<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended: December 31,1995
---------------------------------------------------
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
exchange Act of 1934
For the transition period from ___________________________________________
Commission file number 0-9836
------------------------------------------------------
COSMETIC SCIENCES, INC.
- --------------------------------------------------------------------------------
Exact name of registrant as specified in its charter
New York 22-2210547
- --------------------------------------------------------------------------------
(State or other jurisdiction of I.R.S. Employer Identification Number
incorporation or organization)
One Old Country Road, Suite 335, Carle Place, N.Y. 11514
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 516-248-2273,
------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $.01 per share
-------------------------------------
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 other shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ ] Yes [ X ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part llI of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State the registrant's revenues for its most recent fiscal year: $7,367,958
The aggregate market value of the Company's voting common stock held by
non-affiliates computed by reference to the average bid and ask price on March
28, 1996 was $3,019,018.
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes ___ No __X__
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date: 19,300,229 common shares as
of March 30, 1996
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's definitive proxy statement for the 1996 Annual
Meeting of Shareholders of the Company are incorporated by reference into Part
III hereof.
Transitional Small Business Disclosure Format (check one): Yes ___ No __X__
<PAGE>
The registrant hereby amends the following items, financial statements, exhibits
or other portions of its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995 as set forth in the pages attached hereto.
Item 1. Description of Business
Item 6. Management's discussion and Analysis or Plan of Operation
Item 7. Financial Statements
Item 1. Description of Business
Background
Cosmetic Sciences, Inc. (the "Company") is in the business of providing
home health care services, principally personal hygiene, homemaking, general
patient safety, and to a lesser extent nursing services ("Home Care"), primarily
through contracts with government agencies under the Medicaid program. The
Company is a holding company which derives 100 percent of its revenues from the
operation of TPC Home Care Services, Inc. ("TPC"), an 83 percent owned
subsidiary doing business as Extended Family Care.
The Company was incorporated in New York on May 10,1978 under the name
M.A.E. Enterprises, Inc. In 1980, the name of the Company was changed to
Cosmetic Sciences, Inc. and also in 1980, the Company completed its initial
public offering of 1.5 million shares of common stock, raising gross proceeds of
$1.5 million. Between 1980 and 1985, the Company engaged in research,
development, marketing and distribution of medical devices and cosmetics. These
products never proved to be commercially viable, and by the mid-1980's the
development of these products were discontinued and the subsidiaries through
which these businesses were operated were dissolved.
In August 1984, the Company entered the Home Care industry by acquiring
all of the outstanding shares of TPC, which at the time was providing Home Care
services in New York and New Jersey. In December 1984, the shareholders of the
Company received as a dividend approximately 17 percent of the outstanding
common stock of TPC, leaving TPC as an 83 percent owned subsidiary of the
Company.
On April 25, 1985, TPC entered into an agreement to acquire all of the
outstanding stock of another home health care company doing business in New
Jersey called A-Round the Clock Nursing Services, Inc. ("A-Round the Clock"). In
December 1985, a Form S-1 Registration Statement was declared effective in
anticipation of an initial public offering by TPC. Proceeds from this offering
were to
<PAGE>
provide the funding for the acquisition of A-Round the Clock. However,
the underwriter terminated the offering, and TPC was unable to find another
underwriter to complete the offering. TPC was forced to borrow the funds
required to consummate the acquisition of A-Round the Clock. The burden of the
additional debt service, coupled with the increased demand for working capital,
further reduced cash flow. Facing bank foreclosure upon TPC's accounts
receivable, significant tax arrears and cash shortfalls, the Company and TPC
filed a petition under Chapter 11 of the U.S. Bankruptcy Code, in the U.S.
Bankruptcy Court, Southern District, New York, in August 1986.
Following the filing of the bankruptcy petition, TPC continued to
operate its Home Care business as a debtor in possession. In July 1987 a secured
lender foreclosed on the common stock of A-Round the Clock, and took possession
and control of the business of A-Round the Clock. TPC continued to provide Home
Care services with operating branches in Hempstead, New York and Hackensack, New
Jersey.
In 1992, the Company's headquarters were moved from Hempstead, New York
to Carle Place, New York. In March 1994, TPC opened a branch office in
Irvington, New Jersey, which moved in March 1996 to East Orange. In February
1995, a satellite office of the Hackensack branch office was opened in Paterson,
New Jersey, which is relocating to Clifton, New Jersey on or about April 15,
1996. In August 1995, a TPC satellite office was opened in Jersey City, New
Jersey and in March 1996, a satellite office was opened in Elizabeth, New
Jersey.
In October 1993, and in connection with the Company's Amended Plan of
Reorganization adopted in 1992, an investment group, COSS Holding Corp.
("C.O.S.S."), invested cash of $250,000 in the Company and thereby became the
holder of approximately 66 percent or 12,748,658 shares of the Company's common
stock. [See "Legal Proceedings"]
On October 31, 1995, the Company, TPC and C.O.S.S. entered into an
agreement with Arbor Home Healthcare Holdings, LLC. ("Arbor") (in which Ivan
Kaufman owns a 99% interest), pursuant to which the Company granted Arbor the
option to purchase 13 million newly issued shares of its common stock for $1.3
million, ($.10 per share). This option can be exercised by Arbor in two equal
installments of 6.5 million shares on or before June 21, 1996 and November 1,
1996, respectively. Upon exercising both installments of this option, Arbor will
own approximately 40 percent of the outstanding common stock of the Company.
To date, neither installment of the option has been exercised. In addition,
C.O.S.S. has agreed to place its holdings of the Company's common stock in a
voting trust, providing Arbor the right to direct the voting of such shares and
to elect a majority of the board of directors of the Company. The Company,
C.O.S.S. and Arbor have
3
<PAGE>
also entered into various agreements relating to C.O.S.S.' holdings of the
Company's common stock. [See "Certain Relationships and Related Transactions" in
the Company's Form 10K-SB item 13].Mr Kaufman is not affiliated with any of the
current officers or directors of the Company.
