UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(D) of The Securities Act of 1934
For the quarterly period ended: March 31, 2004
Commission file number: 000-30734
HUMANA TRANS SERVICES HOLDING CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 11-3255617
(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
7466 New Ridge Road, Suite 7, Hanover, Maryland 21076
(Address of principal executive offices)
(410) 855-8758
(Issuer's telephone number)
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 and 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $0.0001 par value 10,751,189
(Class) (Outstanding as of May 13, 2004)
HUMANA TRANS SERVICES HOLDING CORP.
FORM 10-QSB
MARCH 31, 2004
INDEX
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets.........................................F-2
Consolidated Statements of Operations...............................F-3
Consolidated Statements of Cash Flows...............................F-4
Consolidated Statements of Stockholders' Equity.....................F-5
Notes to Consolidated Financial Information.........................F-6
Item 2 Management's Discussion and Analysis or Plan of Operation.............4
Item 3 Controls and Procedures..............................................10
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.....................................................11
Item 2. Changes In Securities.................................................11
Item 3. Defaults Upon Senior Securities.......................................11
Item 4. Submission Of Matters To A Vote Of Security Holders...................11
Item 5. Other Information....................................................11
Item 6. Exhibits and Reports on Form 8-K.....................................12
Signatures....................................................................13
Certifications................................................................14
2
PART I: FINANCIAL INFORMATION.
HUMANA TRANS SERVICES HOLDING CORP.
AND SUBSIDIARIES
MARCH 31, 2004
TABLE OF CONTENTS Page
FINANCIAL STATEMENTS
Balance Sheet as of March 31, 2004 F-1
Statements of Operations for the year
ended March 31, 2003 and March 31, 2004 F-2
Statements of Operations for the year
ended March 31, 2003 and March 31, 2004 F-3
Statements of Stockholders' Deficiency for year
ended March 31, 2003 and March 31, 2004 F-4
Statements of Cash Flows for the year
ended March 31, 2003 and March 31, 2004 F-5
Notes to Financial Statements F6-F11
3
HUMANA TRANS SERVICES HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31,
Assets 2004
Current assets -----------
Cash and cash equivalents $ 177,425
Accounts receivable 711,374
Prepaid expenses and other current assets 38,199
-----------
Total current assets 926,998
-----------
Other assets
Client list 369,234
Total assets $ 1,296,232
===========
Liabilities and Stockholders' Deficiency
Current liabilities
Accounts payable $ 74,083
Accrued expenses 260,905
Loans payable - related parties 553,459
Payroll taxes payable 1,443,113
-----------
Total current liabilities 2,331,560
-----------
Total liabilities 2,331,560
-----------
Commitments and contingencies
Stockholders' deficiency
Common stock, $.0001 par value, 50,000,000 authorized,
9,701,189 shares outstanding 970
Additional paid in capital 3,841,005
Deficit (4,877,303)
-----------
Total stockholders' deficiency (1,035,328)
-----------
Total liabilities and stockholders' deficiency $ 1,296,232
===========
See notes to the condensed consolidated financial statements.
F-1
HUMANA TRANS SERVICES HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended Three Months Ended
March 31, March 31,
-------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenues $ 2,989,474 $ -- $ 2,033,835 $ --
Cost of revenues 2,535,931 -- 1,904,210 --
----------- ----------- ----------- -----------
Gross profit 453,543 -- 129,625 --
----------- ----------- ----------- -----------
Expenses:
General and administrative
Expenses 951,345 89,385 450,564 51,120
Impairment of intangible assets 107,100 -- 107,100 --
Stock compensation expense 3,290,000 -- 3,290,000 --
----------- ----------- ----------- -----------
Total expense 4,348,445 89,385 3,886,229 51,120
----------- ----------- ----------- -----------
Operating loss (3,894,902) (89,385) (3,756,604) (51,120)
----------- ----------- ----------- -----------
Other income (expense)
Interest expense (7,946) -- 13,930 --
Miscellaneous expense (4,086) -- (4,086) --
----------- ----------- ----------- -----------
(12,032) -- 9,844 --
----------- ----------- ----------- -----------
Net loss $(3,906,934) $ (89,385) $(3,746,760) $ (51,120)
=========== =========== =========== ===========
Net loss per share of
common stock
(basic and diluted) $ (0.49) $ (0.01) $ (0.39) $ (.01)
=========== =========== =========== ===========
Weighted average number of common stock
shares used in per share calculation
(basic and diluted)
8,023,189 5,965,244 9,701,189 6,555.000
=========== =========== =========== ===========
See notes to the condensed consolidated financial statements.
F-2
HUMANA TRANS SERVICES HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months
Ended
March 31,
-------------------
2004 2003
-------- --------
Cash flows from operating activities
Net cash provided by (used in)
operating activities $ 58,527 $(63,017)
-------- --------
Cash flows from financing activities
Increase (decrease) in loans payable - 102,814 63,064
-------- --------
related parties
Net cash provided by financing activities 102,814 63,064
-------- --------
Net increase in cash 161,341 47
Cash and cash equivalents - beginning of period 16,084 --
-------- --------
Cash and cash equivalents - end of period $177,425 $ 47
======== ========
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 21,876 $ --
======== ========
Taxes $ -- $ --
======== ========
Information about noncash activities:
Common stock issued to satisfy stockholders' Loans $ 35,000 $ --
======== ========
Common stock issued for client list $428,000 $ --
======== ========
See notes to the condensed consolidated financial statements.
