SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
COSMETIC SCIENCES, INC.
.............................................................
(Name of Registrant as Specified In Its Charter)
.............................................................
(Name of Person(s) Filing Proxy Statement if other
than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction
applies:
.......................................................
2) Aggregate number of securities to which transaction
applies:
.......................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is
calculated and state how it was determined):
.......................................................
4) Proposed maximum aggregate value of transaction:
.......................................................
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5) Total fee paid:
.......................................................
[ X ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form of Schedule and the date of its filing.
1) Amount Previously Paid:
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4)Date Filed:
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COSMETIC SCIENCES, INC.
_______________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
_______________________
September 25, 1996
The Annual Meeting of Shareholders of Cosmetic Sciences,
Inc. (the "Company") will be held at the offices of Arbor Home
HealthCare Holding, LLC, 333 Earle Ovington Boulevard, Suite 900,
Uniondale, New York, 11553 on Wednesday, September 25, 1996, at
10:00 a.m., for the following purposes:
(1) To elect four directors to serve on the Board of
Directors until the next annual meeting of
shareholders;
(2) To approve an amendment to the Company's Certificate
of Incorporation to effect an increase in the
Company's authorized shares of Common Stock, $.01 par
value, to 50,000,000 shares;
(3) To approve an amendment to the Company's Certificate
of Incorporation to create a new class of authorized
preferred stock which may be issued subject to such
rights, preferences and limitations as shall be
determined by the Board of Directors;
(4) To approve an amendment to the Company's Certificate
of Incorporation to provide for the Company to engage
in the home health care business;
(5) To approve an amendment to the Company's Certificate
of Incorporation to change the name of the Company to
Extended Family Care Corporation;
(6) To approve an amendment to the Company's Certificate
of Incorporation to eliminate personal liability of
the Company's directors to the extent permitted by
Section 402(b) of the New York Business Corporation
Law;
(7) To ratify the appointment of Carpenter & Onorato, P.C.
as the independent auditors to audit the financial
statements of the Company and its subsidiaries for the
year ending December 31, 1996; and
(8) To transact such other business as may properly come
before the meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on
September 4, 1996 as the record date for determining shareholders
entitled to notice of and to vote at the meeting.
If you will be unable to attend the meeting and vote in
person, kindly mark, sign, date and return the enclosed proxy
promptly so that your shares will be represented. Sending in your
proxy will not prevent you from voting in person at the meeting.
By Order of the Board of Directors
Robert Kohlmeyer, Secretary
<PAGE>
COSMETIC SCIENCES, INC.
One Old Country Road, Suite 335
Carle Place, New York 11514
The Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995, including financial statements, is being
mailed to shareholders together with these proxy materials on or
about September 9, 1996. The Annual Report contains various
cautionary statements concerning the Company to which reference is
hereby made.
_________________________
PROXY STATEMENT
_________________________
This statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Cosmetic Sciences, Inc. (the
"Company") to be used at the Annual Meeting of Shareholders of the
Company (the "Meeting"), to be held on Wednesday, September 25,
1996, at 10:00 A.M. at the offices of Arbor Home HealthCare
Holding, LLC at 333 Earle Ovington Blvd., Suite 900, Uniondale,
New York, 11553.
Voting Procedure
Shareholders of record at the close of business on September
4, 1996 will be entitled to vote at the Meeting. On the record
date, there were 19,000,226 shares of Common Stock, par value $.01
per share ("Common Stock"), outstanding, each of which is entitled
to one vote at the Meeting. Holders of the Common Stock will vote
as a single class as to all matters to come before the Meeting.
Of the Common Stock outstanding, Coss Holding Corporation ("Coss")
owns 12,749,658 shares of Common Stock, representing in the
aggregate approximately 67% of the votes entitled to be cast at
the Meeting. Such shares are held in a voting trust and will be
voted FOR the election of each director, FOR the approval of the
various amendments to the Company's Certificate of Incorporation
set forth in Proposal 2-6 below, and FOR the ratification of the
appointment of auditors. See "Certain Relationships and Related
Transactions."
The By-Laws of the Company (the "By-Laws") provide that the
holders of a majority of the Common Stock issued and outstanding
and entitled to vote at the Meeting, present in person or
represented by proxy, shall constitute a quorum at the Meeting.
The By-Laws further provide that directors of the Company shall be
elected by a plurality vote and that, except as otherwise provided
by statute, the Certificate of Incorporation of the Company, or
the By-Laws, all other matters coming before the Meeting shall be
decided by the vote of a majority of the number of shares of
Common Stock present in person or represented by proxy at the
Meeting and entitled to vote.
Votes cast at the Meeting will be counted by the persons
appointed by the Company to act as inspectors of election for the
Meeting. The inspectors of election will treat Common Stock
represented by a properly executed and returned proxy as present
at the Meeting for purposes of determining a quorum. Abstentions
and broker non-votes with respect to particular proposals will not
affect the determination of a quorum.
Four directors will be elected by a plurality vote of the
Common Stock present, in person or by proxy, and entitled to vote
at the Meeting. Accordingly, abstentions and broker non-votes as
to the election of directors will have no effect on the election
of directors. All other matters to come before the Meeting
require the approval of a majority of the Common Stock present and
entitled to vote; therefore, abstentions as to particular
<PAGE>
proposals will have the same effect as votes against such
proposals. Broker non-votes as to particular proposals will not,
however, be deemed to be a part of the voting power present with
respect to such proposals and will not therefore count as votes
for or against such proposals and will not be included in
calculating the number of votes necessary for approval of such
proposals.
Proxies in the enclosed form are solicited by the Board of
Directors to provide an opportunity to every shareholder to vote
on all matters scheduled to come before the Meeting, whether or
not he or she attends in person. If proxies in the enclosed form
are properly executed and returned, the Common Stock represented
will be voted at the Meeting in accordance with shareholder
direction. Proxies in the enclosed form will be voted FOR the
election of each director, FOR the approval of the specified
amendments to the Certificate of Incorporation set forth in
Proposals 2-6 and FOR the ratification of the appointment of
auditors unless contrary specification is made. Any shareholder
executing a proxy may revoke that proxy or submit a revised one at
any time before it is voted. A shareholder may also attend the
Meeting in person and vote by ballot, thereby canceling any proxy
previously given. Except for the election of directors, approval
of the amendments to the Certificate of Incorporation and the
ratification of the appointment of auditors, management expects no
other matters to be presented for action at the Meeting. If,
however, any other matters properly come before the Meeting, the
persons named as proxies in the enclosed form of proxy intend to
vote in accordance with their judgment on the matters presented.
