===============================================================================
The purpose of this amendment is to correct typographical errors in 1996 Balance
Sheet, caption: "Total liabilities and stockholders' equity" and 1996 Statement
of Operations, caption: "Gross margin".
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended FEBRUARY 29, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 0-11781
HOSPITAL STAFFING SERVICES, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2150637
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6245 NORTH FEDERAL HIGHWAY, SUITE 400
FORT LAUDERDALE, FLORIDA 33308-1900
(Address of principal executive offices)
(954) 771 - 0500
Registrant's telephone number, including area code
===============================================================================
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
February 29, November 30,
1996 1995
------------ ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 2,599,021 $ 1,697,804
Short-term investments 11,753 11,620
Trade accounts receivable, less allowance
for doubtful accounts of $616,306
and $599,599, respectively 6,419,717 6,129,371
Settlements due from Medicare 10,364,908 10,372,741
Prepaid expenses 325,977 418,335
Amounts due from officers/directors 33,642 40,392
Current and deferred income taxes receivable 1,149,635 1,149,634
Other 125,420 344,482
------------ ------------
Total current assets 21,030,073 20,164,379
------------ ------------
NON-CURRENT ASSETS:
Net property and equipment 1,040,132 986,592
------------ ------------
Intangibles related to businesses
acquired 2,160,016 2,160,016
Non-competition agreements 479,426 479,426
------------ ------------
Total intangibles 2,639,442 2,639,442
Less: Accumulated amortization (693,779) (664,418)
------------ ------------
Net intangibles 1,945,663 1,975,024
------------ ------------
Deposits and other assets 266,659 244,826
------------ ------------
Total non-current assets 3,252,454 3,206,442
------------ ------------
Total assets $ 24,282,527 $ 23,370,821
============ ============
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
February 29, November 30,
1996 1995
------------ ------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 1,903,032 $ 2,577,470
Line of credit payable (Note 3) 2,397,347 767,115
Accrued payroll and benefits 2,726,204 2,240,404
Accrued expenses 4,311,027 4,224,210
Income taxes payable 216,015 296,000
Capital leases 7,131 7,131
Notes payable (Notes 2 & 5) 1,017,594 1,255,130
------------ ------------
Total current liabilities 12,578,350 11,367,460
------------ ------------
NON-CURRENT LIABILITIES:
Notes payable (Notes 2 & 5) 765,215 882,965
Capital leases 45,304 45,304
------------ ------------
Total non-current liabilities 810,519 928,269
------------ ------------
------------ ------------
Total liabilities 13,388,869 12,295,729
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 3,5 & 6)
STOCKHOLDERS' EQUITY:
Preferred stock - $.001 par value;
authorized 5,000,000 shares;
none issued or outstanding -- --
Common stock- $.001 par value;
authorized 20,000,000 shares;
6,349,770 shares issued
and outstanding; respectively 6,350 6,350
Additional paid-in capital 22,428,887 22,428,887
Accumulated deficit (11,541,579) (11,360,145)
------------ ------------
Total stockholders' equity 10,893,658 11,075,092
------------ ------------
Total liabilities and
stockholders' equity $ 24,282,527 $ 23,370,821
============ ============
The accompanying notes are an integral part of
these consolidated condensed balance sheets.