F-3
HUMANA TRANS SERVICES HOLDING CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited interim condensed financial statements included
herein have been prepared in accordance with the instructions to Form
10-QSB and Item 310 of Regulation SB of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations, although Trans Services Holding Corp and
Subsidiaries believes that the disclosures are adequate to make the
information presented not misleading. For further information, refer to
the consolidated financial statements and footnotes thereto included in
the Company's Form 10-KSB for the fiscal year ended September 30, 2003,
filed with the Security and Exchange Commission on January 20, 2004.
2. ORGANIZATION AND BUSINESS
On August 16, 2002, Steam Cleaning USA Inc., (the "Company") a Delaware
corporation was organized (formerly known as TTI Holdings of America Corp.
("TTI")), issued 90,000,000 of its shares of common stock in exchange for
100% of the common stock of Steam Cleaning USA, Inc., (the "Operating
Subsidiary"), a Wisconsin corporation organized in August 2002. The
stockholdings of the original stockholders of the Operating Subsidiary
represented approximately 90% of the stock outstanding of the Company on a
post exchange basis. Simultaneously with the exchange, the Operating
Subsidiary merged into the Company, with the Company changing its name to
Steam Cleaning USA, inc. (a Delaware corporation). As a legal effect of
the merger, the Company acquired all of the assets and assumed all the
liabilities of the Operating Subsidiary. For reporting purposes, however,
the foregoing stock-exchange transaction has been accounted for as a
reverse acquisition in which the Operating Subsidiary acquired all the
assets and liabilities of the Company and recorded them at their fair
value and as if the Company remained the reporting entity. Because the
Company is the surviving entity for legal purposes, all equity
transactions have been restated in terms of the Company's capital
structure.
On July 1, 2003 the Company acquired Humana Trans Services Holding Corp.
and its wholly-owned subsidiaries, Humana Trans Services Group Ltd., Bio
Solutions, LLC, Skilled Tradesman, Inc., Waste Remediation, Inc., and
Professional Employee Organization. Humana Trans Services Group Ltd. was
incorporated in Delaware on April 25, 2003 issuing 1,000 shares of common
stock. On August 4, 2003 the Company filed a Certificate of Amendment to
its Certificate of Incorporation changing its name to Humana Trans
Services Holding Corp. ("Humana"). The Company's certificate of
incorporation authorized it to issue 20,000,000 shares of common stock
with a par value of $.0001 per share and 5,000,000 shares of preferred
stock, par value $.0001. Prior to the Company's acquisition of Humana and
Bio Solutions LLC (see below) it had no operations.
F-4
HUMANA TRANS SERVICES HOLDING CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. ORGANIZATION AND BUSINESS (Continued)
Humana, located in Maryland, was founded as a payroll staffing company and
provider of outsourced business solutions focusing on human resource
services to a variety of industries in 15 states. Humana's wholly-owned
subsidiaries include Humana Trans Services Group Ltd., Bio Solutions, LLC,
Skilled Tradesman, Inc., Waste Remediation, Inc., and Professional
Employee Organization. Humana's financial statements include revenues
resulting from activities presently derived from a revenue sharing
arrangement with Precision Management System, LLC.
Humana provides a variety of employment related services:
(1) Professional Employee Organization offers payroll management and
benefits processing services to its clientele, for which it earns an
administrative fee, but the related payroll burden is absorbed by
the Company's clientele.
(2) Humana Trans Services Group Ltd. offers temporary staffing placement
solutions, primarily to the trucking industry. Other subsidiaries
provide short or long term employee leasing or permanent placement
to a variety of industries including (name the industries).
GOING CONCERN
The accompanying condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
shown in these financial statements, the Company incurred recurrent net
losses, $3,906,934 for the six months ended March 31, 2004, and $3,746,760
for the three months ended March 31, 2004. At March 31, 2004, current
liabilities exceed current assets by $1,404,562. Financing recently has
been from stockholder advances, factoring of accounts receivable and
equity capital. These factors raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not
include any adjustment that might result from the outcome of this
uncertainty.
It is the intention of the Company's management to improve profitability
by significantly reducing operating expenses and to increase revenues
significantly, through growth and acquisitions. The Company anticipates
that in order to fulfill its plan of operation, including payment of
certain past liabilities of the Company, it will need to seek financing
from outside sources. The Company is currently pursuing a private and
public placement of equity and also is actively pursuing discussion with
one or more potential acquisition or merger candidates. There is no
assurance that the Company will be successful in raising the necessary
funds nor is there a guarantee that the Company can successfully execute
any acquisition or merger transaction with any company or individual or if
such transaction is effected, that the Company will be able to operate
such company profitably or successfully. The ultimate success of these
measures is not reasonably determinable at this time. These factors raise
substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustment that might
result from the outcome of this uncertainty.
