UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended February 28, 2001

Commission File Number: 1-8509

                           NANTUCKET INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

Delaware                                                  58-0962699
(State of other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

45 Ludlow Street, Suite 602, Yonkers, New York              10705
   (Address of principal executive offices)               (Zip Code)

                                  914-375-7591
              (Registrant's telephone number, including area code)

                  73 Fifth Avenue, Suite 6A, New York, NY 10003
                       (Former Address, since last report)

Common Stock, $.10 par value                    NASD Supplemental Market
Securities registered pursuant to               Name of each exchange on
Section 12(g) of the Act                        which registered

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding  twelve months (or for such shorter period that the registrant was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. |X| YES |_| NO

The aggregate  market value of the  outstanding  Common Stock of the  registrant
held by  non-affiliates  of the  registrant  as of June 1,  2001,  based  on the
average bid and asked price of the Common Stock on the NASD Supplemental  Market
on said date was $194,328.

As of June 1, 2001, the Registrant had  outstanding  3,238,796  shares of common
stock not including 3,052 shares classified as Treasury Stock.


<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE
                                   into PART I

Annual Report On Form 10-K for the Fiscal Year Ended February 27, 2000.


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<PAGE>

ITEM 1. BUSINESS

Proposed Reorganization

      Nantucket Industries,  Inc. (the "Company") is currently insolvent. It has
had no business and carried on no business  activities  since  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. (Case Name: Nantucket Industries,  Inc., Case Number: 00-B
10867).  The Company intends to file a Plan of  Reorganization  and a Disclosure
Statement in June 2001.

      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 a similar business combination.  No assurance can be given
that this goal  will be  achieved.  Management  will  have  sole  discretion  to
determine  which  business,  if any, may be merged or  acquired,  as well as the
terms of any merger or  acquisition.  Management  has searched and discussed the
possibilities  of a business  combination with several entities that appeared to
have value  potential  for a viable  combination  but each  situation was deemed
infeasible  after vigorous due diligence done by management.  However,  Accutone
Inc., a company controlled by John H. Treglia,  the Company's current president,
is among the companies and  businesses  which  management has made its candidate
with regard to the possibility of an acquisition or merger  transaction with the
Company.  If the Company should  ultimately  acquire a business or property from
any member of management,  the terms of such acquisition might not be the result
of arm's length negotiations.  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 tot he Company than if such transactions were
effected on an arms length basis.

      The  proposed  reorganization  of the  Company and the  acquisition  of or
merger  with a new  business  can be  expected  to  require  the  issuance  of a
substantial amount t of new shares of common stock or other securities. Any such
stock issuances will significantly reduce the proportionate ownership and voting
power of each other shareholder.

History

      Until the end of October 1999, when the Company  discontinued all business
activities,   it  produced  and  distributed   popular  priced  branded  fashion
undergarments for sale,  throughout the United States, to mass merchandisers and
national  chains.  The Company  produced and sold its men's  underwear  products
primarily  under licensed  labels  including  "Brittania" and "Arrow" and, until
March 31, 1998, the Company also produced  women's  innerwear,  under the GUESS?
label,  for sale to department and specialty  stores.  Prior to the cessation of
all business  activities,  all of the Company's  produces were  manufactured  by
offshore  production  contractors  located  in  Mexico,  the  Far  East  and the
Caribbean Basin,  packaging and distribution of the Company's  produce lines was
based in its leased facility in Cartersville, Georgia. The Company conducted all
of its business activities  directly,  and indirectly through its four currently
dormant  subsidiary  corporations,  Nantucket  Hosiery  Mills  Inc.,  a Delaware
Corporation ("NHMI"),  Nantucket Mills Inc., a Delaware  Corporation,  Nantucket
Hosiery  Mills  Corp.  a North  Carolina  corporation  ("NHMC"),  and


                                       3
<PAGE>

Nantucket  Management Corp., a New York corporation.  The four currently dormant
subsidiary  corporations  will be  terminated  at the  time of any  acquisition,
merger or other  business  combination.  For a discussion  in more detail of the
company's former business  operations and the factors leading to the termination
of the  company's  business,  reference  is  made  to  Item  1 of  Part I of the
company's  annual  report on Form 10-K for the fiscal  year ended  February  27,
1999.

Termination of Operations

      The Company experienced  significant losses from operations in recent year
which resulted in severe cash flow deficits that negatively impacted the ability
of the Company to continue its business as formerly structured.  The Company has
been totally  inactive since October 1999 and filed for protection under Chapter
11 on March 3, 2000.  During  fiscal  2000,  the  effect of  sharply  decreasing
revenues  over the  previous  four years,  continuing  losses  from  operations,
interest  payment  defaults on outstanding  debt, the lack of a long-term credit
facility,  and the  concentration of almost all sales among only three customers
forced the Company to discontinue all of its business and  operations.  Prior to
the periods  covered by this  report,  in fiscal 1995 and 1996,  the Company had
funded its operations by refinancing its debt and increasing its capital through
(I) the  sale  of $1  million  of  non-voting  convertible  preferred  stock  to
management;  (ii) the sale of  treasury  stock  which  increased  equity by $2.9
milli8on;  and (iii) the completion of a $3.5 million private placement (see the
discussion,  below,  under the  subcaption,  "Continuing  Default on Outstanding
Debentures"). The Company had also implemented a restructuring strategy aimed at
improving operating results, through the reduction of costs, the streamlining of
operations,  and the closing of the  Company's  Puerto Rico Plant.  These effort
failed to bring the  Company's  operations  to a profitable  level.  Some of the
major  factors and  occurrences  which led to the Company's  insolvency  and the
termination  of its  operations  are described  below.  For a discussion in more
detail  of  each  of the  matters  discussed  below,  reference  is  made to the
Company's annual report on Form 10-K for the fiscal year ended February 27, 1999
and to Item 7 "Management's  Discussion and Analysis of Financial  Condition and
Results of Operations", included in this Report.

Discontinuance of GUESS? Product Line

      From  December  7, 1992 until the first  quarter of the fiscal  year ended
February  27, 1999,  the Company  held the  exclusive  United  States  rights to
produce and sell  undergarments  bearing the "GUESS?"  trademark and  variations
thereof.  The license  was subject to  termination  prior to its  expiration  if
certain minimum sales goals were not met, with the payment of minimum royalti8es
required in the amounts of  $560,000,  $700,000  and  $840,000  for the contract
years ended May 31, 1997, 1998 and 1999  respectively.  Minimum sales goals were
never achieved under this license.  During the term of this license, the Company
did not have the capital  resources  necessary to develop and support the GUESS?
product line at the levels required in the licensing agreement.  Therefore,  the
Company, with the support of the licensor,  GUESS? Inc., initiated a strategy to
discontinue  the  GUESS?   product  line,   which  was  finally  and  completely
discontinued during the first quarter of fiscal year 1999.


                                       4
<PAGE>

Termination of "Arrow" License

      Pursuant to an agreement,  dated October 5, 1992,  with Cluett,  Peabody &
Co.,  Inc.,  the Company held the  exclusive  United  States  rights (the "Arrow
License")  to produce and sell  men's' and boys'  fashion  underwear,  T-shirts,
V-neck shirts,  tank tops, briefs and boxer shorts bearing the "ARROW" trademark
during the period commencing January 1, 1993 and expiring, as extended, December
31, 1999. The terms of the Arrow License required that the Company pay a minimum
royalty of $162,500 for each annual period through December 31, 1996, increasing
to $250,000 for each annual  period from  January 1, 1997  through  December 31,
1999. The Company began shipping  product under this trademark  during the first
quarter of fiscal 1994. Net sales under this license were $4.4 million in fiscal
1999,  $4.8 million in fiscal 1998 and $5.7 million in fiscal 1997.  Because the
Company was unable to meet the minimum  sales  vol8ume  requirements  called for
under the Arrow License,  as of march 12, 1999, the Company reached an agreement
with the licensor to terminate the Arrow License.

Failure to Meet Minimum Sales Requirements Under "Botany 300" License

      On December 21, 1992, the Company  obtained from the McGregor  Corporation
the exclusive  United States rights (the "Botany 500 License))  trademark during
the period commencing on January 1, 1993 and expiring, pursuant to an extension,
December  31,  2001.  Under the terms of the  license  agreement,  the  McGregor
Corporation  had the right to  terminate  the  Botany 500  License  prior to its
expiration  if certain  minimum  sales goals were not met.  Minimum sales levels
required  under the Botany 500 License for  calendar  1996 were  $750,000 and $1
million for each  calendar year  thereafter.  The company was never able to meet
the minimum sales requirements under the Botany 500 License with net sales under
the  license  for fiscal  1997  (which  included  most of  calendar  1996) being
$652,000 and $225,000 for fiscal 1998 (which  included  most of calendar  1997).
After  fiscal  1998,  the  Company  ceased all  operations  under the Botany 500
License.

Termination of Levi Strauss/Brittania Operations

      Commencing in September  1988, the Company held a license (the  "Brittania
License")  from  Brittania  Sportswear  Ltd.  ("Brittania").  Levi Strauss & Co.
("Levi  Strauss")  was the parent  company  of  Brittania.  Under the  Brittania
License, the Company had the right to manufacture and market men's underwear and
other  products  under the trademark  "Brittania  from Levi Strauss & Co". Sales
under the "Brittania  License  aggregated  $14.9 million in fiscal 1997 and $4.5
million in fiscal 1998,  accounting for 49% of the Company's  fiscal 1997 sales,
and 21% of the  Company's  fiscal  1998  sales.  During  the  fiscal  year ended
February 27, 1999, the Company made no sales under the Brittania License.  As of
January 1, 1997,  the Brittania  License had been renewed for a five-year  term,
including  automatic  renewals of two years if certain minimum sales levels were
achieved.  However,  on January 22, 1997, Levi's announced its intention to sell
Brittania. As a result of the action taken by Levi Strauss,  K-mart, the largest
retainer of the Brittania brand, and the Company's largest customer  (accounting
for sales of Brittania product of approximately $11 million in fiscal year 1997,
and $3 million in fiscal year 1998), advised the Company that it would no longer
continue its  commitment  to carry the  Brittania  trademark.  In response,  the
Company  filed a  multi-million  lawsuit  against Levi Strauss and  Brittania in
march 1997,  alleging that Brittania had breached various  obligations under its
license agreement with the Company,  including without  limitation it's covenant
of good faith and fair dealing.  This  litigation was settled in June 1998, with


                                       5
<PAGE>

the Company realizing approximately $725,000 from such settlement.

Loss of Revolving Credit Line

      The Company had a fifteen  million dollar  revolving  credit facility with
Congress  Financial Corp.  ("Congress").  This facility  provided for: (I) loans
based upon eligible accounts receivable and inventory;  (ii) a $3,000,000 letter
of credit  facility;  and (iii)  purchase  money  term loans of up to 75% of the
orderly liquidation value of newly acquired and eligible  equipment.  Borrowings
bore  interest at 2 3/4% above prime.  The  Company's  agreement  with  Congress
required,  among other things, that the Company maintain minimum working capital
and net worth levels.  Borrowings under the agreement were  collateralized  by a
lien on substantially all of the assets of the Company.  As at February 27, 1999
the  Company  was not in  compliance  with the net  worth  and  working  capital
covenants  and the  facility  could no longer be utilized.  It was  subsequently
terminated  on  October  15,  1999.  Because  of its poor  financial  status and
outlook, the Company was not able to replace the Congress credit facility.

Continuing Default on Outstanding Debentures

      On August 15, 1996, the Company completed a $3.5 million private placement
with NAN Investors, L.P., an investment partnership ("NAN Investors").  Terms of
this transaction included the issuance of 250,000 shares of the Company's common
stock and two  convertible  subordinated  debentures in the aggregate  principal
amount of $2,760,000 (the "NAN Debenture").  The NAN Debentures bore interest at
an annual rate of 12.5%,  payable  semi-annually,  with the principal amount due
and payable on August 15, 2001.  Although the NAN  Debentures  were  convertible
into the Company's common stock, NAN Investors  eventually waived all conversion
rights.

      Beginning in August 1997,  the Company was in default on interest  payment
due  under the NAN  Debentures.  The NAN  Debentures  were  secured  by a second
mortgage on the Company's  manufacturing  and  distribution  facility located in
Cartersville,  Georgia.  This  property was sold on October 1, 1997.  To release
NAN's  security  interest  in the  property  and to extend the cure  period with
respect to a  $172,500  interest  payment  default  on the NAN  Debentures,  the
Company prepaid $707,000 of the principal  amount of the NAN Debentures,  plus a
$176,000  prepayment  penalty.1 In connection  herewith,  in September 1997, the
Company entered into an agreement with NAN Investors (the "First NAN Forbearance
Agreement")  providing  for the  extension of the cure period for the default on
the interest payments. The First NAN Forbearance Agreement was extended month by
month  until  May  1998,  at  which  time,  the  Company  entered  into  another
forbearance   agreement  with  NAN  Investors   (the  "Second  NAN   Forbearance
Agreement")  to extend,  until  December  1998,  the cure  period  for  interest
payments then in default (totaling  $322,551) as well as the interest  payments,
which were to fall due in August and December  1998. In  consideration  for such
extension,  the Company  agreed to secure the NAN Debentures by a first priority
lien on all the assets of the  Company,  both  tangible and  intangible,  to the
extent not otherwise prohibited under the Congress revolving credit facility and
to issue to NAN Investors five-year warrants convertible

----------
(1) Total proceeds from the sale of the  Cartersville  facility were $2,850,000.
In  addition  to the  $883,000  paid  to  NAN  Investors  by  way of a  $707,000
prepayment  of principal  and a $176,000  prepayment  penalty,  the Company used
$525,000 to pay other financing secured by this property. The remaining proceeds
were utilized to reduce the Company's revolving credit line with Congress.


