U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended August 31, 2001.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from _______ to _______.
Commission File Number: 1-8509
NANTUCKET INDUSTRIES, INC.
(Exact Name of Issuer as Specified in Its Charter)
Delaware 58-0962699
(State of other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
45 Ludlow Street, Suite 602, Yonkers, New York 10705
(Address of principal executive offices)
914-375-7591
(Registrant's telephone number, including area code)
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
X YES NO ____
APPLICABLE ONLY TO CORPORATE ISSUERS
As of October 15, 2001, the Registrant has outstanding 3,238,796 shares of
common stock not including 3,052 shares classified as Treasury Stock.
Nantucket Industries, Inc.
(Debtor-in-Possession)
----------
TABLE OF CONTENTS
PART I
Item 1 - Financial Information (unaudited) Page
----
Nantucket Industries, Inc. and Subsidiaries
Consolidated Balance Sheet as of
August 31, 2001 ................................................. 3
Consolidated Statements of Operations
For the three month periods
Ended August 31, 2001 and August 31, 2000........................ 4
Consolidated Statements of Cash Flows
For the three month periods
Ended August 31, 2001 and August 31, 2000....................... 5
Notes to Financial Statements...................................... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations...................... 7
PART II
Item 1 - Legal Proceedings................................................... 8
Item 6 - Exhibits and Reports on Form 8-K.................................... 8
The financial statements are unaudited. However, the management of the
issuer believes that all necessary adjustments (which include only normal
recurring adjustments) have been reflected to present fairly the financial
position of registrant at August 31, 2001 and the results of its operations and
changes in its financial position for the three month periods ended August 31,
2001 and August 31, 2000.
Nantucket Industries, Inc. and Subsidiaries
(Debtor-in-Possession)
CONSOLIDATED BALANCE SHEETS
(unaudited)
August 31, February 28,
2001 2001
------------ ------------
(1)
Assets
CURRENT ASSETS
Cash $ 1,452 $ 1,452
Accounts receivable (Notes 2 and 8)
Inventories (Notes 6 and 8)
Other current assets 20,331 20,331
------------ -----------
Total current assets 21,783 21,783
------------ -----------
Property, plant and equipment, net 0 0
Other assets, net 0 0
------------ -----------
$ 21,783 $ 21,783
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Convertible subordinated debentures (Note 4) $ 826,845 $ 826,845
Current portion of capital lease obligations (Note 8) 93,070 93,070
Accounts payable 244,764 244,764
Accrued salaries and employee benefits 11,031 11,031
Accrued unusual charge (Note 5) 77,083 77,083
Accrued expenses and other liabilities 129,515 129,515
Accrued royalties 319,048 319,048
------------ -----------
Total current liabilities 1,701,356 1,701,356
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 0 0
1,701,356 1,701,356
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value; 500,000 shares authorized, of which 500 500
5,000 shares have been designated as non-voting with liquidating
preference of $200 per share and are issued and outstanding
Common stock, $.10 par value; authorized 20,000,000 324,185 324,185
shares; issued 3,241,848
Additional paid-in capital 12,539,503 12,539,503
Deferred issuance cost (61,069) (61,069)
Accumulated deficit (14,462,755) (14,462,755)
------------ -----------
(1,659,636) (1,659,636)
Less 3,052 shares of common stock held in treasury, at cost 19,937 19,937
------------ -----------
(1,679,573) (1,679,573)
------------ -----------
$ 21,783 $ 21,783
============ ===========
(1) Derived from audited financial statements.
The accompanying notes are an integral part of these statements.
3
Nantucket Industries, Inc. and Subsidiaries
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
August 31, August 31,
2001 2000
---------- -----------
Net sales $0 $0
Cost of sales 0 0
--------- ---------
Gross profit 0 0
--------- ---------
Selling, general and administrative expenses 0 0
--------- ---------
Operating (loss) profit 0 0
--------- ---------
Other income 0 0
Interest expense 0 0
--------- ---------
Net income (loss) 0 0
========= =========
Net income (loss) per share - basic and diluted
(Note 3) 0 0
========= =========
Weighted average common shares outstanding 3,238,796 3,238,796
========= =========
The accompanying notes are an integral part of these statements.