F-5
HUMANA TRANS SERVICES HOLDING CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. ORGANIZATION AND BUSINESS (Continued)
CONTROL BY PRINCIPAL STOCKHOLDERS (Continued)
The directors, executive officers and their affiliates or related parties,
own beneficially and in the aggregate, the majority of the voting power of
the outstanding shares of the common stock of the Company. Accordingly,
the directors, executive officers and their affiliates, if they voted
their shares uniformly, would have the ability to control the approval of
most corporate actions, including increasing the authorized capital stock
of the Company and the dissolution, merger or sale of the Company's assets
or business.
3. ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States of America, 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 revenue and expenses during the reporting period. Actual
results could differ from those estimates.
SIGNIFICANT ESTIMATES AND CONTINGENT LIABILITIES
Several areas require management's estimates relating to uncertainties for
which it is reasonably possible that there will be a material change in
the near term. The more significant areas requiring the use of management
estimates related to valuation of Humana's liabilities, valuation of
contingent liabilities and the valuation of long-lived assets.
REVENUE RECOGNITION
Humana accounts for its revenues in accordance with EITF 99-19, Reporting
Revenues Gross as a Principal Versus Net as an Agent. Humana recognizes
all amounts billed to its temporary staffing customers as gross revenue,
because among other things, Humana is the primary obligor in the temporary
staffing arrangement. Humana has pricing latitude, selects temporary
employees for a given assignment from a broad pool of candidates. Humana
is at risk for the payment of its direct costs, whether or not Humana's
customers pay on a timely basis or at all. Humana assumes a significant
amount of other risks and liabilities as an employer of its temporary
staff, and therefore, is deemed to be a principal in regard to these
services. Other services are recorded as net where the Company earns an
administrative fee for its services, but does not recur any costs or risk
in providing the related services. Humana also recognizes as gross revenue
and as unbilled receivables, on an accrual basis, any such amounts that
relate to services performed by temporary employees which have not been
billed to the customer at the end of the accounting period. The employee
leasing revenue is recognized as the service is rendered.
F-6
HUMANA TRANS SERVICES HOLDING CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. ACCOUNTING POLICIES (Continued)
RECLASSIFICATIONS
Certain reclassifications have been made to the 2003 financial statements,
to conform to the current year's presentation.
4. IMPAIRMENT OF LONG-LIVED INTANGIBLE ASSET
Statement of Financial Accounting Standards (SFAs) No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" requires that such assets so be reported at the lower of
carrying amount or net realizable value. Impairments charges to such
assets represent the difference between the carrying value of the assets
and and their fair market value based on estimated future discounted cash
flow.
In the quarter ended March 31, 2004, the Company acquired a customer list
from Corporate Program Administrators ("CPA"), whereby the Company had the
rights to solicit and recontract the customers of CPA. After several
months working with the customer list, the Company has concluded its fair
market value (net realizable value) was less than its carrying amount of
$428,400. Accordingly the Company has recognized an impairment loss of
$107,100 for the three months ended March 31, 2004, which is included in
the Company's Statements of Operations.
5. PAYROLL TAXES PAYABLE
In conjunction with the acquisition of Humana Trans Service Group (see
Note 2) the company assumed delinquent past due state and federal payroll
taxes. The Company also has current payroll tax liabilities that are past
due. Several states have filed liens on the company. The balance of these
liabilities as shown in the balance sheet as of March 31, 2004 was
$1,443,113. The Company has accrued estimated interest and penalties on
the unpaid payroll taxes amounting to approximately $300,000, which is
included in payroll taxes payable. The company is currently paying all
payroll taxes and intends to pay and settle with state and federal
jurisdictions at time of receiving additional working capital.
6. LOANS PAYABLE - RELATED PARTIES
Loans payable to related parties includes advances made by stockholders,
directors and other related parties for the purpose of providing working
capital to the Company. The $553,450 total outstanding loans payable at
March 31, 2004 consisted of the following:
Note Payable - James Zimbler $ 230,000
Due to Personnel Management Solutions, LLP 145,000
Other related parties 178,459
----------
Total $ 553,459
==========
F-7
HUMANA TRANS SERVICES HOLDING CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. LOANS PAYABLE - RELATED PARTIES (Continued)
NOTE PAYABLE - JAMES ZIMBLER - This is the note issuance in conjunction
with the acquisition of Humana (see Note 1). On July 10, 2003 a settlement
agreement was entered into by the Company, National Management and the
major shareholder of the company whereby the majority stockholder gave
holdings in National Management Consulting and other companies that was
being held as collateral in order to satisfy the obligation. A new
obligation was created to this stockholder for an amount equal to the
settlement amount.
Full payment of the note plus interest at the rate of 7% per annum is due
July 2, 2005 if the Company conducts a secondary offering, or at the
option of the payee, upon conversion of the amount due, including accrued
interest, convertible into common stock of the company at a 25% discount
to market. The note is classified as current due to the demand conversion
provision.