On October 31, 1995, C.S.I. entered into an agreement with Arbor Management, LLC
(in which Ivan Kaufman owns a 99% interest), for two years by which C.S.I. will
pay $7,500 a month to Arbor Management, LLC for management services, including
accounting, finance, human resources and marketing, rendered to the Company.
Home Care Services
According to published industry data, the home care industry in 1994
constituted a $23 billion market with an annual growth rate exceeding 20
percent. Primary reasons cited for such rapid growth include: (1) the general
aging of the United States' population; (2) the cost savings achievable through
at-home treatment as an alternative to hospital care; (3) medical and
technological advances which enable a growing number of treatments to be
administered at home rather than in a medical facility; and (4) Insurance (both
government regulated and private) reimbursement policies which provide certain
incentives to minimize the length of in-patient hospital care.
TPC provides its patients the services of certified home health aides,
personal care aides, homemakers and to a lesser extent registered and licensed
practical nurses. These individuals are part-time employees of TPC who work for
TPC as needed. TPC's roster of Home Care personnel includes approximately 435
paraprofessionals and 10 nurses.
TPC requires its paraprofessionals and nurses to meet certain licensing,
certification, and/or other requirements. TPC conducts mandatory in-service
classes for its nurses and paraprofessionals both to meet New York and New
Jersey continuing education requirements and to fulfill TPC's own quality
assurance standards. These in-service classes typically last between three and
six hours and are offered periodically. They are taught by health care
professionals selected by TPC for their expertise in their fields, including
nurses, physical therapists, social workers and occasionally physicians. All
field staff employees are subject to an internal review not less than every 60
days.
TPC was recently surveyed by the Joint Commission on Accreditation of
Healthcare Organizations (JCAHO) and, in February 1996, was found to meet the
requirements for accreditation. JCAHO is the accrediting body for hospitals; its
accreditation enhances TPC's contractual business. TPC's accreditation will
expire
4
<PAGE>
in October 1998, at which time TPC must be resurveyed for the following
three-year term.
Procedure for a Typical Home Care Placement
When TPC accepts a new patient for service, TPC's Director of Nursing or
nursing supervisor confers with the patient's physician and other medical and
health care professionals (collectively, the patient's "Health Care Team") to
(1) obtain the physician's orders; (2) acquire a detailed description of the
patient's medical problem; (3) determine the patient's specific home care
requirements (the "Protocol"), including the plan of treatment and
pharmaceutical services, products and equipment which will be needed; and (4)
determine the type of personnel and the number of hours and shifts required. The
Director of Nursing and/or a nursing supervisor seeks to verify all initial
information received and selects the appropriate Home Care personnel to care for
the patient.
In a typical Home Care case, TPC's personnel assigned to the case visit
the patient on a prescribed schedule to administer the Protocol and to provide
other general care to the patient. All Home Care cases are supervised by a
nursing supervisor to ascertain whether any problems have arisen in connection
with the services. Occasionally the Company acts as a subcontractor for other
home care companies, implementing the patient Potocol under the direct
supervision of the primary contractor. TPC's nurses and paraprofessionals are in
frequent contact with the patient's Health Care Team.
Care Givers
TPC employs a variety of clinical and ancillary personnel as follows:
1. Certified Home Health Aides ("CHHA") provide assistance as prescribed by
the physician in accordance with the Protocol and assist with personal
hygiene, housekeeping, general patient safety and other supportive
tasks. CHHAs hold a higher level of education, classroom training and
field supervision than Personal Care Aides.
2. Personal Care Aides ("PCA") assist the patient with personal hygiene,
dressing, bathing, meal preparation/feeding, housekeeping, general
patient safety and other activities of daily living.
3. Homemakers assist with light housekeeping, meal preparation and
shopping.
4. Registered Nurses ("RN") supervise and implement plans of treatment as
mandated by a physician, administer medication, maintain required
documentation and supervise all other non-RN health care employees.
5. Licensed Practical Nurses ("LPN") can administer certain medications and
assist the RN's in performing certain procedures.
5
<PAGE>
ORGANIZATIONAL STRUCTURE
Branch Description
TPC presently has three operating branches, three satellite sites, and a
corporate headquarters. The branches are located in New York and New Jersey with
corporate headquarters located in New York. Each operating branch is licensed by
the appropriate state agency for its location. Each operating branch is staffed
by a director of nursing, nursing supervisors, a branch director, a personnel
manager, staffing coordinator(s) and clerical personnel. TPC conducts its own in
house state approved training courses to prepare qualified employees for
employment. In addition, TPC maintains a recruiting program to attract qualified
personnel to its staff.
Customers
TPC has four types of customers: public assistance agencies, other third
party payers, insurance companies and private pay customers.
Public assistance agencies, which provided approximately 81 percent and
71 percent of total TPC's revenues in 1995 and 1994, respectively, are billed
directly for Home Care services provided to individuals who have qualified for
Medicaid benefits. TPC's business in Nassau County, New York is tied directly to
a single contract between TPC and the Department of Social Services in Nassau
County. A substantial portion of TPC's business would be lost should this single
contract be terminated. The contract with Nassau County is renewable on an
annual basis and has been in existence in excess of ten years. TPC has no reason
to believe that this contract will not be renewed in the future, however, there
is no assurance that the contract will be renewed.
In New Jersey, unlike New York, the New Jersey Department of Medicaid
will grant a Medicaid contract to any accredited home health care agency. New
business is obtained through referrals from physicians, county medical services,
community organizations, hospital social service workers, nurses, insurance
companies and the patient's family.
Other third party payers, such as hospitals and other health care
institutions, provided 11 percent and 12 percent of total TPC's revenues, in
1995 and 1994, respectively. The third party payer subcontracts with TPC for
Home Care services. These contracts are generally non-exclusive.
