f10qsb0507_chsi.htm
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
___________________________
 
FORM 10-QSB
___________________________
 
|x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended May 31, 2007
 
OR
 
|o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission file number 0-26715
 
COMPREHENSIVE HEALTHCARE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
58-0962699
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
 
45 Ludlow Street, Suite 602
Yonkers, New York 10705
(Address of principal executive offices) (Zip Code)
 
(914) 375-7591
(Registrant’s telephone number, including area code)
 
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|
 
The Registrant is a shell company. Yes [X] No [  ]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of July 13, 2007, we had 17,577,109 shares of common stock outstanding, $0.10 par value.
 
 
 
1



Item 1. Financial Statements 
 

Comprehensive Healthcare Solutions, Inc. and Subsidiaries
 
Condensed Consolidated Balance Sheet
 
(Unaudited)
 
 
 
 
 
May 31,
2007
 
 
 
 
 
ASSETS
 
Current assets:
 
 
 
    Cash and cash equivalents
 
$
668
 
 
 
 
  
 
Property and equipment, net
 
 
4,537
 
 
 
 
  
 
Total assets
 
$
5,205
 
 
 
 
  
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
 
 
  
 
    Accounts payable and accrued expenses
 
$
256,058
 
    Loan payable
 
 
10,000
 
    Due to related party
 
 
145,935
 
    Convertible debentures, short term
 
 
426,910
 
    Derivative liabilities
 
 
192,932
 
 
 
 
  
 
Total current liabilities
 
 
1,031,835
 
 
 
 
  
 
Convertible debentures and notes, long term
 
 
19,873
 
 
 
 
  
 
Total liabilities
 
 
1,051,708
 
 
 
 
  
 
Stockholders’ deficit:
 
 
  
 
    Preferred stock, no par value; 5,000 shares
 
 
  
 
      authorized and no shares issued and outstanding -
 
 
-
 
    Common stock, $.10 par value: 50,000,000
 
 
  
 
      shares, 17,577,109 shares issued
 
 
1,757,711
 
    Additional paid-in capital
 
 
2,137,127
 
    Accumulated deficit
 
 
(4,941,341
)
Total stockholders’ deficit  
 
 
(1,046,503
)
 
 
 
  
 
Total liabilities and stockholders’ deficit
 
$
5,205
 
 
 
 
  
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 


2

Comprehensive Healthcare Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Three Months Ended May 31,
(Unaudited)
 
 
 
 
 
 
 
 
 
 
2007
 
 
2006
 
 
 
 
 
 
 
 
Net sales
 
$
-
 
 
$
27,994
 
Cost of sales
 
 
-
 
 
 
29,821
 
 
 
 
    
 
 
    
Gross profit
 
 
-
  
 
 
(1,827
)
 
 
 
    
 
 
    
Selling, general and administrative expenses
 
 
35,675
    
 
28,807
  
Professional fees
 
 
12,575
    
 
39,325
  
 
 
 
      
 
    
Loss from operations
 
 
(48,250
)
  
 
(69,959
)
 
 
 
      
 
    
Other income (expenses):
 
 
      
 
    
Gain on derivative liabilities
 
 
13,903
    
 
43,782
  
Interest expense, net
 
 
(32,319
)
  
 
(23,784
)
 
 
 
      
 
    
Total other income (expense)
 
 
(18,416
)
  
 
19,998
  
 
 
 
      
 
    
Loss before provision for income taxes
 
 
(66,666
)
  
 
(49,961
)
 
 
 
      
 
 
 
Income taxes
 
 
-
    
 
-
  
 
 
 
      
 
 
 
Net loss from continuing operations
    
(66,666
)
    
(49,961
)
                 
Discontinued operations, net of tax
  
 
-
    
 
(23,913
)
                 
Net loss
 
$
(66,666
)
  
$
(73,874
)
 
 
 
 
 
 
 
 
 
Loss per share - basic and diluted
 
$
(0.00
)
  
$
(0.00
)
Weighted average shares outstanding -
 
 
  
 
 
 
  
 
   basic and diluted
 
 
17,109,718
      
15,369,065
  

 
The accompanying notes are an integral part of these condensed consolidated financial statements.
  