                                       6
<PAGE>

to a total of $16,500,000  shares of the Company's stock at an exercise price of
$.10 per share.  Thereafter,  the Company  remained  in default on all  interest
payments  as they fell due.  There was o  forbearance  agreement  in effect  for
interest payments which fell due subsequent to December 1998 and, as at February
1999,  interest payments in default under the NAN Debentures totaled $2,052,986.
As a  consequence  of such default,  in  accordance  with their rights under the
terms of the NAN Security Agreement, NAN Investors took possession of all assets
of the Company,  which  consisted  principally  of  inventory  having a value of
$430,000  and  outstanding  accounts  receivable  in an amount of  approximately
$500,000.  On October 12,  1999,  the  inventory  was sold by NAN  Investors  to
American  Basics  Company  LLC, a third  party which was  unaffiliated  with the
Company or any affiliate of the Company or of NAN Investors. The proceeds of the
inventory  sale and the accounts  receivable  have been applied by NAN Investors
towards the Company's  outstanding debt. As at May 31,  2000emaining debt to NAN
was approximately $820,000.

Termination of All Operations

      In the years  preceding the  termination  of  operations,  the Company had
experienced  difficulty  in filling all of its  orders,  caused in large part by
recurring  cash  shortages,  the expiration of its financing  arrangements  with
Congress  (and before that with  Chemical  Bank),  and the failure to obtain the
investment necessary to support and develop the GUESS? product line. The Company
had previously addressed its liquidity issues by the infusion of debt and equity
financing,  including (I) a refinancing in March 1994; (ii) additional equity of
$3.9 million  raised in fiscal  1995;  (iii) a $3.5  million  private  placement
completed  August 1996; and (iv) by the reduction in costs  associated  with the
consolidation  and  restructuring of the operations in fiscal 1998 and 1999, and
the attempt to more effectively  manage working  capital.  All of these efforts,
however,  failed to keep the Company  solvent and with the loss of the Brittania
License,  continuing losses from operations,  interest payment defaults, and the
lack of any  credit  facilities,  the  Company  was  forced to  discontinue  all
business operations by the end of October 1999. The Company has remained totally
inactive since October 1999 and filed for  protection  under Chapter 11 on March
3, 2000.

Products and Sales

      Since the  termination of all business  operations in October of 1999, the
Company has not produced  any  products or made any sales of any kind.  Prior to
that time,  the company  manufactured  and sold men's fashion  underwear to mass
merchandisers and, in the case of the GUESS? division,  ladies' undergarments to
better  department  and specialty  stores,  primarily  through direct contact by
salaried and commissioned Company sales personnel. For a discussion in detail of
the Company's former products, sales, and operations,  reference is made to item
1 of part I of the  Company's  annual  report on Form 10-K for the  fiscal  year
ended  February 27, 1999.  With respect to results of operations  for the fiscal
year ended February 27, 2000 prior to the cessation of operations,  reference is
made  to  Item 7 of  this  Report,  "Management's  Discussion  and  analysis  of
Financial Condition and Results of Operations.


                                       7
<PAGE>

Customers

      Until the Company ceased operations in October 1999, two of its customers,
Target Stores Inc. and Sears each  accounted  for more than 10% of  consolidated
net sales  during the fiscal years ended  February 27, 2000 and 1999.  These two
customers,  as well as K-Mart, each accounted for more than 10% of the Company's
consolidated net sales during fiscal 1998.

Delivery Requirements

      Until the Company ceased  operations in October 1999, all purchase  orders
were taken for current delivery and the Company had no long-term sales contracts
with any  customer,  or any contract  entitling  the Company to be the exclusive
supplier of merchandise to a retailer or distributor.

Backlog

      After the termination of the GUESS?  license,  the Company did not, in the
normal course of its business,  carry any  significant  backlog.  Orders for the
Company's two major  customers  were received the same week as the expected ship
date.  When the company ceased doing business in October 1999, it had no backlog
of orders and has had no business  activity since,  including  fiscal year ended
February 27,  2001.  At the end of the most recent prior fiscal year (year ended
February  27,  1999),  its backlog was an  immaterial  mount,  as compared to $1
million at the end of February 1998.

Competition

      Until the  Company  ceased  operations,  all of its  markets  were  highly
competitive.  For a more detailed description of the competitive  environment in
which the Company  operated and the bases on which it  endeavored  to compete in
such environment,  reference is made to the subtopic  "Competition" in Item 1 of
Part I of the  company's  annual  report on Form 10-K for the fiscal  year ended
February 27, 1999.

Patents

      The Company has developed and patented  packaging  suitable for its former
products.  With the termination of the Company's operations in October 1999, the
Company was no longer in a position  to use its  patented  packaging  in its own
business.  Present  management  has  explored  the  possibility  of  selling  or
licensing the right to exploit the Company's packaging patents,  but to date has
met with only negative  responses  because of the wide  availability  of similar
types of packaging products.

Environmental Matters

      Until it ceased  operations in October 1999,  the company's  packaging and
distribution facility was located in Cartersville, GA. The Company believes that
such facility materially conformed to all governmental regulations pertaining to
environmental quality as then promulgated.


                                       8
<PAGE>

Employees

      Since the  termination  of its  operations in October of 1999, the company
has had no employees other than its president, John H. Treglia and Marsha Ellis,
its Treasurer and Chief Associate  Officer.  Both such officers devote such time
to the  affairs  of the  Company as is  required  for the  performance  of their
duties.  None of the  Company's  former  employees  were  covered by  collective
bargaining  agreements.  The Company  never  experienced  a work stoppage due to
labor  difficulties and its former management  believed that the relationship of
the Company with its  employees was  satisfactory.  (See Item 13 of this Report,
Certain Relationships and Related Transactions.)

ITEM 2. PROPERTIES

      From the time of the termination of business operations until December 31,
2000,  the  Company's  principal  headquarters  were located at the office of an
unaffiliated company,  located at 73 Fifth Avenue, Suite 6A, New York, NY 10003.
The Company utilized desk space and certain office  personnel  services on these
premises,  in a month to month basis at a cost of $250 per month.  These  rental
costs were waived at the end of calendar year 2000.  Since January 1, 2001,  the
Company has been utilizing desk,  certain office personnel,  and filing space at
the offices of Accutone, Inc. at 45 Ludlow Street, Yonkers, New York 10705.

      Until  October 1999 the  Company's  executive  offices were located at 510
Broadhollow  Road,  Melville,  New York. The Company  occupied 2,000 square feet
under a lease which was scheduled to expire July 31, 2002.  This lease  provided
for aggregate  rentals which  increased 4% annually from $46,000 to $52,000 plus
increases for certain taxes and energy costs. The Company  terminated this lease
agreement  effective  September  30, 1999 without  incurring any  penalties.  No
monies are owed in respect of this lease.

      Until  October  31,  1999,  the  Company  occupied  a 71,000  square  foot
manufacturing  and distribution  facility in Cartersville,  Georgia under a five
year lease. This facility was located at 435 Industrial Park Road, Cartersville,
Georgia. The initial annual rental was $188,148 subject to increases based on an
established  formula over the five year lease term which was scheduled to expire
on December  31,  2002.  The Company was  notified on December 17, 1999 that the
premises was considered abandoned and that in accordance with sections 20 and 21
of the lease,  the lease was terminated  effective that date. To date, no claims
have been filed  against  the  Company in respect of this  property.  The leased
Cartersville  facility  was  used  for the  packaging  and  distribution  of the
Company's products.

ITEM 3. LEGAL PROCEEDINGS

      Management is unaware of any pending or threatened  legal  proceedings  to
which the  Company is a party or of which any of its assets is the  subject.  No
director,  officer,  or affiliate of the company,  or any  associated  of any of
them, is a party to or has a material interest in any proceeding  adverse to the
Company,  except that George  Gold,  a director  of the  company,  is a creditor
included in the Chapter 11 proceedings initiated by the Company.


                                       9
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

During the year ended  February  28, 2001 the Company did not submit any matters
to a vote of its shareholders.


                                       10
<PAGE>

                                     PART II

ITEM 5. MARKET FOR THE  REGISTRANT'S  COMMON STOCK AND RELATED  SECURITY  HOLDER
        MATTERS

      The Company's  Common Stock,  $. 10 par value,  was traded on the American
Stock Exchange under the symbol "NAN" until April 17, 1998.  Because the Company
had fallen below  American  Stock  Exchange  guidelines  for continued  listing,
effective  April 17, 1998 the  Company's  Stock was  delisted.  It is  currently
traded in the over-the-counter  market and quoted on the OTC Electronic Bulletin
Board maintained by the National  Association of Securities  Dealers,  Inc. (the
"OTC Bulletin Board").  The stock was quoted on the OTC Bulletin Board under the
symbol NANK until march 3, 2000,  when the  Company  filed a Voluntary  Petition
under Chapter 11 of the  Bankruptcy  Code in the U.S.  Bankruptcy  Court for the
Southern District of New York. After that date, the Company's OTC bulletin Board
Symbol was changed to, NANKQ,  which is its current symbol.  The following table
sets forth  representative  high and low bid prices by calendar  quarters during
the last two fiscal years and the  subsequent  interim  period through March 31,
2000,  as traded on the  American  Stock  Exchange  until  April 17, 1998 and as
reported in the OTC Bulletin  Board since May 21, 1998.  The level of trading in
the  Company's  common  stock has been  sporadic  and limited and the bid prices
reported may not be indicative of the value of the common stock or the existence
of an active  market.  The OTC market  quotations  reflect  inter-dealer  prices
without  retail  markup,  markdown,  or other fees or  commissions,  and may not
necessarily represent actual transactions.

                                                               Bid Prices
     Period                                                   Common Stock
     ------                                                   ------------
                                                            Low          High

   Fiscal Year Ended February 27, 2000

      May 31, 1999                                         $0.03         $0.08
      August 31, 1999                                       0.02           .625
      November 30, 1999                                     0.02           .625
      February 27, 2000                                     0.01           .11

   Fiscal Year Ended February 28, 2001

      May 31, 2000                                         $0.0625       $0.10
      August 31, 2000                                       0.02          0.02
      November 30, 2000                                     0.01          0.02
      February 27, 2001                                     0.001         0.006

As of June  2001,  the  Company's  Common  Stock was held by  approximately  262
holders of record and approximately 1,100 beneficial owners.

The Company has never paid any cash  dividends on its Common  Stock,  and has no
present intention of so doing in the foreseeable future.


                                       11
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

      The following table sets forth selected consolidated financial information
with respect to the Company and its subsidiaries for the five fiscal years ended
February 27, 2001.

      The  information  set  forth  below  should  be read in  conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operation"  and  in  conjunction  with  the  Company's   Consolidated  Financial
Statements and notes thereto appearing elsewhere in this Report.

                              For Fiscal Year Ended
                              ---------------------
                    (In thousands, except per share amounts)

                                   Feb. 27      Feb. 27     Feb. 27     Feb. 28
                                     2001        2000        1999        1998
Summary Statements of Operations
--------------------------------

Net sales                          $   --      $  5,344    $ 11,518    $ 21,683

Gross profit                           --         1,625       2,410       3,102

Net (loss) gain sale of asset          --          (539)        (15)        712

Net gain sale of asset                 --            --         712          --

Unusual credit (charge)                --            --          --          --

Net income (loss)                      --         1,409         937      (4,665)

Net earnings (loss)
per share-basic
and diluted                            --          (.40)        .26    $  (1.47)

Average shares
outstanding                            --         3,239       3,239       3,249


                                       12
<PAGE>

Summary Balance Sheet Data
--------------------------

Total assets                             22          22       3,476       7,208

Working capital                      (1,680)     (1,680)       (956)     (2,120)

Long-term debt (exclusive
of current maturities)                   --          --          64         299

Convertible subordinated
debt                                    827         827       2,053       2,053

Stockholders' equity                 (1,680)     (1,680)       (306)     (1,262)


                                       13
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS

Termination of Operations

      The  Company  experienced  significant  losses in recent  years which have
generally resulted in severe cash flow issues that have negatively  impacted the
ability of the  Company to  continue  its  business.  During  fiscal  2000,  the
combined effects of various negative developments, including but not limited to:
(I) sharply  decreasing  revenues over the previous four years;  (ii) continuing
losses from operations;  (iii) interest  payment  defaults on outstanding  debt,
(iv) the lack of a long-term credit facility;  and (v) the  concentration of all
sales among only three  customers  forced the company to discontinue  all of its
business and operations. During the year ended 2001 the Company remained totally
inactive.

      Prior to the periods covered by the financial  statements included in this
report,  in fiscal 1995 and 1996, the Company had funded its operating losses by
refinancing  its debt and  increasing  its capital  through:  (I) the sale of $1
million of non-voting  convertible preferred stock to management;  (ii) the sale
of treasury stock which increased  equity by $2.9 million;  (iii) the completion
of a $3.5  million  private  placement.  During the  several  years prior to the
termination  of its  operations,  the Company had  implemented  a  restructuring
strategy aimed at improving  operating results,  through the reduction of costs,
the  streamlining  of operations,  and the closing of the company's  Puerto Rico
plant.  These efforts  failed to bring the Company's  operations to a profitable
level.  Some of the major  factors and  occurrences  which led to the  company's
insolvency and the  termination of its  operations;  are descried  below.  For a
discussion in more detail of each of the matters  discussed below,  reference is
made to the  company's  annual  report on Form 10-K for the  fiscal  year  ended
February 27, 1999.

