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 November 30, 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 January 3, 2002, 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)
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TABLE OF CONTENTS
PART I
Item 1 - Financial Information (unaudited) Page
----
Nantucket Industries, Inc. and Subsidiaries
Consolidated Balance Sheet as of
November 30, 2001............................................3
Consolidated Statements of Operations
For the three month periods
Ended November 30, 2001 and
November 30, 2000............................................4
Consolidated Statements of Cash Flows
For the three month periods
Ended November 30, 2001 and
November 30, 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
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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 November 30, 2001 and the results of its operations
and changes in its financial position for the three month periods ended November
30, 2001 and November 30, 2000.
2
Nantucket Industries, Inc. and Subsidiaries
(Debtor-in-Possession)
CONSOLIDATED BALANCE SHEETS
(unaudited)
November 30, 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)
November 30, November 30,
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)
Thirteen Weeks Ended
----------------------------
November 30, November 30,
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 amended 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 November 30, 2001
and November 30, 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
1
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). At a hearing held on
December 10, 2001 before United States Bankruptcy Judge, Hon. Richard A.
Bohanan, in the Southern District of New York, an order was signed confirming
the plan of reorganization, which order became effective December 20, 2001.
The signed order calls for the following means of execution of the plan:
1. The assets of Accutone, Inc. shall be acquired by the reorganized
(new) Nantucket Industries, Inc. These shall consist of its
facilities, contracts, service agreements, accounts receivable,
patent rights, customer lists, etc.
2. All currently issued and outstanding shares in (old) Nantucket
Industries, Inc. of all classes and all warrants, options and
subscriptions to (old) Nantucket Industries, Inc. equity interests
shall be deemed cancelled and rendered null and void.
3. The reorganized Nantucket Industries, Inc. shall issue approximately
6 million Shares of common stock out of the total number of shares
authorized by the amended charter as follows:
A. Approximately 714,840 shares will be issued to the holders of
Allowed Claims and Equity Interests in (old) Nantucket
Industries, Inc. The basis of this distribution as stated in
the plan of reorganization as confirmed by the Federal
Bankruptcy Court to be as follows:
1) Holders of Allowed General Unsecured claims shall
receive in full settlement and satisfaction of their
respective claims (1) one share per $5.00 of General
Unsecured Claim.
2) Holders of issued and outstanding shares of preferred
stock in (old) Nantucket Industries, Inc. shall receive,
in full settlement of their liquidation preference and
all other rights appurtenant to such shares one (1)
share per $20.00 of liquidation preference currently
held, and the currently outstanding shares of preferred
stock shall be cancelled of record.
3) Holders of all issued and outstanding shares of common
stock in (old) Nantucket Industries, Inc. shall receive
in full settlement and satisfaction of their respective
equity interests, one (1) share per ten (10) shares of
currently issued stock presently held, and the current
outstanding common shares in (old) Nantucket Industries,
Inc. shall be canceled of record.
B. The balance of approximately 5,285,160 shares shall be issued
to the current equity interest holders of Accutone, Inc. in
consideration of, and exchange for, that entity.
C. The currently issued shares of stock in the subsidiaries, all
of which are held by Nantucket Industries, Inc. shall be
deemed cancelled, null and void.
8
The company anticipates the implementation of the confirmed plan of
reorganization, including changing the name of Nantucket Industries, Inc. to
Accutone Hearing Care Corp. as expeditiously as possible prior to January 31,
2002.
Item 6 - Exhibits and Reports on Form 8-K
Exhibits
1. Notice of Entry and Notice of Deadline for Filing Administrative
Claims
2. Order Confirming Plan of Reorganization signed by Hon. Richard A.
Bohanan.
3. Order Approving Disclosure Statement to Debtor's Second Amended Plan
of Reorganization and Fixing Time for Filing Acceptances or
Rejections of Plan Combined with Notice.
4. Second Amended Joint Plan of Reorganization.
5. Disclosure Statement to the Second Amended Plan of Reorganization.
Form 8-K
None
9
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 January 7, 2002 By /s/ John H. Treglia
-------------------------------------
John H. Treglia
President, Secretary and CFO
Dated January 7, 2002 By /s/ Marsha C. Ellis
-------------------------------------
Marsha C. Ellis
Treasurer and Chief Accounting Officer
9