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Unaudited) (Unaudited)
February 29, February 28,
1996 1995
------------ ------------
Net revenue from services $ 14,505,628 $ 13,711,732
------------ ------------
Cost of services:
Professional salaries and benefits 7,519,966 7,432,394
Other professional expenses 1,458,761 1,401,249
------------ ------------
Total cost of services 8,978,727 8,833,643
------------ ------------
Gross margin 5,526,901 4,878,089
------------ ------------
Selling, general and
administrative expenses:
Salaries and benefits 3,229,817 2,679,209
Legal expenses 137,614 486,015
All other expenses 2,023,223 1,574,892
------------ ------------
Total selling, general
and administrative expenses 5,390,654 4,740,116
------------ ------------
Income from operations 136,247 137,973
------------ ------------
Interest and other income (expense):
Interest expense (109,134) (87,557)
Interest income 16,034 17,669
Other income,net 56,263 33,009
------------ ------------
Total interest and other income (expense) (36,837) (36,879)
------------ ------------
Income before provision
for income taxes 99,410 101,094
Provision for income taxes (25,889) (38,000)
------------ ------------
Income before extraordinary item 73,521 63,094
Extraordinary loss on early extinguishment
of debt (Note 3) (254,955) --
------------ ------------
Net income (loss) ($181,434) $63,094
============ ============
Income (loss) per common share:
Income (loss) before extraordinary item $.01 $0.01
Extraordinary loss on early
extinguishment of debt (.04) --
------------ ------------
Net income per common share ($.03) $0.01
============ ============
Weighted average common shares outstanding: 6,349,770 5,649,770
============ ============
The accompanying notes are an integral part of
these consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
(Unaudited) (Unaudited)
February 29, February 28,
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income (loss) ($181,434) $63,094
----------- -----------
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 231,282 174,791
Extraordinary loss on early extinguishment of debt (Note 3) 99,955 -
Provision for losses on trade accounts receivable 59,842 58,045
Gain on sale of fixed assets - (5,981)
Changes in assets and liabilities:
(Increase) decrease in assets-
Trade accounts receivable (350,188) 249,443
Settlements due from Medicare 7,833 339,490
Prepaid expenses and other current assets 92,356 (102,317)
Amounts due from officers/directors - 4,186
Deposits and other assets (127,136) 44,231
Increase (decrease) in liabilities -
Accounts payable (667,688) (87,483)
Accrued payroll and payroll taxes 485,800 75,397
Accrued expenses and other (150,718) (1,007,112)
Income taxes payable (79,985) (276,998)
----------- -----------
Total adjustments (398,647) (534,308)
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (580,081) (471,214)
----------- -----------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Sale (purchase) of short-term investments, net (133) 1,148,729
Capital expenditures (176,833) (22,790)
Proceeds from sale of California, New York and Arizona home health operations 145,782 -
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (31,184) 1,125,939
----------- -----------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Line of credit borrowings 16,398,143 14,363,000
Line of credit repayments (14,767,911) (14,608,208)
Payments under notes payable (117,750) (27,234)
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 1,512,482 (272,442)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 901,217 382,283
Cash and cash equivalents at beginning of period 1,697,804 516,770
----------- -----------
Cash and cash equivalents at end of period $2,599,021 $899,053
=========== ===========
Supplemental Cash Flow Disclosures:
Cash paid: Income Taxes $108,105 $224,948
Interest $96,869 $72,004
</TABLE>
The accompanying notes are an integral part of
these consolidated condensed financial statements.
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
(UNAUDITED)
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES -
The accounting policies followed by Hospital Staffing Services, Inc.
and subsidiaries (the "Company") for quarterly financial reporting purposes are
the same as those disclosed in the Company's annual financial statements. In the
opinion of management, the accompanying consolidated condensed financial
statements reflect all adjustments (which consist only of normal recurring
adjustments) necessary for a fair presentation of the information presented.
The quarterly consolidated condensed financial statements herein have
been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company's management
believes the disclosures are adequate to make the information not misleading, it
is suggested that these quarterly consolidated condensed financial statements be
read in conjunction with the audited annual financial statements and footnotes
therein.
NOTE 2: ACQUISITIONS AND DIVESTITURES -
On January 13, 1995, all the fixed assets and certain intangible assets
of the Company's Broward County, Florida private duty home health agency were
sold to the Company's Chairman and Chief Executive Officer. The assets were sold
at their fair market value of $185,000.