DUE TO PERSONNEL MANAGEMENT SOLUTIONS, LLP ("PMS") represents funds
advanced to fund the revenue sharing arrangement between PMS and the
Company prior to the proposed acquisition of PMS by the Company. The
acquisition has been terminated on behalf of the sellers. Repayment terms
still have to be established. The advance is unsecured and non-interest
bearing.
7. LEASE COMMITMENT
In August 2002, the Company entered into 3-year lease for the use of its
headquarters in Maryland. The lease calls for payments of $1,780/month.
Rent expense for six months period ended March 31, 2004 and 2003 was
$10,680. Additionally, the lease is guaranteed by the president of the
company.
8. STOCK TRANSACTIONS
On January 2, 2004, the Company issued 2,350,000 shares for $3,290,000 of
compensation to certain officers, directors and consultants. Additionally,
on the same date the Company issued 306,000 shares for the acquisition of
a customer list purchase from CPA (see note 9) for $428,400. The closing
price of the stock on January 2, 2004 was used in determining the value of
the transaction.
Also on January 2, 2004, the Company issued 700,000 shares for conversion
of a $35,000 note payable at the request of the holder of the note.
F-8
9. RECENT TRANSACTIONS
Corporate Program Administrators, Inc.
On November 10, 2003, the Company entered into a purchase agreement to
purchase certain assets of CPA for the issuance of 306,000 shares of the
Company's common stock. The effective date of close of the transaction was
January 1, 2004 (see note 4). The fair value of this stock transaction was
recorded using the closing price of the Company's stock on January 2, 2004
and amounted to $428,400.
Personnel Management Solutions LLP
The Company and PMS had entered into a "memorandum of understanding on
December 10, 2003 to pursue a "definitive purchase agreement" by the
Company of PMS (the seller). Completion of any purchase was contingent
upon performance of adequate due diligence.
Prior to the execution of the proposed purchase agreement, the Company
managed all operations and accounts of PMS effective January 1, 2004. All
operations continue to be processed by PMS in the name of the Company. PMS
will retain ownership of all accounts and responsibility for all
liabilities. The Company will receive a fee of 0.05% of total gross
payroll processed during this period. The sellers terminated progressing
toward a final purchase agreement during May, 2004.
10. COMMITMENTS AND CONTINGENCIES
CONSULTING CONTRACTS
On January 2, 2004 the Company entered into a consulting agreement with
the Chairman of the Board of Directors as follows:
a) $12,000 per month
b) 550,000 shares of common stock and an option to purchase an
additional 550,000 shares at an exercise price of $1.50/share
c) Participation in any special incentive compensation plan
d) Reimburse the expense of medical benefits such as insurance
available to other executives.
The Agreement is through the last day of December, 2004. The Agreement is
automatically renewed unless the Board of Directors determines not to
renew it.
The 550,000 share issue of common stock is included in stock compensation
expense in the statement of income.
F-9
10. COMMITMENTS AND CONTINGENCIES (Continued)
CHIEF FINANCIAL OFFICER
The Company has entered into an agreement with a company owned by the
Chief Financial Officer (also stockholder and director), effective March
1, 2004. The arrangement calls for the compensation to provide certain
services to be compensated at the rate of $8500/month. The Company is
currently only paying approximately $2300 under the arrangement, and
accruing the difference. The agreement continues until terminated by
either party.
WORK COMPENSATION INSURAVCE AUDIT
The Company has recently undergone an audit by the IWIF Worker's
Compensation Insurance for the insurance coverage of its Maryland
operations. As a result of the audit, IWIF claims it is due a total of
$149,368 for unpaid additional premiums. The matter has not reached a
stage of litigation, and the Company expects to reach a resolution with
IWIF for the payment of some compromised amount. If this agreement is
reached, management expects it will not have a material effect upon the
Company.
11. SUBSEQUENT EVENTS
CONSULTING AGREEMENT
On April 5, 2004 the Company entered into an agreement with a
Director/Stockholder to provide certain services. The compensation for
this arrangement is as follows:
a) Issuance of 250,000 shares of common stock which have "piggy back"
registration rights
b) Participation in any special incentive compensation plan
c) Any benefits for other executives
The agreement remains in force until March 2005, and is automatically
renewed for an additional one year unless the Board of Directors determine
not to renew it.
PENDING ACQUSITION OF THE COMPANY
On May 6, 2004 the Company entered into a "Letter of Intent" ("LOI") to
acquire Emcore Professional Employees, Inc., a company in the employee
leasing similar to Humana. The LOI calls for the Company to issue common
stock for 100% of Emcore's outstanding common stock so that the current
Emcore shareholders will own 60% of Humana after the acquisition. A
condition to closing is a commitment must be in place to raise $5,000,000
of capital for 11% of the outstanding shares of the Company. This will
leave Humana current shareholders with 29% of the outstanding shares.