Proxy Solicitation
The cost of soliciting proxies will be borne by the Company.
In addition to solicitations by mail, arrangements have been made
for brokers and nominees to send proxy material to their
principals, and the Company will reimburse them for their
reasonable expenses in doing so. The Company's transfer agent,
American Stock Transfer and Trust Company, will assist in the
solicitation of proxies from brokers and nominees. The fees for
the services of the transfer agent are included in the monthly
fees paid by the Company; however, the Company will reimburse the
transfer agent for its reasonable out-of-pocket expenses incurred
in connection with providing solicitation services. Certain
employees of the Company, who will receive no compensation for
their services other than their regular remuneration, may also
solicit proxies by telephone, telegram, telex, telecopy, or
personal interview.
PROPOSAL 1. ELECTION OF DIRECTORS
At the Meeting, four directors are to be elected to a one-
year term and to hold office until his or her successor is elected
and qualified. The Board of Directors consists of one class,
which serves for a one-year term. The persons named in the
enclosed form of proxy intend to vote such proxy, unless otherwise
directed, FOR the election of each of the directors nominated to
serve on the Board to serve until the fiscal 1997 Annual Meeting
of Shareholders. If, contrary to present expectation, any of the
nominees should become unavailable for any reason, votes may be
cast pursuant to the accompanying form of proxy for a substitute
nominee designated by the Board.
Information Concerning Directors and Director Nominees
Set forth below is certain information concerning directors
and director nominees.
<PAGE>
<TABLE>
<CAPTION>
Year First
Elected A
Name of Nominee Age Position Director
<S> <C> <C> <C>
Joseph Heller 32 Vice President/Director Nominee (1)
Paul Elenio 29 Vice President/Controller/ (1)
Principal Financial Officer/
Director Nominee
Mary Ann Page 54 Acting Chief Executive Officer/ 1994
Vice President/Director/Director
Nominee
Robert Kohlmeyer 41 Secretary/Treasurer/Director/ 1992
Director Nominee
</TABLE>
The biographies of each of the above individuals are set
forth below at "Directors, Executive Officers, Promoters and
Control Persons."
(1) Mr. Heller and Mr. Elenio are nominated for election as
directors for the first time at this Meeting.
Corporate Governance
Directors are elected at the annual meeting of shareholders
and hold office until their successors have been duly elected and
qualified, or until their earlier death, resignation or removal.
The Board of Directors has primary responsibility for
directing the management of the business and affairs of the
Company. The Board currently consists of four members.
Executive officers serve at the discretion of the Board of
Directors, subject to any employment agreement between the
executive officer and the Company.
The Board of Directors voted by unanimous written consent in
lieu of formal meetings with respect to all actions taken in the
year ended December 31, 1995, except for one formal meeting which
all directors attended.
Compensation of Directors
Directors and committee members who are part of management
serve as such without compensation but are reimbursed for their
reasonable out-of-pocket expenses in attending meetings of the
Board and its committees.
Recommendation and Vote
The Board of Directors recommends a vote "FOR" the election
of the nominees listed above as directors of the Company to hold
office until the next annual meeting or until their successors are
elected and qualified.
<PAGE>
PROPOSAL 2. PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO EFFECT AN INCREASE IN THE COMPANY'S AUTHORIZED SHARES
OF COMMON STOCK TO 50,000,000 SHARES
General
The Board of Directors has unanimously adopted resolutions
approving and recommending that the shareholders adopt an
amendment to Article FOURTH of the Company's Certificate of
Incorporation to increase its authorized Common Stock from
20,000,000 to 50,000,000 shares (the "Authorized Common Stock
Amendment"). The relative rights and limitations of the Common
Stock would remain unchanged under the amendment. The Common
Stock does not have preemptive rights. At September 10, 1996, the
Company had 19,000,226 shares of Common Stock issued and
outstanding.
The Authorized Common Stock Amendment is being proposed for
two purposes:
First, as set forth below in "Certain Relations and Related
Transactions," Arbor Home HealthCare Holding, LLC ("Arbor")
received an option in October, 1995 (the "Option") to purchase up
to 13,000,000 newly issued shares of the Company for $.10 per
share, in two installments of 6,500,000 shares each. Coss, which
currently owns 67% of the outstanding shares of Common Stock of
the Company, agreed with Arbor when it was granted the Option that
it would arrange for a stockholders' meeting at which it would
vote in favor of amending the Company's Certificate of
Incorporation so as to provide sufficient authorized and unissued
capital for Arbor to exercise its Option. Of the increase of
30,000,000 authorized shares for which shareholder approval is
hereby sought, 13,000,000 will be reserved for issuance to Arbor
to enable it to exercise its Option, and 17,000,000 will be
available for issuance at the discretion of the Board of Directors
as discussed below. Arbor has already exercised the first half of
its Option for 6,500,000 shares of Common Stock by delivering to
the Company a notice of exercise and by depositing $650,000 into
escrow, to be released to the Company upon approval of the
Authorized Common Stock Amendment.
Second, management believes that the proposed amendment to
Article FOURTH of the Certificate of Incorporation will provide
several long-term advantages to the Company and its stockholders.
The passage of the proposal and the resulting increase in
authorized shares might enable the Company to pursue acquisitions
or enter into transactions which management believes provide the
potential for growth and profit, such as strategic alliances and
funding of new business opportunities. Additional authorized
shares could also be used to raise cash assets through sales of
stock to public and private investors. With the limited number of
shares currently available for such uses, it is impractical for
the Company to evaluate or seek to consummate business
combinations or other transactions involving the issuance of
Common Stock which, if they could be accomplished, might enhance
stockholder value. If additional shares are available,
transactions dependent upon the issuance of additional shares of
Common Stock would be less likely to be undermined by delays and
uncertainties occasioned by the need to obtain stockholder
authorization prior to the consummation of such transactions. The
ability to issue shares, as deemed in the Company's best interests
by the Board, will also permit the Company to avoid the expenses
which are incurred in holding special stockholders' meetings in
the future.
