUTIONS, INC. and SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
5- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
Accounting
for Convertible Debentures, Warrants and Derivative Instruments -
Continued
included
within equity, and no fair value adjustments are required from period to period.
In accordance with EITF 00-19, all of the Company’s warrants to purchase common
stock are accounted for as liabilities. The fair value of these warrants and
conversion options is shown on the Company’s balance sheet and the unrealized
changes in the values of these derivatives are shown in the Company’s
consolidated statement of operations as “Loss on derivative
liabilities.”
The
Company has penalty provisions in the registration agreements for its debentures
and warrants that require it to make certain payments in the event
of failure to maintain, for certain prescribed periods, an effective
registration statement for the common stock securities underlying the debentures
and the associated warrants and failure to maintain the listing of our common
stock for quotation on the Nasdaq National Market, the Nasdaq SmallCap Market,
the New York Stock Exchange or the American Stock Exchange after being so listed
or included for quotation, or if the common stock ceases to be traded on the
Over-the-Counter Bulletin Board (the “OTCBB”) or any equivalent replacement
exchange on the OTC Bulletin Board, NASDAQ National Market, NASDAQ SmallCap
or
New York Stock Exchange. The EITF, which has not been adopted, considers
alternative treatments including whether or not the registration right itself
is
a separate derivative liability, or if it is a derivative considered as a
combined unit with the conversion feature of a convertible instrument. If the
unit is considered separate, the EITF discusses possible alternative treatments
including the possibility that the combined unit is a derivative liability
only
if the maximum liquidated damages exceed the difference between the fair value
of registered and unregistered shares. In September 2005, the FASB staff
reported that the EITF postponed further deliberations on Issue No. 05-04 The
Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument
Subject to Issue No. 00-19 (“EITF 05-04”) pending the FASB reaching a conclusion
as to whether a registration rights agreement meets the definition of a
derivative instrument.
The
Company considers the liquidated damages provision in its various security
instruments to be combined with its registration rights and conversion
derivatives, and does not account for the provision as a separate
liability. The Company records any registration delay
payments as an expense in the period when incurred. If the FASB were to adopt
an
alternative view, the Company could be required to account for the registration
delay payments as a separate derivative. Accordingly, the Company would need
to
record the fair value of the estimated payments, although no authoritative
methodology currently exists for evaluating such computation.
Recent
Accounting Pronouncements
In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS
No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(SFAS 159) which permits entities to choose to measure many financial
instruments and certain other items at fair value that are currently required
to
be measured at fair value. SFAS 159 will be effective for the Company on March
1, 2008. The Company is currently evaluating the impact of adopting SFAS 159
on
its financial position, cash flows and results of operations.
In
September 2006, the FASB issued SFAS No. 157 (FAS 157), “Fair
Value Measurements,” which establishes a framework for measuring fair value in
accordance with GAAP and expands disclosures about fair value measurements.
FAS
157 does not require any new fair value measurements but rather eliminates
inconsistencies in guidance found in various prior accounting pronouncements.
FAS 157 is effective for fiscal years beginning after November 15, 2007.
The Company is currently evaluating the impact this standard will have on its
financial condition, results of operations, cash flows or
disclosures.
COMPREHENSIVE
HEALTHCARE SOLUTIONS, INC. and SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
6 – COMMON STOCK
On
May
24, 2007 the Company issued 400,000 and 100,000 shares of common stock to its
Chief Executive Officer and a consultant for compensation and services rendered;
respectively.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following discussion and analysis provides information which management believes
is relevant to an assessment and understanding of our financial condition.
The
discussion should be read in conjunction with our financial statements and
notes
thereto appearing in this form 10QSB. The following discussion and
analysis contains forward-looking statements, which involve risks and
uncertainties. Our actual results may differ significantly from the results,
expectations and plans discussed in these forward- looking
statements.
The
Company
We
were
previously in the business of audiological services directly, and indirectly
through our subsidiaries, Accutone Inc. and Interstate Hearing Aid Service
Inc.,
until January 3, 2007. Both subsidiaries had changed the focus of their
marketing to include, not only the individual, self-pay patients, but health
care entities and organizations which could serve as patient referral sources
for us. The hearing aid industry is competitively changing at a rapid pace
and
marketing of these services and competing with organizations with stronger
capital availability was becoming more difficult. As a result management decided
to divest these two subsidiaries as of January 3, 2007.