 
 

3



Comprehensive Healthcare Solutions, Inc. and Subsidiaries
  
Condensed Consolidated Statements of Cash Flows
  
For the Three Months Ended May 31,
  
(Unaudited)
  
 
 
  
 
    
 
  
 
  
2007
    
2006
  
Cash Flows from Operating Activities:
  
 
    
 
  
Net loss
   $ (66,666 )   $ (73,874 )
Adjustments to reconcile net loss to net cash
                
used in operating activities:
                
Depreciation and amortization
    
701
      
4,442
  
Gain on derivative liabilities
     (13,903 )     (43,782 )
Amortization of debt discount
    
24,165
      
13,081
  
Expense for shares and warrants issued for services rendered
    
16,000
      
7,887
  
Changes in current assets and liabilities:
                
Accounts receivable
    
-
       (10,194 )
Accounts payable and accrued expenses
    
27,643
      
19,630
  
Net cash used in operating activities
     (12,060 )     (82,810 )
 
                
Cash Flows from Financing Activities:
                
Proceeds from issuance of convertible debentures and notes
            
75,000
  
Proceeds from loans from related party
    
8,523
      
14,495
  
Net cash provided by financing activities
    
8,523
      
89,495
  
 
                
Net (decrease) increase in cash and cash equivalents
     (3,537 )    
6,685
  
 
                
Cash and cash equivalents, beginning of the period
    
4,205
      
46,157
  
Cash and cash equivalents, end of period
   $
668
     $
52,842
  
 
                
Supplemental Disclosure of Cash Flow Information:
                
Cash paid during the period for:
                
Interest
   $
-
     $
15
  
Income taxes
   $
-
     $
-
  
 
                
Non-cash Investing and Financing Activities:
                
Derivative liability recorded
   $ (13,903 )   $ (43,782 )
Common stock issued for services rendered
   $
50,000
     $
7,887
  
 
  

The accompanying notes are an integral part of these condensed consolidated financial statements. 
 
 
 
4
 
 
Comprehensive Healthcare Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
 
NOTE 1 - ORGANIZATION

Comprehensive Healthcare Solutions, Inc.  and its wholly owned subsidiaries (Company) was in the business of selling and distributing medical care discount cards, hearing aids and providing audiological services.  On January 3, 2007, the Company conveyed its interest in Accutone, Inc., a wholly owned subsidiary, to Larry A. Brand.  On January 3, 2007 Accutone entered into an agreement with John Treglia, the Company’s Chief Executive Officer to take title to the stock of Interstate Hearing Aid, Inc., a wholly owned subsidiary of Accutone. See note 4.

NOTE 2 – GOING CONCERN

The accompanying interim unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern.   The Company has losses from operations for the three months ended May 31, 2007.  Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders.

These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.  In this regard, Management is proposing to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.

NOTE 3 – BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements of  the Company, included in this Form 10-QSB have been prepared in accordance with accounting principles generally accepted in the United States and the instructions to Form 10-QSB and consequently do not include all disclosures required by Form 10-KSB. Additional information may be obtained by referring to the Company’s Form 10-KSB for the year ended February 28, 2007. In the opinion of management, all adjustments (consisting only of normal recurring items) necessary for a fair presentation of the financial information for the interim periods reported in this Form 10-QSB have been made.

The accounting policies followed for quarterly financial reporting are the same as those disclosed in the Notes to Consolidated Financial Statements included in the Company’s Form 10-KSB filed with the Securities and Exchange Commission for the fiscal year ended February 28, 2007. Certain amounts in the prior period have been reclassified to conform to the current presentation.

NOTE 4 - DISCONTINUED OPERATIONS

On January 3, 2007, the Company entered into an agreement to convey the Company’s interest in Accutone, Inc., (Accutone). (Accutone), a 100% wholly owned subsidiary, to a third party in consideration for the cancellation of a $218,500 loan issued by the third party on June 6, 2005 and accrued interest on the loan. Accutone is a Pennsylvania corporation in the business of selling hearing aid products.