In the event the proposal is passed, stockholder approval of
the issuance of the 30,000,000 additional shares of Common Stock,
the authorization of which is sought hereby, will not be sought
prior to the issuance of additional securities unless such
issuances relate to a merger, consolidation or other transaction
which requires stockholder approval.
<PAGE>
The proposal, if approved, would strengthen the position of
management and might make the removal of management more
difficult, even if such removal would be generally beneficial to
the Company's stockholders. The authorization to issue the
additional shares of Common Stock would provide management with a
capacity to negate the efforts of unfriendly tender offerors
through the issuance of securities to others who are friendly or
desirable to management.
The Certificate of Incorporation does not provide for
cumulative voting. As a result, in order to be ensured of
representation on the Board, a stockholder must control the votes
of a majority of the shares present and voting at a stockholders'
meeting at which a quorum is present. The lack of cumulative
voting requires an entity seeking a takeover to acquire a
substantially greater number of shares to ensure representation on
the Board than would be necessary were cumulative voting
available.
The submission of this proposal is not a part of any plan by
the Company's management to adopt a series of amendments to the
Certificate of Incorporation or Bylaws so as to render the
takeover of the Company more difficult. Management is not aware
of the existence of any other provisions in the Certificate of
Incorporation or Bylaws having an anti-takeover effect, other than
the Preferred Stock Amendment (Proposal 3 below).
The issuance of additional shares of Common Stock may have a
dilutive effect on earnings per share and on the equity and voting
power of existing holders of Common Stock. It may also adversely
affect the market price of the Common Stock. However, in the
event additional shares are issued in transactions whereby
favorable business opportunities are provided, the market price
may increase.
Management has no plans at present to issue any or all of
the additional shares of Common Stock, the authorization of which
is hereby sought, except for the up to 13,000,000 shares reserved
for issuance to Arbor upon the full or partial exercise of the
Option.
Dissenters' Rights
Pursuant to the New York Business Corporation Law, the
Company's shareholders are not entitled to dissenters' rights of
appraisal with respect to the Authorized Common Stock Amendment.
Recommendation and Vote
Approval of the Authorized Common Stock Amendment requires
the affirmative vote of the holders of a majority of the shares of
Common Stock voting either in person or by proxy at the Annual
Meeting. The Board of Directors believes that it is in the best
interests of the Company to approve the Authorized Common Stock
Amendment. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE AUTHORIZED COMMON
STOCK AMENDMENT.
The text of the Authorized Common Stock Amendment is
reproduced at the end of Proposal 3 below, along with the text of
the Preferred Stock Amendment set forth therein. If one of either
Proposal 2 or 3 is not approved, appropriate adjustment will be
made in the text of the resolution. The text of both proposed
amendments is presented together for convenience in that the
voting trustee holding 67% of the Company's outstanding voting
shares beneficially owned by Coss has already indicated it will
vote "FOR" the approval of Proposals 2 and 3.
<PAGE>
PROPOSAL 3. PROPOSED AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO AUTHORIZE UP TO 10,000,000 SHARES
OF PREFERRED STOCK
The Board of Directors has unanimously adopted resolutions
approving and recommending that the shareholders adopt an
amendment to the Certificate of Incorporation (the "Preferred
Stock Amendment") to authorize the issuance by the Company of up
to 10,000,000 shares of preferred stock (the "Preferred Stock").
The Board of Directors believes that the authorization of
the Preferred Stock is in the best interests of the Company and
its shareholders and believes that it is advisable to authorize
such shares and have them available in connection with possible
future transactions, such as financings, strategic alliances,
corporate mergers, acquisitions, possible funding of new business
opportunities and other uses not presently determinable and as may
be deemed to be feasible and in the best interests of the Company.
In addition, the Board of Directors believes that it is desirable
that the Company have the flexibility to issue shares of Preferred
Stock without further shareholder action, except as otherwise
provided by law.
The Preferred Stock will have such designations,
preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as are
determined by the Board of Directors. Thus, if the Preferred
Stock Amendment is approved, the Board of Directors would be
entitled to authorize the creation and issuance of up to
10,000,000 shares of Preferred Stock in one or more series with
such limitations and restrictions as may be determined in the
Board's sole discretion, without further authorization by the
Company's shareholders. Shareholders will not have preemptive
rights to subscribe for shares of Preferred Stock.
It is not possible to determine the actual effect of the
Preferred Stock on the rights of the shareholders of the Company
until the Board of Directors determines the rights of the holders
of a series of the Preferred Stock. However, such effects might
include (i) restrictions on the payment of dividends to holders of
the Common Stock; (ii) dilution of voting power to the extent that
the holders of shares of Preferred Stock are given voting rights;
(iii) dilution of the equity interests and voting power if the
Preferred stock is convertible into Common Stock; and (iv)
restrictions upon any distribution of assets to the holders of the
Common Stock upon liquidation or dissolution and until the
satisfaction of any liquidation preference granted to the holders
of Preferred Stock.
The Board of Directors is required by New York law to make
any determination to issue shares of Preferred Stock based upon
its judgment as to the best interests of the shareholders and the
Company, Although the Board of Directors has no present intention
of doing so, it could issue shares of Preferred Stock (within the
limits imposed by applicable law) that could, depending on the
terms of such series, make more difficult or discourage an attempt
to obtain control of the Company by means of a merger, tender
offer, proxy contest or other means. When in the judgment of the
Board of Directors such action would be in the best interests of
the shareholders and the Company, the issuance of shares of
Preferred Stock could be used to create voting or other
impediments or to discourage persons seeking to gain control of
the Company, for example, by the sale of Preferred Stock to
purchasers favorable to the Board of Directors. In addition, the
Board of Directors could authorize holders of a series of
Preferred Stock to vote either separately as a class or with the
holders of Common Stock, on any merger, sale or exchange of assets
by the Company or any other extraordinary corporate transaction.
The existence of the additional authorized shares could have the
effect of discouraging unsolicited takeover attempts. The
issuance of new shares could also be used to dilute the stock
ownership of a person or entity seeking to obtain control of the
Company should the Board of Directors consider
<PAGE>
the action of such entity or person not to be in the best
interests of these shareholders and the Company. Such issuance of
Preferred Stock could also have the effect of diluting the
earnings per share and book value per share of the Common Stock
held by the holders of Common Stock.
Management has no plans at present to issue any of the
shares of Preferred Stock, the authorization of which is hereby
sought.