The insurance segment of TPC's business represented approximately 2 and
6
<PAGE>
7 percent of TPC's total revenues in 1995 and 1994, respectively. This business
is dependent upon the insurer's decision to enter into various preferred
provider networks ("PPO") and health maintenance organization networks ("HMO").
The insurance segment has become more closely linked to associations with
various PPOs and HMOs. Therefore, TPC will have to develop alliances with such
networks or risk the loss of business.
Private pay customers represented approximately 6 and 10 percent of
TPC's revenues in 1995 and 1994, respectively. These customers have determined,
for a variety of reasons, including ineligibility of public assistance, or
insurance benefits, to personally pay for the Home Care services provided by
TPC. These customers are referred to TPC from a variety of sources.
The charts below sets forth: (a) the percent of total TPC's revenues by
type of customer; (b) percent of total TPC's revenues by state; and (c) TPC
Medicaid revenues as percentages of total state revenues.
Percent of Total TPC Revenues by Type of Customer 1995 1994
- ------------------------------------------------- ---- ----
Medicaid (Through public assistance agencies) 81% 71%
Other third party payers 11 12
Insurance 2 7
Private pay 6 10
--- ---
100% 100%
Percent of Total TPC Revenues by State 1995 1994
--- ---
New York 25% 36%
New Jersey 75 64
TPC Medicaid Revenues as Percentages of
Total State Revenues 1995 1994
- --------------------------------------- --- ---
New York 82% 84%
New Jersey 80 63
Governmental Regulation and Licensing
The Company's business is subject to substantial regulation by state and
local authorities. These regulations can cause significant time delays, as well
as additional costs, as TPC must comply with state eligibility standards for
licensing and/or accreditation as a Home Care provider. The imposition of more
stringent regulatory requirements or the denial, revocation, or suspension of
any license or
7
<PAGE>
accreditation necessary for TPC to operate in a particular market could have a
material adverse effect on TPC's operations.
Medicaid reimbursement rates in New York and New Jersey are not
negotiated by TPC, but are established by these respective states. Recent
budgetary pressures at the federal and state governmental level, may in the
future, reduce the allocation of federal and state budgetary dollars
appropriated for the Medicaid program. This reduction, if it occurs, will have a
negative impact on TPC's revenues and profitability. Federal and state budgetary
pressures may adversely impact TPC by: (1) reducing the Medicaid reimbursement
rates paid by the state; (2) reducing the number of hours that will be
reimbursed per case; and (3) reducing the funding of one or more public
assistance agencies with which TPC presently does business. [See "Management's
Discussion and Analysis or Plan of Operation - Industry Information" and
"Forward Looking Statements Cautionary Factors"]
New York State requires approval of the Public Health Council of the New
York State Department of Health ("NYPHC") for any change in a "Controlling
Person" of an operator of a licensed health care services agency ("LHCSA").
Control of an entity is presumed to exist if any person owns, controls or holds
the power to vote 10% or more of the voting securities of such entity. To the
extent TPC or the Company may seek to acquire control of an LHCSA, TPC would
have to be granted the approval of the NYPHC prior to exercising control over
such LHCSA. NYPHC approval is also required if any entity seeks control of more
than 10 percent of the voting securities of the Company or TPC. The NYPHC has
approved the change of control that occurred from the acquisition by C.O.S.S. of
approximately 66 percent of the Company's common stock and the option granted to
Arbor to acquire 40 percent of the Company's common stock.
Health regulatory agencies of New York and New Jersey, where TPC
operates, require satisfaction of certain standards with respect to personnel,
services and supervision. Health regulatory agencies also require the
establishment of a professional advisory group that includes at least one
physician, one registered nurse and other representatives from related
disciplines or consumer groups. TPC is currently in compliance with such
standards.
Applicable federal and state "anti-kickback" regulations in general
provide that TPC may not make certain payments in order to receive referrals of
patients. The Company believes that it is in compliance with both state and
Federal "anti-kickback" regulations.
Competitive Conditions
8
<PAGE>
TPC's health care operations face competition in recruiting qualified
health care personnel, securing customers and providing services, from numerous
proprietary health care agencies and not-for-profit organizations, many of which
are substantially larger and better financed than TPC.
In New York, TPC has an annual contract with the Department of Social
Services in Nassau County representing approximately 21 percent of TPC's total
revenue in 1995. This type of contract was awarded to approximately sixty home
health care agencies, and currently, no additional agencies are permitted to bid
on this contract. Cases are referred to agencies on a rotating basis. TPC is at
a competitive disadvantage in other locations in New York State, since TPC does
not have Medicaid contracts in areas other than Nassau County.
In New Jersey, unlike New York, the New Jersey Department of Medicaid
will grant Medicaid contracts to any accredited home health care agency. Each
branch office of TPC has a contract with the New Jersey Department of Medicaid
for billing and administrative purposes. For New Jersey, new business is
dependent on referrals through physicians, county medical services, community
organizations, hospital social service workers, nurses, insurance companies and
the patient's family. Consequently, all of TPC's New Jersey business is subject
to numerous competitive factors. TPC believes that prompt service, price
(excluding Medicaid which by virtue of fixed reimbursement rates cannot be a
differentiating factor), quality of service and the range of services offered
are the principal factors which enable it to compete effectively in the New
Jersey market.
Marketing and Sales
TPC currently markets its health care personnel and services in Nassau
and Queens counties in New York, and in the eastern and northern counties in New
Jersey. TPC's services are marketed by a team of professionals headed by a
Regional Director, in each state. All of TPC's services are promoted through
print Competitive Conditions and yellow page advertising, brochures, direct mail
and visual presentations through field sales calls. Targeted clients are
hospitals, nursing homes, retirement centers, social service agencies, senior
citizen centers and other home care companies for sub-contract referrals. TPC's
representatives maintain telephonic contact not only to maintain a relationship
with existing referral sources, but also to establish new sources and markets.