On January 3, 2007, Accutone entered into an agreement with John Treglia, the Company’s Chief Executive Officer to take title to the stock of Interstate Hearing Aid, Inc. (Interstate), a wholly owned subsidiary. Interstate is a Pennsylvania corporation, which is insolvent, and which owes, among other obligations, in excess of $350,000, primarily for federal and state withholding taxes.

The accompanying unaudited condensed consolidated financial statements and notes reflect the operations of  Accutone and Interstate  as discontinued operations for the three months ended May 31, 2006. There were no cash flows from investing or financing activities for discontinued operations for the three months ended May 31, 2006.

Revenues for Accutone and Interstate for the three months ended May 31, 2006 were $68,314 and $45,544, respectively.
 

5
 
COMPREHENSIVE HEALTHCARE SOLUTIONS, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Revenue Recognition
In accordance with Emerging Issues Task Force (“EITF”) 00-21, we have determined that certain of our contractual arrangements contain multiple deliverables which represent separate units of accounting, specifically, the initial hearing screening and the subsequent delivery of the hearing aid and any follow up services necessary. Revenue related to initial screening services is recognized upon delivery of the screening services as there is no further obligation to provide subsequent service, objective and reliable evidence of the fair value of these services exists and the delivery of these services have value to the customer on a stand-alone basis. Revenue is recognized on the delivery of hearing aids in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards (“SFAS”) No. 48: Revenue Recognition When Right of Return Exists when delivery of the product has occurred and follow up service is completed assuming that collectibility is reasonably assured. If collection is doubtful, no revenue is recognized until such receivables are collected. Generally, customers have a 45 day period in which to either return the product or request follow up service; we therefore recognize revenue for products delivered only upon expiration of the 45 day return period.
 
Reporting Comprehensive Income
Comprehensive income approximates net income for all periods presented.

Earnings (Loss) Per Common Share
Basic earning (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted earning per share is computed assuming the exercise of stock options, warrants and convertible debentures, if any, under the treasury stock method and the related income tax effects if not anti-dilutive. For loss periods, common share equivalents are excluded from the calculation, as their effect would be anti-dilutive.
 
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Accounting for Convertible Debentures, Warrants and Derivative Instruments
 
Statement of Financial Accounting Standard (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, requires all derivatives to be recorded on the balance sheet at fair value. These derivatives, including embedded derivatives in the Company’s structured borrowings, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange-traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.
 
The pricing model the Company uses for determining fair values of the Company’s derivatives is the Black Scholes Pricing Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates, exchange rates and option volatilities. Selection of these inputs involves management’s judgment and may impact net income.
 
In particular, the Company uses volatility rates for a time period similar to the length of the underlying convertible instrument based upon the closing stock price of the Company’s common. However, we do not use stock price information prior to February 2002 when the Company emerged from bankruptcy. The Company determined that share prices prior to this period do not reflect the ongoing business valuation of the Company’s current operations. The Company uses a risk-free interest rate, which is the U. S. Treasury bill rate, for a security with a maturity that approximates the estimated expected life of our derivative or security. The Company uses the closing market price of the Company’s common stock on the date of issuance of a derivative or at the end of a quarter when a derivative is valued at fair value. The volatility factor used in Black Scholes has a significant effect on the resulting valuation of the derivative liabilities on the Company’s balance sheet. The initial volatility for the calculation of the embedded and freestanding derivatives ranged from 115% to 190%, this volatility-rate will likely change in the future. The Company’s stock price will also change in the future. To the extent that the Company’s stock price increases or decreases, the Company’s derivative liabilities will also increase or decrease, absent any change in volatility rates.

In September 2000, the Emerging Issues Task Force issued EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Company’s Own Stock,” (“EITF 00-19”) which requires freestanding contracts that are settled in a company’s own stock, including common stock warrants, to be designated as an equity instrument, asset or a liability. Under the provisions of EITF 00-19, a contract designated as an asset or a liability must be carried at fair value on a company’s balance sheet, with any changes in fair value recorded in the company’s results of operations. A contract designated as an equity instrument must be
 
 
6
 
COMPREHENSIVE HEALTHCARE SOLUTIONS, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Accounting for Convertible Debentures, Warrants and Derivative Instruments - Continued

included within equity, and no fair value adjustments are required from period to period. In accordance with EITF 00-19, all of the Company’s warrants to purchase common stock are accounted for as liabilities. The fair value of these warrants and conversion options is shown on the Company’s balance sheet and the unrealized changes in the values of these derivatives are shown in the Company’s consolidated statement of operations as “Loss on derivative liabilities.”