      The  factors  noted  about  resulted  in  the  termination  of  all of the
company's business  activities in October 1999 and the filing, on March 3, 2000,
of 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 company
remained  inactive  during fiscal year ended February 27, 2001.  Chief among the
factors  leading to the present  insolvency of the company were: (I) the loss of
the company's  largest  customer  because of  Levi-Strauss's  decision,  late in
fiscal 1997, to sell its "Brittania"  line of men's underwear and other products
which the company was licensed to manufacture and sell; (ii) the failure to meet
sales goals  required  under various other  licenses h3ld by the company and the
resultant  loss  of  such  licenses;  and  (iii)  the  company's  incurrence  of
substantial  amounts of debt in order to fund  losses  from  operations  and the
inability of the company to repay such debt, including the following:

1.  Termination of Levi  Strauss/Brittania  Operations.  Commencing in September
1988,  the Company  held a license  (the  "Brittania  License")  from  Brittania
Sportswear  Ltd.  ("Brittania").  Levi Strauss 7 Co.  )"Levi  Strauss")  was the
parent company of Brittania.  Under the Brittania  License,  the Company had the
right to  manufacture  and market men's  underwear and other  products under the
trademark "Brittania from Levi Strauss 7 Co.". Sales under the Brittania License
aggregated  $14.9  million  in fiscal  1997 and $4.5  million  in  fiscal  1998,
accounting for 49% of the company's  fiscal 1997 sales, and 21% of the company's
fiscal 1998 sales.  During the fiscal year ended  February 27, 1999, the Company
made no sales under the Brittania License.  As of January 1, 1997,


                                       14
<PAGE>

the Brittania License had been renewed for a five-year term, including automatic
renewals of two years if certain minimum sales levels were achieved. However, on
January 22, 197, Levi's  announced its intention to sell Brittania.  As a result
of the  action  taken by Levi  Strauss,  K-Mart,  the  largest  retailer  of the
Brittania  brand, and the Company's  largest  customer  (accounting for sales of
Brittania  product of  approximately  $11  million in fiscal  year 1997,  and $3
million  in fiscal  year  1998),  advised  the  Company  that it would no longer
continue its  commitment  to carry the  Brittania  trademark.  In response,  the
Company filed a multi-million  dollar lawsuit against Levi Strauss and Brittania
in march 1997,  alleging that Brittania had breached various  obligations  under
its license  agreement  with the  Company,  including  without  limitation  it's
covenant of good faith and fair  dealing.  This  litigation  was settled in June
1998, with the Company  realizing  approximately  $725,000 in gross value out of
such settlement.

2.  Discontinuance of GUESS" Product Line. From December 7, 1992 until the first
quarter of the  fiscal  year ended  February  27,  1999,  the  Company  held the
exclusive  United  States rights to produce and sell  undergarments  bearing the
"GUESS?"  trademark  and  variations   thereof.   The  license  was  subject  to
termination prior to its expiration if certain minimum sales goals were not met,
with the  payment of minimum  royalties  required  in the  amounts of  $560,000,
$700,000 and $840,000 for the contract  years ended May 31, 1997,  1998 and 1999
respectively. Minimum sales goals were never achieved under this license. Due to
the lack of capital  resources  necessary  to  develop  and  support  the GUESS?
product line at the levels  required in the  licensing  agreement.  The Company,
with the support of the  licensor,  initiated a strategy to terminate the GUESS?
license,  and the  Company  discontinued  its GUESS?  division  during the first
quarter of fiscal year 1999.

3.  Termination of "Arrow" License.  Pursuant to an agreement,  dated October 5,
1992,  with Cluett,  Peabody & Co., Inc., the Company held the exclusive  United
States rights (the "Arrow  License") to produce and sell men's and boys' fashion
underwear,  T-shirts,  V-neck shirts, tank tops, briefs and boxer shorts bearing
the "ARROW" trademark during the period commencing January 1, 1993 and expiring,
pursuant to an  extension,  December  31, 1999.  The terms of the Arrow  License
required  that the  Company pay a minimum  royalty of  $162,500  for each annual
period through December 31, 1996,  increasing to $250,000 for each annual period
from January 1, 1997 through  December 31, 1999.  Because the Company was unable
to meet the minimum sales requirements under the Arrow License,  as of March 12,
1999, the company  reached an agreement with the licensor to terminate the Arrow
License.

4. Failure to meet Minimum Sales  Requirements  Under  "Botany 500" License.  On
December 21, 1992,  the Company  obtained  from the  McGregor  corporation,  the
exclusive  United  States  rights (the "Botany 500 License") to produce and sell
men's and boys' fashion knit underwear briefs bearing the "BOTANY 500" trademark
during the period  commencing  on January 1, 1993 and  expiring,  pursuant to an
extension,  December 31,  2001.  Under the terms of the license  agreement,  the
McGregor  Corporation had the right to terminate the Botany 500 License prior to
its expiration if certain minimum sales goals were not met. Minimum sales levels
required  under the Botany 500 License for  calendar  1996 were  4750,000 and $1
million of each calendar year thereafter. The Company was never able to meet the
minimum sales requirements under the Botany 500 License with net sales under the
license for fiscal 1997 (which  included most of calendar  1996) being  $652,000
and  $225,000  for fiscal 1998 (which  included  most of calendar  1997).  After
fiscal 1998, the Company ceased all operations under the Botany 500 License.


                                       15
<PAGE>

5. Loss of Revolving  Credit  Line.  Until  October 15, 1999,  the Company had a
fifteen million dollar revolving  credit facility with Congress  Financial Corp.
("Congress"). This facility provided for: (I) loans based upon eligible accounts
receivable and inventory; (ii) a $3,000,000 letter of credit facility; and (iii)
purchase money term loans of up to 75% of the orderly liquidation value of newly
acquired and eligible equipment. Borrowings bore interest at 2 3/4% above prime.
The Company's  agreement with Congress  required,  among other things,  that the
Company  maintain of minimum  working  capital and net worth levels.  Borrowings
under the agreement were  collateralized  by a lien on substantially  all of the
assets of the company. As at February 27, 1999 the Company was not in compliance
with the net worth and working capital covenants.  This credit facility utilized
was  terminated  by  Congress  on  October  15,  1999 and,  because  of its poor
financial status and outlook, the Company was not able to replace it.

6. Continuing Default on Outstanding Debentures. On August 15, 1996, the Company
completed  a $3.5  million  private  placement  with  NAN  Investors,  L.P.,  an
investment partnership ("NAN Investors"). Terms of this transaction included the
issuance of 250,000  shares of the  Company's  common stock and two  convertible
subordinated  debentures in the aggregate  principal  amount of $2,760,000  (the
"NAN  Debenture").  The NAN Debentures bore interest at an annual rate of 12.5%,
payable  semi-annually,  with the principal amount due and payable on August 15,
2001.  Although the NAN Debentures were  convertible  into the Company's  common
stock, NAN Investors eventually waived all conversion rights.

Beginning  in August 1997,  the Company was in default on interest  payments due
under the NAN  Debentures.  The NAN Debentures were secured by a second mortgage
on  the  company's   manufacturing   and   distribution   facility   located  in
Cartersville,  Georgia.  This  property was sold on October 1, 1997.  To release
NAN's  security  interest  in the  property  and to extend the cure  period with
respect to a $172,500  interest  payment default on the Debentures,  the Company
prepaid  $707,000 of the principal  amount of the NAN Debentures plus a $176,000
prepayment  penalty.(2) In connection therewith,  in September 1997, the Company
entered  into an  agreement  with NAN  Investors  (the  "First  NAN  Forbearance
Agreement")  providing  for the  extension of cure period for the default on the
interest  payments.  The First NAN  Forbearance  Agreement was extended month by
month  until  May  1998,  at  which  time,  the  company  entered  into  another
forbearance   agreement  with  NAN  Investors   (the  "Second  NAN   Forbearance
Agreement")  to extend,  until  December  1998,  the cure  period  for  interest
payments then in default  (totaling  $322,551) as well as the interest  payment,
which was to fall due in August 1998. In consideration  for such extension,  the
company and NAN Investors  entered into a security  agreement (The "NAN Security
Agreement), pursuant to which the Company agreed to secure the NAN Debentures by
a first  priority  lien on all the  assets of the  Company,  both  tangible  and
intangible,  to the extent not otherwise prohibited under the Congress revolving
credit facility and to issue to NAN Investors five-year warrants  convertible to
a total of 16,500,000  shares of the Company's tock at an exercise price of $.10
per share. Thereafter,  the company remained in default on all interest payments
due after august 1997. There was no forbearance agreement in effect with respect
to interest  payments  which fell due subsequent to December 1998 and therefore,
at that point,  the Company was in default  with  respect to the full  principal
amount of the NAN Debentures and all unpaid interest accrued  thereon,  which at
that time

-----------
(2) Total proceeds from the sale of the  Cartersville  facility were $2,850,000.
In  addition  to the  $883,000  paid  to  NAN  Investors  by  way of a  $707,000
prepayment  of principal  and a $176,000  prepayment  penalty,  the Company used
$525,000 to pay other financing secured by this property. The remaining proceeds
were utilized to reduce the Company's revolving credit financing with Congress.


                                       16
<PAGE>

totaled  $2,052,986.  Pursuant to their rights under the NAN Security Agreement,
NAN Investors  took  possession of all of the Company's  assets,  subject to the
release of the senior creditor  (Congress).  These assets consisted  entirely of
inventory  and  receivable.   NAN  Investors  ultimately  realized  a  total  of
$1,222,654  from the sale or collection  of such assets,  reducing the Company's
indebtedness to approximately $826,845 as at the end of fiscal 2000. Further, in
recognition of NAN Investors rights,  under the NAN Security  Agreement,  to any
and all  remaining  assets of the Company,  on February  17,  2000,  the Company
surrendered to NAN Investors,  all of its right,  title, and interest in certain
unasserted  claims it believes it had against Target  Stores,  Inc. and SGS U.S.
Testing Co., Inc. (the "Claims") on the condition that the net amount  collected
in  respect  of the  Claims  be set off  against  the  amount  of the  Company's
indebtedness to NAN Investors.  Management believed that the value of the Claims
would thus be maximized  because the Company  lacked the financial  resources to
assert the Claims and NAN Investors already had an existing right to any amounts
that the company  might  collect in respect of the Claims.  Management  believed
that the Claims  consisted  of: (I) a claim  against  Target  Stores,  Inc.  for
unauthorized  off-sets and credits taken in a presently  undetermined  amount to
the best of present management's knowledge,  NAN Investors is currently pursuing
all legal  remedies  available  with  respect to (ii) a claim  against  SGS U.S.
Testing Co., Inc. in the approximate  amount of $35,000.  A claim filed into the
Federal  Bankruptcy  Court by SGS U.S.  attorneys  for the Company have filed an
objection  and are  seeking a set-off  of  claims.  In the years  preceding  the
termination of operations, the company had experienced difficulty in filling all
of its orders, caused in large part by recurring cash shortages,  the expiration
of its working  capital  financing  arrangements,  and the failure to obtain the
investment  necessary to support and develop the GUESS?  product  line.  From at
least fiscal 1996  onwards,  the company had  attempted to address its liquidity
issues by the infusion of debt and equity financing, including (I) a refinancing
in March 1994;  (ii)  additional  equity of $3.9 million  raised in fiscal 1995;
(iii) an August 1996 $3.5 million private placement, which left the Company with
$2,760,000 in debt under the NAN Debentures,  bearing interest an annual rate of
12.5%; and (iv) by the reduction in costs associated with the  consolidation and
restructuring of the operations in fiscal 1998 and 1999, and the attempt to more
effective management of working capital. All of these efforts,  however,  failed
to keep  the  Company  solvent  and  with  the  loss of the  Brittania  License,
continuing losses from operations,  interest payment  defaults,  and the lack of
any credit  facilities,  the  Company  was forced to  discontinue  all  business
operations  by the end of October  1999.  For a discussion in more detail of the
restructuring  strategy  which the  Company  implemented  in attempts to improve
operating results and enhance its financial resources, reference is made to Item
7 of part II of the  Company's  annual  report on Form 10-K for the fiscal  year
ended February 27, 1999.

Operating  results  for fiscal  1998  reflected  $1.8  million in  restructuring
charges  including  $1.2  million  associated  with the phase out of the  GUESS?
division ($660,000  inventory  write-offs,  $540,000 in deferred costs and other
charges),  with the balance  associated with write-downs,  and reserves of asset
values, and other non-cash items. The operating results for fiscal 1999 included
$1,930,000 in other income all of which was the result of litigation settlements
as discussed  earlier.  The operating results for fiscal 2000 do not include any
unusual credits or charges. Since the Company has remained inactive there are no
operating results for the fiscal year ended February 27, 2001.


                                       17
<PAGE>

Results of Operations

Sales

      There were no sales for the year ended  February  27,  2001.  The  Company
remained  inactive since it ceased doing business in October of 1999.  Total net
sales for the  fiscal  year  ended  February  27,  2000 were  $5,344,223,  which
represented  a decrease of  approximately  53.6% from fiscal 1999 when total net
sales were  approximately  $11.5  million.  In turn,  fiscal  1999 net sales had
represented  a decrease of 47% from fiscal 1998,  when net sales  totaled  $21.7
million.  Net sales for 1998 also represented a decrease from net sales for 1997
which had totaled $30.4 million.

      No sales were generated under the discontinued Brittania license in fiscal
2000 or fiscal 1999 as compared to $4.5 million in fiscal 1998.  Sales under the
Brittania  license in fiscal 1998, in turn, had  represented a decrease of $10.4
million from Brittania sales in fiscal 1997.

      Operations  under the GUESS?  License  were  completely  phased out by the
first quarter of fiscal 1999. There were,  therefore,  no sales  attributable to
this line in fiscal  2000,  as  compared  to $2.4  million in fiscal 1999 and $7
million in fiscal 1998.

      Former  management  of the company has  attributed  the steady  decline in
total net sales, since fiscal 1998,  primarily to the phase out of the Brittania
product  associated  with  the  actions  announced  by  Levi to  dispose  of the
Brittania  brand,  and the loss of  certain  styles to  competitors  within  the
company's business environment as well as a lack of sufficient working capital.