TPC's staff attend health care sponsored seminars and various trade shows and
exhibitions.
Business Strategy
The Company's business strategy is to provide Home Care services to a
diversified mix of customers in the geographic markets served by the Company.
The Company anticipates growing its business in the following ways: (a) opening
9
<PAGE>
new locations in both its existing and additional geographic markets; (b) adding
additional products and services, including hospice care and skilled pediatric
care; and (c) forming joint ventures and alliances and/or acquiring other Home
Care businesses. (See "Forward Looking Statements - Cautionary Factors")
Liability Insurance
TPC is exposed to potential liability in the event of negligence or
wrongful acts of its personnel. TPC maintains liability insurance which it
believes to be adequate. There can be no assurance, however, that TPC will be
able to maintain its existing insurance at an acceptable cost or obtain
additional insurance in the future as required. There can be no assurance that
TPC's insurance will be sufficient to cover liabilities resulting from claims
that may be brought in the future.
Employees
The Company currently has approximately 490 employees, 45 of which are
full-time employees. TPC has no union contracts with any of its employees and
believes that its relationship with its employees is good. TPC pays its
employees at rates that it believes are competitive.
Employees at one branch of TPC are attempting to organize a union to
represent the employees at the branch. An initial hearing before the National
Labor Relations Board ("NLRB") has determined that a vote should be taken by the
employees of this branch to decide whether the union should represent these
employees. It is uncertain whether the efforts to unionize this branch will be
successful. The Company, however, does not anticipate a material adverse affect
on its operations and financial condition should the efforts to unionize the
branch prove successful. The Company does not know at this time whether efforts
will be made to unionize its other branches, whether those efforts would be
successful, and whether if successful, they would have a material effect upon
the Company's operations or financial condition.
Securities Filings
Since filing its petition for bankruptcy in 1986, the Company has not
filed any required reports under the Securities Exchange Act of 1934 (the
"Exchange Act"). The last such report filed was the Company's Form 10-K for the
fiscal year ended December 31, 1985. During the years while in bankruptcy, the
Company did not possess adequate financial and staffing resources to produce
audited financial statements and other reports as required by the Exchange Act.
The Company has made a commitment to file the reports as required under the
Exchange Act commencing with this report.
10
<PAGE>
As a result of the Company's past non-compliance with the Exchange Act,
the Securities and Exchange Commission (the "SEC") may determine to bring civil
and administrative proceedings against the Company. While the likelihood of such
proceedings being brought is uncertain, if such proceedings were brought, the
Company could be subject to substantial monetary penalties and other
administrative remedies. The Company is also aware that if the SEC were to seek
substantial monetary or administrative remedies against the Company, Arbor may
not elect to exercise its option, which, if exercised fully, would result in an
injection of $1.3 million of capital into the Company.
Forward Looking Statements - Cautionary Factors
Except for the historical information and statements contained in this
Report, the matters and items set forth in this Report are forward looking
statements that involve uncertainties and risks some of which are discussed at
appropriate points in the Report and are also summarized as follows:
1. The Company derives most of its revenues from Medicaid
reimbursements. To the extent Medicaid reimbursements are reduced the Company's
revenues may be adversely impacted. Reductions in Medicaid budgetary dollars are
being discussed at the federal and state executive and legislative levels,
including the states of New York and New Jersey.
2. The Company's expansion strategy is contingent upon obtaining
additional financing. As such, if the Company were unable to obtain such
financing, it may fail to achieve all or part of its expansion strategy. The
Company believes its expansion strategy would be sufficiently funded if Arbor
exercises its option in full and injects $1.3 million of equity into the
Company. If the capital required to fund the Company's expansion strategy does
not come from Arbor through its exercise of its option in full, the Company will
seek alternative financing to fund its expansion strategy.
Item 6. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis provides information which the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. This discussion
should be read in conjunction with the audited consolidated financial statements
and related notes contained elsewhere in this filing.
Overview
The Company's revenues are derived from providing home health services
to individuals, in New York and New Jersey, through various contracts with
government agencies (under the Medicaid program) and to a lesser extent
hospitals,
11
<PAGE>
insurance companies, private pay and other third party payers.
Industry Information
According to published industry data, the home care industry in 1994
constituted a $23 billion market with an annual growth rate exceeding 20 percent
for this industry sector. Primary reasons cited for such rapid growth include:
(1) the general aging of the United States' population; (2) the substantial cost
savings achievable through at-home treatment as an alternative to hospital care;
(3) medical and technological advances which enable a growing number of
treatments to be administered at home rather than in a medical facility; and (4)
Insurance (both government regulated and private) reimbursement policies which
provide certain incentives to minimize the length of in-patient hospital care.
The Company believes that the factors above will continue to contribute to
steady growth for the home care industry.
The Company is aware of discussions in New York and New Jersey at the
executive and legislative branches of government, concerning a possible
reduction of Medicaid reimbursement rates. The Company does not know if any such
reduction will occur, or if it were to occur, the extent of the reduction, and
therefore does not know if there would be a material adverse effect on the
Company's financial condition as a result of any such reduction. [See "Forward
Looking Statements - Cautionary Factors"]
Results of Operations
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Patient Service Revenue: Net patient service revenue increased $2,757,768 or
60% to $7,367,958 for the year ended December 31, 1995 from $4,610,190 for the
year ended December 31, 1994. The addition of two new branches in 1995 increased
net patient service revenue by $1,149,408 or 25%. The balance of the increase in
net patient service revenue resulted from an increase in the remaining branches'
net patient service revenue of $1,608,360 or 35% from 1994 to 1995, due to a
general upward trend in the Home Care business, and aggressive recruiting and
marketing programs that enabled the Company to increase its referral sources and
number of cases serviced.