It is also anticipated per the LOI that Humana's current staffing business
will be "spun off" to existing Humana shareholders, based upon their
pro-rata shares. Additionally the "spin off" company would include
$1,000,000 of the $5,000,000 capital raise. The Acquisition shares and
Additional shares not previously issued shall be restricted under Rule 144
of the Securities Act of 1933.
F-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with our audited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward-looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or our behalf. We disclaim any obligation to update
forward-looking statements.
OVERVIEW
Humana Trans Services Holding Corp., formerly Steam Cleaning USA, Inc., formerly
TTI Holdings of America Corp was incorporated in November 1994 under the laws of
the State of Delaware under the name Thermaltec International, Corp. On May 18,
2001, Thermaltec changed its name to TTI Holdings of America Corp. ("TTI" or the
"Company"). From its inception until July 2001, TTI was primarily engaged in the
thermal spray coating industry in the U.S. and Costa Rica. In July 2001, TTI
divested the operations of its thermal spraying business, formerly consolidated
in its wholly-owned subsidiary Panama Industries, Ltd, to its shareholders of
record as of June 22, 2001 in the form of a stock dividend on the basis of one
(1) share of Panama for every three (3) shares of TTI owned (the "Panama
Spin-off"). Accordingly, as of July 2, 2001, TTI was no longer in the thermal
spraying business and has been operating as a holding company focused on
developing new business opportunities.
On October 10, 2001, TTI entered into an agreement to merge its wholly owned
subsidiary Transventures into Cyberedge Enterprises, Inc, a Delaware corporation
company that had recently filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. TTI was to receive 20% of the total outstanding shares of
Cyberedge at the closing. The purpose of the transaction was to allow
Cyberedge's management, primarily its President, James W Zimbler, to develop the
transportation and logistics business utilizing their in-house network of
industry contacts. This transaction was never completed however.
4
Pursuant to a Stock Purchase Agreement, dated August 15, 2002, entered into by
the Registrant, the shareholders of the issued and outstanding shares of Steam
Cleaning USA, Inc., sold their shares to the Registrant to for a total of
90,000,000 shares of common stock. Steam Cleaning USA, Inc., a Wisconsin
corporation, was set up by a group of outside individuals for the purpose of
effectuating a transaction organized specifically to potentially acquire and
expand the operations of Steam Cleaning and Sterilization, Inc. Steam Cleaning
and Sterilization began its existence as an unincorporated proprietorship over
forty-five years ago when the present owners began providing steam cleaning and
cart maintenance services to local grocery stores in Wisconsin. The
proprietorship was incorporated in 1962 under its present name as a Wisconsin
corporation. The company continued to primarily service grocery stores, even
after the stores were acquired or merged into larger regional entities. The
shares were issued after the effectiveness of the five (5) for one (1) reverse
split, to be effective on September 3, 2002. At that time the shareholders will
received an aggregate total amount of 18,000,000 shares. The owners of Steam
Cleaning and Sterilization were slow to enter into serious meaningful
discussions about a business combination, and on December 27, 2002, the Stock
Purchase Agreement, dated August 15, 2002, was amended in that the 90,000,000
shares issued were returned to the treasury and in their place a total of
5,000,000 shares were issued. On August 19, 2002 the company changed its name to
Steam Cleaning USA, Inc.
As of July 1, 2003, we entered into a Stock Purchase Agreement to purchase 100%
of the stock of Humana Trans Services Holding Corp., a Delaware corporation
("Holding"). Holding is the owner of Humana Trans Services Group, Ltd., Skilled
Tradesman, Inc., Waste Remediation Systems, Inc., and Bio Solutions of Maryland,
LLC. Holding was previously wholly-owned by our former Director, James W.
Zimbler, and other shareholders, as was set forth on the filing of July 10,
2004. The purchase price for the 100% issued and outstanding shares of Holding
is the issuance of 6,000,000 shares of common stock of the Company, to be issued
after the effective date of the reverse 8 for 1 split of the common stock of the
Company.
RECENT TRANSACTIONS:
Corporate Program Administrators, Inc.
On November 10, 2003, (as amended January 1, 2004) the company entered into an
asset purchase agreement to purchase certain assets of Corporate Program
Administrators, Inc. for the issuance of 306,000 shares of common stock. No
liabilities are being assumed and certain assets such as accounts receivable and
"prepaids" have been excluded from the purchase.
The transaction was effective within the second fiscal quarter ended March 31,
2004.
Personnel Management Solutions LLP
The company and Personnel Management Solutions, LLP ("PMS") entered into a
"Memorandum of Understanding on December 10, 2003 to pursue a "Definitive
Purchase Agreement . Completion of the purchase is contingent upon performance
of adequate due diligence by the company. The proposed seller terminated the
transaction during May 2004. The Parties are currently operating under a
Management Agreement. Prior to the execution of a definitive agreement for the
purchase of PMS by the company managed all operations and accounts of PMS
effective January 1, 2004. All operations are to continue to be processed by
PMS, but will be in the name of the company. PMS will retain ownership of all
accounts and responsibility for all liabilities. The company will receive a fee
of 0.05% of total gross payroll processed during this period.
