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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 EVENT REPORTED): AUGUST 31, 1998
APPAREL TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-23138 95-4374592
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation or Organization) File Number) Identification No.)
2300 SOUTH EASTERN AVENUE, COMMERCE, CALIFORNIA 90040
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 725-4955
FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT: NOT APPLICABLE
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ITEM 5. OTHER EVENTS
DELINQUENCY OF FILING OF FORM 10-KSB
The Annual Report of Apparel Technologies, Inc. (the "Registrant") on
Form 10-KSB for the Fiscal Year ended May 31, 1998, was required to be filed
by the Registrant on or before August 31, 1998. The Registrant was unable to
timely file Form 10-KSB as it did not have sufficient funds to complete the
audit of its financial statements required to be included in such filing.
(See "Lack of Capital" below). The Registrant intends to file Form 10-KSB
at such time as it has sufficient funds to complete the audit. There are no
assurances as to when or if the Registrant will be able to complete this
filing.
LACK OF CAPITAL
In May 1998 the Registrant entered into a loan agreement with Southridge
Capital Partners providing for the funding of $2.0 million through the
issuance of a series of Promissory Notes convertible into Common Stock. As
of June 19, 1998, Southridge had funded $1.1 million of the $2.0 million
commitment. On July 15, 1998 Southridge refused to fund, and continues to
refuse to fund any of the remaining $900,000 commitment (See "Litigation"
below). Revenues from operations have not been sufficient to meet the
Registrant's cash flow requirements. As of the date of this Report the
Registrant presently has no available working capital and it has no
commitments for working capital. Although the Registrant has been actively
engaged in discussions with a number of third parties to obtain needed
working capital, the Registrant has no commitments for working capital and
there are no assurances that working capital can be obtained at the times and
in the amounts needed.
As a result of the working capital deficiency and its inability to meet
current expenses, the Registrant has been forced to suspend its day to day
operations and close its New York and Paris offices. The Paris subsidiary,
APTX France has filed for protection under the bankruptcy laws of France and
is in the process of liquidation. If the Registrant is unable to obtain
working capital, it will be required to seek protection under U.S. bankruptcy
laws.
LITIGATION
On July 21, 1998 the Registrant was served with an action by Southridge
Capital Partners ("Southridge"), through its nominee, Thomson Kernaghan &
Co. Ltd., alleging that the Registrant breached the lending agreement with
Southridge by refusing to convert certain convertible notes and convertible
preferred stock into the Registrant's Common Stock. The action also alleges
that the Registrant and two of its officers defrauded Southridge by refusing
to convert the convertible securities into Common Stock. In August 1998
Southridge obtained a court order attaching $500,000 of the Registrant's
assets, pending a trial on the merits of Southridge's breach of contract
claim against the Registrant. Although there can be no assurances as to the
outcome of this proceeding, the Registrant and the named officers believe
they have meritorious defenses to this
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proceeding. The Registrant also believes it has substantial counterclaims
against Southridge arising out of its failure to honor its funding
obligations. However, the Registrant's ability to pursue these claims and
defend this proceeding is presently impaired by the Registrant's lack of
working capital. The Registrant has been engaged in settlement discussions
with Southridge. However, no settlement has been reached and there are no
assurances that any settlement will be reached.
The Registrant is also engaged as a defendant in a number of civil
proceedings, including eviction proceedings relating to its New York City
office and its Commerce, California headquarters.
RESIGNATION OF DIRECTORS AND OFFICERS
Two of the Registrant's four directors, Douglas Plank and William
Conlin, resigned from the Registrant's Board of Directors in August 1998.
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 thereunto duly authorized.
APPAREL TECHNOLOGIES, INC.
(Registrant)
Date: September 10, 1998 By: /s/ Katherine Van Ness
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Katherine Van Ness,
Chief Executive Officer
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