The Company has penalty provisions in the registration agreements for its debentures and warrants that require it to make certain payments in the event of  failure to maintain, for certain prescribed periods, an effective registration statement for the common stock securities underlying the debentures and the associated warrants and failure to maintain the listing of our common stock for quotation on the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange or the American Stock Exchange after being so listed or included for quotation, or if the common stock ceases to be traded on the Over-the-Counter Bulletin Board (the “OTCBB”) or any equivalent replacement exchange on the OTC Bulletin Board, NASDAQ National Market, NASDAQ SmallCap or New York Stock Exchange. The EITF, which has not been adopted, considers alternative treatments including whether or not the registration right itself is a separate derivative liability, or if it is a derivative considered as a combined unit with the conversion feature of a convertible instrument. If the unit is considered separate, the EITF discusses possible alternative treatments including the possibility that the combined unit is a derivative liability only if the maximum liquidated damages exceed the difference between the fair value of registered and unregistered shares. In September 2005, the FASB staff reported that the EITF postponed further deliberations on Issue No. 05-04 The Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to Issue No. 00-19 (“EITF 05-04”) pending the FASB reaching a conclusion as to whether a registration rights agreement meets the definition of a derivative instrument.
 
The Company considers the liquidated damages provision in its various security instruments to be combined with its registration rights and conversion derivatives, and does not account for the provision as a separate liability.  The Company  records any registration delay payments as an expense in the period when incurred. If the FASB were to adopt an alternative view, the Company could be required to account for the registration delay payments as a separate derivative. Accordingly, the Company would need to record the fair value of the estimated payments, although no authoritative methodology currently exists for evaluating such computation.
 
Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159) which permits entities to choose to measure many financial instruments and certain other items at fair value that are currently required to be measured at fair value. SFAS 159 will be effective for the Company on March 1, 2008. The Company is currently evaluating the impact of adopting SFAS 159 on its financial position, cash flows and results of operations.

In September 2006, the FASB issued SFAS No. 157 (FAS 157), “Fair Value Measurements,” which establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. FAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. FAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact this standard will have on its financial condition, results of operations, cash flows or disclosures.


7
COMPREHENSIVE HEALTHCARE SOLUTIONS, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6 – COMMON STOCK

On May 24, 2007 the Company issued 400,000 and 100,000 shares of common stock to its Chief Executive Officer and a consultant for compensation and services rendered; respectively.

 
8

 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our financial condition. The discussion should be read in conjunction with our financial statements and notes thereto appearing in this form 10QSB.  The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward- looking statements.
 
The Company

We were previously in the business of audiological services directly, and indirectly through our subsidiaries, Accutone Inc. and Interstate Hearing Aid Service Inc., until January 3, 2007. Both subsidiaries had changed the focus of their marketing to include, not only the individual, self-pay patients, but health care entities and organizations which could serve as patient referral sources for us. The hearing aid industry is competitively changing at a rapid pace and marketing of these services and competing with organizations with stronger capital availability was becoming more difficult. As a result management decided to divest these two subsidiaries as of January 3, 2007. 

A major portion of our net sales were generated by fees earned by the provision of audiological testing in our offices as well as a minor amount provided on site in Nursing Homes, Assisted Living Facilities, Senior Care Facilities and Adult Day Care Centers as well as the sales and distribution of hearing aids generated in each of these venues.  In addition to the revenue generated from our audiological services, management believed that revenues would increase in future periods as a result of increased distribution and marketing of our medical discount cards as set forth herein. To position ourselves to take advantage of this market, on March 1, 2004 pursuant to a Stock Purchase Agreement, we acquired Comprehensive Network Solutions, Inc. Based on this acquisition, we changed our name to Comprehensive Healthcare Solutions, Inc. to better reflect the fact that we operate in several medical venues. This acquisition management believed would allow the Company to take full advantage of the opportunity to become a major player providing access to discounted health care provider networks and services.  The Company was unsuccessful in pursuing this business due to various factors including a lack of sufficient working capital.