A
major
portion of our net sales were generated by fees earned by the provision of
audiological testing in our offices as well as a minor amount 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. In addition to the revenue generated from
our audiological services, management believed that revenues would increase
in
future periods as a result of increased distribution and marketing of our
medical discount cards as set forth herein. To position ourselves to take
advantage of this market, on March 1, 2004 pursuant to a Stock Purchase
Agreement, we acquired Comprehensive Network Solutions, Inc. Based on this
acquisition, we changed our name to Comprehensive Healthcare Solutions, Inc.
to
better reflect the fact that we operate in several medical venues. This
acquisition management believed would allow the Company to take full advantage
of the opportunity to become a major player providing access to discounted
health care provider networks and services. The Company was
unsuccessful in pursuing this business due to various factors including a lack
of sufficient working capital.
On
December 5, 2006, the Company entered into an agreement with Comprehensive
Associates, LLC (“Associates”) whereby certain assets of the Company were
transferred to Associates. These assets include, but are not limited to, all
of
the Company’s right, title, and interest, in, to, and under a Marketing
Affiliation Agreement with Alliance Heathcard, Inc. As consideration
for the assignment of assets, Associates agreed to cancel a $27,400 loan issued
June 16, 2006, and the Company’s obligation to reimburse Associates for legal
fees related to that loan in the maximum amount of $20,188.75. In further
consideration for the Transfer, Associates extended the repayment period for
the
$235,000 loan issued August 19, 2005 until April 5, 2007. Associates
continues to work with the Company on a revised working
arrangement.
On
January 3, 2007, the Company entered into an agreement to convey the Company’s
interest in Accutone, Inc. (“Accutone”), to Larry A. Brand (“Brand”) in
consideration for the cancellation of a $218,500 loan issued by Brand on June
6,
2006 and accrued interest on the loan. Accutone is a Pennsylvania corporation
in
the business of selling hearing aid products. The Company owns all of the issued
and outstanding shares of stock of Accutone. Accutone has been minimally
profitable in its operations within the last five years, its balance sheet
does
not reflect a positive liquidation value, and the shares of stock of Accutone
have no realizable value for the Corporation, as there is no viable market
for
its stock in light of its history. Brand has been active in the business of
hearing aid manufacturing and marketing and was a participant in the creation
of
Accutone, and desired to take ownership of the business.
On
January 3, 2007, Accutone entered into an agreement with John Treglia. Pursuant
to that agreement, Mr. Treglia agreed to take title to the
stock of Interstate Hearing Aid, Inc. (“Interstate”), Accutone’s wholly-owned
subsidiary, from Accutone upon the conveyance of the Accutone stock from Brand.
Interstate is a Pennsylvania corporation, which is insolvent, and which owes,
among other obligations, in excess of $250,000 in federal and state withholding
taxes for the years 2001 through 2006.
To
date
we have not been able to raise additional funds through either debt or equity
offerings. Without this additional cash we have been unable to pursue our plan
of operations and we no longer believe that we will be able to raise the
necessary funds to continue to pursue our business operations. Since we have
not
been able to raise funds, have entered into the above transaction and we have
ceased the pursuit of our business plan and are actively seek out and
investigating possible business opportunities with the intent to acquire or
merge with one or more business ventures.
Critical
Accounting Policies and Estimates
Our
discussion of our financial condition and results of operations is an analysis
of the unaudited condensed consolidated financial statements, which have been
prepared in conformity with accounting principles generally accepted in the
United States of America (“GAAP”), consistently applied. Although our
significant accounting policies are described in Note 5 of the notes to
condensed consolidated financial statements, the following discussion is
intended to describe those accounting policies and estimates most critical
to
the preparation of our consolidated financial statements. The preparation of
these unaudited condensed consolidated financial statements requires our
management to make estimates and assumptions that affect the reported amounts
of
assets, liabilities, revenues, expenses, and related disclosure of contingent
assets and liabilities. On an ongoing basis, we evaluate our estimates. We
base
our estimates on historical experience and on various other factors that we
believe to be reasonable, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates.
We
believe the following critical accounting policy affect the more significant
judgments and estimates used in the preparation of our consolidated financial
statements:
•
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We
have issued convertible debentures with embedded derivatives and
warrants,
which estimates and opinions that may change the nature of the accounting
treatment based on FAS 133, EITF 98-5 and EITF 00-19 among
others.
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Recently
Issued Accounting Pronouncements
In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS
No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(SFAS 159) which permits entities to choose to measure many financial
instruments and certain other items at fair value that are currently required
to
be measured at fair value. SFAS 159 will be effective for the Company on March
1, 2008. The Company is currently evaluating the impact of adopting SFAS 159
on
its financial position, cash flows and results of operations.
In
September 2006, the FASB issued SFAS No. 157 (FAS 157), “Fair
Value Measurements,” which establishes a framework for measuring fair value in
accordance with GAAP and expands disclosures about fair value measurements.
FAS
157 does not require any new fair value measurements but rather eliminates
inconsistencies in guidance found in various prior accounting pronouncements.
FAS 157 is effective for fiscal years beginning after November 15, 2007.