Selling, General and Administrative Expenses

      There  were no selling or  general  and  administrative  expense in fiscal
2001.  The Company  remained  inactive since it ceased doing business in October
1999. Selling,  general and administrative expenses in fiscal 2000 of $2,161,376
were  approximately  41% of sales. For fiscal 1999 and 1998, these expenses were
$2.9 million and $2 million respectively,  and as a percentage of sales, 25% for
fiscal  year 1999,  and 33% for fiscal  year 1998.  General  and  administrative
expenses  for  fiscal  year 1998  included  $691,000  in  non-recurring  charges
incurred as part of the company's restructuring efforts. While thee efforts were
somewhat  successful in reducing  expenses as a percentage of sales, the loss of
the  Brittania  product  line  ultimately  resulted  in the  Company's  becoming
insolvent.

Interest Expense

      There  was no  interest  expense  in fiscal  2001.  The  company  remained
inactive  since it ceased  doing  business  in October  1999.  Interest  expense
decrease by $172,715 in fiscal 2000, reflecting the payment of interest for only
eight  months of the fiscal year as well as the  reduction  of debt caued by the
application to the outstanding  debt of proceeds from the ale and liquidation by
the creditor, NAN Investors, of certain of the company's assets. In fiscal 1999,
interest expense decreased by approximately  $805,000,  reflecting reductions in
the outstanding  revolving credit facility and the  subordinated  debt. Prior to
that, in fiscal 1998, interest expenses had increased by


                                       18
<PAGE>

approximately $112,000, reflecting $175,000 booked as the expense resulting from
the issuance of 16,500,000 warrants.

Liquidity and Capital Resources

      The Company  incurred  significant  operating losses in recent years which
resulted in sever cash flow problems  which  negatively  impacted the ability of
the company to conduct its business as structured  and  ultimately  caused it to
become and  remain  insolvent.  The  pertinent  history  in recent  years of the
company's liquidity and capital resources is as follows:

      Prior to the periods covered by the financial  statements included in this
Report, in march, 1994, the company's principal  arrangements consisted of (I) a
three year $15,000,000 revolving credit facility with Congress financial; (ii) a
$2,000,000  "Term Loan  Agreement  with Chemical  Bank;  and (iii) an additional
$1,500,000  Term Loan with Congress.  The financing  arrangements  with congress
were  covered  by a loan and  security  agreement,  dated  march  24,  1994 (the
"Congress Loan and Security  Agreement").  On May 31, 1996k, the company amended
the  Congress  Loan and  Security  Agreement  to provide  for;  (I)  $251,000 in
additional equipment term loan financing, (ii) extension of the repayment period
for all outstanding term loans, (iii)  supplemental  revolving loan availability
from march 1st through June 30th of each year and (iv)  extension of the renewal
date to march 20, 1998.  In March,  May,  August and December of 1998,  Congress
extended its Loan and Security Agreement with the Company.  The agreement was to
expire on December 31,  1998,  but was extended to August 31, 1999 and from each
month  thereon,  on a month to month basis,  until  October 15, 1999 when it was
mutually  terminated by Congress and the company.  With the loss of the congress
financing, the Company was left with no credit facility, and became insolvent.

      During the several years  preceding its ultimate  insolvency,  the Company
had raised money through the sale of equity  securities  with:  (I) a $1,000,000
investment  by a group of  investors  headed by George  Samberg,  who was a that
time, the president and CEO of the company;  (ii) a $2.9 million sale of 490,000
shares of common treasury stock to GUESS?  and certain  of its  affiliates;  and
(iii) a sale of 250,000 shares of the Company's common stock to NAN Investors in
fiscal 1997.  The sale of common stock to NAN  Investors was tied to the sale of
debt  securities  consisting of two convertible  subordinated  debentures in the
aggregate face amount of $2,760,000 bearing interest at an annual rate of 12.5%.
Therefore,  while the company  realized  gross proceeds of $3.5 million from its
sales to NAN Investors,  $2,760,000 of this amount actually represented new debt
because it constituted the aggregate principal amount of two NAN Debentures. The
NAN Debentures were secured by a second mortgage on the Company's  manufacturing
and   distribution   facility  in  Cartersville,   Georgia  (the   "Cartersville
Facility").  The Company  utilized  the $3.5 in  proceeds  from its sales to NAN
Investors to prepay existing debt.  Therefore,  while these  transactions  had a
positive effect on the company's  liquidity and capital  resources,  the Company
was ultimately left with substantial debt which, after the loss of the Brittania
line, the company was unable to repay or even to service.

      During  fiscal  1998,  on October  1,  1997,  the  company  completed  the
consolidation  of its  facilities  and sold the  Cartersville  facility for cash
aggregating to $2,850,000. The company reflected a gain on the sale of $793,000.
The proceeds were used to (I) repay $525,000 financing secured by this property;
(ii) to prepay  4707,000  of the NAN  Debentures;  and  (iii) to pay a  $176,000
prepayment penalty incurred from the prepayment of NAN Debentures. The remaining
net proceeds were utilized to reduce the congress revolving credit financing.


                                       19
<PAGE>

      During fiscal 2000,  working capital levels decreased to $(1,685,573) from
$(956,404) at February 27, 1999 levels reflecting the surrender of the company's
assets NAN  Investors  pursuant to its rights under the NAN Security  Agreement.
Working  capital at February 27, 1999,  reflected  reductions in receivable  and
inventories  utilized to reduce  debt  levels.  The  respective  $1,108,860  and
$1,981,523 million reductions in inventory levels, as at the ends of fiscal 2000
and fiscal 1999,  reflected  the Company's  reduction in sales  volume,  and its
continuing  efforts to manage  its supply  chain  towards  delivering  inventory
closer to forecasted  demand.  During  fiscal 1999,  the  subordinated  debt was
reclassified  as short  term due to the  Company's  inability  to make  interest
payments on the NAN  Debentures.  During fiscal 2000,  on October 11, 1999,  the
Board of Directors  voted to allow NAN Investors to liquidate the assets covered
by its security agreement.

Outlook

      Nantucket Industries,  Inc. (the "Company") is currently insolvent. It has
had no business and carried on no business  activities  since  October  1999. On
March 3, 2000,  the company filed a Voluntary  Petition  under Chapter 11 of the
Unites  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 company intends to file a Chapter 11 Plan and a Disclosure Statement
in June 2001.

      The  goal  of the  projected  Chapter  11  reorganization  will be for the
Company to effect a merger,  acquire the assets or the capital stock of existing
businesses, or to effect another similar business combination. No assurances can
be given that the Company will be successful in doing so.  Management  will have
sole  discretion  to  determine  which  businesses,  if any,  may be  formed  or
acquired,  as well as the terms of any  acquisition.  Accutone  Inc.,  a company
controlled  by John H.  Treglia,  the  Company's  current  president,  has  been
identified as a potential  company and business which  management has considered
with regard to the possibility of an acquisition or merger  transaction with the
Company.  If the Company should  ultimately  acquire a business or property from
any member of management,  the terms of such acquisition might not be the result
of arm's length negotiations. Any transaction between the Company and any of its
affiliates could present management with a conflict of interest.  Therefore,  it
is the intention of management that, if such transaction should occur, the terms
thereof  will be no less  beneficial  to the Company  than they would be if such
transactions had been effected on an arms length basis.

      The  proposed  reorganization  of the  Company and the  acquisition  of or
merger  with  new  businesses  can  be  expected  to  require  the  issuance  of
substantial  amounts  of new  shares  of the  Company's  common  stock  or other
securities. Any such stock issuances will significantly reduce the proportionate
ownership and voting power of each other shareholder.


                                       20
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The financial  statements of the Company,  required to be included in this
Report are set forth below.


                                       21
<PAGE>

                           NANTUCKET INDUSTRIES, INC.

                                     INDEX

                                                                            PAGE
                                                                            ----

Report of Independent Certified Public Accountants -
Pilotti, Cunzio & Associates LLP                                             23

Consolidated balance Sheets -
February 28, 2001, February 27, 2000 and February 27, 1999                   24

Consolidated Statements of Operations - Years Ended
February 28, 2001, February 27, 2000 and February 27, 1999                   25

Consolidated Statements of Stockholders' Equity - Years Ended
February 28, 2001, February 27, 2000 and February 27, 1999                   26

Consolidated Statements of Cash Flows - Years Ended
February 28, 2001, February 27, 2000 and February 27, 1999                   27

Notes to Consolidated Financial Statements                                   28

Report of Independent Certified Public Accounts -
Grant Thornton LLP                                                           41

Consolidated Balance Sheets -
February 27, 1999 and February 28, 1998                                      42

Consolidated Statements of Operations -
Year Ended February 27, 1999, February 28, 1998, and March 1, 1997           44

Consolidated Statements of Stockholders' Equity -
Years Ended February 27, 1999, February 28, 1998 and March 1, 1997           45

Consolidated Statements of Cash Flows - Years Ended
February 27, 1999, February 28, 1998 and March 1, 1997                       47

Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedule                                          49


                                       22
<PAGE>

                [Letterhead of Pilotti, Cunzio & Associates LLP]

                                                                     [LOGO] PC&A

Independent Auditors' Report

To the Board of Directors
Nantucket Industries, Inc. and Subsidiaries
(Debtor-In-Possession)
New York, New York

We have  audited  the  accompanying  consolidated  balance  sheet  of  Nantucket
Industries, Inc. and Subsidiaries (Debtor-In-Possession) for the two years ended
February  28,  2001  and the  related  consolidated  statements  of  operations,
stockholders'  deficit and cash flows for the year then ended.  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 audit. The financial  statements for February 27, 1999 were audited by other
auditors, therefore we do not render an opinion on these financial statements.

We conducted our audit in accordance with 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 audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  consolidated  financial  position  of  Nantucket
Industries,  Inc.  and  Subsidiaries  (Debtor-In-Possession)  as of February 28,
2001, and the consolidated  results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  As  represented  in the  accompanying
financial  statements,  the  Company  has a net  capital  deficiency,  operating
losses,  and  defaulted  on  interest  payments.  These  factors,  among  others
discussed in Note 1 to the accompanying financial statements,  raise substantial
doubt about the company's  ability to continue as a going concern.  Management's
plans in regard to these matters are also  described in Note 1. These  financial
statements do not include any adjustments  that might result from the outcome of
these uncertainties.

/s/ Pilotti, Cunzio & Associates LLP
June 6, 2001


                                       23
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                                     Consolidated Balance Sheets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                              February 27,    February 27,
February 28,                                                                          2001            2000            1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>        <C>            <C>
Assets
   Cash and cash equivalents                                                 $       1,452    $      1,452    $    622,268
   Accounts receivable (Notes 2 and 8)                                                  --              --         961,989
   Inventories (Notes 6 and 8)                                                          --              --       1,108,860
   Other current assets                                                             20,331          20,331          67,347
--------------------------------------------------------------------------------------------------------------------------
              Total current assets                                                  21,783          21,783       2,760,464
--------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net (Notes 7 and 8)                                      --              --         538,522
Other assets, net                                                                       --              --         176,601
--------------------------------------------------------------------------------------------------------------------------
                                                                             $      21,783    $     21,783    $  3,475,587
==========================================================================================================================
Liabilities and Stockholders' Deficit
   Current portion of capital lease obligations (Note 8)                     $      93,070    $     93,070    $     56,452
   Convertible subordinated debt (Note 4)                                          826,845         826,845       2,052,986
   Accounts payable                                                                244,764         244,764         248,538
   Accrued salaries and employee benefits                                           11,031          11,031          80,740
   Accrued unusual charge (Note 5)                                                  77,083          77,083          95,833
   Accrued expenses and other liabilities                                          129,515         129,515         863,271
   Accrued royalties                                                               319,048         319,048         319,048
--------------------------------------------------------------------------------------------------------------------------
              Total current liabilities                                          1,701,356       1,701,356       3,716,868
Capital lease obligations, net of current portion (Note 8)                              --              --          64,250
--------------------------------------------------------------------------------------------------------------------------
              Total liabilities                                                  1,701,356       1,701,356       3,781,118
--------------------------------------------------------------------------------------------------------------------------
Stockholders' deficit (Notes 4 and 11)
   Preferred stock, $.10 par value; 500,000 shares authorized, of which
      5,000 shares have been designated as non-voting convertible with
      liquidating preference of $200 per share and are issued and
      outstanding                                                                      500             500             500
   Common stock, $.10 par value; authorized 20,000,000
      shares; issued 3,241,848                                                     324,185         324,185         324,185
   Additional paid-in capital                                                   12,539,503      12,539,503      12,539,503
   Deferred issuance cost                                                               --         (61,069)        (96,425)
   Accumulated deficit                                                         (14,523,824)    (14,462,755)    (13,053,357)
--------------------------------------------------------------------------------------------------------------------------
                                                                                (1,659,636)     (1,659,636)       (285,594)
   Less 3,052 shares of common stock held in treasury, at cost                      19,937          19,937          19,937
--------------------------------------------------------------------------------------------------------------------------
              Total stockholders' deficit                                       (1,679,573)     (1,679,573)       (305,531)
--------------------------------------------------------------------------------------------------------------------------
                                                                             $      21,783    $     21,783    $ 3,475,587
==========================================================================================================================
</TABLE>

                                 See accompanying notes to financial statements.