4
Nantucket Industries, Inc. and Subsidiaries
(Debtor-in-Possession)
Consolidated Statements of Cash Flows
(unaudited)
5
Thirteen Weeks Ended
----------------------------------
August 31, August 31,
2001 2000
----------------------------------
Cash flows from operating activities:
Net (loss) earnings $0 $0
Adjustments to reconcile net (loss) income
to net cash (used in) provided by operating activities:
Depreciation and amortization 0 0
Provision for doubtful accounts 0 0
Gain on sale of fixed assets 0 0
Provision for obsolete and slow-moving inventory 0 0
(Increase) decrease in assets
Accounts receivable 0 0
Inventories 0 0
Other current assets 0 0
Increase (decrease) in liabilities
Accounts payable 0 0
Accrued expenses and other liabilities 0 0
Accrued unusual charge 0 0
----------------------------------
Net cash (used in) provided by operating activities 0 0
----------------------------------
Cash flows from investing activities
(Additions) removals to property, plant and equipment 0 0
Proceeds from sale of fixed assets 0 0
Decrease in other assets 0 0
----------------------------------
Net cash used in investing activities 0 0
----------------------------------
Cash flows from financing activities
Repayments under line of credit agreement, net 0 0
Payments of capital lease obligations 0 0
Repayments of long-term debt 0 0
----------------------------------
Net cash used in financing activities 0 0
----------------------------------
NET (DECREASE) INCREASE IN CASH 0 0
Cash at beginning of period 0 0
----------------------------------
Cash at end of period $0 $0
==================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period:
Interest $0 $0
==================================
Income taxes $0 $0
==================================
The accompanying notes are an integral part of these statements.
5
NANTUCKET INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED August 31, 2001 AND August 31, 2000
(unaudited)
The following notes to the consolidated financial statements should be
read in light of the following:
As a result of the following, all information which appears in the
financial statements included in this report, is purely historical and will have
no impact on future operations and results, if any. For an explanation of the
company's historical accounting policies and data, reference is made to the
Notes to the Financial Statements included in the Company's annual report on
Form 10-K for the fiscal year ended February 28, 2001.
The Company experienced significant losses from operations in recent years
which resulted in severe cash flow deficiencies. As a result of such losses and
the Company's inability to raise financing to continue operations, it became
insolvent and, finally, it terminated all business operations in October 1999.
On March 3, 2000, the Company filed a Voluntary Petition under Chapter 11
of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the
Southern District of New York. The goal of the projected reorganization will be
for the Company to be merged with, or to acquire the assets or the capital stock
of, existing businesses, or to effect similar business combinations. The
Company's subsidiaries will be dissolved. No assurance can be given that this
goal will be achieved. Management will have sole discretion to determine which
businesses, if any, may be merged or acquired, as well as the terms of any
merger or acquisition. The Company's second ammended Plan of Reorganization,
dated July 5, 2001 and the Disclosure Statement thereto, was filed by Management
on July 6, 2001 with the Bankruptcy Court. This Plan proposes that the Company
acquire, in a "reverse acquisition", Accutone Inc. a Delaware Corporation
("Accutone") controlled by John H. Treglia, the Company's current president. In
a "reverse acquisition", the shareholders of the company which is acquired (in
this case, Accutone) will end up owning the preponderance of the issued and
outstanding capital stock of the company which was the acquirer (in this case,
Nantucket Industries, Inc.). before it can be put into effect, the proposed Plan
of Reorganization will have to be approved by the Company's creditors and
interest holders, confirmed by the Bankruptcy Court. An order approving the
Disclosure Statement has been presented to the Court for Settlement on October
17, 2001 and a hearing to confirm the Plan is scheduled for December 10, 2001.
Management is completely unable to predict or to even venture an opinion as to
whether all such required approvals and confirmation will be forthcoming. As a
result, no prediction can be made with respect to whether the reverse
acquisition of Accutone by the Company will ever take place. If it should occur,
such acquisition would not be considered to be an arm's length transaction.