On December 5, 2006, the Company entered into an agreement with Comprehensive Associates, LLC (“Associates”) whereby certain assets of the Company were transferred to Associates. These assets include, but are not limited to, all of the Company’s right, title, and interest, in, to, and under a Marketing Affiliation Agreement with Alliance Heathcard, Inc.  As consideration for the assignment of assets, Associates agreed to cancel a $27,400 loan issued June 16, 2006, and the Company’s obligation to reimburse Associates for legal fees related to that loan in the maximum amount of $20,188.75. In further consideration for the Transfer, Associates extended the repayment period for the $235,000 loan issued August 19, 2005 until April 5, 2007.  Associates continues to work with the Company on a revised working arrangement. 

On January 3, 2007, the Company entered into an agreement to convey the Company’s interest in Accutone, Inc. (“Accutone”), to Larry A. Brand (“Brand”) in consideration for the cancellation of a $218,500 loan issued by Brand on June 6, 2006 and accrued interest on the loan. Accutone is a Pennsylvania corporation in the business of selling hearing aid products. The Company owns all of the issued and outstanding shares of stock of Accutone. Accutone has been minimally profitable in its operations within the last five years, its balance sheet does not reflect a positive liquidation value, and the shares of stock of Accutone have no realizable value for the Corporation, as there is no viable market for its stock in light of its history. Brand has been active in the business of hearing aid manufacturing and marketing and was a participant in the creation of Accutone, and desired to take ownership of the business.
 
On January 3, 2007, Accutone entered into an agreement with John Treglia. Pursuant to that agreement, Mr. Treglia   agreed to take title to the stock of Interstate Hearing Aid, Inc. (“Interstate”), Accutone’s wholly-owned subsidiary, from Accutone upon the conveyance of the Accutone stock from Brand. Interstate is a Pennsylvania corporation, which is insolvent, and which owes, among other obligations, in excess of $250,000 in federal and state withholding taxes for the years 2001 through 2006.
 
To date we have not been able to raise additional funds through either debt or equity offerings. Without this additional cash we have been unable to pursue our plan of operations and we no longer believe that we will be able to raise the necessary funds to continue to pursue our business operations. Since we have not been able to raise funds, have entered into the above transaction and we have ceased the pursuit of our business plan and are actively seek out and investigating possible business opportunities with the intent to acquire or merge with one or more business ventures. 
 
 
9
 
Critical Accounting Policies and Estimates
 
Our discussion of our financial condition and results of operations is an analysis of the unaudited condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), consistently applied. Although our significant accounting policies are described in Note 5 of the notes to condensed consolidated financial statements, the following discussion is intended to describe those accounting policies and estimates most critical to the preparation of our consolidated financial statements. The preparation of these unaudited condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on various other factors that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
 
We believe the following critical accounting policy affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:
 
•
We have issued convertible debentures with embedded derivatives and warrants, which estimates and opinions that may change the nature of the accounting treatment based on FAS 133, EITF 98-5 and EITF 00-19 among others.

Recently Issued Accounting Pronouncements
 
In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159) which permits entities to choose to measure many financial instruments and certain other items at fair value that are currently required to be measured at fair value. SFAS 159 will be effective for the Company on March 1, 2008. The Company is currently evaluating the impact of adopting SFAS 159 on its financial position, cash flows and results of operations.

In September 2006, the FASB issued SFAS No. 157 (FAS 157), “Fair Value Measurements,” which establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. FAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. FAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact this standard will have on its financial condition, results of operations, cash flows or disclosures.
 
THREE MONTHS ENDED MAY 31, 2007 COMPARED TO THREE MONTHS ENDED MAY 31, 2006
 
Revenue
 
Revenue for the three months ended May 31, 2007 and 2006 was $ 0 and $27,994, respectively. The decrease in revenues is attributable to severe cash flow problems that negatively impacted our ability to conduct our business as structured and ultimately caused us to become and remain insolvent.
 