5
SUBSEQUENT TRANSACTIONS
On May 7, 2004, the Registrant entered into a Letter of Intent with Emcore
Professional Employers, Inc. ("Emcore"), of Greenville, North Carolina, whereby
Registrant will acquire 100% of the issued and outstanding shares of common
stock of Emcore, for approximately 60% of the then issued and outstanding shares
of Registrant.
The Letter of Intent is contingent upon certain conditions, one of which is the
obtaining of $5,000,000 of equity financing, along with the proposed "spin-out"
of the recruiting and staffing business of the Registrant.
The transaction must close by August 30, 2004, unless extended by mutual consent
for an additional period of ninety (90) days.
RESULTS OF OPERATIONS
Until July 1, 2003, the last quarter of the Registrant's fiscal year, ending
September 30, 2003, the Registrant did not have an operating unit. Therefore a
comparison of to the previous year is not an accurate representation of the
increase or decrease of the revenues and costs of sales of the Registrant.
For the six months and three months ended March 30, 2003, the Registrant had
Revenues of 2,989,474, and 2,033,835 respectively, During the current quarter as
a result of acquiring customers in CPA, the company entered the business of
employee leasing in addition to the business to of providing temporary service
for the transportation industry. This employee leasing only accounted for sale
of $4,657 for this quarter. Temporary services recognizes the gross amount of
the billed services as revenues and the corresponding cost of sales on the
statement of operations due to fact that the company assumes the risk of profit
based upon the direct costs it incurs. Employee Leasing only recognizes a fee
charged by the company to process the payroll, pay payroll taxes, employee
benefits and workers compensation insurance expense; All the above costs are
passed on to the customer and the company is not at risk for these items. The
total amount of payroll processed for the quarter due to employee leasing was
$4,514,000. Two items that have depressed the average gross profit and average
administration fee charged for employee leasing was the inability of the company
to pass on as either increased billing rates or the charged administration for
increases in workers compensation insurance premiums and changes in employers
unemployment tax rates. Examples of the types of temporary services that Humana
provides to its clients, include; Driver recruitment, including the placement of
ads, interviewing, all testing and background checks, Driver leasing and Leased
labor. Currently Humana operates in approximately 5 states. Some of Humana's
clients are Cardinal Healthcare, Giant Foods and Royal Ahold. Examples of the
employee leasing business include transportation and warehouse employees.
Administrative expenses including impairment losses and stock compensation
expense was $4,348,445 and $3,886,229 resulting in a losses from operations of
$3,894,902 and $3,756,604 for the six months and three months ended respectively
as compared to $89,385 and $51,120 for the same respective periods. Included in
these amounts are expenses for stock compensation expense of $3,290,000 and
$107,100 of impairment expense, both of which do not utilize cash resources. The
increases in the remainder of Administrative expensed are due to the start up of
the operations due to increases in personnel, professional, professional fees,
and a generally higher level of fixed administrative expenses. It is anticipated
by the Registrant that General and Administrative costs will remain relatively
the same, while Revenues and Gross profit will increase as a result of the
business derived from CPA
6
PROVISION FOR INCOME TAXES
The company has determined that it will more likely than not use any tax net
operating loss carry forward in the current tax year and has taken and therefore
has a valuation amount equal to 100% of any asset.
LIQUIDITY AND FINANCIAL RESOURCES
During the six months ended March 31, 2004 net cash provided by operating
activities was $58,527 compared to $63,017, used in operations. Financing
resources for these activities have primarily been from stockholder advances,
and factoring of Accounts Payable. However, the Company incurred net losses of
$3,906,934 and $3,746,760 for each of the six and three months ended March 31,
2004; the company still has a net operating loss even if the stock compensation
expense of $3,290,000 and Impairment expense of $107,100 did not occur.
Additionally at March 31, 2004, current liabilities exceed current assets by $
$1,404,562, these factors raise substantial doubt about the Company's ability to
continue as a going concern. The Company anticipates that in order to fulfill
its plan of operation including payment of certain past liabilities of the
company, it will need to seek financing from outside sources. The company is
currently pursuing private debt and equity sources. It is the intention of the
Company's management to also improve profitability by significantly reducing
operating expenses and to increase revenues significantly, through growth and
acquisitions. The Company is actively in discussion with one or more potential
acquisition or merger candidates. There is no assurance that the company will be
successful in raising the necessary funds nor there a guarantee that the Company
can successfully execute any acquisition or merger transaction with any company
or individual or if such transaction is effected, that the Company will be able
to operate such company profitably or successfully.
RISK FACTORS AND UNCERTIANTIES
Much of the information included in this statement includes or is based upon
estimates, projections or other "forward looking statements". Such forward
looking statements include any projections or estimates made by us and our
management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.
Such estimates, projections or other "forward looking statements" involve
various risks and uncertainties as outlined below. We caution the reader that
important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other "forward
looking statements".
7
Key Personnel
All of our present officers or directors are key to our continuing operations,
we rely upon the continued service and performance of these officers and
directors, and our future success depends on the retention of these people,
whose knowledge of our business and whose technical expertise would be difficult
to replace. At this time, some of our officers or directors are bound by
employment agreements, and as a result, any of them could leave with little or
no prior notice.