Dissenters' Rights
Pursuant to the New York Business Corporation Law, the
Company's shareholders are not entitled to dissenters' rights of
appraisal with respect to the Preferred Stock Amendment.
Recommendation and Vote
Approval of the Preferred Stock Amendment requires the
affirmative vote of the holders of a majority of the shares of
Common Stock voting either in person or by proxy at the Annual
Meeting. The Board of Directors believes that the Preferred Stock
Amendment is in the best interest of the shareholders of the
Company. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE PREFERRED STOCK
AMENDMENT.
The text of the Preferred Stock Amendment follows below,
along with the text of the Authorized Common Stock Amendment.
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF
COSMETIC SCIENCES, INC. TO EFFECT THE AUTHORIZED
COMMON STOCK AMENDMENT AND THE
PREFERRED STOCK AMENDMENT
Section 4 of the Certificate of Incorporation of the Company
shall be amended in its entirety to read as follows:
"4. Number of Shares. The total number of shares of
stock that the Company shall have authority to issue
is sixty million (60,000,000), consisting of fifty
million (50,000,000) shares of common stock (the
"Common Stock") of the par value of one cent ($.01)
each and ten million (10,000,000) shares of preferred
stock (the "Preferred Stock") of the par value of one
cent ($.01) each.
"Designation of Classes; Relative Rights, etc..
The designation, relative rights, preferences and
limitations of the shares of each class are as
follows:
"The shares of Preferred Stock may be issued
from time to time in one or more series of any number
of shares, provided that the aggregate number of
shares issued and not canceled of any and all such
series shall not exceed the total number of shares of
Preferred Stock hereinabove authorized, and with
distinctive serial designations, all as shall
hereafter be stated and expressed in the resolution or
resolutions providing for the issue of such shares of
Preferred Stock from time to time adopted by the Board
of Directors pursuant to authority so to do which is
hereby vested in the Board of Directors. Each series
of shares of Preferred Stock (a) may have such voting
powers, full or limited, or may be without voting
powers; (b) may be subject to redemption at such time
or times and at such prices; (c) may be entitled to
receive dividends (which may be cumulative or non-
cumulative) at such rate or rates, on such conditions
and at such times, and payable in preference to, or in
such relation to, the dividends payable on any other
class or classes or series of stock; (d) may
<PAGE>
have such rights upon the dissolution of, or upon any
distribution of the assets of, the Company; (e) may be made
convertible into or exchangeable for, shares of any other
class or classes or of any other series of the same or any
other class or classes of shares of the Company at such
price or prices or at such rates of exchange and with such
adjustments; (f) may be entitled to the benefit of a sinking
fund to be applied to the purchase or redemption of shares
of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon
the creation of indebtedness of the Company or any
subsidiary, upon the issue of any additional shares
(including additional shares of such series or of any other
series) and upon the payment of dividends or the making of
other distributions on, and the purchase, redemption or
other acquisition by the Company or any subsidiary of, any
outstanding shares of the Company and (h) may have such
other relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof;
all as shall be stated in said resolution or resolutions
providing for the issue of such shares of Preferred Stock.
Shares of Preferred Stock of any series that have been
redeemed (whether through the operation of a sinking fund or
otherwise) or that if convertible or exchangeable, have been
converted into or exchanged for shares of any other class or
classes shall have the status of authorized and unissued
shares of Preferred Stock of the same series and may be
reissued as a part of the series of which they were
originally a part or may be reclassified and reissued as
part of a new series of shares of Preferred Stock to be
created by resolution or resolutions of the Board of
Directors or as part of any other series of shares of
Preferred Stock, all subject to the conditions or
restrictions on issuance set forth in the resolution or
resolutions adopted by the Board of Directors providing for
the issue of any series of shares of Preferred Stock.
"Subject to the provisions of any applicable law or of
the By-laws of the Company as from time to time
amended, with respect to the closing of the transfer
books or the fixing of a record date for the
determination of shareholders entitled to vote and
except as otherwise provided by law or by the
resolution or resolutions providing for the issue of
any series of shares of Preferred Stock, the holders
of outstanding shares of Common Stock shall
exclusively possess voting power for the election of
directors and for all other purposes, each holder of
record of shares of Common Stock being entitled to one
vote for each share of Common Stock standing in his or
her name on the books of the Company. Except as
otherwise provided by the resolution or resolutions
providing for the issue of any series of shares of
Preferred Stock, the holders of shares of Common Stock
shall be entitled, to the exclusion of the holders of
shares of Preferred Stock of any and all series, to
receive such dividends as from time to time may be
declared by the Board of Directors. In the event of
any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, after
payment shall have been made to the holders of shares
of Preferred Stock of the full amount to which they
shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of
shares of Preferred Stock, the holders of shares of
Common Stock shall be entitled, to the exclusion of
the holders of shares of Preferred Stock of any and
all series, to share, ratably according to the number
of shares of Common Stock held by them, in all
remaining assets of the Company available for
distribution to its shareholders.
<PAGE>
"Subject to the provisions of this Certificate of
Incorporation and except as otherwise provided by law,
the stock of the Company, regardless of class, may be
issued for such consideration and for such corporate
purposes as the Board of Directors may from time to
time determine."
PROPOSAL 4. PROPOSED AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO PROVIDE THAT THE COMPANY IS AUTHORIZED
TO ENGAGE IN PROVIDING HOME HEALTH CARE SERVICES
The Board of Directors has unanimously adopted resolutions
approving and recommending that the shareholders adopt an
amendment to the Certificate of Incorporation (the "Corporate
Purpose Amendment") which will delete the current reference in the
Certificate of Incorporation to the Company's involvement in the
business of selling cosmetics and to clarify that the Company's
business is providing home health care services. The Board of
Directors believes that such clarification is advisable to
accurately reflect the Company's business and to delete any
references to the business in which the Company is no longer
engaged.
Therefore, Paragraph 2 of the Certificate of Incorporation
is proposed to be amended by deleting the first four lines thereof
and replacing them as follows:
"The Company shall be authorized to engage in the
business of providing home health care services
including both professional and paraprofessional care
and such other services necessary or desirable in
relation thereto."
Dissenters' Rights
Pursuant to the New York Business Corporation Law, the
Company's shareholders are not entitled to dissenters' rights of
appraisal with respect to the Corporate Purpose Amendment.