                                       24
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                           Consolidated Statements of Operations
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                              February 27,    February 27,
  Years ended February 28,                                                            2001            2000            1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>             <C>
  Net sales                                                                   $         --    $  5,344,223    $ 11,517,842
  Cost of sales                                                                         --       3,719,692       9,107,947
--------------------------------------------------------------------------------------------------------------------------
              Gross profit                                                              --       1,624,531       2,409,895
  Selling, general and administrative expenses                                          --       2,161,376       2,879,200
--------------------------------------------------------------------------------------------------------------------------
              (Loss) from operations                                                    --        (536,845)       (469,305)
  Other income (expense):
     Net loss (gain) on sale of assets (Note 7)                                         --         538,522          15,093
     Interest expense                                                                   --         334,031         506,746
     Other income (Note 12)                                                             --              --      (1,928,624)
--------------------------------------------------------------------------------------------------------------------------
              Total other (income) expense                                              --         872,553      (1,406,785)
--------------------------------------------------------------------------------------------------------------------------
              Earnings (loss) before income taxes                                       --      (1,409,398)        937,480
  Income taxes (Note 10)                                                                --              --              --
--------------------------------------------------------------------------------------------------------------------------
  Net income (loss)                                                                     --    $ (1,409,398)   $    937,480
  Net earnings (loss) per share - basic and diluted                                     --    $       (.40)   $       0.26
--------------------------------------------------------------------------------------------------------------------------
  Weighted average common shares outstanding                                     3,238,796       3,238,796       3,238,796
==========================================================================================================================
</TABLE>

                                 See accompanying notes to financial statements.


                                       25
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

<TABLE>
<CAPTION>
                                 Consolidated Statement of Stockholders' Deficit
--------------------------------------------------------------------------------------------------------------------------------

                                          Preferred stock
                                           designated as
                                       non-voting convertible             Common stock
                                    -------------------------------------------------------------
                                                                                                     Additional       Deferred
                                                                                                       paid-in        issuance
                                       Shares           Amount          Shares           Amount        capital          costs
--------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                  <C>        <C>              <C>          <C>               <C>
Balance at March 1, 1998                 5,000             $500        3,241,848        $324,185     $12,539,503       $(115,541)

Net earnings

Amortization of deferred costs                                                                                            19,116
                                     -------------------------------------------------------------------------------------------

Balance at February 27, 1999             5,000              500        3,241,848         324,185      12,539,503         (96,425)

Net(loss)

Amortization of deferred costs                                                                                            35,356
                                     -------------------------------------------------------------------------------------------

Balance at February 27, 2000             5,000              500        3,241,848         324,195      12,539,503         (61,069)

Net earnings (loss)

Amortization of deferred costs                                                                                            61,069
                                     -------------------------------------------------------------------------------------------

Balance at February 27, 2001             5,000             $500        3,241,848        $324,185     $12,539,503    $         --
================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                              Treasury stock
                                                        ------------------------

                                   Accumulated
                                     deficit            Shares          Amount          Total

-------------------------------------------------------------------------------------------------
<S>                               <C>                  <C>           <C>            <C>
Balance at March 1, 1998          $(13,990,837)           3,052         $(19,937)    $(1,262,127)

Net earnings                           937,480                                           937,480

Amortization of deferred costs                                                            19,116
                                 ----------------------------------------------------------------

Balance at February 27, 1999       (13,053,357)           3,052          (19,937)       (305,531)

Net(loss)                           (1,409,398)                                       (1,409,398)

Amortization of deferred costs                                                            35,356
                                 ----------------------------------------------------------------

Balance at February 27, 2000       (14,462,755)           3,052          (19,937)     (1,679,573)

Net earnings (loss)

Amortization of deferred costs         (61,069)
                                 ----------------------------------------------------------------

Balance at February 27, 2001      $(14,523,824)           3,052         $(19,937)    $(1,644,217)
=================================================================================================
</TABLE>
                                 See accompanying notes to financial statements.


                                       26
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                           Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                    February 27,    February 27,
  Years ended February 28,                                                   2001           2000            1999
----------------------------------------------------------------------------------------------------------------
  <S>                                                                      <C>       <C>             <C>
  Cash flows from operating activities:
     Net earnings (loss)                                                   $   --    $(1,409,398)    $   937,480
     Adjustments to reconcile net earnings (loss) to
        net cash provided by operating activities:
          Depreciation and amortization                                        --         35,356         397,053
          Provision for doubtful accounts                                      --             --          11,210
          Loss (gain) on sale of fixed assets                                  --        538,522          15,093
          Provision for obsolete and slow-moving inventory                     --             --          77,528
          Issue of warrants                                                    --             --              --
          Decrease (increase) in assets:
             Accounts receivable                                               --        961,989       1,906,536
             Inventories                                                       --      1,108,860       1,903,995
             Other current assets                                              --         47,016           4,548
          (Decrease) increase in liabilities:
             Accounts payable                                                  --         (3,774)       (473,945)
             Accrued expenses and other liabilities                            --       (803,465)       (453,720)
             Income taxes payable                                              --             --              --
             Accrued unusual charge                                            --        (18,750)       (547,884)
----------------------------------------------------------------------------------------------------------------
                Net cash provided by operating activities                      --        456,356       3,777,894
----------------------------------------------------------------------------------------------------------------
  Cash flows from investing activities:
     Additions to property, plant and equipment                                --             --         (59,562)
     Proceeds from sale of fixed assets                                        --             --          51,745
     Decrease in other assets                                                  --        176,601          56,525
----------------------------------------------------------------------------------------------------------------
                Net cash provided by investing activities                      --        176,601          48,708
----------------------------------------------------------------------------------------------------------------
  Cash flows from financing activities:
     (Repayments) borrowings under line of credit agreement, net               --             --      (3,161,286)
     Payments of short-term debt                                               --     (1,226,141)             --
     Payments of long-term debt and capital lease obligations                  --        (27,632)        (51,898)
----------------------------------------------------------------------------------------------------------------
                Net cash (used in) provided by financing activities            --     (1,253,773)     (3,213,184)
----------------------------------------------------------------------------------------------------------------
  Net increase (decrease) in cash and cash equivalents                         --       (620,816)        613,418
  Cash and cash equivalents, beginning of year                              1,452        622,268           8,850
----------------------------------------------------------------------------------------------------------------
  Cash and cash equivalents, end of year                                   $1,452    $     1,452     $   622,268
================================================================================================================
  Supplemental Disclosure of Cash Flow Information:
     Cash paid during the year for:
        Interest                                                           $   --    $   881,670     $   191,440
        Income taxes                                                       $   --    $        --     $        --
</TABLE>

                                 See accompanying notes to financial statements.


                                       27
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

  1.  Restructuring  and            The accompanying  financial  statements have
       Liquidity Matters            been prepared assuming that the Company will
                                    continue as a going concern. There have been
                                    no sales since November 1999 and the Company
                                    has remained  inactive for fiscal year 2001.
                                    The Company  filed for Chapter 11 bankruptcy
                                    protection  in  March  2000.  Management  is
                                    seeking   merger   candidates  in  order  to
                                    continue the  Corporation.  If Management is
                                    unsuccessful  in  its  merger  search,   the
                                    Company  will cease to exist.  There were no
                                    sales  under the  Brittania  license for the
                                    fiscal  years 2001,  2000 and 1999.  As more
                                    fully  described  in Note 3, Levi  Strauss &
                                    Co.,   the  parent   company  of   Brittania
                                    Sportswear  Ltd. a licensor which  accounted
                                    for $4.5  million  of the  Company's  fiscal
                                    1998 sales,  announced  their  intention  to
                                    sell  Brittania.  In  light  of the  actions
                                    announced  by Levi's,  K mart,  the  largest
                                    retailer  of the  Brittania  brand  and  the
                                    Company's  largest  customer,   advised  the
                                    Company that it would no longer continue its
                                    on-going   commitment   to   the   Brittania
                                    trademark.  Sales to this customer decreased
                                    from $3 million in fiscal 1998,  to $0 sales
                                    in  fiscal  year  1999.  In  response,   the
                                    Company filed a lawsuit against Levi-Strauss
                                    & Co.,  alleging that the licensor  breached
                                    various   obligations   under  the   license
                                    agreement,  including without limitation its
                                    covenant of good faith and fair dealing. The
                                    Company settled this litigation in June 1998
                                    (see Note 12).

                                    The Company  experienced  significant losses
                                    in fiscal years 1998 and 1999 which resulted
                                    in severe cash flow  issues that  negatively
                                    impacted  the  ability  of  the  Company  to
                                    conduct its business as then structured.  In
                                    fiscal  year 1999 due to the lack of capital
                                    resources  needed to  properly  develop  and
                                    support the GUESS? product line, the Company
                                    discontinued sales under the GUESS? license.
                                    Sales for this  product line in fiscal 2001,
                                    2000, and 1999 aggregated $.0, $.0, and $2.5
                                    million,  with  gross  margins of 0%, 0% and
                                    11.8%,  respectively.  As of March 1999, the
                                    company  reached an  agreement  with Cluett,
                                    Peabody  & Co.,  the  licensor  of the ARROW
                                    trademark,  to terminate  its Arrow  license
                                    (see Note 12).  Until  April 17,  1998,  the
                                    Company's  common  stock  was  traded on the
                                    American Stock Exchange. Because the Company
                                    fell   below    American    Stock   Exchange
                                    guidelines for continued listing,  effective
                                    April  17,  1998,  the  Company's  stock was
                                    delisted.   The  Company  has  defaulted  on
                                    interest  payments to its subordinated  debt
                                    holder, and has no long-term credit facility
                                    in  place.  As a  result,  there  can  be no
                                    assurance that the Company can continue as a
                                    going concern.


                                       28
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------


                                    The accompanying financial statements do not
                                    include  any  adjustments  relating  to  the
                                    recoverability    and    classification   of
                                    recorded   asset   amounts  or  amounts  and
                                    classifications of liabilities that might be
                                    necessary  should  the  Company be unable to
                                    continue in existence.  The ultimate  impact
                                    or  resolution  of these  matters may have a
                                    materially  adverse effect on the Company or
                                    on its financial condition.

                                    The Company has funded its operating  losses
                                    by  refinancing  its debt in fiscal 1995 and
                                    increasing its capital  through (a) the sale
                                    of  $1  million  of  non-voting  convertible
                                    preferred  stock to management  (Note 11) in
                                    fiscal  1995;  (b) the  fiscal  1995 sale of
                                    treasury  stock  which  increased  equity by
                                    $2.9 million, and (c) the completion in 1996
                                    of a $3.5 million  private  placement  (Note
                                    4).

  2. Summary of
     Significant
     Accounting Policies
                                    a. The Company

                                    Nantucket    Industries,    Inc.   and   its
                                    wholly-owned      inactive      subsidiaries
                                    (debtor-in-possession)    (the    "Company")
                                    design and  distribute  branded  and private
                                    label   fashion    undergarments   to   mass
                                    merchandisers and national chains throughout
                                    the  United  States,  until it ceased  doing
                                    business in October 1999.

                                    b. Principles of Consolidation

                                    The   consolidated    financial   statements
                                    include   the    accounts    of    Nantucket
                                    Industries,   Inc.   and  its  wholly  owned
                                    subsidiaries   (debtor-in-possession).   All
                                    significant    intercompany   balances   and
                                    transactions   have  been   eliminated.

                                    c. Accounts Receivable

                                    An  allowance   for  doubtful   accounts  is
                                    provided  based  upon  historical  bad  debt
                                    experience  and periodic  evaluations of the
                                    aging of the accounts.


                                       29
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                    d. Property, Plant and Equipment

                                    Property,  plant and equipment are stated at
                                    cost. Equipment under lease is stated at the
                                    present value of the minimum lease  payments
                                    at the inception of the lease.  Depreciation
                                    and   amortization   are   provided  by  the
                                    straight-line   method  over  the  estimated
                                    useful lives of the assets as follows:

                                                                      Years
                                                                      -----
                                    Buildings and improvements        20-40

                                    Machinery and equipment            3-10

                                    Furniture and fixtures               10


                                    e. Stock Options

                                    As  described  in Note 11, the  Company  has
                                    granted  stock options for a fixed number of
                                    shares  to  employees  and  officers  at  an
                                    exercise  price equal to the market value of
                                    the   shares  on  the  date  of  grant.   As
                                    permitted  by SFAS No. 123,  the Company has
                                    elected to  continue  to  account  for stock
                                    options grants in accordance with APB No. 25
                                    and recognizes no  compensation  expense for
                                    these grants.

                                    f. Income Taxes

                                    The   Company    and   its   wholly    owned
                                    subsidiaries  file  a  consolidated  federal
                                    income tax  return.  Deferred  income  taxes
                                    arise as a  result  of  differences  between
                                    financial    statement    and   income   tax
                                    reporting.

                                    g. Earnings (Loss) Per Common Share

                                    In fiscal  year 1998,  the  Company  adopted
                                    Statement of Financial  Accounting Standards
                                    No. 128 (SFAS No. 128),  Earnings Per Share,
                                    which requires  public  companies to present
                                    earnings  per  share  and,  if   applicable,
                                    diluted  earnings per share. All comparative
                                    periods  must be restated as of February 28,
                                    1998 in accordance  with SFAS No. 128. Basic
                                    earnings per share are based on the weighted
                                    average number of common shares  outstanding
                                    without  consideration  of potential  common
                                    share  equivalents.   Diluted  earnings  per
                                    share  are  based  on the  weighted  average
                                    number of common and potential common shares
                                    outstanding.   The  calculation  takes  into
                                    account  the shares  that may be issued upon
                                    exercise  of stock  options,  reduced by the
                                    shares  that  may be  repurchased  with  the
                                    funds  received from the exercise,  based on
                                    the  average   price  during  the  year.  At
                                    February   27,   2000,   the   Company   had
                                    outstanding  warrants to purchase 16,500,000
                                    shares   of   common   stock   which   would
                                    potentially  dilute basic earnings per share
                                    but  have not  been  considered  for the two
                                    prior  periods  as they  would  have  had an
                                    antidilutive impact (see Note 9).