If we are unable to hire and retain sales and marketing and operational
personnel, any business we acquire could be materially adversely affected.
Competition for qualified individuals is likely to be intense, and we may not be
able to attract, assimilate, or retain additional highly qualified personnel in
the future. The failure to attract, integrate, motivate and retain these
employees could harm our business.
Uncertain Ability to Manage Growth
Our ability to achieve any planned growth upon the acquisition of a suitable
business opportunity or business combination will be dependent upon a number of
factors including, but not limited to, our ability to hire, train and assimilate
management and other employees and the adequacy of our financial resources. In
addition, there can be no assurance that we will be able to manage successfully
any business opportunity or business combination. Failure to manage anticipated
growth effectively and efficiently could have a materially adverse effect on our
business.
"Penny Stock" Rules May Restrict the Market for the Company's Shares
Our common shares are subject to rules promulgated by the Securities and
Exchange Commission relating to "penny stocks," which apply to companies whose
shares are not traded on a national stock exchange or on the NASDAQ system,
trade at less than $5.00 per share, or who do not meet certain other financial
requirements specified by the Securities and Exchange Commission. These rules
require brokers who sell "penny stocks" to persons other than established
customers and "accredited investors" to complete certain documentation, make
suitability inquiries of investors, and provide investors with certain
information concerning the risks of trading in the such penny stocks. These
rules may discourage or restrict the ability of brokers to sell our common
shares and may affect the secondary market for our common shares. These rules
could also hamper our ability to raise funds in the primary market for our
common shares.
Possible Volatility of Share Prices
Our common shares are currently publicly traded on the Over-the-Counter Bulletin
Board service of the National Association of Securities Dealers, Inc. The
trading price of our common shares has been subject to wide fluctuations.
Trading prices of our common shares may fluctuate in response to a number of
factors, many of which will be beyond our control. The stock market has
generally experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of companies with no
current business operation. There can be no assurance that trading prices and
price earnings ratios previously experienced by our common shares will be
matched or maintained. These broad market and industry factors may adversely
affect the market price of our common shares, regardless of our operating
performance.
In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs for us and a
diversion of management's attention and resources.
8
Indemnification of Directors, Officers and Others
Our Certificate of Incorporation and By-laws contain provisions with respect to
the indemnification of our officers and directors against all expenses
(including, without limitation, attorneys' fees, judgments, fines, settlements,
and other amounts actually and reasonably incurred in connection with any
proceeding arising by reason of the fact that the person is one of our officers
or directors) incurred by an officer or director in defending any such
proceeding to the maximum extent permitted by Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers and controlling
persons of our company under Delaware law or otherwise, we have been advised
that the opinion of the Securities and Exchange Commission is that such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable.
Anti-Takeover Provisions
We do not currently have a shareholder rights plan or any anti-takeover
provisions in our By-laws. Without any anti-takeover provisions, there is no
deterrent for a take-over of our company, which may result in a change in our
management and directors.
Reports to Security Holders
Under the securities laws of Delaware, we are not required to deliver an annual
report to our shareholders but we intend to send an annual report to our
shareholders.
Limited Cash Resources
We have limited cash as a result of continuing loss operations with no firm
commitment for additional financing, no guarantee of increase in revenues or
decrease in expenses.
Customer Contracts
All customer contracts are short and we can not guarantee that all business
obtained through CPA will be stay will us or be signed on.
Costs of Temporary Services
We have fixed contracts in place for services to be provided but cost of labor,
workman's compensation insurance premiums, and employer payroll taxes could
increase.
CRITICAL ACCOUNTING POLICIES
Revenue Recognition
We account for our revenues in accordance with EITF 99-19, "Reporting Revenues
Gross as a Principal Versus Net as an Agent". We recognize all amounts billed to
temporary staffing customers as gross revenue, because among other things,
Humana is the primary obligor in the temporary staffing arrangement. Humana has
pricing latitude, selects temporary employees for a given assignment from a
broad pool of candidates. Humana is at risk for the payment of its direct costs,
whether or not Humana's customers pay on a timely basis or at all. Human assumes
a significant amount of other risks and liabilities as an employer of its
temporary staff, and therefore, is deemed to be a principal in regards to these
services. Other services are recorded as net where the Humana earns an
administrative fee for its services, but does not recur any costs or risk in
providing the related services. Humana also recognizes as gross revenue and as
unbilled receivables on an accrual basis, any such amounts that relate to
services performed by temporary employees who have not been billed to the
customer at the end of the accounting period, the employee leasing revenue is
recognized as the service is rendered.
9
CRITICAL ESTIMATES
Intangible Asset-Customer Lists
The length of amortization (life) of the customer list and if any diminutions of
value has occurred are critical estimates for the company.
ITEM 3. CONTROLS AND PROCEDURES.