Recommendation and Vote
Approval of the Corporate Purpose Amendment requires the
affirmative vote of the holders of a majority of the shares of
Common Stock voting either in person or by proxy at the Annual
Meeting. The Board of Directors believes that it is in the best
interests of the Company to approve the Corporate Purpose
Amendment. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE CORPORATE PURPOSE
AMENDMENT.
PROPOSAL 5. PROPOSED AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO EFFECT A CHANGE IN THE COMPANY'S NAME
The Board of Directors has unanimously adopted resolutions
approving and recommending that the shareholders adopt an
amendment to the Certificate of Incorporation (the "Name Change
Amendment") to authorize changing the Company's name to Extended
Family Care Corporation. The purpose of the change is to
accurately reflect the Company's current business.
Dissenters' Rights
Pursuant to the New York Business Corporation Law, the
Company's shareholders are not entitled to dissenters' rights of
appraisal with respect to the Name Change Amendment.
<PAGE>
Recommendation and Vote
Approval of the Name Change Amendment requires the
affirmative vote of the holders of a majority of the shares of
Common Stock voting either in person or by proxy at the Annual
Meeting. The Board of Directors believes that it is in the best
interests of the Company to approve the Name Change Amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE NAME CHANGE AMENDMENT.
PROPOSAL 6. PROPOSED AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO LIMIT LIABILITY OF DIRECTORS
The Board of Directors has unanimously adopted resolutions
approving and recommending that the shareholders adopt an
amendment to the Company's Certificate of Incorporation,
consistent with Section 402(b) of the New York Business
Corporation Law ("New York BCL"). Proposal 6 is a proposal to
amend the Company's Certificate of Incorporation by adding a
provision which, in certain cases, would eliminate the personal
liability of directors of the Company for monetary damages arising
from breach of fiduciary duty as a director (the "402(b)
Amendment").
The Board of Directors believes that the proposal will
assist the Company in attracting and retaining qualified
individuals to serve as directors and officers of the Company.
The proposal allows the Company to adopt certain provisions of the
New York BCL which were authorized by the state legislature with
the intention of enabling New York corporations to take measures
to respond to the threat of litigation which directors of public
companies face in carrying out their responsibilities and to the
limited availability of directors' and officers' liability
insurance. Since directors and officers of the Company may
benefit from this proposal, the Board of Directors has an interest
in the passage thereof by the shareholders. The Board of
Directors believes, however, that adoption of the proposal is in
the best interests of the Company and its shareholders.
Background
Since 1986, many states have enacted statutes to reduce the
exposure of corporate directors to litigation seeking to impose
upon them heavy monetary liability for their acts or inaction in
such capacity. As noted in the legislative memorandum
accompanying the Act amending Section 402(b) of the New York BCL
with respect to directors' liability, the purpose of the New York
legislation was "to assure that qualified and experienced persons
continue to be willing to serve as...directors of New York
corporations by relieving them of the threat of monetary liability
in connection with their duties...." Such liability is not
eliminated or limited if the acts or omissions of directors are in
bad faith, involve intentional misconduct or knowing violations of
law, violate certain statutory prohibitions, or result in a profit
or other advantage to the director to which he is not legally
entitled. Section 402(b) of the New York BCL is an enabling
provision only. Shareholder approval of an amendment to the
Certificate of Incorporation is required to effect the limitation
on monetary liability authorized by the statute.
Text of Proposed Amendment
The text of the proposed amendment to be added to the
Company's Certificate of Incorporation is as follows:
"To the fullest extent permitted by the
New York Business Corporation Law as
presently in effect or hereafter amended,
a director of the Corporation shall not be
personally liable to the Corporation or
its shareholders for damages for any
breach of duty as a
<PAGE>
director. Any repeal or modification of
this Article by the shareholders of the
Corporation shall not adversely affect any
right or protection of a director of the
Corporation existing hereunder with
respect to any act or omission occurring
prior to such repeal or modification."
Reasons for the Proposed Amendment
Directors of New York corporations are required, under the
New York BCL, to perform their duties in such capacity in good
faith and with that degree of care which an ordinarily prudent
person in a like position would use under similar circumstances.
A director may rely upon information, opinions, reports or
statements (including financial statements) prepared by certain
officers or employees, professional advisors or committees of the
Board on which such director does not serve. Decisions made on
that basis are protected by the "business judgment rule" and
should not be questioned by a court in the event of a lawsuit
challenging such decisions. The expense of defending such
lawsuits, the frequency of unwarranted litigation and the
inevitable uncertainties of applying the business judgment rule to
particular facts and circumstances mean, as a practical matter,
that directors must rely on indemnification arrangements and
directors' and officers' liability insurance in the event of such
expenses or unforeseen liability.
Effect of the Proposed Amendment
The proposed amendment would protect each of the Company's
directors against personal liability to the Company or its
shareholders for any breach of duty unless a judgment or other
final adjudication adverse to the directors establishes that (i)
his acts or omissions were in bad faith, or (ii) involved
intentional misconduct or a knowing violation of the law, or (iii)
he personally gained in fact a financial profit or other advantage
to which he was not legally entitled, or (iv) his acts violated
the prohibitions contained in Section 719 of the New York BCL
against certain declarations of dividends, certain purchases or
redemptions of its shares by the Company, certain distributions of
assets after dissolution of the Company without adequately
providing for its liabilities and the making of certain loans to
directors. In the past, there has been no claim of the type which
would be affected by the proposed amendment and none is presently
pending or, to the knowledge of management of the Company,
threatened. Since the amendment provides that the liability of
the Company's directors is limited to the fullest extent permitted
by the New York BCL "as presently in effect or hereafter amended",
the amendment will further protect directors to the extent
provided in any amendment to the statute, without further approval
of the shareholders.
The amendment does not reduce the fiduciary duty of a
director; it only eliminates monetary damage awards to the Company
and its shareholders occasioned by a breach of that duty. It does
not affect equitable remedies, such as to enjoin or rescind a
transaction involving a breach of fiduciary duty, although such
remedies may be unavailable or ineffective with respect to a
particular challenged action of the Board of Directors. The
amendment does not affect a director's liability for acts taken or
omitted prior to the time the amendment becomes effective (i.e.,
after shareholder approval and filing with the New York Secretary
of State), nor does it affect the liabilities of directors who are
also officers for acts taken or omitted in their capacity as
officers. The limitation of liability afforded by the amendment
affects only actions brought by the Company or its shareholders,
and does not preclude or limit recovery of damages by third
parties, nor does it affect the responsibility of directors under
other laws, such as the federal securities laws. The amendment
provides that any repeal or modification thereof would not affect
any right or protection of a director thereunder with respect to
any act or omission occurring prior to such repeal or
modification.