                                       30
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                    h. Reporting Comprehensive Income

                                    In  June  1997,  the  Financial   Accounting
                                    Standards  Board (FASB) issued  Statement of
                                    Financial Accounting Standards No. 130 (SFAS
                                    No. 130),  Reporting  Comprehensive  Income,
                                    which is effective  for the  Company's  year
                                    ending  February  27,  1999.  SFAS  No.  130
                                    addresses the  reporting  and  displaying of
                                    comprehensive  income  and  its  components.
                                    Earnings  (loss)  per  share  will  only  be
                                    reported  for net earnings  (loss),  and not
                                    for comprehensive  income.  Adoption of SFAS
                                    No.  130  relates to  disclosure  within the
                                    financial  statements and is not expected to
                                    have a  material  effect  on  the  Company's
                                    financial statements.

                                    i. Segment Information

                                    In June 1997, the FASB also issued Statement
                                    of Financial  Accounting  Standards  No. 131
                                    (SFAS No. 131), Disclosure About Segments of
                                    an Enterprise and Related Information, which
                                    is effective for the  Company's  year ending
                                    February 27, 1999.  SFAS No. 131 changes the
                                    way  public  companies  report   information
                                    about  segments  of their  business in their
                                    financial  statements  and requires  them to
                                    report selected segment information in their
                                    quarterly reports.  Adoption of SFAS No. 131
                                    relates to  disclosure  within the financial
                                    statements  and is not  expected  to  have a
                                    material  effect on the Company's  financial
                                    statements.

                                    j. Fiscal Year

                                    The Company's fiscal year ends on the Sunday
                                    nearest to February  28, with the  exception
                                    of February 28, 2001 an inactive  year,  the
                                    fiscal  years  ended  February  27, 2000 and
                                    February 27, 1999 contained 52 weeks.

                                    k. Reclassification

                                    Certain   prior  year   amounts   have  been
                                    reclassified  in  order  to  conform  to the
                                    current year's presentation.

                                    l. Use of Estimates

                                    In   preparing   the   Company's   financial
                                    statements,  management  is required to make
                                    estimates  and  assumptions  that affect the
                                    reported  amounts of assets and  liabilities
                                    and the disclosure of contingent  assets and
                                    liabilities  at the  date  of the  financial
                                    statements,  and  the  reported  amounts  of
                                    revenues and expenses  during the  reporting
                                    period.  Actual  results  could  differ from
                                    those estimates.

                                    m. Impairment of Long-Lived Assets

                                    The Company  applies  Statement of Financial
                                    Accounting Standards No. 121, Accounting for
                                    the Impairment of Long-Lived  Assets and for
                                    Long-Lived   Assets  to  be   Disposed   of.
                                    Accordingly,  when  indicators of impairment
                                    are   present,   the  Company   periodically
                                    evaluates  the  carrying  value of property,
                                    plant  and  equipment  and   intangibles  in
                                    relation to the  operating  performance  and
                                    future   undiscounted   cash  flows  of  the
                                    underlying  business.  The  Company  adjusts
                                    carrying amount of the respective  assets if
                                    the expected future  undiscounted cash flows
                                    are  less  than   their  book   values.   No
                                    impairment loss was required in fiscal years
                                    2001, 2000 and 1999.


                                       31
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                    n. Fair Value of Financial Instruments

                                    Based on borrowing rates currently available
                                    to the Company for debt with  similar  terms
                                    and  maturities,   the  fair  value  of  the
                                    company's  long-term  debt  approximate  the
                                    carrying  value.  The carrying  value of all
                                    other  financial   instruments   potentially
                                    subject to valuation risk, principally cash,
                                    accounts  receivable  and accounts  payable,
                                    also approximate fair value.

  3. Concentration of Risk          For the  period  ended  February  28,  2001,
                                    there  were  no  sales  or  other   business
                                    activities. For February 28, 2000 there were
                                    no sales.  For February  27, 2000,  sales to
                                    the Company's largest customer accounted for
                                    38.8% of net  sales  and 23%,  respectively,
                                    for the two prior fiscal years. Sales to the
                                    second largest customer in fiscal years 1999
                                    and 1998  were  33.6% of net  sales and 22%,
                                    respectively.  As  previously  described,  K
                                    Mart,  which  represented $0 of net sales in
                                    the 1999 fiscal  year,  and 16% and 40%, for
                                    the two  prior  fiscal  years,  advised  the
                                    Company  it would  no  longer  continue  its
                                    commitment  to the  Brittania  trademark and
                                    consequently,  the Company  currently has no
                                    business  with  this   customer.   No  other
                                    customer  accounted for more than 10% of the
                                    Company's  consolidated net sales for fiscal
                                    1999 and 1998.

  4. Private Placement              On August 15, 1996, the Company  completed a
                                    $3.5  million  private   placement  with  an
                                    investment   partnership.   Terms   of  this
                                    transaction included the issuance of 250,000
                                    shares and  $2,760,000 of 12.5%  convertible
                                    subordinated debentures that were due August
                                    15, 2001.

                                    The convertible  subordinated debentures are
                                    secured   by  a  second   mortgage   on  the
                                    Company's   manufacturing  and  distribution
                                    facility located in  Cartersville,  Georgia.
                                    In   conjunction   with  the  sale  of  this
                                    property  completed  on October 1, 1997 (see
                                    Note 7), the  Company  prepaid  $707,000  of
                                    these debentures.

                                    The  debentures,  after giving effect to the
                                    prepayment   related  to  the  sale  of  the
                                    Company's  facility  referred to above, were
                                    convertible  into the Company's common stock
                                    over the next  five  years.  The  investment
                                    partnership  waived all  conversion  rights.

                                    The  agreement  grants the investor  certain
                                    registration  rights for the  shares  issued
                                    and the conversion shares to be issued.

                                    The difference between the purchase price of
                                    the  shares  issued  and their  fair  market
                                    value  on   August   15,   1996   aggregated
                                    $197,500.  This was  reflected  as  deferred
                                    issue  cost and will be  amortized  over the
                                    expected  five-year term of the subordinated
                                    convertible debentures. The prorated portion
                                    of these costs  associated  with the prepaid
                                    $707,000 of these  debentures was recognized
                                    in the accounting  period in which the event
                                    occurred.

                                    Costs associated with this private placement
                                    aggregated   $409,000   including   $104,000
                                    related to the shares issued which have been
                                    charged to paid in  capital.  The  remaining
                                    balance of $305,000  will be amortized  over
                                    the five-year term of the debentures.

                                    The  Company  was in  default  in respect to
                                    interest payments due on the subordinated


                                       32
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                    debt in August  1997,  and again in February
                                    1998. In September  1997,  the  Subordinated
                                    debt holder and the Company  entered into an
                                    agreement  to extend the cure  period on the
                                    default.   This  forbearance  agreement  was
                                    extended  month by month until May 1998.  In
                                    May  1998,  the  Company   entered  into  an
                                    agreement with the debt holder to extend the
                                    cure  period,  with  respect to  $322,551 in
                                    prior interest  payment defaults and for the
                                    interest  payment due in August 1998,  until
                                    December 1998. In return, the Company agreed
                                    to secure the debentures by a first priority
                                    lien on all the  assets of the  Company,  to
                                    the extent not  otherwise  prohibited  under
                                    the revolving  credit facility (Note 8), and
                                    to issue five-year  warrants  convertible to
                                    16,5000,000 shares of the Company's stock at
                                    an  exercise  price  of  $.10.  The  Company
                                    obtained an  independent  valuation  of this
                                    transaction,  in the amount of $175,000, and
                                    this  amount  was  expensed  in fiscal  year
                                    1998.  The Company is  currently  in default
                                    for interest  payments due since August 1997
                                    on this note, including the interest payment
                                    due February  1999.  There is no forbearance
                                    agreement in effect  subsequent  to December
                                    1998   and   therefore,    the   outstanding
                                    liability of  $2,052,986  is classified as a
                                    current  liability.  In  October  1999,  the
                                    Company  assigned the  accounts  receivable,
                                    inventory   and   all  law   suits   to  the
                                    subordinated creditor.

  5. Unusual (Credit) Charge        In  November  1992,  the  Company   acquired
                                    Phoenix  Associates,  Inc., a  manufacturing
                                    facility in Puerto Rico, pursuant to a stock
                                    purchase  agreement.  Phoenix  had  been  an
                                    exclusive   contractor   for  the   Company,
                                    manufacturing  many of the Company's product
                                    lines.  A portion of the purchase  price was
                                    subordinated  debt  payable  to  the  former
                                    owners of Phoenix, of which $300,000 was due
                                    February 2, 1998. In April 1993, the Company
                                    discovered   an   inventory    variance   of
                                    $1,700,000,   principally   attributable  to
                                    unrecorded  manufacturing  and material cost
                                    variance at the Puerto Rico facility,  which
                                    were   incurred   prior  to  the   Company's
                                    acquisition of this  facility.  As a result,
                                    the Company  initiated an action against the
                                    former  owners of the facility as more fully
                                    described in Note 12. Accordingly, in fiscal
                                    1995 the Company eliminated this payable and
                                    reflected   such  reduction  as  an  unusual
                                    credit in the 1995 financial statements.

                                    In  March  of  fiscal   1994,   the  Company
                                    terminated the  employment  contracts of its
                                    Chairman and  Vice-Chairman.  In  accordance
                                    with the  underlying  agreement,  they  were
                                    paid in aggregate of approximately  $400,000
                                    per year in  severance  and other  benefits,
                                    through February 27, 1999.

                                    As of  February  28, 2001 and  February  27,
                                    2000, the accrued  unusual charge of $77,083
                                    represents    payments    due    under   the
                                    termination   agreements   to   the   former
                                    Chairman  and  Vice-chairman.  As of October
                                    1997, pending  negotiation of more favorable
                                    terms,  payment under these  agreements  was
                                    suspended.


                                       33
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

  6. Inventories                    Inventories  are  recorded  at the  lower of
                                    cost  or  market   value   using  the  first
                                    in-first-out  (FIFO) cost flow  method,  and
                                    are summarized as follows:

                                    February 28,   February 27,     February 27
                                        2001           2000             1999
           ---------------------------------------------------------------------
           Raw materials                 $ --         $ --         $       --
           Work in process                 --           --                 --
           Finished goods                  --           --          1,108,860
           ---------------------------------------------------------------------
                                         $ --         $ --         $1,108,860
           =====================================================================

  7. Property, Plant and
     Equipment                      Property, plant and equipment are summarized
                                    as follows:

                                    February 28,   February 27,     February 27
                                        2001           2000             1999
           ---------------------------------------------------------------------
              Land                       $ --         $ --         $       --
              Buildings and improvements   --           --             26,034
              Machinery and equipment      --           --          1,485,090
              Furniture and fixtures       --           --            142,489
           ---------------------------------------------------------------------
                                           --           --          1,653,613
              Less accumulated
                depreciation               --           --          1,115,090
           ---------------------------------------------------------------------
                                         $ --         $ --         $  538,523
           =====================================================================

  8. Long-Term Debt and Notes
     Payable                        a. Revolving Credit

                                    The  Company  has  a $15  million  revolving
                                    credit  facility,  which  expired  in  March
                                    1998,  and has been  extended  to August 31,
                                    1999.   The   revolving   credit   agreement
                                    provides  for  loans  based  upon   eligible
                                    accounts   receivable   and   inventory,   a
                                    $3,000,000  letter  of credit  facility  and
                                    purchase  money  term  loans of up to 75% of
                                    the  orderly   liquidation  value  of  newly
                                    acquired and eligible equipment.  Borrowings
                                    bear  interest  at 2 3/4% above  prime.  The
                                    agreement requires,  among other provisions,
                                    the  maintenance of minimum  working capital
                                    and  net  worth  levels  and  also  contains
                                    restrictions regarding payment of dividends.
                                    Borrowings    under   the    agreement   are
                                    collateralized  by substantially  all of the
                                    assets of the Company.  At February 28, 2001
                                    and February 27, 2000, the revolving  credit
                                    facility was not in place.


                                       34
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                    b. Capital Leases

                                    The Company leases  equipment  under capital
                                    leases.  During  Fiscal 2000,  the Company's
                                    equipment was returned for non-payment.

  9. Net Earnings (Loss) Per        The   following   table   sets   forth   the
     Common Share                   computation  of basic and  diluted  loss per
                                    share:

<TABLE>
<CAPTION>
                                          February 28,   February 27,     February 27
                                              2001           2000             1999
       -------------------------------------------------------------------------------
      <S>                                 <C>             <C>                <C>
       Net earnings (loss)  attributable
          to common stockholders         $       --      $(1,409,398)       $ 937,480

       Accrued dividends on preference
         shares                                  --      $   (81,074)       $ (81,103)

       Numerator for basic and diluted
         net earnings (loss) per common
         share - earnings  (loss)
         attributable to common
         stockholders                    $       --      $        --        $ 856,377
       -------------------------------------------------------------------------------
       Denominator for basic and diluted
         net earnings (loss) per common
         share - weighted average shares
         outstanding                      3,238,796        3,238,796        3,238,796
       -------------------------------------------------------------------------------
       Basic and diluted net  earnings
         (loss) per share                $       --      $      (.40)      $     0.26
       ===============================================================================
</TABLE>

  10. Income Taxes                  Deferred income taxes reflect the net effect
                                    of   temporary   differences   between   the
                                    carrying  amounts of assets and  liabilities
                                    for  financial  reporting  purposes  and the
                                    amount   used  for  income   tax   purposes.
                                    Deferred  tax  assets  and  liabilities  are
                                    measured    using    enacted    tax   rates.
                                    Significant   components  of  the  Company's
                                    deferred   taxes  at  February   28,   2001,
                                    February  27, 2000 and February 27, 1999 are
                                    as follows:

<TABLE>
<CAPTION>
                                          February 28,   February 27,     February 27
                                              2001           2000             1999
      --------------------------------------------------------------------------------
      <S>                                 <C>             <C>                <C>
      Deferred tax assets

        Net operating loss
          carryforward                   $7,215,000       $7,215,000       $6,987,000

        Accrued severance                        --               --           36,000

        Excess of tax basis  over
          book basis of                          --               --               --

        Capitalized inventory costs              --               --           22,000

        Other                                    --               --          121,000
      --------------------------------------------------------------------------------
                                          7,215,000        7,215,000        7,166,000
      Deferred tax liabilities

        Difference between the book
          and tax basis of property,
          plant and equipment               331,000          331,000          331,000
      --------------------------------------------------------------------------------
         Net deferred tax asset           6,884,000        6,884,000        6,835,000
         Valuation allowance              6,884,000        6,884,000       (6,835,000)
      --------------------------------------------------------------------------------
         Net deferred taxes             $        --       $       --      $        --
      ================================================================================
</TABLE>


                                       35
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------


                                    The  Company   anticipates   utilizing   its
                                    deferred  tax  assets  only to the extent of
                                    its deferred tax  liabilities.  Accordingly,
                                    the Company has fully reserved all remaining
                                    deferred   tax   assets,   which  it  cannot
                                    presently utilize.