While any transaction between the Company and any of its affiliates could
present management with a conflict of interest, it is the intention of
management that is such transaction should occur, the terms thereof will be no
less beneficial to the Company than if such transaction had been effected on an
arms length basis. If a Plan of Reorganization is not confirmed by the
Bankruptcy Court, or is confirmed, but management is not able to successfully
complete a merger or acquisition, the Company will cease to exist.
6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The Company experienced significant losses from operations in recent years
which resulted in severe cash flow deficiencies. As a result of such losses and
the Company's inability to raise financial to continue operations, it became
insolvent and, finally, it terminated all business operations in October 1999.
On March 3, 2000, the Company filed a Voluntary Petition under Chapter 11 of the
United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern
District of New York.
As a result of the foregoing, during the quarters ended August 31, 2001
and August 31, 2000, the company made no sales, realized no revenues, and
incurred no operational expenses.
For discussions in more detail respecting the Company's results of
operations during the three years leading up to the termination of operations,
reference is made to Item 7. "management's Discussion and analysis of Financial
Condition and Results of Operations" which appeared in the Company's annual
reports on Forms 10-K for the fiscal years ended February 28, 2001 and 2000.
Liquidity and Capital Resources
During the several years leading up to the termination of operations, the
company had funded its operating losses by refinancing its debt and increasing
its capital through the sale of debt and equity securities. As at August 31,
2001, the company's assets and liabilities were unchanged from the February 28,
2001 year end, with total assets of $21,783 and total liabilities of $1,701,356.
For discussions in more detail respecting the Company's liquidity and
capital resources during the three years leading up to the termination of
operations, reference is made to Item 7. "Management's Discussion and analysis
of Financial Condition and Results of Operations" which appeared in the
Company's annual reports on forms 10-K for the fiscal years ended February 28,
2001 and 2000.
7
PART II
OTHER INFORMATION
Item 1 - Legal Proceedings
On March 3, 2000, Nantucket Industries, Inc. (the "Company") filed a
Voluntary petition under chapter 11 of the United States Bankruptcy Code in the
U.S. Bankruptcy Court for the Southern District of New York. (Case Name:
Nantucket Industries, Inc., Case Number: 00-B10867). The goal of the projected
reorganization will be for the Company to be merged with, or to acquire the
assets or the capital stock of an existing business or to effect similar
business combinations. No assurance can be given that this goal will be
achieved. Management will have sole discretion to determine which businesses, if
any, may be merged or acquired, as well as the terms of any merger or
acquisition. The Plan of Reorganization and the disclosure Statement, which
Management filed with the Bankruptcy Court, will propose that the company
acquire, in a "reverse acquisition", Accutone In., a Delaware Corporation
("Accutone") controlled by John H. Treglia, the company's current president. In
a "reverse acquisition", the shareholders of the company which is acquired (in
this case, Accutone) will end up owning the preponderance of the issued and
outstanding capital stock of the company which was the acquirer (in this case,
Nantucket Industries, Inc.). Before it can be put into effect, the proposed Plan
of Reorganization will have to be approved by the Company's creditors, confirmed
by the Bankruptcy Court, and not objected to after the fact by the
court-appointed Trustee for the Creditors. A hearing before the Bankruptcy Court
with respect to the aforesaid is currently scheduled for December 10, 2001.
Management is completely unable to predict or to even venture an opinion as to
whether all such required approvals and confirmation will be forthcoming. As a
result, no predication can be made with respect to whether the reverse
acquisition of Accutone by the company will ever take place. If it should occur,
such acquisition would not be considered to be an arm's length transaction.
While any transaction between the Company and any of its affiliates could
present management with a conflict of interest, it is the intention of
management that if such transaction should occur, the terms thereof will be no
less beneficial to the Company than if such transaction had been effected on an
arms length basis. If a Plan of Reorganization is not confirmed by the
Bankruptcy Court, or is confirmed, but management is not able to successfully
complete a merger or acquisition, the Company will cease to exist.
Item 6 - Exhibits and Reports on Form 8-K
None
8
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
NANTUCKET INDUSTRIES, INC.
Dated October 15, 2001 By /s/ John H. Treglia
--------------------------------------
John H. Treglia
President, Secretary and CFO
Dated October 15, 2001 By /s/ Marsha C. Ellis
--------------------------------------
Marsha C. Ellis
Treasurer and Chief Accounting Officer
9