<PAGE>
The Company's directors acknowledge that they and future
directors may personally benefit from adoption of the proposed
amendment at the potential expense of the Company's shareholders,
whose right to bring claims for monetary damages against directors
will be limited thereby, and that they may thus have a conflict of
interest in recommending approval of the amendment. The Board of
Directors believes, however, that the diligence exercised by
directors stems primarily from their desire to act in the best
interests of the Company, and not from a fear of monetary damage
awards. Accordingly, the Board believes that the level of
scrutiny and care exercised by directors will not be lessened by
adoption of the proposed amendment. The Board believes that such
adoption will enhance the Company's ability to attract and retain
qualified individuals to serve as directors of the Company.
Approval of the proposed amendment to the Certificate of
Incorporation requires the affirmative vote of the holders of at
least a majority of the issued and outstanding shares of Common
Stock.
Dissenters' Rights
Pursuant to the New York Business Corporation Law, the
Company's shareholders are not entitled to dissenters' rights of
appraisal with respect to the 402(b) Amendment.
Recommendation and Vote
Approval of the 402(b) Amendment requires the affirmative
vote of the holders of a majority of the shares of Common Stock
voting either in person or by proxy at the Annual Meeting. The
Board of Directors believes that it is in the best interests of
the Company to approve the 402(b) Amendment. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE 402(B) AMENDMENT.
PROPOSAL 7. RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors of the Company seeks ratification by
the shareholders of the Board's appointment of Carpenter &
Onorato, P.C. to act as the independent auditors of the financial
statements of the Company and its subsidiaries for the fiscal year
ending December 31, 1996. One or more representatives of the
auditors are expected to be available at the Meeting to respond to
appropriate questions and will be given an opportunity to make a
statement at the Meeting.
Effective February 19, 1996, the Company dismissed Rose,
Michlin, Karpf & Co. ("Rose, Michlin") as its independent auditor
of its financial statements. The new independent auditor to be
engaged by the Company to audit the Company's financial
statements, effective February 19, 1996, is Carpenter & Onorato,
P.C.
Rose, Michlin did not complete the audit of the Company's
financial statements for the two most recent fiscal years 1994 and
1995. However, during these years there were no disagreements
with Rose, Michlin on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope of
procedure. Further, the Company was not advised by Rose, Michlin
during this period of the existence of any of the events described
in Item 304(a)(1)(B) of Regulation S-B.
The financial statements of the Company as of and for the
fiscal years ended December 31, 1994 and December 31, 1995 were
audited by Carpenter & Onorato, P.C. Said reports did not contain
an adverse opinion or a disclaimer of an opinion, and was not
qualified or modified as to uncertainty, audit scope or accounting
principles.
<PAGE>
The Board of Directors recommends that the shareholders
ratify the appointment of Carpenter & Onorato, P.C., to act as the
independent auditors of the Company for the 1996 fiscal year.
OTHER BUSINESS
Management knows of no other business which is to be
presented for action at the Meeting. Should any other matters
properly come before the Meeting, the persons named in the
accompanying proxy will have discretionary authority to vote all
proxies in accordance with their judgment.
It is important that proxies be returned promptly.
Therefore, shareholders who do not expect to attend in person are
urged to execute and return the enclosed proxy to which no postage
need be affixed if mailed in the United States.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Mary Ann Page 54 Acting Chief Executive
Officer/Vice-President/
Director/Director Nominee
Patricia Cantalupo 36 Former Vice-President/
Former Director
Peter P. Jackson 45 Former Chief Executive
Officer of TPC
Paul Elenio 29 Vice President/Controller/
Principal Financial Officer/
Director Nominee
Robert Kohlmeyer 41 Secretary/Treasurer/
Director/Director Nominee
Steven Gorenstein 52 Former President and
Chief Executive Officer/
Former Director
Joseph Heller 32 Vice President/Director
Nominee
</TABLE>
Mary Ann Page
Acting Chief Executive Officer since January 1996; Vice
President and Director of the Company since June 1994. Ms. Page
is also President and a Director of TPC Home Care Services, Inc.,
the Company's majority-owned subsidiary ("TPC"). From 1991 to
1993, Ms Page held the position of Director of Training for Health
Force, a national home health care agency, where she was
responsible for training new franchisees in all aspects of home
care personnel services. From 1988 to 1991, she held the position
of Director of Franchising for Winston Franchising Corp. Ms. Page
will be standing for reelection as a director at the Meeting.
<PAGE>
Patricia Cantalupo
Vice President and Director since 1992. Dr. Cantalupo is
also a Vice President and Secretary of TPC. Dr. Cantalupo has
been the principal owner of Cantalupo Chiropractic Associates, a
full service multi-disciplinary Chiropractic Health Care Facility,
since 1985. Dr. Cantalupo will not be standing for reelection at
the Meeting, having resigned from the position of Vice President
and Director in August, 1996.
Peter P. Jackson
Mr. Jackson's employment with the Company ended in August,
1996. Mr. Jackson had been Managing Director of Business
Development since January 1996. Mr. Jackson was Chief Executive
Officer of TPC from July 1993 to December 1995.
Paul Elenio
Vice President and Controller of the Company since January
1996. From 1993 to 1995 Mr. Elenio held the position of Financial
Reporting and Tax Supervisor for BankAmerica Mortgage, FSB,
formally Arbor National Mortgage, Inc., a mortgage banking company
which originated, sold and serviced residential and commercial
mortgages. From 1991 to 1993, Mr. Elenio held the position of
Senior Accountant for Arbor National Mortgage, Inc. Mr. Elenio is
standing for election as a director for the first time at the
Meeting.
Robert Kohlmeyer
Secretary, Treasurer and Director of the Company since 1992.
Mr. Kohlmeyer is also Secretary/Treasurer and Director of TPC.
Mr. Kohlmeyer has been President and Chief Operating Officer of
CRK Contracting, a regional large scale electrical contracting
company, since 1987. Mr. Kohlmeyer is standing for reelection as
a director at the Meeting.