Cost of Services: Cost of services increased $1,805,292 or 62% to $4,706,196 for
1995 from $2,900,904 for 1994. The increase in cost of services is primarily
12
<PAGE>
due to increases in field staff payroll cost resulting from a 60% increase in
net patient service revenue. The Company's growth in the number of cases
serviced increased the need for additional field staff to service these cases.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased $471,558 or 28% to $2,180,242 for 1995 from
$1,708,684 for 1994. This increase reflects higher administrative salaries,
marketing and facility expenses associated with the additional branch locations
and the increase in case volume. Selling, general and administrative expenses as
a percentage of net revenues decreased to 30% in 1995 from 37% in 1994, which
was primarily attributable to fixed overhead being absorbed by the increase in
net patient service revenue.
Provision For Income taxes: Provision for income taxes increased $173,000 or
481% to $209,000 for the year ended December 31, 1995 from $36,000 for the year
ended December 31, 1994. The increase is primarily due to a $420,926 or 420%
increase in pre-tax income (adjusted for permanent taxable differences) and
partially due to an increase in the Company's effective tax rate from 1994 to
1995.
Inflation and Seasonality
Medicaid reimbursements, which represent the Company's principal source
of revenue, have historically been adjusted to keep pace with inflation. There
can be no assurance that future Medicaid reimbursement will keep pace with
inflation.
The Company's business is generally not subject to seasonal trends.
Liquidity and Capital Resources
The nature of the Company's business requires weekly payments of wages
to its personnel at the time they render services, while it receives payments
for services rendered over an extended period of time (30 to 90 days). At
December 31, 1995 and December 31, 1994, the Company's accounts receivable
balances were $895,131 and $803,664, respectively. During 1995 and 1994, TPC's
days sales in accounts receivable was approximately 49 and 61 days,
respectively.
At December 31, 1995, the Company had working capital of $285,828.
Historically, the Company's cash requirements have been met internally from
operations. The Company currently has no outstanding bank debt nor does it have
any agreements for a line of credit.
In 1995 and 1994, the Company generated cash from operating activities
of $555,433 and $39,713 respectively. The change in cash generated from
operating
13
<PAGE>
activities in 1995 was a result of increased revenues and profitability and a
faster collection of accounts receivable.
During 1995 the Company invested $57,373 in property and equipment
primarily for purchases of computers, telecommunication equipment, and furniture
and equipment associated with the Company's two new branch locations.
In 1995, the Company used cash to pay down $83,687 in various loan and
capital lease obligations. In 1994, the Company had net borrowings of $41,949
from various parties.
The Company believes that its liquidity and capital resources are adequate for
its current level of operations. However, due to its anticipated geographical
expansion, addition of new products and services and potential acquisitions and
joint ventures of other home care businesses (See "Business Strategy"), the
Company expects its future capital needs to increase. Should Arbor exercise its
option in full to purchase common stock of the Company in 1996 (See "Certain
Relationships and Related Transactions") it will contribute $1.3 million in cash
to the Company. The Company believes that the proceeds from the exercise of the
Arbor option will be sufficient to meet the Company's expansion related and
working capital requirements over the next twelve months. Should Arbor not
exercise its option to purchase the Company's shares, the Company will seek
alternative financing to fund its business expansion. The Company's inability to
obtain alternative financing could have a material adverse effect on the
Company's business expansion plans. [See "Forward Looking Statements -
Cautionary Factors"]
Item 7. Financial Statements.
The Company's financial statements and schedules appear at the end of this
Report.
14
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Consolidated Financial Statements
Years Ended December 31, 1995 and 1994
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Page
Independent Auditor's Report F - 2
Consolidated Balance Sheets as of December 31, 1995 and
December 31, 1994 F - 3
Consolidated Statements of Operations for the years ended
December 31, 1995 and 1994 F - 4
Consolidated Statements of Shareholder's Equity for the
years ended December 31, 1995 and 1994 F - 5
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994 F - 6
Notes to Consolidated Financial Statements F - 7
F - 1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
Cosmetic Sciences, Inc.
We have audited the accompanying balance sheets of Cosmetic Sciences, Inc. and
subsidiary, as of December 31, 1995 and 1994 and the related consolidated
statements of operations, shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Cosmetic Sciences, Inc., at December 31, 1995 and 1994 and the consolidated
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Carpenter & Onorato, P.C.
Certified Public Accountants
Garden City, NY 11530
March 8, 1996
F - 2
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31,
<TABLE>
<CAPTION>
1995 1994
---- ----
Assets
------
<S> <C> <C>
Current Assets:
Cash $ 511,563 $ 97,190
Accounts receivable, net of allowance for doubtful accounts
of $100,000 and $48,190, respectively (note 2) 895,131 803,664
Prepaid expenses 146,809 72,756
--------------- ----------------
Total current assets 1,553,503 973,610
Property and equipment, net (note 5) 118,591 38,449
Other assets:
Deferred taxes (note 7) 259,000 468,000
License, net (notes 3 and 6) 515,832 555,511
Other 11,197 7,123
--------------- ----------------
Total assets $ 2,458,123 $ 2,042,693
=============== ================
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 222,677 $ 204,695
Accrued expenses (note 10) 543,974 325,683
Customer deposits 59,146 71,270
Notes payable (note 4) 148,449 218,449
Payroll taxes payable (note 10) 280,584 332,858
Current portion of obligations under capital leases 12,845 -
--------------- ----------------
Total current liabilities 1,267,675 1,152,955
--------------- ----------------
Non-current liabilities:
Long-term debt (note 4) 54,500 62,000
Obligations under capital leases 40,010 -
--------------- ----------------
Total non-current liabilities 94,510 62,000
--------------- ----------------
Total liabilities 1,362,185 1,214,955
--------------- ----------------
Commitments and contingencies (notes 8, 9, and 10)
Minority interest in subsidiary 140,008 93,610
--------------- ----------------
Shareholders' equity (notes 6 and 7)
Common stock, $.01 par value, 20,000,000 shares authorized,
19,300,229 shares issued and outstanding 194,506 194,506
Additional paid-in-capital 638,844 638,844
Retained earnings (deficit) 122,580 (99,222)
--------------- ----------------
Total shareholders' equity 955,930 734,128
--------------- ----------------
Total liabilities and shareholders' equity $ 2,458,123 $ 2,042,693
=============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
F - 3
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Years Ended December 31,
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net patient service revenue (note 2) $ 7,367,958 $ 4,610,190
--------- -----------------
Cost of services:
Salaries 4,058,749 2,495,237
Payroll taxes and other 647,447 405,667
---------------- -----------------
Total cost of services 4,706,196 2,900,904
---------------- -----------------
Gross profit 2,661,762 1,709,286
Selling, general and administrative expenses 2,180,242 1,708,684
---------------- -----------------
Income from operations 481,520 602
Interest expense 4,320 21,072
---------------- -----------------
Income (loss) before provision for income
taxes and minority interest 477,200 (20,470)
Provision for income taxes, income tax
equivalent provision (note 7) 209,000 36,000
---------------- -----------------
Net income (loss) before minority interest 268,200 (56,470)
Minority interest in subsidiary net income (loss) 46,398 (8,889)
---------------- -----------------
Net income (loss) $ 221,802 $ (47,581)
================ =================
Primary earnings (loss) per share $ 0.0107 $ (0.0025)
================ =================
Fully diluted earnings per share $ 0.0105 $ -
================ =================
Weighted average number of shares outstanding:
Primary $ 20,823,555 19,300,229
================ =================
Fully diluted $ 21,033,562 -
================ =================
</TABLE>
See accompanying notes to consolidated financial statements.
