SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1 TO FORM
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest reported): February 28, 2004
Nantucket Industries, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-26715 58-0962699
(Commission File Number) (IRS Employer Identification No.)
45 Ludlow Street, Suite 602, Yonkers, NY 10705
(Address of Principal Executive Offices)(Zip Code)
(914) 375-7591
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 28, 2004 (the "Effective Date"), pursuant to a Stock Purchase
Agreement ("Agreement") between Nantucket Industries, Inc. ("Nantucket" or the
"Company"), a Delaware corporation and all of the shareholders of Comprehensive
Network Solutions, Inc. ("Comprehensive"), Nantucket acquired one hundred
percent (100%) of the issued and outstanding shares of common stock of
Comprehensive from the Comprehensive Shareholders in consideration for the
issuance of a total of 250,000 restricted shares of Nantucket common stock to
the Comprehensive Shareholders. Pursuant to the Agreement, Comprehensive became
a wholly owned subsidiary of the Company. Additional consideration of $60,000
was also paid to Comprehensive to be used as working capital.
The acquisition was approved by the unanimous consent of the Board of Directors
of the Company on February 28, 2004.
The acquisition will allow the Company to utilize the resources of both
companies to enter the health benefit market with Consumer Choice products for
individuals, employers, associations, unions and political subdivisions.
Comprehensive's business plan focuses on marketing health care benefits that
enable the prospective clients to choose appropriate providers and financial
arrangements that best meet their individual needs. The business plan also
includes the complete development and market implementation of a high quality
musculoskeletal disease management program for target markets with directed care
of workers' compensation cases.
Comprehensive was organized in June, 2002 with headquarters in Austin, Texas.
The company has been focused on specialty health benefits products, including
three levels of provider networks and one limited indemnity medical insurance
plan. These products have been trademarked as ChiroCare Select, ChiroCare
Advantage, ChiroCare Optima and CNS 500 Plan. The company is currently working
on expanding its product with additional benefits and alternative benefit
funding options. These new expanded products will be offered through a captive
retail sales operation to individuals and small employers; and customized
private label versions of the products through its broker and consultant
relationships to associations, unions political subdivisions and large
employers. The offerings are alternative cost and quality benefit solutions to
prospects and clients who are uninsured or underinsured through existing
traditional defined benefit health plans.
Comprehensive's goals include a plan to develop disease management treatment
guidelines that would address back, neck and upper extremity musculoskeletal
conditions specifically for workers' compensation. During the past year, these
guidelines have been codified and copyrighted. Through an affiliation with
Health Partners, the strategy is to develop exclusive provider organizations
(EPO) in markets where state regulation enables workers' compensation plans to
direct injured workers to specific health care providers. Comprehensive's EPOs
will be marketed to workers' compensation and employee benefit plans on the
basis access fees, case management fees and shared savings of future medical
costs versus historic medical costs and patient outcomes
The company will continue to refine and improve its Predictive Model of evidence
based treatment guidelines and disease management for musculoskeletal injuries
and illnesses. The quality and cost effective management of these conditions
will continue to be a primary focus for the company's medical and network
development staff in preparation for additional market introductions.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired
Financial statements of the Company are filed in this amendment to this Report
after the signature page.
(b) Pro forma financial information
Pro forma financial information will be furnished with the aforementioned
amendment.
(c) Exhibits
Number Exhibit
------ -------
2.1 Stock Purchase Agreement February 28, 2004. *
Filed with original 8K on March 16, 2004.
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 hereunto duly authorized.
NANTUCKET INDUSTRIES, INC.
By:/s/ John H. Treglia
-----------------------------
John H. Treglia
President
June 21, 2004
COMPREHENSIVE NETWORK SOLUTIONS, INC.
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORTS
FOR THE YEAR ENDED DECEMBER 31, 2003
AND
FOR THE PERIOD FROM INCEPTION (MAY 7, 2002)
TO DECEMBER 31, 2002
COMPREHENSIVE NETWORK SOLUTIONS, INC.
TABLE OF CONTENTS
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PAGE
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INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3-4
Statements of Stockholders' Equity 5
Statements of Cash Flows 6-7
NOTES TO FINANCIAL STATEMENTS 8-11
Austin, Texas May 2, 2004
To the Board Members of
Comprehensive Network Solutions, Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of Comprehensive Network
Solutions, Inc. (the Company) as of December 31, 2003 and 2002, and the related
statements of operations, stockholders' equity, and cash flows for the year
ended December 31, 2003 and the period from May 7, 2002 (inception) through
December 31, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits of the financial statements provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
2003 and 2002, and the results of its operations and cash flows for the year
ended December 31, 2003, and for the period from May 7, 2002 (inception) through
December 31, 2002 in conformity with U.S. generally accepted accounting
principles.