                                    For tax purposes at February  28, 2001,  the
                                    Company's  net operating  loss  carryforward
                                    was  $20,200,000,  which,  if  unused,  will
                                    expire  from  2008  to  2013.   Certain  tax
                                    regulations   relating   to  the  change  in
                                    ownership may limit the Company's ability to
                                    utilize its net operating loss  carryforward
                                    if the ownership  change,  as computed under
                                    each   regulation,   exceeds  50%.   Through
                                    February 28,  2001,  the change in ownership
                                    was less than 50%.

                                    There was no income tax provision  (benefit)
                                    for the fiscal years 2001, 2000 and 1999.

                                    The  following  is a  reconciliation  of the
                                    normal expected statutory federal income tax
                                    rate to the  effective  rate reported in the
                                    financial statements.

<TABLE>
<CAPTION>
                                                     February 28,  February 27,    February 27,
                                                         2001          2000            1999
              ---------------------------------------------------------------------------------
             <S>                                          <C>         <C>             <C>
              Computed "expected" provision for:

                  Federal income taxes                    0%          (35.0)%         (35.0)%

                  Valuation allowance                     0            35.0            35.0
              ---------------------------------------------------------------------------------
              Actual provision for income taxes           0%           --   %          --   %
              ---------------------------------------------------------------------------------
</TABLE>

11. Stockholders' Equity            a.  Stock Options

                                    The 1972  stock  option  plan,  as  amended,
                                    provides  for the  issuance  of  options  to
                                    purchase  up to  340,000  shares  of  common
                                    stock  at the  market  value  of the date of
                                    grant.  Options  are  exercisable  up to ten
                                    years from the date of grant and vest at 20%
                                    per year.

                                    The Company has adopted the  disclosure-only
                                    provisions of SFAS No. 123. Accordingly,  no
                                    compensation  costs have been recognized for
                                    grants made under the Company's stock option
                                    plan. Had compensation  cost been determined
                                    based on the fair value,  as  determined  in
                                    accordance with the requirements of SFAS No.
                                    123,  at the date of  grant of stock  option
                                    awards,  the  increase  in the net  loss for
                                    fiscal  2001,  2000 and 1999 would be $0, $0
                                    and $91,000,  respectively.  In fiscal 2001,
                                    2000 and 1999  there were no awards of stock
                                    options.  During the initial phase-in period
                                    of SFAS No. 123, such  compensation  may not
                                    be  representative  of the future effects of
                                    applying this statement.


                                       36
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                    A summary of option  activity  for the years
                                    ended February 28, 2001,  February 27, 2000,
                                    and February 27, 1999 is as follows:

                                                                  Weighted
                                              Number of           Average
                                               Options         Exercise Price
         -----------------------------------------------------------------------
          Balance, February 27, 1999           106,000              $5.05

           Forfeited                           106,000              $5.05
         -----------------------------------------------------------------------
          Balance, February 27, 2000                --                 --
         -----------------------------------------------------------------------
          Balance, February 28, 2001                --                 --
         -----------------------------------------------------------------------

                                    b. Issuance of Preferred Stock

                                    On March 22,  1994,  the Company sold to its
                                    management  group 5,000 shares of non-voting
                                    convertible  preferred stock for $1,000,000.
                                    These  shares are  convertible  into 200,000
                                    shares of common  stock at the rate of $5.00
                                    per  share.   These   shares   provide   for
                                    cumulative  dividends  at  a  floating  rate
                                    equal to the prime rate. Such dividends were
                                    convertible into common stock at the rate of
                                    $5.00 per share. The conversion  rights were
                                    waived  in  May  1998.   These   shares  are
                                    redeemable, at the option of the Company, on
                                    or  after  February  27,  1999  and  have  a
                                    liquidation preference of $200 per share. As
                                    of February 28, 2001,  February 27, 2000 and
                                    February 27, 1999  dividends in arrears were
                                    $570,134,     $489,484     and     $408,384,
                                    respectively.

                                    c. Issuance of Treasury Stock

                                    In connection with the Company's refinancing
                                    on March 22, 1994, the Company  entered into
                                    a  $2,000,000  term  loan  agreement  with a
                                    financial   institution.   Pursuant  to  the
                                    agreement,  the  Company  issued to the bank
                                    10,000  treasury  common  shares  related to
                                    mandatory prepayments, which were not made.

                                    d. Grant of Warrants

                                    Warrants  have been granted to NAN Investors
                                    LP to  purchase  16,500,000  shares  of  the
                                    Company's  Common  Stock for $.10 per share,
                                    with a  five-year  term  effective  May  21,
                                    1998.


                                       37
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

12. Commitments, Contingencies
    and Related Party
    Transactions                    a. Agreement with Principal Stockholders

                                    On March 1,  1994,  in  connection  with the
                                    restructuring   described  in  Note  4,  the
                                    Company entered into agreements with its two
                                    principal   stockholders   and  a  group  of
                                    employees  (the  "Management   Group").  The
                                    agreements provide, among other things, for:

                                    The    reimbursement    of   the   principal
                                    stockholders,  limited to $1.50 per share to
                                    the extent that the gross proceeds per share
                                    from  the  sale  of  common   stock  by  the
                                    stockholders   during  the  two-year  period
                                    beginning  September  1,  1994 are less than
                                    $5.00 per share. Such guaranty is applicable
                                    to a maximum of 150,000  shares sold by such
                                    stockholders,  subject to  reductions  under
                                    certain    circumstances.    The   principal
                                    stockholders  sold 157,875 shares  including
                                    88,400 at  prices  below  $5.00  per  share;
                                    37,125 shares in the fiscal year ended March
                                    1, 1997 and 51,275  shares in the year ended
                                    March 2, 1996 which  resulted in a charge to
                                    operating  results of $12,000  and  $35,000,
                                    respectively.

                                    Warrants to purchase up to 157,875 shares of
                                    common  stock  equal to the number of shares
                                    sold  by  the  principal  stockholders.  The
                                    exercise  price per  share of such  warrants
                                    would  equal  the gross  proceeds  per share
                                    from the corresponding sale by the principal
                                    stockholders.   Such   warrants   expire  on
                                    February 28, 2000. As of May 14, 1999, these
                                    warrants  have  not  been  requested  to  be
                                    issued, nor have they been issued.

                                    The  contribution  to the  Company  of  life
                                    insurance  policies  with  a cash  value  of
                                    $535,000  which, if borrowed by the Company,
                                    would  be  repaid   by  the  two   principal
                                    stockholders.

                                    b. Trademark Licensing Agreements

                                    Royalties    including   minimum   licensing
                                    payments to GUESS?,  Inc. which owns 9.9% of
                                    the outstanding common stock of the Company,
                                    aggregated   $74,000  in  fiscal  1999,  and
                                    $840,000 in fiscal 1998.  Due to the lack of
                                    capital  resources  necessary to develop and
                                    support the GUESS? product line, the company
                                    discontinued  its  GUESS?  division  in  the
                                    first  quarter  of  fiscal  year  1999.  The
                                    GUESS?  license was  terminated  as of March
                                    31, 1998.


                                       38
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                    c. Litigation

                                    In  September  1993,  the  Company  filed an
                                    action  against the former owners of Phoenix
                                    Associates,   Inc.  (Phoenix).  The  Company
                                    sought compensatory damages of approximately
                                    $4.0 million plus declaratory and injunctive
                                    relief for acts of alleged securities fraud,
                                    fraudulent conveyances,  breach of fiduciary
                                    trust and unfair  competition  in connection
                                    with the  acquisition of the common stock of
                                    Phoenix.

                                    Additionally, the Company has filed a demand
                                    for  arbitration  which  seeks  compensatory
                                    damages of $4.0  million,  rescission of the
                                    stock purchase  agreement,  rescission of an
                                    employment  agreement and other matters, all
                                    on account of alleged  breaches of the stock
                                    employment       agreement,       fraudulent
                                    misrepresentation  and  breach of  fiduciary
                                    duties.

                                    In  November  1993,  the  former  owners  of
                                    Phoenix  filed  counter  claims  against the
                                    Company alleging  improper  termination with
                                    regard  to their  employment  agreement  and
                                    breach of the stock purchase agreement.  The
                                    Company settled this litigation and realized
                                    $675,000  from this matter which is included
                                    in the accompanying  statement of operations
                                    for 1999 under the caption "Other income."

                                    On  December 9, 1997,  a former  officer and
                                    director  of the  Company  filed a complaint
                                    against  the  Company in the State  Court of
                                    Fulton County,  State of Georgia relating to
                                    payments  allegedly  due him under the March
                                    18,  1994  Severance   Agreement,   and  was
                                    seeking  damages in the amount of  $219,472.
                                    The Company  reached a  settlement  with the
                                    officer  in the amount of  $100,000  plus an
                                    amount based on reaching a certain  level of
                                    recovery,  if any,  from  the  Levi  Strauss
                                    litigation.  Based  on the  settlement  with
                                    Levi's, no additional  accrual to the former
                                    officer and director was necessary.

                                    On January 15, 1998, in the Supreme Court of
                                    the State of New York, Westchester County, a
                                    Director  of the  Company  filed a complaint
                                    against  the Company for breach of the March
                                    18, 1994  Severance  Agreement,  and seeking
                                    damages  in  the  amount  of  $559,456  plus
                                    applicable interest and legal fees which was
                                    accrued as of February 28, 1998. The Company
                                    on March 9, 1998,  filed  counterclaims in a
                                    significantly  larger amount. In April 1999,
                                    the Company  reached a  settlement  with the
                                    Director for $75,000  which  resulted in the
                                    reduction of  approximately  $530,000 in the
                                    accrued  unusual  charge this  reduction  is
                                    included in the  accompanying  Statement  of
                                    Operations under the caption "Other Income."

                                    The   Company  is  subject  to  other  legal
                                    proceedings and claims,  which arise, in the
                                    ordinary  course  of  its  business.  In the
                                    opinion   of    management,    other   legal
                                    proceedings  and claims in which the Company
                                    is defendant will be  successfully  defended
                                    or  resolved   without  a  material  adverse
                                    effect   on   the   consolidated   financial
                                    position  or  results of  operations  of the
                                    Company.  The  Company  with  respect to the
                                    aforementioned  litigation  at February  27,
                                    2000   has   made   no   provision   in  the
                                    accompanying financial statements.


                                       39
<PAGE>

                                                      Nantucket Industries, Inc.
                                                                and Subsidiaries
                                                          (Debtor-In-Possession)

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

13.Brittania Litigation             Beginning  in  September  1988,  the Company
                                    became a licensee of  Brittania  Sportswear,
                                    Ltd.,  a  wholly-owned  subsidiary  of  Levi
                                    Strauss & Co.,  to  manufacture  and  market
                                    men's underwear and other products under the
                                    trademark  "Brittania  from  Levi  Strauss &
                                    Co.". Sales under this license aggregated $0
                                    in fiscal year 1999,  $4.5 million in fiscal
                                    1998.

                                    As of  January  1,  1997,  the  license  was
                                    renewed  for  a  five-year  term,  including
                                    automatic  renewals  of two years if certain
                                    minimum  sales  levels  were  achieved.   On
                                    January  22,  1997,   Levi's  announced  its
                                    intention to sell Brittania. In light of the
                                    actions  announced  by Levi's,  K Mart,  the
                                    largest  retailer of the Brittania brand and
                                    the Company's  largest  customer  accounting
                                    for   approximately   $11   million  of  the
                                    Company's  fiscal  1997  sales of  Brittania
                                    product,  advised the Company  that it would
                                    no longer  continue its on-going  commitment
                                    to the Britannia trademark.

                                    The  Company  filed a lawsuit  against  Levi
                                    Strauss  &  Co.  and  Brittania  Sportswear,
                                    Ltd.,  alleging  that the licensor  breached
                                    various   obligations  under  the  licensing
                                    agreement,  including without limitation its
                                    covenant of good faith and fair dealing. The
                                    Company agreed to settle this  litigation in
                                    June   1998   and   realized   approximately
                                    $725,000  in gross  value  from this  matter
                                    which  is  included   in  the   accompanying
                                    statement  of  operations  under the caption
                                    "Other income."

14. Subsequent Events               On March 3,  2000,  the  Company  filed  for
                                    Chapter 11 protection  with U.S.  Bankruptcy
                                    Court. The Company is involved in discussion
                                    with   merger   candidates,   should   these
                                    discussions  prove futile, a move to Chapter
                                    7 liquidation is probable.