Steve Gorenstein
President, Chief Executive Officer and Director of the
Company since 1992. Mr. Gorenstein resigned as an officer and
director in January 1996. From 1991 to present, Mr. Gorenstein has
been President of Career Placements, Inc., a temporary employment
agency.
Joseph Heller
Mr. Heller was appointed Vice President of the Company in
March, 1996, From August 1995 to the present, Mr. Heller has also
been a Vice President of Arbor Home HealthCare Holding, LLC, a
holding company which holds the option to purchase up to 40% of
the currently outstanding shares of the Company. See "Certain
Relationships and Related Transactions." From June 1995 to the
present, Mr. Heller has also been Vice President of Corporate
Planning for Arbor Management, LLC. See "Certain Relationships
and Related Transactions." From 1991 to May 1995, Mr. Heller has
held the positions of Vice President of Financial Analysis and
Budgeting and Director of Shareholder Relations for Arbor National
Mortgage, Inc. and its successor. From 1990 to 1991, Mr. Heller
was an Acquisition Associate for WinStar Services, Inc., a
merchant and investment banking firm. From 1987 to 1990, Mr.
Heller was a Senior Analyst for Morgan Stanley & Co., a leading
investment banking firm, and from 1985 to 1987, Mr. Heller was a
Senior Accountant for Ernst & Young, LLP, an international
accounting and consulting firm. Mr. Heller is a Certified Public
Accountant; in 1991, he received a Masters degree in Business
Administration from Fordham University. Mr. Heller is standing
for election as a director for the first time at the Meeting.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation
<CAPTION>
(a) (b) (c) (d) (e)
Name and
Principal Other
Position Year Salary($) Bonus($) Compensation($)
<S> <C> <C> <C> <C>
Steve Gorenstein 1995 $0 $0 $0
Chief Executive Officer 1994 $0 $0 $0
President and Director 1993 $0 $0 $0
Mary Ann Page 1995 $82,210 $6,250 $
Acting Chief Executive 1994 $66,221 $0 $
Officer 1993 $ 9,231 $0 $
</TABLE>
No officer of the Company received compensation in excess of
$100,000 from 1993 - 1995. Members of the Board of Directors
received no compensation of any kind for services provided as a
director.
There are no employment agreements with any officer or
director of the Company or its subsidiaries.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of certain beneficial owners.
The following sets forth the holdings of any person known by
the issuer to be the beneficial owner of more than five percent of
the Company's Common Stock:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class
<S> <C> <C> <C>
Common Stock Coss Holding Corp. 12,749,658 67.1
1 Old Country Road
Suite 335
Carle Place, NY. 11514
Common Stock Arbor Home HealthCare 25,749,658 (1) 80.5
Holding, LLC
333 Earle Ovington Blvd.
Uniondale, NY. 11553
Common Stock Ivan Kaufman 25,749,658 (1)(2) 80.5
c/o Arbor Home
HealthCare Holding, LLC
333 Earle Ovington Blvd.
Uniondale, NY. 11553
_______________________________________
</TABLE>
<PAGE>
(1) Includes and gives effect to the exercise in full of options
held by Arbor to purchase up to 13 million newly issued
shares from the Company. Includes voting power over
12,749,658 shares owned by Coss Holding Corp. pursuant to a
voting trust. (See "Certain Relationships and Related
Transactions").
(2) Ivan Kaufman owns a 99 percent interest in Arbor Home
HealthCare Holding LLC. and is its controlling member.
(b) Security Ownership of Management.
The following sets forth the holdings of all of the
Company's directors, executive officers and director nominees, as
well as all directors and officers as a group:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class
<S> <C> <C> <C>
Common Stock Steven Gorenstein 0 0
16 Barrington Place
Dix Hills, NY 11747
Common Stock Robert Kohlmeyer (1) 0 0
86 Hilltop Drive
Smithtown, NY 11787
Common Stock Mary Ann Page 0 0
c/o Cosmetic Sciences, Inc.
1 Old Country Road
Carle Place, NY 11514
Common Stock Patricia Cantalupo 0 0
50 Harvard Drive
Westbury, NY 11590
Common Stock Peter P. Jackson 110,000 (1) *
c/o Cosmetic Sciences, Inc.
1 Old Country Road
Carle Place, NY 11514
Common Stock Paul Elenio 0 0
c/o Cosmetic Sciences, Inc.
1 Old Country Road
Carle Place, NY 11514
Common Stock Joseph Heller 0 0
c/o Arbor Management, LLC
333 Earle Ovington Blvd.
Uniondale, NY 11553
Common Stock All directors and
executive officers
as a group 110,000 *
_____________________________________
*Less than 1%
</TABLE>
(1) Owned by son Steven Jackson. Peter Jackson disclaims
beneficial ownership of these shares.
<PAGE>
(c) Changes in control
Coss has placed all of its 12,749,658 shares of the
Company's Common Stock (the "Coss Shares"), representing
approximately 67 percent of the currently outstanding Company
Common Stock, in a voting trust. Arbor will have the right under
this voting trust to direct the voting of all of the Coss Shares
and to nominate a majority of the Company's Board of Directors.
(See "Certain Relationships and Related Transactions".)
In addition, pursuant to a certain Amended and Restated
Option Agreement (the "Option Agreement"), dated as of October 31,
1995, by and among Arbor, Coss, Coss' shareholders, the Company,
and TPC, Arbor acquired from the Company an option to purchase up
to 13 million shares of the Company's Common Stock. Should this
option be exercised in full, Arbor will have beneficial ownership
and voting rights to 80.5 percent of the outstanding Common Stock
of the Company. (See "Certain Relationships and Related
Transactions".)
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Option Agreement, Arbor acquired from the
Company an option to purchase up to 13 million shares of the
Company's Common Stock as follows: (a) Arbor has an irrevocable
option (the "First Option") to purchase, by June 21, 1996 (which
date was extended to August 21, 1996), 6.5 million shares of the
Company's Common Stock at an exercise price of $.10 per share; (b)
subject to Arbor's timely exercise of the First Option and the
issuance of the shares of Common Stock pursuant to such exercise,
Arbor will be given the option (the "Second Option") to purchase,
by November 1, 1996, up to an additional 6.5 million shares of the
Company's Common Stock at an exercise price of $.10 per share. The
First and Second Options are subject to adjustment in the event of
stock splits and similar events.
On August 21, 1996, Arbor exercised the First Option by
delivering to the Company a notice of exercise of the First Option
and by depositing $650,000 in escrow, to be released to the
Company upon approval of the Authorized Common Stock Amendment.