F - 4
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Common Stock Additional Retained Total
Earnings Shareholders'
Shares Amount Paid-in capital (Deficit) Equity
--------------- ------------------ ----------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
December 31, 1993 19,300,229 $ 194,506 $ 220,524 $ (51,641) $ 363,389
Benefit of utilization
of net operating
loss carryforward - - 418,320 - 418,320
Net loss - - - (47,581) (47,581)
--------------- ---------------- -------------------- ---------------------- --------------------
December 31, 1994 19,300,229 194,506 638,844 (99,222) 734,128
Net income - - - 221,802 221,802
--------------- ---------------- -------------------- ---------------------- --------------------
December 31, 1995 19,300,229 $ 194,506 $ 638,844 $ 122,580 $ 955,930
=============== ================ ==================== ====================== ====================
</TABLE>
See accompanying notes to consolidated financial statements.
F - 5
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31,
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
- -------------------------------------
Net income (loss) $ 221,802 $ (47,581)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Allowance for doubtful accounts 51,810 48,190
Depreciation and amortization 36,273 20,051
Amortization of intangible assets 39,679 39,679
Provision for income taxes, income tax equivalent provision 209,000 36,000
Minority interest in subsidiary income (loss) 46,398 (8,889)
Change in operating assets and liabilities:
(Increase) in assets:
Accounts receivable (143,276) (284,988)
Prepaid expenses (74,053) (10,945)
Security deposits (4,074) (2,700)
Increase (decrease) in liabilities:
Accounts payable 17,982 21,008
Accrued expenses 218,290 140,927
Customer deposits (12,124) 20,919
Payroll taxes payable (52,274) 68,042
---------------- ------------------
Net cash provided by operating activities 555,433 39,713
---------------- ------------------
Cash flow from investing activity:
- ----------------------------------
Purchase of property and equipment (57,373) (9,464)
---------------- ------------------
Net cash (used in) investing activity (57,373) (9,464)
---------------- ------------------
Cash flow from financing activity:
- ----------------------------------
Loans from affiliates - 61,949
Payment of obligations under capital leases (6,187) -
Repayment of loans (77,500) (20,000)
---------------- ------------------
Net cash (used in) provided by financing activities (83,687) 41,949
---------------- ------------------
Net increase in cash 414,373 72,198
Cash at beginning of year 97,190 24,992
---------------- ------------------
Cash at end of year $ 511,563 $ 97,190
================ ==================
Supplemental disclosures:
Equipment acquired under capital lease obligation $ 59,042 $ -
================ ==================
Cash paid during the year for:
Interest $ 5,825 $ 3,312
================ ==================
Income taxes $ 654 $ 479
================ ==================
</TABLE>
See accompanying notes to consolidated financial statements.
F - 6
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995
(1) Significant Accounting Policies
(a) Description of Business
Cosmetic Sciences, Inc. (C.S.I.) or (the Company), is primarily engaged
in the business of providing health care services in the home through
its 83% majority owned subsidiary, T.P.C. Home Care Services, Inc.
(T.P.C.). C.S.I. is the holding company for T.P.C.
T.P.C. is a licensed home care provider servicing patients since 1980.
T.P.C. has offices in New York and New Jersey, providing twenty four
hour home care services.
On August 5, 1986, T.P.C. and its parent, C.S.I., filed voluntary
petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code. On March 23, 1992, this plan of reorganization was
confirmed by the United States Bankruptcy Court. On January 13, 1995,
the bankruptcy court issued a final decree.
As part of the plan of reorganization, on October 8, 1993, per an
agreement between C.O.S.S. Holding Corp. (C.O.S.S.), an investor group,
and C.S.I. dated March 23, 1992, C.S.I. issued 12,749,658 shares of
stock to C.O.S.S. for $250,000 in cash which resulted in C.O.S.S.
owning a 66% interest in C.S.I. Also, unsecured creditors were given
the option to receive a pro rata share of C.S.I.'s common stock or 12%
of the allowed amount of their respective claims. This option resulted
in C.S.I. issuing 1,388,959 shares of common stock to the unsecured
creditors.