The Company is currently evaluating the impact this standard will have on its
financial condition, results of operations, cash flows or
disclosures.
THREE
MONTHS ENDED MAY 31, 2007 COMPARED TO THREE MONTHS ENDED MAY 31,
2006
Revenue
Revenue
for the three months ended May 31, 2007 and 2006 was $ 0 and $27,994,
respectively. The decrease in revenues is attributable to severe cash flow
problems that negatively impacted our ability to conduct our business as
structured and ultimately caused us to become and remain insolvent.
Cost
of sales
Cost
of
sales were $ 0 and $29,821 for in the three months ended May 31, 2007 and 2006,
respectively.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses were $34,974 and $27,437 for the
three months ended May 31, 2007 and 2006, respectively, a increase of $7,537,
or 27%. The increase is primarily attributable to an
increase in compensation expense.
Professional
Fees
Professional
fees were $12,575 and $39,325 for the three months ended May 31, 2007 and
2006, respectively, a decrease of
$26,750
or 68% due to reduced expense for consultants raising financing, legal and
accounting fees.
Other
income (expenses):
Interest
expense was $32,319 and $23,784 for the three months ended May 31, 2007 and
2006, respectively. Interest expense is primarily comprised of non-cash
amortization of debt discount.
Change
in
derivative liability was a positive amount of $13,903 and $43,782 for the three
months ended May 31, 2007 and 2006, respectively. This positive change
represents a decrease in the fair value of the derivative, resulting from a
reduction in the Company’s market price per common share
Liquidity
and Capital Resources
We
incurred significant operating losses in recent years which resulted in severe
cash flow problems that negatively impacted our ability to conduct our business
as structured and ultimately caused us to become and remain insolvent. We
believed that our audiology business would generate sufficient working capital
to finance its current operations at existing levels of revenue. However, we
no
longer believe that the current cash generated by the audiology business is
sufficient to expand its scope of business activities. This prompted management
to take the steps to divest us of these entities.
We
estimated that in order for us to achieve our marketing goals successfully
for
our Solution Card and its other related products we would require between
$750,000 and $1,500,000 of additional capital. Management sought external
sources of financing in order to support any such expansion plans as the
anticipated cash flows from the sale of our cards would not be sufficient to
support any expansion plans. We failed in our attempts to raise the funds
necessary and therefore our growth was curtailed and we could not concentrate
on
increasing the volume and profitability of our existing outlets.
On
June
1, 2005 and August 1, 2005, we issued convertible debentures in the amounts
of
$200,000 and $50,000, respectively. The debentures have a term of five years
and
are convertible 20% per year to common stock of our company. The conversion
rates are $0.50, $0.75, $0.75, $1.00 and $1.00, for the respective traunches
that are convertible each year. Interest due may be paid in cash or in shares
at
the option of the debenture holder. With regard to the $200,000 note, on January
3, 2007, the Company entered into an agreement to convey the Company’s interest
in Accutone in consideration for the cancellation of such debt. The
$50,000 debt instrument is currently in default as we have not made the required
interest payments. The lender cannot accelerate the due date on the
debt.
On
August
19, 2005, we entered into a consulting and financing agreement with
Comprehensive Associates, LLC, a private investment group, pursuant to which
we
received $217,000 net of legal expenses and other related fees, in
consideration for the issuance of two separate convertible debentures of $35,000
and $200,000, which are convertible at $.25 per share. In addition, we entered
into an agreement to issue warrants which could raise an additional $2,665,000,
if and when, the warrants are exercised. Under the consulting agreement, the
investors received warrants to purchase 5 million shares at $0.25 per share.
On
September 29, 2005, Comprehensive Associates, LLC loaned us $28,000 to be
utilized for the printing of cards. Our agreement calls for revenue sharing
on
all of the cards printed as a result of the utilization of these funds, as
well
as a nominal rate of interest on the loan. We did not make the required payments
of interest, which were due after 90 days. In addition, we do not have
sufficient authorized shares to meet the potential conversion obligation and
we
did not file a required registration statement, therefore, we are in default
of
the loan. As a result of the default, the loan is due and payable, although
the
lender has not issued a demand for payment of the debt.
On
September 20, 2005, we entered into a term sheet with Westor Capital Croup,
Inc.
On November 28, 2005, Westor raised a total of $145,000; shortly thereafter
the
agreement with Westor Capital was terminated. Pursuant to the term sheet with
Westor, we were required to file an SB-2 registration statement by January
15,
2006, which was not completed. We therefore are in breach of this agreement.
In
addition, pursuant to our original funding agreement and subsequent redemption
agreement with Comprehensive Associates, LLC we were also required to file
a
registration statement, and therefore we are also in breach of this agreement.
The loan is, due to the default, due and payable. The lender has not issued
a
demand for payment of the debt.