Austin, Texas
May 2, 2004
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FINANCIAL STATEMENTS
COMPREHENSIVE NETWORK SOLUTIONS, INC.
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
ASSETS
-------------------------------------------------------------------------------
2003 2002
-----------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 2,448 $ 8,273
Accounts Receivable 470 -0
-----------------------------------
Total Current Assets 2,918 8,273
OTHER ASSETS 1,200 1,200
PROPERTY AND EQUIPMENT, NET 8,873 11,470
-----------------------------------
TOTAL ASSETS $ 12,991 $ 20,943
-----------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------------------------------------------
$ 1,759
CURRENT LIABILITIES
Accounts payable
$ 8,708
Obligation under capital lease, current portion 2,502 2,401
Notes payable 171,645 61,600
-----------------------------------
Total Current Liabilities 182,855 65,760
-----------------------------------
OTHER LIABILITIES
Obligation under capital lease, net of current portion 3,726 6,228
-----------------------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $1.00 par value, 100,000 shares authorized, 40,000 issued and
outstanding, 6,800 issuable at December 31, 2003; 40,000 issuable at December
31, 2002
46,800 40,000
Retained earnings (deficit) (220,390) (91,045)
-----------------------------------
Total Stockholders' Equity (Deficit) (173,590) (51,045)
-----------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 12,991 $ 20,943
-----------------------------------
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
-2-
COMPREHENSIVE NETWORK SOLUTIONS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
Revenues
Sales $ 43,640
Other income 13,287
--------------
Total Revenue 56,927
--------------
Expenses
Salaries and wages 85,094
Commission 7,165
Rent 19,862
Other 74,151
--------------
Total Expenses 186,272
Net Loss $ (129,345)
--------------
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
-3-
COMPREHENSIVE NETWORK SOLUTIONS, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (MAY 7, 2002) TO DECEMBER 31, 2002
Revenues
Sales $ 35
Other income 14,315
---------------
Total Revenue 14,350
---------------
Expenses
Salaries and wages 31,225
Rent 11,291
Other 62,879
---------------
Total Expenses 105,395
---------------
Net Loss $ (91,045)
---------------
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
-4-
COMPREHENSIVE NETWORK SOLUTIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 2003
AND
FOR THE PERIOD FROM MAY 7, 2002 (INCEPTION)
THROUGH DECEMBER 31, 2002
Member Common Stock
Capital Retained
Contributed Shares Amount Earnings Total
--------------------------------------------------------------------------------
Balance at May 7, 2002 (inception) $ -0- -0- $ -0- $ -0- $ -0-
Contributions to L.L.C. 40,000 -0- -0- -0- 40,000
Issuance of common stock upon
conversion to a C-Corporation
(40,000) 40,000 40,000 -0- -0-
Net loss -0- -0- -0- (91,045) (91,045)
--------------------------------------------------------------------------------
Balance at December 31, 2002 -0- 40,000 40,000 (91,045) (51,045)
Issuable common stock -0- 6,800 6,800 -0- 6,800
Net loss -0- -0- -0- (129,345) (129,345)
--------------------------------------------------------------------------------
Balance at December 31, 2003 $ -0- 46,800 $ 46,800 $ (220,390) $ (173,590)
--------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
-5-
COMPREHENSIVE NETWORK SOLUTIONS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (129,345)
Depreciation 2,597
Adjustments to reconcile net income to net cash provided by operating
activities:
Increase in accounts receivable (470)
Increase in accounts payable 6,949
--------------
NET CASH USED BY OPERATING ACTIVITIES (120,269)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments made on capital lease (2,401)
Net proceeds from line of credit 110,045
Issuance of common stock 6,800
--------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 114,444
--------------
NET DECREASE IN CASH (5,825)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 8,273
--------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,448
--------------
SUPPLEMENTAL INFORMATION
Interest paid $ -0-
--------------
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
-6-
COMPREHENSIVE NETWORK SOLUTIONS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (MAY 7, 2002) THROUGH DECEMBER 31, 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (91,045)
Depreciation 1,515
Adjustments to reconcile net income to net cash provided by operating
activities:
Increase in other assets (1,200)
Increase in accounts payable 1,759
-----------
NET CASH USED BY OPERATING ACTIVITIES (88,971)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments made on capital lease (1,356)
Net proceeds from line of credit 61,600
Issuance of common stock 40,000
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 100,244
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (3,000)
-----------
NET CASH USED BY INVESTING ACTIVITIES (3,000)
-----------
NET INCREASE IN CASH 8,273
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -0
-----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,273
-----------
SUPPLEMENTAL INFORMATION
Interest paid $ -0
-----------
NON-CASH TRANSACTION
Property and equipment acquired under capital lease $ 9,985
-----------
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
-7-
COMPREHENSIVE NETWORK SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
----------------------
Comprehensive Network Solutions, Inc. (the Company) was formed on May
7, 2002 as a Texas Limited Liability Corporation, for the purpose of
offering non-insurance membership cards that enable uninsured or
underinsured patients to obtain chiropractic services at a discount.