On October 31, 1995, C.S.I. entered into an agreement with Arbor Home
Healthcare Holdings, LLC (Arbor) (in which Ivan Kaufman owns a 99%
interest), by which C.S.I. granted Arbor the irrevocable option for
C.S.I. to issue 13,000,000 shares of C.S.I. stock to Arbor at $.10 per
share. This option agreement can be exercised by Arbor in two equal
stock issuances of 6.5 million shares on or before June 21, 1996 and
November 1, 1996, respectively. Upon exercising such option, Arbor will
own approximately a 40% interest in C.S.I. In addition, per the
agreement, C.O.S.S. has placed all of its 12,749,658 shares of C.S.I.
common stock in a voting trust. Arbor has the right to direct the
voting of all of the C.O.S.S. shares and to nominate a majority of the
C.S.I. Board.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of C.S.I.
and its majority owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
(Continued)
F - 7
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(c) Revenue Recognition and Allowance for Doubtful Accounts
Net patient service revenue is recorded at the Company's reimbursement
rates or contracted rates. Such revenue is received from patients,
third party payors and others for services rendered. A significant
portion of the Company's revenue is received from third-party payors
(i.e. Medicaid) and is subject to audit and adjustment by those payors.
A provision for doubtful accounts is made for accounts receivable
estimated to be uncollectible; which is based upon management's
evaluation of relevant facts that effect the collectibility of accounts
receivable.
(d) Property and Equipment
Property and equipment are recorded at cost. The carrying amount of the
assets and related accumulated depreciation and amortization are
removed from the accounts when such assets are disposed of and the
resulting gain or loss is included in operations. Depreciation and
amortization of equipment and leasehold improvements are computed using
the declining balance method for the following useful lives of the
assets:
Furniture and fixtures 5 - 7 years
Equipment 5 years
Leasehold improvements lesser of the useful life of the
asset or the remaining lease period.
(e) Post-retirement Health Care and Life Insurance Benefits
The Company does not provide post-retirement benefits for its
employees.
(f) Income Taxes
In 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", which requires
recognition of deferred tax liabilities and assets for the future tax
consequences attributable to temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities at statutory rates expected to be in effect when such
amounts are realized or settled. The effects of statutory tax law or
rate changes are reflected in income in the period of enactment.
(g) Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common stock and common stock
equivalents outstanding
(Continued)
F - 8
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
during each period. Common stock equivalents represent the dilutive
effect of the assumed exercise of certain outstanding stock options.
(2) Concentration of Segment Risk
T.P.C. provides temporary health care personnel to in-home patients in
New York and New Jersey. T.P.C. grants credit to its patients who are
insured under third-party payor agreements. Deposits are required for
all private business. The mix of accounts receivable from private and
third-party payors at December 31 were as follows:
1995 1994
---- ----
Medicaid 62% 52%
Insurance 2 14
Other third-party payors 29 23
Private 7 11
100% 100%
====== =====
Historically, credit losses relating to customers have not been
significant and have been within management's expectations.
(3) Intangible Assets
Intangible assets at December 31 are as follows:
1995 1994
---- ----
License $ 595,190 $595,190
less accumulated amortization 79,358 39,679
$ 515,832 $555,511
========== ========
The value of the above license was derived from the valuation of the
entity's assets as part of its "Fresh Start Reporting" (see note 6).
(Continued)
F - 9
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(4) Notes Payable and Long-Term Debt
Notes payable and long-term debt consist of the following at December
31:
1995 1994
---- ----
Note payable - Bank due on demand.
$30,000 was paid in 1995 as full and
complete satisfaction of the original
$50,000 debt. $ - $ 50,000
Note payable, non-interest bearing,
payable in monthly installments of $1,500
with a final balloon payment of $26,000
due in August, 1998. 72,500 80,000
Notes payable, non-interest bearing and
payable on demand. 80,000 80,000
Due to Affiliated Parties (see note 8). 50,449 70,449
------------ -----------
Notes payable and long-term debt 202,949 280,449
Less current portion 148,449 218,449
------------ -----------
Long-term debt $ 54,500 $ 62,000
============ ===========
(5) Property and Equipment
Property and equipment consist of the following:
1995 1994
---- ----
Furniture and fixtures $ 18,751 $ 15,723
Machinery and equipment 167,108 112,763
Leasehold improvements 7,039 7,039
Equipment held under capital leases 59,042 -
---------- -----------
251,940 135,525
less accumulated depreciation and
amortization 133,349 97,076
---------- -----------
$ 118,591 $ 38,449
========== ===========
(Continued)
F - 10
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(6) Fresh Start Reporting
On October 8, 1993, the Company, pursuant to the plan of
reorganization, issued stock to C.O.S.S. in exchange for $250,000 and
also issued stock to the unsecured creditors (see note 1). Accordingly,
the Company implemented Statement of Position (SOP) 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code." SOP
90-7 is applicable because pre-reorganization shareholders received
less than 50% of the Company's new common stock and the reorganization
value of the assets of the reorganized Company is less than the total
of all post-petition liabilities and allowed claims.
SOP 90-7 requires an allocation of the reorganization value to the
entity's assets. The Company's reorganization value was determined to
be $838,204. Such reorganization value was first allocated to existing
tangible assets (primarily cash and accounts receivable) at book value
and next to Home Health Care Licenses (primarily state accreditation's
and government agency contracts). The reorganization value of its
assets was determined by valuing the Company's equity at the
confirmation date (March 23, 1992), at fair value, and adding post
reorganization liabilities on this date as reflected in the bankruptcy
files. The fair value of the Company's equity at the confirmation date
was based on the average consideration received by the Company for the
stock issued to C.O.S.S. and the unsecured creditors. Included in the
reorganization value is the value for the Company's Home Health Care
Licenses of $595,190. This asset is amortized by the straight line
method over 15 years. Amortization expense for each year equals $39,679
and is included in selling, general and administrative expenses.
Adopting "Fresh Start Reporting" resulted in the Company financial
statements being prepared on the basis that a new reporting entity was
created. Assets and liabilities were recorded at their estimated fair
values and the Company's accumulated deficit was eliminated.
