U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 25, 2000
[ ] 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 or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
73Fifth Avenue, Suite 6A, New York, NY 10003
(Address of Principal executive offices)
(917) 853-0475
(Issuer'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. Yes |X| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 17, 2000, the Registrant had outstanding 3,238,796 shares
of common stock not including 3,052 shares classified as Treasury Stock.
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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 25, 2000 .............................................. 3
Consolidated Statements of Operations
for the twenty six week periods
ended August 25, 2000 and August 28, 1999 .................... 4
Consolidated Statements of Cash Flows
for the twenty six week periods
ended August 25, 2000 and August 28, 1999 .................... 5
Notes to Financial Statements .................................... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations ..................... 8
PART II
Item 1 - Legal Proceedings ................................................ 9
Item 6 - Exhibits and Reports on Form 8-K ................................. 10
----------
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 25, 2000 and the results of its operations and
changes in its financial position for the thirteen and twenty six week periods
ended August 25, 2000 and August 28, 1999.
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Nantucket Industries, Inc. and Subsidiaries
(Debtor-in-Possession)
CONSOLIDATED BALANCE SHEETS
(unaudited)
August 25, February 27,
2000 2000
---------------------------
(unaudited) (1)
Assets
CURRENT ASSETS
Cash $ 1,452 $ 1,452
Accounts receivable
Inventories 0 0
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 $ 826,845 $ 826,845
Current portion of capital lease obligations 93,070 93,070
Accounts payable 244,764 244,764
Accrued salaries and employee benefits 11,031 11,031
Accrued unusual charge 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 5,000 shares
have been designated as non-voting with
liquidating preference of $200 per share
and are issued and outstanding 500 500
Common stock, $.10 par value; authorized
20,000,000 shares; issued 3,241,848 324,185 324,185
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.
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Nantucket Industries, Inc. and Subsidiaries
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended Thirteen Weeks Ended
August 25, August 28, August 25, August 28,
2000 1999 2000 1999
-----------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 0 $3,837,195 $ 0 $1,654,920
Cost of sales 0 2,537,853 0 1,041,244
-----------------------------------------------------
Gross profit 0 1,299,342 0 613,676
Selling, general and administrative expenses 0 1,322,737 0 663,912
-----------------------------------------------------
Operating (loss) profit 0 (23,395) 0 (50,236)
Other income 0 (1,373) 0 (1,373)
Interest expense 0 (189,887) 0 (94,295)
-----------------------------------------------------
Net income (loss) 0 (214,655) 0 (145,904)
=====================================================
Net income (loss) per share - basic and diluted 0 $ (0.07) 0 $ (0.05)
=====================================================
Weighted average common shares outstanding $3,238,796 $3,238,796 $3,238,796 $3,238,796
=====================================================
</TABLE>
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Nantucket Industries, Inc. and Subsidiaries
(Debtor-in-Possession)
Consolidated Statements of Cash Flows
(unaudited)
Twenty-six Weeks Ended
-----------------------
August 25, August 28,
2000 1999
-----------------------
Cash flows from operating activities:
Net (loss) earnings $ 0 $(214,655)
Adjustments to reconcile net (loss)
income to net cash (used in) provided
by operating activities:
Depreciation and amortization 0 106,143
Provision for doubtful accounts 0 12,832
Gain on sale of fixed assets 0 1,373
Provision for obsolete and
slow-moving inventory 0 0
(Increase) decrease in assets
Accounts receivable 0 (479,748)
Inventories 0 305,040
Other current assets 0 (44,244)
Increase (decrease) in liabilities
Accounts payable 0 (100,678)
Accrued expenses and other liabilities 0 (17,423)
Accrued unusual charge 0 (14,583)
----------------------
Net cash (used in) provided by
operating activities 0 (445,943)
----------------------
Cash flows from investing activities
(Additions) removals to property,
plant and equipment 0 4,842
Proceeds from sale of fixed assets 0 23,500
Decrease in other assets 0 0
----------------------
Net cash used in investing activities 0 28,342
----------------------
Cash flows from financing activities
Repayments under line of credit agreement, net 0 0
Payments of capital lease obligations 0 (22,946)
----------------------
Net cash used in financing activities 0 (22,946)
----------------------
NET (DECREASE) INCREASE IN CASH 0 (440,547)
Cash at beginning of period 0 622,268
----------------------
Cash at end of period $ 0 $ 181,721
======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period:
Interest $ 0 $ 5,272
======================
Income taxes $ 0 $ 0
======================
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NANTUCKET INDUSTRIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED AUGUST 25, 2000 AND AUGUST 28, 1999
(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 27, 2000.