On February 15, 1995, a wholly-owned subsidiary of the Company acquired
certain assets of a therapy company for an aggregate purchase price of
approximately $496,000, representing approximately $96,000 in fixed assets and
approximately $400,000 in certain intangibles. The purchase price is being
satisfied by the forgiveness of a $75,000 trade accounts receivable that the
therapy company owed the Company for therapy services provided by the Company
prior to the acquisition date and through the issuance of a promissory note of
$420,650 with the balance due in equal annual payments of $84,130 for five
years.
In March 1995, operations in Texas were sold for $60,000.
NOTE 3: DEBT -
In February 1996, the Company entered into a two-year $8 million
uncommitted revolving line of credit with a commercial finance company.
The credit facility bears interest at prime plus two percent per
annum, payable monthly,
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
is secured by substantially all assets of the Company and requires adherence to
certain financial covenants. Borrowing is based on the Company's eligible
accounts receivable as defined. A portion of the proceeds from this new credit
facility was used to retire the remaining outstanding indebtedness with the
Company's prior lender.
The new credit facility includes up to $2.0 million securing a standby
letter of credit required by the insurance carrier for the Company's workers'
compensation coverage. In connection with the Company's new financing
arrangements, the Company's workers' compensation insurance carrier reduced the
letter of credit requirement to $1.8 million from $2.0 million. As of February
29, 1996, the Company was contingently liable for a $1.8 million standby letter
of credit issued by its lender representing a reduction of otherwise available
borrowing.
Similar to the prior line of credit, the total borrowing available is
subject to the renewal of certain nursing services contracts in the U.S. Virgin
Islands. Such contracts are in the process of renewal and management is of the
opinion that the full borrowing capacity will be available to the Company.
Additionally, while the interest rate on the new facility is unchanged from the
prior facility, administration fees and charges related to the line of credit
are significantly reduced.
The new line of credit contains a number of covenants, some of which
could affect the Company's operations. The most significant of these covenants
include (i) maintenance of minimum tangible net worth; (ii) timely submission of
monthly, quarterly and annual financial statements; (iii) limitations on
payments to employees or related parties for consulting agreements and in the
case of terminating employees, severance agreements; (iv) restrictions on new
debt, guarantees and the payment of dividends; and (v) approval and/or notice
requirements for acquisitions, mergers, the sale of assets and changes in
management. The Company is in compliance with all required loan covenants.
As of February 29, 1996, principal borrowings under the credit facility
were approximately $2.4 million and approximately $1.7 million was available for
additional borrowing under the line of credit.
In retiring the old line of credit, the Company incurred a penalty of
approximately $150,000 and wrote off approximately $104,955 of unamortized loan
costs associated with the retired indebtedness in the first quarter of fiscal
1996. As a result, the Company recorded an after-tax loss of $254,955, which
has been reflected in the Company's consolidated condensed statement of
operations as an extraordinary item.
NOTE 4: STOCKHOLDERS' EQUITY -
1983 Stock Option Plan
The Company's 1983 Incentive Stock Option Plan, as amended
(the "1983 Plan"),
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
provided for the grant of options to purchase up to 300,000 shares of common
stock at an exercise price of not less than 100% of the fair market value of the
Company's common stock on the date of grant (110% of fair market value in the
case of an optionee who is the owner of greater than 10% of the outstanding
shares).
At February 29, 1996, no options were granted or exercised under the
1983 Plan and none expired. At February 29, 1996, options to purchase 17,250
shares were outstanding at an exercise price of $5.875 per share. These options
are exercisable for up to ten years from the date of grant. No options will be
granted under the 1983 Plan in the future.
1990 Stock Option Plan
In 1989, the Company adopted the 1990 Stock Option Plan (the "1990
Plan") which provides that options may be granted to purchase up to 770,000
shares of common stock. Options granted under the 1990 Plan are in the form of
either an incentive stock option ("ISO") qualified under Section 422 of the
Internal Revenue Code, a non-qualified stock option ("NSO") or a reload option
(a newly issued option to purchase shares of common stock equal in number to the
shares of common stock which may be tendered, in lieu of cash, to pay for the
exercise of options previously granted). The Company's Compensation and Stock
Option Committee recommends to the full Board of Director's compensation for the
directors and executive officers, including determining bonus compensation,
awarding option grants and other benefits.