The Option Agreement also provides for various negative
covenants in favor of Arbor with respect to actions that may be
taken by Coss, its shareholders, the Company and TPC.
Coss has placed all of its 12,749,658 shares of the
Company's Common Stock (the "Coss Shares"), representing
approximately 67 percent of the currently outstanding Company
Common Stock, in a voting trust. Arbor has the right under this
voting trust to direct the voting of all of the Coss Shares. In
addition, under certain circumstances, the trustee of the voting
trust is required to observe certain restrictions in the event
Coss wishes to effect a sale, transfer or encumbrance of the Coss
Shares. Coss will retain all economic rights in the Coss Shares,
including, but not limited to, its right to dividends.
Pursuant to a Registration Rights and Conditional Put Option
Agreement (the "Registration Rights Agreement"), dated as of
October 31, 1995, between Coss and the Company, the Company has
agreed to register the Coss Shares for resale under the Securities
Act of 1933, as amended (the "Securities Act"), upon the written
demand of Coss made at any time commencing one year after the date
on which the Company's Common Stock is listed on the Nasdaq Stock
Market (whether as a SmallCap Market security or a National Market
System security, or any equivalent or successor of the foregoing).
Pursuant to the Registration Rights Agreement, the Company will be
obligated to file up to three registration statements over a
three-year period, with one-third of the Coss Shares (subject to
certain adjustments) to be registered in each year of such three
year period. Notwithstanding the foregoing, the Company has the
<PAGE>
right to reject the demand by Coss, following which Coss may
require that the Company redeem the Coss Shares at a price equal
to 75 percent of the average bid price in effect during the thirty
trading days prior to the demand for registration. Upon the
Company's rejection of the demand, Coss, at its option, may sell
the Coss Shares to a party other than the Company, subject to the
Company's right of first refusal on such sale. Arbor has the
right to purchase the Coss Shares in lieu of the Company on the
same terms and conditions granted the Company as described the two
preceding sentences. In addition, Coss has been granted certain
registration rights in the event the Company shall register any
shares for sale under the Securities Act.
On October 31, 1995, the Company entered into a two year
Financial Services Agreement with Arbor Management, LLC ("Arbor
Mgt."), in which Ivan Kaufman owns a 99% interest. This Agreement
requires Arbor Mgt. to provide consulting services in the areas of
finance, information systems, accounting and marketing. Arbor
Mgt. receives a fee of $7,500 per month for these services. This
agreement is subject to early termination if Arbor Health's First
Option is not exercised or upon the listing of the Company's
Common Stock on the NASDAQ Stock Market.
ANNUAL REPORT
The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1995, which includes audited financial
statements, accompanies this Proxy Statement, but such Annual
Report is not incorporated in this Proxy Statement and is not
deemed to be a part of the proxy solicitation material; except,
however, that the financial statements included in said Annual
Report shall be deemed proxy solicitation material and are hereby
incorporated by reference.
EXHIBITS TO FORM 10-KSB
The Company will furnish, at its cost for copying and
mailing, to each person whose Proxy is being solicited, upon
written request of any such person, exhibits not included with the
Company's Annual Report on Form 10-KSB which accompanies this
Proxy Statement. Written requests for copies of such exhibits
should be directed to Joseph Heller, Vice President, Cosmetic
Sciences, Inc., One Old Country Road, Suite 335, Carle Place, New
York, 11514.
SHAREHOLDER PROPOSALS
If any shareholder desires to present a proposal for action
at the Company's fiscal 1997 annual meeting, such proposal must be
in compliance with applicable laws and Securities and Exchange
Commission regulations and must be received by the Company on or
prior to May 11, 1997. Such proposals should be directed to
Joseph Heller, Vice President, Cosmetic Sciences, Inc., One Old
Country Road, Suite 335, Carle Place, New York, 11514.
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors and officers, and
persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership
and reports of changes in ownership with the Securities and
Exchange Commission ("SEC"). Such persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a)
reports they file.
<PAGE>
Based solely on its review of the copies of such reports
received by it with respect to fiscal 1995, or written
representations from certain reporting persons, the Company
believes that all filing requirements applicable to its directors,
officers and persons who own more than 10% of a registered class
of the Company's equity securities have been timely complied with,
except that Coss, Steven Gorenstein, Mary Ann Page, Patricia
Cantalupo, Robert Kohlmeyer, Peter Jackson and Paul Elenio failed
to timely file a Form 3 - Initial Statement of Beneficial
Ownership. Paul Elenio has since filed his Form 3.
By Order of the Board of Directors
Exhibit 13 Financial Statements included in Annual Report
incorporated herein by reference
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
<TABLE>
<CAPTION>
Page
<S> <C>
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
</TABLE>
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 2,128,432 1,660,494
----------- ---------
Provision for doubtful accounts 51,810 48,190
----------- ---------
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
---- ----
Cash flows from operating activities:
- ------------------------------------
<S> <C> <C>
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:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Medicaid 62% 52%
Insurance 2 14
Other third-party payors 29 23
Private 7 11
---- ----
100% 100%
==== ====
</TABLE>
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:
<TABLE>
1995 1994
---- ----
<S> <C> <C>
License $595,190 $595,190
less accumulated amortization 79,358 39,679
-------- --------
$515,832 $555,511
======== ========
</TABLE>
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:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
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.
Interest on this note was not imputed
as the Company considers the amount to
be immaterial. 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
========== =========
</TABLE>
(5) Property and Equipment
----------------------
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
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
========= =========
</TABLE>
(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 (valued at present value which
approximated fair value) 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. The Company based the fifteen year amortization period on the
nature of the licenses, the Company's historical experience with the licenses
and management's estimate of the future term of the licenses. These licenses are
subject to periodic audits by various state agencies. In general, material non
compliance with state guidelines could result in a termination of the
licenses. However, the Company has been awarded the licenses over the
past ten years and is in compliance with all state guidelines as of December 31,
1995 and 1994, respectively.
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:
<TABLE>
<CAPTION>
1995
----
Capital Operating
------- ---------
<S> <C> <C>
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
======== ===========
</TABLE>
The gross amount of assets recorded under capital lease obligations was $59,042
at December 31, 1995. Interest on the capital lease obligations was not
imputed as the Company considers the amount to be immaterial.
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