Cost of sales
 
Cost of sales were $ 0 and $29,821 for in the three months ended May 31, 2007 and 2006, respectively.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative expenses  were $34,974 and $27,437 for the three months ended May 31, 2007 and 2006, respectively, a increase of $7,537, or  27%.  The increase is primarily attributable to an increase in compensation expense.

Professional Fees
 
Professional fees were $12,575 and $39,325 for the three months ended May 31, 2007 and 2006, respectively, a decrease of
$26,750 or 68% due to reduced expense for consultants raising financing, legal and accounting fees.
 
Other income (expenses):

Interest expense was $32,319 and $23,784 for the three months ended May 31, 2007 and 2006, respectively. Interest expense is primarily comprised of non-cash amortization of debt discount.
 
 
10

 
Change in derivative liability was a positive amount of $13,903 and $43,782 for the three months ended May 31, 2007 and 2006, respectively. This positive change represents a decrease in the fair value of the derivative, resulting from a reduction in the Company’s market price per common share

Liquidity and Capital Resources
 
We incurred significant operating losses in recent years which resulted in severe cash flow problems that negatively impacted our ability to conduct our business as structured and ultimately caused us to become and remain insolvent. We believed that our audiology business would generate sufficient working capital to finance its current operations at existing levels of revenue. However, we no longer believe that the current cash generated by the audiology business is sufficient to expand its scope of business activities. This prompted management to take the steps to divest us of these entities.

We estimated that in order for us to achieve our marketing goals successfully for our Solution Card and its other related products we would require between $750,000 and $1,500,000 of additional capital. Management sought external sources of financing in order to support any such expansion plans as the anticipated cash flows from the sale of our cards would not be sufficient to support any expansion plans. We failed in our attempts to raise the funds necessary and therefore our growth was curtailed and we could not concentrate on increasing the volume and profitability of our existing outlets.
 
On June 1, 2005 and August 1, 2005, we issued convertible debentures in the amounts of $200,000 and $50,000, respectively. The debentures have a term of five years and are convertible 20% per year to common stock of our company. The conversion rates are $0.50, $0.75, $0.75, $1.00 and $1.00, for the respective traunches that are convertible each year. Interest due may be paid in cash or in shares at the option of the debenture holder. With regard to the $200,000 note, on January 3, 2007, the Company entered into an agreement to convey the Company’s interest in Accutone in consideration for the cancellation of such debt.  The $50,000 debt instrument is currently in default as we have not made the required interest payments. The lender cannot accelerate the due date on the debt.

On August 19, 2005, we entered into a consulting and financing agreement with Comprehensive Associates, LLC, a private investment group, pursuant to which we received $217,000 net of legal expenses and other related fees, in consideration for the issuance of two separate convertible debentures of $35,000 and $200,000, which are convertible at $.25 per share. In addition, we entered into an agreement to issue warrants which could raise an additional $2,665,000, if and when, the warrants are exercised. Under the consulting agreement, the investors received warrants to purchase 5 million shares at $0.25 per share. On September 29, 2005, Comprehensive Associates, LLC loaned us $28,000 to be utilized for the printing of cards. Our agreement calls for revenue sharing on all of the cards printed as a result of the utilization of these funds, as well as a nominal rate of interest on the loan. We did not make the required payments of interest, which were due after 90 days. In addition, we do not have sufficient authorized shares to meet the potential conversion obligation and we did not file a required registration statement, therefore, we are in default of the loan. As a result of the default, the loan is due and payable, although the lender has not issued a demand for payment of the debt.
 
On September 20, 2005, we entered into a term sheet with Westor Capital Croup, Inc. On November 28, 2005, Westor raised a total of $145,000; shortly thereafter the agreement with Westor Capital was terminated. Pursuant to the term sheet with Westor, we were required to file an SB-2 registration statement by January 15, 2006, which was not completed. We therefore are in breach of this agreement. In addition, pursuant to our original funding agreement and subsequent redemption agreement with Comprehensive Associates, LLC we were also required to file a registration statement, and therefore we are also in breach of this agreement. The loan is, due to the default, due and payable. The lender has not issued a demand for payment of the debt.
 
We have total liabilities of $1.0 million and assets of $5,205. Without new financing, we will be forced to liquidate our businesses. Management is currently working diligently on raising new financing.
 