Pursuant to Board action during the three months ended February 29,
1996, 42,500 options to purchase common stock were granted to certain key
employees (under the 1990 Stock Option Plan) with an exercise price of $3.00 per
share. The exercise price exceeded the market price of the common stock at the
date of the grant. The 30,000 options vest as of the date of the award and are
exercisable for a period of five years from the date of vesting. The 12,500
options vest one year from the date of the award and are exercisable for a
period of five years from the date of vesting.
NOTE 5: SEVERANCE OBLIGATIONS -
On December 30, 1994, the Company and its Chairman and Chief Executive
Officer entered into an agreement to modify the Termination and Benefits
Agreement dated June 1, 1991. The Company and the Chief Executive Officer agreed
to currently settle the future obligation for $1 million.
In connection with the January 13, 1995 sale of the Broward County home
health agency to the Chief Executive Officer, $185,000 of the $1 million
obligation was satisfied as an offset to the purchase price of the Broward
agency. Additionally, $100,000 of the $1 million obligation was satisfied as
settlement of the amounts advanced from the Company to the Chief Executive
Officer in prior years. As of February 29, 1996, the Company's remaining future
obligation to the officer was approximately $532,000 payable under a promissory
note including interest at the prime rate (8.25%) in installments of $13,000
per month.
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
As part of a severance agreement with the Company's former Chief
Financial Officer, approximately $647,000 was expensed in the second quarter of
fiscal 1995. As of February 29, 1996, the Company's remaining liability was
approximately $368,000 payable under a promissory note with payments of $26,250
per month.
NOTE 6: COMMITMENTS AND CONTINGENCIES -
Dade County Medicare Investigation:
On December 3, 1992, in connection with a federal investigation into
Medicare practices by health care providers in South Florida, the Company was
served with federal search warrants. In response to the issuance of the federal
search warrants, the Company engaged counsel who initiated a lawyer-directed
internal investigation into its Medicare claims processing system. This internal
investigation focused on a review of the compliance of the Company's Medicare
practices with applicable laws and regulations.
On December 15, 1992, the Health Care Financing Administration (HCFA)
(through its fiscal intermediary) notified the Company of its decision to
suspend reimbursement to the Company's South Florida Medicare offices. Such
suspension of Medicare payments in South Florida was based, in part, upon
allegations of fraud arising from the federal investigation into claims that
were submitted to Medicare for services that were not rendered. Management
believes that the alleged violations and investigation relate to the Company's
Dade County, Florida Medicare provider and to the allocation of certain
corporate overhead costs to that provider and other of the Company's providers.
Neither the federal investigation nor the reason for the suspension relates to
services performed by other of the Company's former or existing Medicare
providers.
In December 1992, due to circumstances arising from the investigation
and suspension of Medicare payments, the Company downsized, and eventually
closed, its offices in Dade, Broward and Monroe counties, Florida, and
terminated its subcontracting relationships with staffing providers in South
Florida.
Subsequent to December 1992, the Company continued to operate its
Medicare office in Palm Beach County, Florida at a substantial cost to the
Company in anticipation of the reinstatement of Medicare payments. However, the
Company was unable to reach agreement with HCFA regarding the reinstatement of
Medicare payments to its South Florida operations. Therefore, in February 1993,
the Company effectively closed its South Florida Medicare operations by closing
the Palm Beach County Medicare office. The Company currently has no Medicare
operations in Florida.
As a result of the federal investigation and HCFA suspension, in fiscal
year 1993 the Company undertook an internal review program, which included
obtaining advice and consultation from an attorney specializing in Medicare law,
engaging a criminal defense attorney and implementing a billing review and
submission program. The
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Company has completed the billing program with respect to all visits not subject
to a claim of timely filing. While the majority of fiscal years 1991 and 1992
claims were billed, a number of claims were not billed based upon the Company's
determination that the claims did not comply with the guidelines established as
part of its internal review program. Management at this time is unable to
estimate when the ultimate outcome of the fiscal years 1991 and 1992 claims
submissions will be known or when the federal investigation may conclude.