The Registrant's principal executive officers and principal financial officer,
based on their evaluation of the registrant's disclosure controls and procedures
(as defined in Rules 13a-14 (c) of the Securities Exchange Act of 1934) as of
January 2, 2004, have concluded that the Registrants' disclosure controls and
procedures are adequate and effective to ensure that material information
relating to the registrants and their consolidated subsidiaries is recorded,
processed, summarized and reported within the time periods specified by the
SEC's rules and forms, particularly during the period in which this quarterly
report has been prepared.
The Registrants' principal executive officers and principal financial officer
have concluded that there were no significant changes in the registrants'
internal controls or in other factors that could significantly affect these
controls subsequent to January 2, 2004, the date of their most recent evaluation
of such controls, and that there was no significant deficiencies or material
weaknesses in the registrant's internal controls.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Other than described below, there are no past, pending or, to our knowledge,
threatened litigation or administrative action which has or is expected by our
management to have a material effect upon our business, financial condition or
operations, including any litigation or action involving our officer, director
or other key personnel. There have been no changes in the company's accountants
or disagreements with its accountants since its inception.
In May and June 2001, TTI entered into several letter agreements to acquire up
to eleven separately owned comprehensive outpatient rehabilitation facilities
("CORF's") that were managed by a Florida based company named Total Health Care
Consulting, Inc ("Total"). The Company was essentially acquiring the licenses to
operate these CORF's with Total providing the back-office management functions.
The acquisition of these CORF's was to have been executed by the distribution of
shares of TTI to the CORF owners based upon certain financial criteria. On
10
August 24, 2001 the Company terminated the agreements with the CORF owners and
did not consummate the acquisitions upon being informed that certain
representations regarding the financial condition of the CORFs and Total and
other material matters were found to be not true. Although approximately
3,500,000 shares of TTI had been issued to the owners of the CORFs, the Shares
have been cancelled on the books of the Company and are not recognized as issued
and outstanding. Other than the legal, accounting and due diligence expenses
incurred in the pursuit of this acquisition, no other costs were incurred. The
Company does not anticipate any legal actions from either side as a result of
these cancelled transactions.
On February 13, 2004, we received a letter from the Counsel for Willow Cove
Investment Group, Inc. ("Willow"), regarding the termination of an agreement
between Willow and the Registrant for investment banking services, dated
November 12, 2003. On November 20, 2003, the Registrant notified Willow that it
was canceling the Agreement due to significant material misrepresentations and
information that was not provided to the Registrant about the principals of
Willow. The Letter from the Counsel for Willow is seeking the continuation of
the services to be provided for in the Agreement and the payment of all fees, or
they will commence Arbitration as set forth in the Agreement. At this point the
Registrant is unable to make an accurate assessment about the claim, but feels
that the misrepresentations and failure to provide the information is
significant and makes the agreement void. The claim would not be material in any
case.
The Registrant has recently undergone an audit by the IWIF Worker's Compensation
Insurance for the insurance coverage of its Maryland operations. As a result of
the audit, IWIF claims it is due a total of $149,368.00 for unpaid additional
premiums. The matter has not reached a stage of litigation, and the Company
expects to reach a resolution with IWIF for the payment of the claimed amount,
or some compromised amount. If this agreement is reached, there will be no
material effect upon the Company.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1 Articles of Incorporation of the Registrant*
3.2 By-laws of the Registrant*
31.1 Section 302 Certification of President and Chief Executive Officer
31.2 Section 302 Certification of Chief Financial Officer
32.1 Section 906 Certification of President and Chief Executive Officer
32.2 Section 906 Certification of Chief Financial Officer
* Previously filed as an exhibit to the Company's Form 10-SB filed on November
10, 2001, and as amended thereafter
(b) Reports on Form 8-K filed during the three months ended March 31, 2004.
A Current Report on Form 8-K-A, amending the Form 8-K filing of July 10, 2003,
under Item 5. Other Events and Regulation FD Disclosure and Item 7, Financial
Statements and Exhibits of Registrant was filed on January 16, 2004.
A Current Report on Form 8-K, under Item 5. Other Events and Regulation FD
Disclosure and Item 7, Financial Statements and Exhibits of Registrant was filed
on March 9, 2004, with respect to the purchase of Corporate Program
Administrators, Inc. and Personnel Management Solutions, LLC.
A Current Report on Form 8-K, under Item 1. Change of Control of Registrant, was
filed on March 9, 2004, regarding changes to the Board of Directors.
A Current Report on Form 8-K, under Item 1. Change of Control of Registrant;
Item 4. Change of Registrant's Certifying Accountant; and Item 7. Financial
Statements and Exhibits, was filed on March 9, 2004, regarding changes to the
Board of Directors, change of its Independent Certifying Accountant and Exhibits
thereto.
Subsequent Events
A Current Report on Form 8-K, under Item 5. Other Events and Regulation FD
Disclosure, was filed on April 11, 2004, regarding the Letter of Intent with
Emcore Professional Employers, Inc.
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 24, 2004
Humana Trans Services Holding Corp.
/s/ John P. Daly
-----------------------------------
John P. Daly, President
/s/ George L. Riggs, III
-----------------------------------
George L. Riggs, III, Chief Financial Officer
13