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 and one or more of its subsidiaries to be merged with, or to
acquire the assets or the capital stock of, existing businesses, 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 intends to file with the Bankruptcy Court, will propose 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, confirmed by the Bankruptcy Court, and not objected to after the fact
by the court-appointed Trustee for the Creditors. As part of the approval
process, the Company must circulate a draft of a proposed disclosure statement,
containing the details of the proposed Plan of Reorganization, to the SEC and
the Trustee. At least 15 days after such circulation, a hearing will be held
before the Bankruptcy Court to determine the adequacy of the proposed disclosure
statement. Hearings had been scheduled for September 7, October 18, and November
16, 2000, but all were adjourned because, as at such dates, the Company had not
yet circulated the proposed disclosure statement. The Company plans to complete
and circulate the said disclosure statement by about the first week in January
and has requested that the Court schedule a hearing for the last week in January
or the beginning of February 2001. To date no date has been set for such
hearing. Management is completely unable to predict or to even venture an
opinion as to whether all such required approvals and confirmations by the
Bankruptcy Court and the Trustee 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
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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.
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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 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.
As a result of the foregoing, during the thirteen and twenty six week
periods ended August 25, 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 0perations" which appeared in the Company's annual
reports on Forms 10-K for the fiscal years ended February 27, 2000 and 1999.
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 25,
2000, the Company's assets and liabilities were unchanged from the February 27,
2000 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 0perations" which appeared in the
Company's annual reports on Forms 10-K for the fiscal years ended February 27,
2000 and 1999.
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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-B 10867). The goal of the projected
reorganization will be for the Company and one or more of its subsidiaries to be
merged with, or to acquire the assets or the capital stock of, existing
businesses, 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 intends to file with the Bankruptcy
Court, will propose 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, confirmed by the Bankruptcy Court,
and not objected to after the fact by the court-appointed Trustee for the
Creditors. As part of the approval process, the Company must circulate a draft
of a proposed disclosure statement, containing the details of the proposed Plan
of Reorganization, to the SEC and the Trustee. At least 15 days after such
circulation, a hearing will be held before the Bankruptcy Court to determine the
adequacy of the proposed disclosure statement. Hearings had been scheduled for
September 7, October 18, and November 16, 2000, but all were adjourned because,
as at such dates, the Company had not yet circulated the proposed disclosure
statement. The Company plans to complete and circulate the said disclosure
statement by about the first week in January and has requested that the Court
schedule a hearing for the last week in January or the beginning of February
2001. To date no date has been set for such hearing. Management is completely
unable to predict or to even venture an opinion as to whether all such required
approvals and confirmations 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 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.
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Item 6 - Exhibits and Reports on Form 8-K
(a) No Exhibits are being filed herewith:
(b) No Current Reports on Form 8-K were filed during the quarter ended
August 25, 2000.
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.
Date: November 17, 2000 By /s/ John H. Treglia
--------------------------------------
John H. Treglia,
President, Secretary and CFO
Date: November 17, 2000 By /s/ Marsha C. Ellis
--------------------------------------
Marsha C. Ellis,
Treasurer and Chief Accounting Officer
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