Accordingly, it is unknown what ultimate impact, if any, the outcome of these
matters will have on the Company's consolidated financial statements.
The settlement amounts due to the Company as reflected in the
accompanying consolidated condensed balance sheets, as well as net revenue from
services presented in the accompanying consolidated condensed statements of
operations, are presented net of estimated Medicare reimbursement disallowances.
The estimated disallowances are subject to continual review and, as such, may be
increased or decreased as substantive information becomes available. Included in
the settlements due from Medicare as of February 29, 1996 is approximately $2.7
million for the Company's former South Florida Medicare operations representing
primarily claims billed by the Company subsequent to closure of its South
Florida Medicare operations. The Company believes that the settlements due from
Medicare as recorded in the Company's consolidated balance sheet as of February
29, 1996 are realizable at their recorded amount.
As of March 1996, 40 months have passed since execution of the search
warrants, and no charges have been brought against the Company or any of its
officers or employees. The Company has been engaged in discussions with
representatives from the United States Attorney's Office for the Southern
District of Florida concerning the possible resolution of the Medicare
investigation and allegations as they might affect the Company directly.
There are no assurances that these discussions will result in a successful
resolution of these matters or in a resolution that would not be materially
adverse to the Company. Even if the Company is successful in resolving the
Medicare investigation with the federal government, in accordance with its
indemnification obligations under its Articles of Incorporation and Bylaws, the
Company may continue to incur legal expenses on behalf of certain of its
existing and former employees who are individually the subject of such
investigation. In addition, the Company has been the subject of an investigation
by the Securities and Exchange Commission ("SEC") relating to the Medicare
investigation by the United States Attorney. The SEC has not instituted any
enforcement proceedings against the Company and any resolution of the matter
with the United States Attorney's Office would not necessarily resolve any
potential future action by the SEC.
Shareholder Class Action Suits:
In October 1992, plaintiffs filed a proposed class action alleging, in
general, that the Company and certain of its officers and directors and the
Company's independent certified public accountants violated provisions of the
Securities and Exchange Act of 1934 by issuing alleged false and misleading
financial statements during the period February 19, 1991 through July 15, 1992.
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
On October 29, 1994, the Company's Board of Directors, after evaluating
the economic merits of the continuing legal costs required to defend this class
action, as well as its potential exposure to adverse judgment, versus the
settlement amount sought by the plaintiff class, agreed
to a settlement between the Company and plaintiff class. Based on the value of
the common stock issued and the cash payment, the Company recorded a charge
totaling approximately $1.9 million in its fiscal year ended November 30, 1994
consolidated statement of operations to accrue the estimated settlement
liability. At a June 30, 1995 hearing, the court approved the settlement and
ordered the dismissal of the claims of all class members against the Company and
the other defendants as described in the Stipulation of Settlement. The court's
judgment is now final and the required cash payment of $1,200,000 plus 700,000
shares of common stock have been deposited with the escrow agent.
In November 1993, a proposed class action with nearly identical
allegations as those set forth above was filed against the Company, certain of
its officers and directors, and the Company's independent certified public
accountants. On October 30, 1995, an Order of Dismissal was entered by the Court
discharging this proposed class action.
Other Litigation, Claims and Assessments:
In the ordinary course of business, the Company is exposed to various
claims and legal proceedings other than those items discussed above. In
management's opinion, the outcome of all other such matters will not have a
material impact upon the Company's consolidated financial position and
consolidated results of operations.
Lease Commitments:
The Company leases its corporate office and substantially all of its
branch offices under certain non-cancelable long-term operating leases which
expire at various dates. Certain of these leases require additional payments for
taxes, insurance, common area maintenance, and in most cases provide for renewal
options. Generally, terms are from one to three years.