The Company converted to a C-Corporation and acquired the assets of
the L.L.C. on September 19, 2002.
Accounts Receivable
-------------------
It is the Company's policy to record reserves for potential credit
losses. Since inception, the Company has experienced minimal losses.
The Company considered no reserves to be necessary at December 31,
2003 and 2002.
Cash and Cash Equivalents
-------------------------
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and highly liquid debt instruments with original
maturities of three months or less.
Estimates
---------
The preparation of the financial statements in accordance with U.S.
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities. Actual results could differ from those estimates.
Income Taxes
------------
The Company accounts for income taxes using the liability method
pursuant to Statement of Financial Accounting Standards ("SFAS") No.
109. Under this method, deferred income taxes are recorded to reflect
the tax consequences on future years of temporary differences between
the tax bases of the assets and liabilities and their financial
amounts at year-end. The Company provides a valuation allowance to
reduce deferred tax assets to their net realizable value. At December
31, 2003, the Company has a potential deferred tax asset of
approximately $61,000, which has been fully reserved, arising from net
operating losses aggregating approximately $180,000. These net
operating losses begin to expire in 2022.
-8-
COMPREHENSIVE NETWORK SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
DECEMBER 31, 2003 AND 2002
NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Property and Equipment
----------------------
Property and equipment are recorded at cost, net of accumulated
depreciation. Depreciation is provided on the straight-line method
over the estimated useful lives of the assets, which is between 5 to 7
years.
Advertising
-----------
The Company expenses all advertising costs as incurred. As of December
31, 2003, advertising expense was $669.
NOTE 2: NOTES PAYABLE
2003 2002
Line of credit with a financial institution
bearing interest at a rate of 4.125%, due on
demand and guaranteed by certain
stockholders' investments $ 161,718 $ 61,600
Line of credit to a bank bearing interest
at a rate of 8.75 %, due on demand and
secured by certain stockholders'
investments 9,927 -0
----------- -----------
Notes payable $ 171,645 $ 61,600
Interest expense for the year ended December 31, 2003 and for the
period inception (May 7, 2002) through December 31, 2002 was $6,402
and $226, respectively.
-9-
COMPREHENSIVE NETWORK SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
DECEMBER 31, 2003 AND 2002
NOTE 3: PROPERTY & EQUIPMENT
Property and equipment consisted of the following at December 31, 2003
and 2002:
2003 2002
-------------------------------------------------------------------------------
Furniture and office equipment $ 12,985 $ 12,985
Less accumulated depreciation (4,112) (1,515)
-----------------------------
Property and equipment, net $ 8,873 $ 11,470
-----------------------------
Depreciation expense for the year ended December 31, 2003 and for the
period inception (May 7, 2002) through December 31, 2002 was $2,597
and $1,515, respectively.
NOTE 4: CAPITAL LEASE OBLIGATIONS
Capital lease payable at December 31, 2003 and 2002 consisted of the
following:
2003 2002
-------------------------------------------------------------------------------------
Capital leases for computer equipment due
in monthly installments of $226 through
2006. The equipment is included in office
equipment at December 31, 2003 at a cost of
$9,985 with accumulated amortization of
$3,162. $6,554 $9,266
Less interest 326 637
------------------------
6,228 8,629
Less current portion 2,502 2,401
------------------------
Capital lease obligation, long-term $3,726 $6,228
------------------------
Scheduled maturities for capital lease obligations for the years ended
December 31, are as follows:
2004 $2,502
2005 2,607
2006 1,119
---------
Total $6,228
---------
-10-
COMPREHENSIVE NETWORK SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
DECEMBER 31, 2003 AND 2002
NOTE 5: OPERATING LEASE OBLIGATIONS
The Company leases various facilities and equipment under operating
lease agreements having terms expiring at various dates through 2006.
Rental expense was $19,862 and $14,504 for the year ended December 31,
2003 and for the period inception (May 7, 2002) through December 31,
2002, respectively.
Future minimum lease payments under operating leases that have initial
or remaining noncancelable lease terms in excess of one year at
December 31, 2003, were as follows:
2004 $ 5,247
2005 3,328
2006 2,101
-----------
Total future minimum lease payments $10,676
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NOTE 6: SUBSEQUENT EVENTS
Subsequent to year end, the Company was acquired and became a
wholly-owned subsidiary of Nantucket Industries through a stock
exchange arrangement. Effective March 1, 2004, the Company exchanged
all of its outstanding common stock for 250,000 shares of the
acquirer's stock and $60,000 in working capital. In addition, certain
stockholders made cash infusions to pay off the line of credit in
exchange for 162,000 shares of stock and 41,200 additional shares of
stock were issued as compensation prior to the acquisition.
-11-