Obligations aggregating $688,090 were discharged pursuant to the plan
of reorganization in 1992.
The effect of all "Fresh Start Reporting" adjustments resulted in
income of $595,190 which should have been reflected in the Statement of
Operations for the nine month period ended September 30, 1993. The
accumulated deficit of $2,343,097 at October 8, 1993 was reclassified
to additional paid-in capital.
(7) Income Taxes
"Fresh Start Reporting" requires the Company to report an income tax
equivalent provision when there is book taxable income and a
pre-reorganization net operating loss carryforward. This requirement
applies despite the fact that the Company's pre-reorganization net
operating loss carryforward would eliminate (or reduce) the related
income tax payable. Therefore, the current and future year benefit
related to the carryforward is not reflected in net loss, but instead
is recorded as a direct increase to additional-paid-in-capital.
(Continued)
F - 11
<PAGE>
COSMETIC SCIENCES INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
During the year ended December 31, 1994, the income tax equivalent
provision and the associated increase in additional paid-in-capital
amounted to $36,000 and $418,320, respectively. The income tax
equivalent provision does not effect the Company's income tax
liability.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current
Federal $ - $ -
State - -
Income tax equivalent provision - 36,000
$ - $ 36,000
------------- -------------
Deferred
Federal $ 160,500 $ -
State 48,500 -
------------- -------------
209,000 -
$ 209,000 $ 36,000
============= =============
Deferred tax assets consist of the following:
Pre-reorganization net operating loss carryforward $ 221,000 $ 451,000
Allowance for doubtful accounts 38,000 17,000
------------- -------------
Total deferred tax assets $ 259,000 $ 468,000
============= =============
The following is a reconciliation of the effective income tax rate to
the Federal statutory rate:
Computed income tax expense (benefit) at 34% $ 162,000 $ ( 7,000)
Increase in taxes resulting from:
Nondeductible expenses 15,000 35,000
State income taxes, net of federal tax benefit 32,000 7,000
Other - effect of graduated tax rates - 1,000
$ 209,000 $ 36,000
============= =============
</TABLE>
At December 31, 1995, the Company has a net operating loss carryforward
(NOL) of approximately $650,000 for tax purposes, expiring beginning
with the year 2000 through 2008.
(Continued)
F - 12
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(8) Related Party Transactions
Notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
C.O.S.S. holds a note which is non-interest
bearing, and payable upon demand. $ 25,449 $ 25,449
An officer of T.P.C. holds a note which is non-
interest bearing, and payable upon demand. - 15,000
An officer of the Company holds a note which
bears an interest rate of 11% and is payable
upon demand. Annual interest expense amounted to
$3,238 and $3,312, respectively. 25,000 30,000
$ 50,449 $ 70,449
=========== =========
</TABLE>
The landlord for the Company's corporate office is an officer of
C.O.S.S. The annual rental is $39,140 per year, and shall be increased
by 12% over the prior year's fixed minimum annual rent. The lease
expires November 30, 2000.
On October 31, 1995, C.S.I. entered into an agreement with Arbor
Management, LLC (in which Ivan Kaufman owns a 99% interest), for two
years by which C.S.I. will pay $7,500 a month to Arbor Management, LLC
for management services, including accounting, finance, human resources
and marketing, rendered to the Company.
(9) Commitments and Contingencies
T.P.C. conducts its operations from leased office spaces in New York
and New Jersey. These leases expire at various dates through the year
2000. Management expects that in the normal course of business, these
leases will be renewed or replaced by other leases. Rent expense for
the years ended December 31 amounted to $104,965 and $68,920,
respectively.
The Company is also the lessee of machinery and equipment under capital
leases expiring in various years through 2000.
(Continued)
F - 13
<PAGE>
COSMETIC SCIENCES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
As of December 31, future net minimum lease payments under capital and
operating leases are as follows:
1995
----
Capital Operating
------- ---------
1996 $ 12,845 $ 187,890
1997 12,845 207,671
1998 12,845 208,295
1999 9,722 197,699
2000 4,598 138,960
Thereafter - 326,462
---------- ----------
$ 52,855 $1,266,977
========== ==========
The gross amount of assets recorded under capital lease obligations was
$59,042 at December 31, 1995.
Since filing its petition for bankruptcy in 1986, the Company has not
filed the reports as required under the Securities Exchange Act of 1934
("Exchange Act"). The Company last filed a Form 10K for the fiscal
period ended December 31, 1985. During the years in bankruptcy, the
Company was unable to gather the financial and staffing resources to
produce audited financial statements and therefore, has been delinquent
in filing such reports. The Company has made an affirmative commitment
to file the reports required under the Exchange Act.
(10) Payroll Taxes Payable
Payroll taxes payable includes pre-petition liabilities to various
federal and state governmental agencies in the amount of $221,443. In
addition, included in accrued expenses are penalties and interest
incurred for the late payment of payroll taxes totaling $102,979. The
Company has commenced negotiations with a federal agency to settle
those agencies claims. Management can make no assurances as to the
outcome of these negotiations.
F - 14
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this amended report 10-KSB/A to be signed on its behalf by
the undersigned, thereunto duly authorized.
(Registrant) COSMETIC SCIENCES, INC.
By: /s/ Paul Elenio
-------------------------------------
Paul Elenio
Vice President, Controller and
Principal Financial Officer
Date: June 26 , 1996
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Mary Ann Page Date: June 26 , 1996
-------------------------------
Mary Ann Page
Acting Chief Executive Officer
and Director
By: /s/ Paul Elenio Date: June 26 , 1996
-------------------------------
Paul Elenio
Vice President, Controller and
Principal Financial Officer
By: /s/ Patricia Cantalupo Date: June 26 , 1996
-------------------------------
Patricia Cantalupo
Vice President and
Director
By: /s/ Robert Kohlmeyer Date: June 26 , 1996
-------------------------------
Robert Kohlmeyer
Secretary, Treasurer
and Director