The following is a schedule of future minimum lease payments as of
February 29, 1996:
FISCAL YEAR AMOUNT
----------- ------
1996 1,147,000
1997 651,000
1998 309,000
1999 179,000
2000 40,000
Total rent expense for the three months ended February 29, 1996 and
February 28, 1995, including the Corporate office, branch facilities and nurses'
housing was approximately $806,000 and $788,000, respectively.
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Termination and Benefits Agreements:
The Company has agreements with certain of its key employees which
provide for severance in the case of involuntary termination and/or a change in
control to promote adherence to non-competition provisions. Such agreements
provide for severance up to 12 months dependent upon the employee involved. The
maximum aggregate salary component commitment for these agreements would be
approximately $491,000 as of February 29, 1996.
Self-Funded Insurance Plans:
The Company self-funds its health and workers' compensation programs up
to policy limits, as defined. Claims in excess of such limits are insured by
third party reinsurers. The Company's estimate of its liability for both
outstanding as well as incurred but not reported claims is based upon its
historical loss experience. As of February 29, 1996 and February 28, 1995, such
reserves totaled approximately $2.5 and $2.6 million, respectively, and are
included as a component of accrued expenses in the accompanying consolidated
condensed balance sheets. Differences between actual losses and reserve
estimates are recognized in the period when such differences become known.
Management believes that the differences, if any, between actual losses reported
subsequent to February 29, 1996 and its recorded reserve estimates will not be
material.
Directors Indemnification Fund:
On October 29, 1994, the Company's Board of Directors approved the
creation of an indemnification fund for up to $2 million for any potential
future expenses which may be incurred by the directors as a result of any future
action against them resulting from their services to the Company. Such
indemnification fund would, if funded, supplement proceeds which may be
available to the directors under the Company's Directors and Officers insurance
policy. On April 3, 1995, the Company's Board of Directors approved the
inclusion of the Company's past directors, and current and past officers, in the
indemnity fund. As of February 29, 1996, no funding has occurred; however, at
the directors' discretion and based upon the Company's future cash position and
other factors as need be considered, such funding may take place.
NOTE 7: CONCENTRATION OF CREDIT RISK -
The Company has been providing services to healthcare facilities
located in the U.S. Virgin Islands, which are owned by the government of the
U.S. Virgin Islands, since 1991. Revenues from these facilities accounted for
approximately 10.7% and 10.5% of consolidated net revenue from services for the
fiscal years ended February 29, 1996 and February 28, 1995, respectively.
Outstanding accounts receivable were approximately $3.0 million and $2.8 million
as of February 29, 1996 and February 28, 1995, respectively, and are included in
trade accounts receivable in the accompanying consolidated condensed balance
sheets. As of March 31, 1996, approximately $3.0 million of the February 29,
1996 outstanding receivable balance from these facilities
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
remained unpaid. Approximately $970,000 of this amount has been outstanding for
180 days or greater. Collections from customers located in the U.S. Virgin
Islands are significantly slower than the Company's domestic customer base. The
government of the U.S. Virgin Islands currently acknowledges the debt and is
instituting a plan to liquidate the amounts past due. Accordingly, for this
reason and because the Company has experienced no collection losses during the
history of these contracts, no allowances for doubtful accounts have been
recorded related to these outstanding receivables.
<PAGE>
HOSPITAL STAFFING SERVICES, INC.
SIGNATURES
FEBRUARY 29, 1996
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HOSPITAL STAFFING SERVICES, INC.
By:/S/RONALD A. CASS Ronald A. Cass, Chairman of the Board,
------------------- Chief Executive Officer, President
Ronald A. Cass and Treasurer
Date: 4-17-1996
----------------
By:/S/RONALD G. HUNEYCUTT Ronald G. Huneycutt, Vice President of
---------------------- Finance/Chief Financial Officer
Ronald G. Huneycutt Date: 4-17-1996
----------------
