8-K/A 1 f8ka10604_nantucket.txt AMENDMENT NO. 1 TO FORM 8-K 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 -------------------------------------------------------------------------------- PAGE ---------- 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 -1- 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 -----------
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-