The chief executive of a newly listed company says he learned a lot from running a former chiropractic business which was liquidated after it couldn't afford to pay a tax bill it was left with due to allegedly claiming incorrect expenses.
Michael Haskell, chief executive of Third Age Health, which listed on the NZX in February, says his current business is more mature, has a professional board and is able to pay for top-notch accounting services.
Haskell was the sole director and shareholder in Chiropractic Equipment Services (CES) which provided chiropractic care and imported and sold chiropractic equipment from 2008 until mid 2015.
Companies office records show liquidators were appointed to CES in April 2018 and it owed the tax department just under $61,000.
The liquidators report claimed the company's director "incorrectly" treated various expense deductions and payments to contractors in filing company tax returns and did not use an accountant or tax agent.
"The company did not retain all its records after it vacated its offices in April 2015, and this has resulted in us not having access to complete records. We have been advised that all the transactions of the company were done through the company bank account."
The liquidators said the outcome of an Inland Revenue adjudication in January 2018 was that the company had allegedly claimed GST input tax deductions on expenses that were not allowable, as well as other expenditure the Commissioner believes was not incurred in the production of taxable income, and has thus been disallowed.
"As a result of the above the company was unable to pay its debts as and when they fell due or were likely to fall due, and the shareholder resolved to liquidate the company."
Haskell told the Herald that when CES closed its last store in 2015 it paid all of its suppliers, staff, landlords and made good on its lease obligations.
"CES was a small business with under 10 staff, small revenue and negligible earnings. It was not too dissimilar to other small businesses where the business owner(s) do quite a bit of the compliance work themselves due to financial constraints."
He said the company was unable to afford accountants for most of its existence.
"The business did a lot of good for people but was just never very good at making money. I personally learned a lot from my experience with CES."
Haskell said Third Age Health was a far more mature business than CES ever was and has been for many years.
"TAH has a professional board with independent directors and has for quite some time.
"TAH can afford to pay for big four accountants to prepare its accounts and big four accountants to audit its accounts. TAH also has an experienced audit committee with an independent chair."
Haskell and his business Michael Haskell & Associates own 34.6 per cent of Third Age Health and is the second largest shareholder behind chairman Bevan Walsh who has a 44.4 per cent stake.
Third Age provides healthcare for residents in rest homes, private hospitals and dementia units.
Haskell has an escrow agreement which means he will not sell any shares until after its March 31 financial accounts have been released to the market likely to be around May. He has also agreed not to sell his shares for less than $2.15 a piece in the two years after listing.
Third Age Health is due to renegotiate one of its major contracts in June. Haskell said it had a securities trading policy in place to prevent any insiders from buying/selling shares during periods when they could possibly be in possession of material information.
Third Age listed on February 11. In its latest financial disclosure - for the six months to September 30 - the company reported a net profit of $597,106 compared with a profit of $734,166 in the previous corresponding period.
Revenue came to $2.75 million, compared with $2.79m a year earlier.
The company paid a 9.25 cents gross dividend for 2020, up from 4.7 cents in the previous year.
Its listing documents show Haskell is being paid a base fee of $265,000 for the year to March 31 plus his company received a parcel of 46,511 shares in June last year. At the $2.15 a piece listing price this was worth just shy of another $100k.
On top of that he could earn a cash bonus of up to $60k a year in each of the next three financial years if growth rate targets are met.
He is also entitled to further cash retention payments of $100,000 and $50,000
if he remains the CEO on 1 April 2021 and 1 April 2022 respectively.
Shares in Third Age Health were trading at $2.30 on Monday.