On December 5, 2006, the Company entered into an agreement with Comprehensive Associates, LLC (“Associates”) whereby certain assets of the Company were transferred to Associates. These assets include, but are not limited to, all of the Company’s right, title, and interest, in, to, and under a Marketing Affiliation Agreement with Alliance Heathcard, Inc. As consideration for the assignment of assets, Associates agreed to cancel a $27,400 loan issued June 16, 2006, and the Company’s obligation to reimburse Associates for legal fees related to that loan in the maximum amount of $20,188.75. In further consideration for the transfer, Associates extended the repayment period for the $235,000 loan issued August 19, 2005 until April 5, 2007.  We are currently in default on this loan.
 
 
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On January 3, 2007, the Company entered into an agreement to convey the Company’s interest in Accutone, Inc. (“Accutone”), to Larry A. Brand (“Brand”) in consideration for the cancellation of a $218,500 loan issued by Brand on June 6, 2006 and accrued interest on the loan. Accutone is a Pennsylvania corporation in the business of selling hearing aid products. The Company owns all of the issued and outstanding shares of stock of Accutone. Accutone was minimally profitable in its operations within the last five years, its balance sheet does not reflect a positive liquidation value, and the shares of stock of Accutone have no realizable value for the Corporation, as there is no viable market for its stock in light of its history. Brand has been active in the business of hearing aid manufacturing and marketing and was a participant in the creation of Accutone, and desires to take ownership of the business.
 
On January 3, 2007, Accutone entered into an agreement with John Treglia. Pursuant to that agreement, Mr. Treglia has agreed to take title to the stock of Interstate Hearing Aid, Inc. (“Interstate”), Accutone’s wholly-owned subsidiary, from Accutone upon the conveyance of the Accutone stock to Brand. Interstate is a Pennsylvania corporation, which is insolvent, and which owes, among other obligations, in excess of $250,000 in federal and state withholding taxes for the years 2001 through 2006.
 
To date we have not been able to raise additional funds through either debt or equity offerings. Without this additional cash we have been unable to pursue our plan of operations and we no longer believe that we will be able to raise the necessary funds to continue to pursue our business operations. Since we have not been able to raise funds, have entered into the above transaction and we have ceased the pursuit of our business plan and are actively seek out and investigating possible business opportunities with the intent to acquire or merge with one or more business ventures. 

Off Balance Sheet Arrangements
 
We have no off-balance sheet arrangements.

Related Party Transactions
 
In May, 2007, the Company issued 400,000 shares of common stock to John Treglia, the Company's CEO, in compensation for services. During the quarterly period ended May 31, 2007, Mr. Treglia lent the Company an additional $8,523 for working capital and the total outstanding debt is $145,935 at May 31, 2007. The loan does not accrue interest and has no fixed repayment date.

Item 3. Controls and Procedures
 
Evaluation of disclosure controls and procedures
 
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of May 30, 2007. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that our disclosure and controls are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
Changes in internal controls
 
There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the first quarter of fiscal 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
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PART II - OTHER INFORMATION
Item 1.     Legal Proceedings.
 
We are currently not a party to any pending legal proceedings and no such actions by, or to the best of its knowledge, against us have been threatened.
 
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds.
 
None.
 
Item 3.    Defaults Upon Senior Securities.
 
None
 
Item 4.    Submission of Matters to a Vote of Security Holders.
 
No matter was submitted during the quarter ending May 31, 2007, covered by this report to a vote of our shareholders, through the solicitation of proxies or otherwise.
 
Item 5.    Other Information.
 
None
 
Item 6.    Exhibits and Reports of Form 8-K.
 
(a)                Reports on Form 8-K and Form 8K-A
 
None   
         
(b)                Exhibits
 
Exhibit Number
Exhibit Title
 
 
31.1   
Certification of John Treglia pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
 
 
32.1         
Certification of John Treglia pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
  

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

COMPREHENSIVE HEALTHCARE SOLUTIONS, INC.
 
By:     /s/ John H. Treglia
JOHN H. TREGLIA
Chief Executive Officer and
Chief Financial Officer
 
 Dated:   July 13, 2007