We
have
total liabilities of $1.0 million and assets of $5,205. Without new financing,
we will be forced to liquidate our businesses. Management is currently working
diligently on raising new financing.
On
December 5, 2006, the Company entered into an agreement with Comprehensive
Associates, LLC (“Associates”) whereby certain assets of the Company were
transferred to Associates. These assets include, but are not limited to, all
of
the Company’s right, title, and interest, in, to, and under a Marketing
Affiliation Agreement with Alliance Heathcard, Inc. As consideration for the
assignment of assets, Associates agreed to cancel a $27,400 loan issued June
16,
2006, and the Company’s obligation to reimburse Associates for legal fees
related to that loan in the maximum amount of $20,188.75. In further
consideration for the transfer, Associates extended the repayment period for
the
$235,000 loan issued August 19, 2005 until April 5, 2007. We are
currently in default on this loan.
On
January 3, 2007, the Company entered into an agreement to convey the Company’s
interest in Accutone, Inc. (“Accutone”), to Larry A. Brand (“Brand”) in
consideration for the cancellation of a $218,500 loan issued by Brand on June
6,
2006 and accrued interest on the loan. Accutone is a Pennsylvania corporation
in
the business of selling hearing aid products. The Company owns all of the issued
and outstanding shares of stock of Accutone. Accutone was minimally profitable
in its operations within the last five years, its balance sheet does not reflect
a positive liquidation value, and the shares of stock of Accutone have no
realizable value for the Corporation, as there is no viable market for its
stock
in light of its history. Brand has been active in the business of hearing aid
manufacturing and marketing and was a participant in the creation of Accutone,
and desires to take ownership of the business.
On
January 3, 2007, Accutone entered into an agreement with John Treglia. Pursuant
to that agreement, Mr. Treglia has agreed to take title to the stock of
Interstate Hearing Aid, Inc. (“Interstate”), Accutone’s wholly-owned subsidiary,
from Accutone upon the conveyance of the Accutone stock to Brand. Interstate is
a Pennsylvania corporation, which is insolvent, and which owes, among other
obligations, in excess of $250,000 in federal and state withholding taxes for
the years 2001 through 2006.
To
date
we have not been able to raise additional funds through either debt or equity
offerings. Without this additional cash we have been unable to pursue our plan
of operations and we no longer believe that we will be able to raise the
necessary funds to continue to pursue our business operations. Since we have
not
been able to raise funds, have entered into the above transaction and we have
ceased the pursuit of our business plan and are actively seek out and
investigating possible business opportunities with the intent to acquire or
merge with one or more business ventures.
Off
Balance Sheet Arrangements
We
have
no off-balance sheet arrangements.
Related
Party Transactions
In
May,
2007, the Company issued 400,000 shares of common stock to John Treglia, the
Company's CEO, in compensation for services. During the quarterly period ended
May 31, 2007, Mr. Treglia lent the Company an additional $8,523 for working
capital and the total outstanding debt is $145,935 at May 31, 2007. The loan
does not accrue interest and has no fixed repayment date.
Item
3. Controls
and
Procedures
Evaluation
of disclosure controls and procedures
Under
the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (Exchange Act), as of May 30, 2007. Based
on
this evaluation, our principal executive officer and principal financial officer
have concluded that our disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in the reports we file
or
submit under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange Commission’s
rules and forms and that our disclosure and controls are designed to ensure
that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our principal executive officer and principal financial officer,
or
persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
Changes
in internal controls
There
were no changes (including corrective actions with regard to significant
deficiencies or material weaknesses) in our internal controls over financial
reporting that occurred during the first quarter of fiscal 2007 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART
II - OTHER INFORMATION
Item
1. Legal
Proceedings.
We
are
currently not a party to any pending legal proceedings and no such actions
by,
or to the best of its knowledge, against us have been threatened.
Item
2. Unregistered Sales of Equity
Securities and Use of Proceeds.
None.
Item
3. Defaults Upon Senior Securities.
None
Item
4. Submission of Matters to a Vote of Security
Holders.
No
matter
was submitted during the quarter ending May 31, 2007, covered by this report
to
a vote of our shareholders, through the solicitation of proxies or
otherwise.
Item
5. Other Information.
None
Item
6. Exhibits and Reports of Form 8-K.
(a)
Reports on Form 8-K and Form 8K-A
None
(b)
Exhibits
Exhibit
Number
|
Exhibit
Title
|
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31.1
|
Certification
of John Treglia pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to
Section 302 of the Sarbanes Oxley Act of 2002.
|
|
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32.1
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Certification
of John Treglia pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
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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
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JOHN
H. TREGLIA
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Chief
Executive Officer and
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Chief
Financial Officer
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Dated: July
13, 2007