                                       40
<PAGE>

                           [GRANT THORNTON LETTERHEAD]

      Report of Independent Certified Public Accountants

Board of Directors
Nantucket Industries, Inc. and Subsidiaries

      We have audited the accompanying  consolidated balance sheets of Nantucket
Industries,  Inc.  and  Subsidiaries  as of February  27, 1999 and  February 28,
1998,and  the  related  consolidated  statements  of  operations,  stockholders'
deficit and cash flows for each of the three years in the period ended  February
27, 1999.  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  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 provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all  material  respects,  the  consolidated  financial  position of Nantucket
Industries, Inc. and Subsidiaries as of February 27, 1999 and February 28, 1998,
and the  consolidated  results of their operations and their cash flows for each
of the three years in the period  ended  February  27, 1999 in  conformity  with
generally accepted accounting principles.

      The accompanying financial statements have been prepared assuming that the
Company will  continue as a going  concern.  As  presented  in the  accompanying
financial  statements,  the  Company  has had  significant  decreases  in sales,
operating  losses,  and defaulted on interest  payments.  These  factors,  among
others  discussed  in Note A to the  accompanying  financial  statements,  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these  matters  are also  described  in Note A.
These financial statements do not include any adjustments that might result from
the outcome of these uncertainties.


                             /s/ Grant Thornton LLP
Atlanta, Georgia
May 14, 1999


                                       41
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>

                                                              February 27,         February 28,
                                                                  1999                1998
                                                              ------------         ------------
<S>                                                             <C>                 <C>
CURRENT ASSETS
   Cash                                                         $  622,268          $     8,850
   Accounts receivable, less allowance for doubtful
     accounts of $273,000 and $351,000, respectively
     (Notes B and H)                                               961,989            2,879,735
   Inventories (Notes F and H)                                   1,108,860            3,090,383
   Other current assets                                             67,347               71,895
                                                                ----------          -----------

Total current assets                                             2,760,464            3,050,863

PROPERTY, PLANT AND EQUIPMENT,
   NET (Notes G and H)                                             538,522              958,075

OTHER ASSETS, NET                                                  176,601              198,786
                                                                ----------          -----------

                                                                $3,475,587          $ 7,207,724
                                                                ==========          ===========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       42
<PAGE>

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>

                                                                 February 27,         February 28,
                                                                     1999                 1998
                                                                 ------------         ------------
<S>                                                                <C>                  <C>
CURRENT LIABILITIES
   Current portion of long-term debt (Note H)                      $                   $ 3,161,286
   Current portion of capital lease obligations (Note H)               56,452               51,898
   Convertible subordinated debt (Note D)                           2,052,986            2,052,986
   Accounts payable                                                   248,538              722,483
   Accrued salaries and employee benefits                              80,740              223,031
   Accrued unusual charge (Note E)                                     95,833              465,000
   Accrued expenses and other liabilities                             863,271              730,478
   Accrued royalties                                                  319,048              763,270
                                                                   ----------          -----------
         Total current liabilities                                  3,716,868            8,170,432

CAPITAL LEASE OBLIGATIONS,
   NET OF CURRENT PORTION (Note H)                                     64,250              120,702

ACCRUED UNUSUAL CHARGE (Notes E and L)                                 78,717
                                                                   ----------          -----------
                                                                    3,781,118            8,469,851

STOCKHOLDERS' DEFICIT (Notes D and K)
   Preferred stock, $.10 par value;  500,000 shares
    authorized,  of which 5,000
     shares have been  designated as  non-voting
     convertible  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                                             (96,425)            (115,541)
   Accumulated deficit                                            (13,053,357)         (13,990,837)
                                                                 ------------          -----------
                                                                     (285,594)          (1,242,190)
Less 3,052 shares of common stock held
in treasury, at cost                                                    9,937               19,937
                                                                 ------------          -----------
                                                                     (305,531)          (1,262,127)
                                                                 ------------          -----------
                                                                 $  3,475,587          $ 7,207,724
                                                                 ============          ===========
</TABLE>


                                       43
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                             Year ended
                                           February 27,      February 28,         March 1,
                                               1999             1998               1997
                                           ------------      ------------       -----------
<S>                                        <C>              <C>                 <C>
Net sales                                  $11,517,842                          $30,394,409
Cost of sales                                9,107,947       18,581,718          24,395,054
                                           -----------      -----------         -----------

     Gross profit                            2,409,895        3,101,608           5,999,355

Selling, general and
 administrative expenses                     2,879,200        7,166,124           7,546,341
                                           -----------      -----------         -----------

     Operating profit (loss)                  (469,305)      (4,064,516)         (1,546,986)

Other (income) expense
   Net loss (gain) on sale of assets
 (Note G)                                       15,093         (711,686)                 --
   Interest expense                            506,746        1,311,875           1,199,529
   Other income (Note L)                    (1,928,624)              --                  --
                                           -----------      -----------         -----------

     Total other (income) expense           (1,406,785)         600,189           1,199,529
                                           -----------      -----------         -----------

     Earnings (loss) before income taxes       937,480       (4,664,705)         (2,746,515)

Income taxes (Note J)                               --               --                  --
                                           -----------      -----------         -----------
     Net earnings (loss)                   $   937,480      $(4,664,705)        $(2,746,515)
                                           ===========      ===========         ===========

Net earnings (loss) per share
 - basic and diluted                       $      0.26      $     (1.47)        $     (0.91)
                                           ===========      ===========         ===========

Weighted average common
 shares outstanding                          3,238,796        3,238,796           3,124,785
                                           ===========      ===========         ===========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       44
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries
                     CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
       Years ended February 27, 1999, February 28, 1998 and March 1, 1997

<TABLE>
<CAPTION>
                                      Preferred stock
                                       designated as
                                      non convertible               Common stock            Additional
                                      ----------------              ------------              paid-in
                                   Shares         Amount        Shares        Amount         capital
                                   ------         ------        ------        ------         -------
<S>                             <C>             <C>            <C>           <C>           <C>
Balance at March 2, 1996            5,000       $      500     2,991,848     $299,185      $11,556,386

Net loss                               --               --            --           --               --

Common stock issued (Note D)           --               --       250,000       25,000          808,117

Balance at March 1, 1997            5,000              500     3,241,848      324,185       12,364,503

Net loss                               --               --            --           --               --

Issue of warrants                      --               --            --           --          175,000

Amortization of deferred costs         --               --            --           --               --
                                ---------       ----------     ---------     --------      -----------
Balance at February 28, 1998        5,000              500     3,241,848      324,185       12,539,503

Net earnings                           --               --            --           --               --

Amortization of deferred costs         --               --            --           --               --
                                ---------       ----------     ---------     --------      -----------

Balance at February 27, 1999        5,000           $  500     3,241,848     $324,185      $12,539,503
                                =========       ==========     =========     ========      ===========


                                 Deferred                          Treasury stock
                                 issuance      Accumulated         --------------
                                   costs         deficit          Shares      Amount          Total
                                   -----         -------          ------      ------          -----
Balance at March 2, 1996        $      --      $(6,579,617)        3,052     $(19,937)      $5,256,517

Net loss                               --       (2,746,515)           --           --       (2,746,515)

Common stock issued (Note D)     (183,772)              --            --           --          649,345
                                 --------      -----------         -----     --------       ----------
</TABLE>


                                       45
<PAGE>

<TABLE>
<CAPTION>

<S>                             <C>           <C>                  <C>       <C>            <C>
Balance at March 1, 1997         (183,772)      (9,326,132)        3,052      (19,937)       3,159,347

Net loss                               --       (4,664,705)           --                    (4,664,705)
Issue of warrants                      --               --            --           --          175,000

Amortization of deferred costs     68,231               --            --           --           68,231
                                ---------     ------------         -----     --------        ---------
Balance at February 28, 1998     (115,541)     (13,990,837)        3,052      (19,937)      (1,262,127)

Net earnings                           --          937,480            --           --          937,480

Amortization of deferred costs     19,116               --            --           --           19,116
                                ---------     ------------         -----     --------       ----------

Balance at February 27, 1999    $ (96,425)    $(13,053,357)        3,052     $(19,937)      $ (305,531)
                                =========     ============         =====     ========       ==========
</TABLE>

The accompanying notes are an integral part of this statement.


                                       46
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                             February 27,    February 28,      March 1,
                                                                 1999            1998            1997
                                                             ------------    ------------     ------------
<S>                                                          <C>             <C>              <C>
Cash flows from operating activities:
   Net earnings (loss)                                       $   937,480     $(4,664,705)     $(2,746,515)
   Adjustments to reconcile net earnings (loss) to
     net cash provided by (used in) operating activities
       Depreciation and amortization                             397,053         569,121          361,425
       Provision for doubtful accounts                            11,210         239,982           32,000
       Loss (gain) on sale of fixed assets                        15,093        (711,686)         (44,496)
       Provision for obsolete and
         slow-moving inventory                                    77,528       1,175,646          415,000
       Issue of warrants                                              --         175,000               --
       Decrease (increase) in assets
        Accounts receivable                                    1,906,536         253,047       (1,487,701)
         Inventories                                           1,903,995         560,411        1,915,199
         Other current assets                                      4,548         419,024          283,886
       (Decrease) increase in liabilities
         Accounts payable                                       (473,945)       (497,380)
         Accrued expenses and other liabilities                 (453,720)        468,708          221,895
         Income taxes payable                                         --          (1,909)          (1,025)
         Accrued unusual charge                                 (547,884)        (92,151)        (408,011)
                                                               ---------       ---------        ---------
              Net cash provided by (used in)
                operating activities                           3,777,894       3,723,859       (1,955,723)

Cash flows from investing activities:
   Additions to property, plant and equipment                    (59,562)       (212,093)        (152,516)
   Proceeds from sale of fixed assets                             51,745       2,808,731           33,756
   Decrease (increase) in other assets                            56,525         348,724         (396,838)
                                                               ---------       ---------        ---------

              Net cash provided by (used in)
                investing activities                              48,708       2,945,362         (515,598)
</TABLE>


                                       47
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED


<TABLE>
<CAPTION>
                                                      February 27,     February 28,      March 1,
                                                          1999             1998            1997
                                                      ------------     ------------     ---------
<S>                                                    <C>             <C>             <C>
Cash flows from financing activities:
   (Repayments) borrowings under line of credit
     agreement, net                                     (3,161,286)     (5,915,589)       173,093
   Payments of short-term debt                                  --              --       (800,000)
   Issuance of convertible subordinated debentures,
     net of expenses                                            --              --      2,351,084
   Payments of long-term debt and capital lease
     obligations                                           (51,898)       (752,693)            --
   Issuance of common stock                                     --              --        740,000
                                                       -----------     -----------     ----------
              Net cash (used in) provided by
                financing activities                    (3,213,184)     (6,668,282)     2,464,177

              Net increase (decrease) in cash              613,418             909         (7,144)

Cash at beginning of year                                    8,850           7,941         15,085
                                                       -----------     -----------     ----------

Cash at end of year                                    $   622,268     $     8,850     $    7,941
                                                       ===========     ===========     ==========
Supplemental Disclosure of Cash Flow Information:
-------------------------------------------------

   Cash paid during the year for:
     Interest                                          $   191,440     $   762,798     $1,173,981
                                                       ===========     ===========     ==========

     Income taxes                                      $        --     $        --     $       --
                                                       ===========     ===========     ==========
</TABLE>
The accompanying notes are an integral part of these statements.


                                       48
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE A - RESTRUCTURING AND LIQUIDITY MATTERS

      The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Net sales for the fiscal year ended
February 27, 1999 decreased 47% from the prior year level to $11.5 million.
There were no sales under the Brittania license for the current fiscal year, and
sales under the GUESS? license declined by $4.5 million from prior year levels.
As more fully described in Note L, Levi Strauss & Co., the parent company of
Brittania Sportswear Ltd. a licensor which accounted for $14.9 million of the
Company's fiscal 1997 sales, and $4.5 million of fiscal 1998 sales, announced
their intention to sell Brittania. In light of the actions announced by Levi's,
K mart, the largest retailer of the Brittania brand and the Company's largest
customer, advised the Company that it would no longer continue its on-going
commitment to the Brittania trademark. Sales to this customer decreased from $11
million in fiscal year 1997, to $3 million in fiscal 1998, to $0 sales in fiscal
year 1999. In response, the Company filed a lawsuit against Levi Strauss & Co.,
alleging that the licensor breached various obligations under the license
agreement, including without limitation its covenant of good faith and fair
dealing. The Company settled this litigation in June 1998 (see Note L).

      The Company has experienced significant losses in recent years which have
generally resulted in severe cash flow issues that have negatively impacted the
ability of the Company to conduct its business as presently structured. In
fiscal year 1999 due to the lack of capital resources needed to properly develop
and support the GUESS? product line, the Company has discontinued sales under
the GUESS? license. Sales for this product line in fiscal 1999, 1998, and 1997
aggregated $2.5, $7.0 and $4.7 million, with gross margins of 11.8%, 6.4% and
13.2%, respectively. As of March 1999, the Company reached an agreement with
Cluett, Peabody & Co., the licensor of the ARROW trademark, to terminate its
Arrow license (see Note L). Until April 17, 1998, the Company's common stock was
traded on the American Stock Exchange. Because the Company fell below American
Stock Exchange guidelines for continued listing, effective April 17, 1998, the
Company's stock was delisted. The Company has defaulted on interest payments to
its subordinated debt holder, and has no long-term credit facility in place, and
currently three customers represent 90% of the Company's net sales.


                                       49
<PAGE>

      As a result of sharply decreasing revenue, the continuing losses, interest
payment default, the lack of a long-term credit facility and the present sales
concentration over three customers, there can be no assurance that the Company
can continue as a going concern. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classifications of liabilities that might
be necessary should the Company be unable to continue in existence. The ultimate
impact or resolution of these matters may have a materially adverse effect on
the Company or on its financial condition.

      In view of the issues described in the preceding paragraph, recoverability
of a major portion of the recorded asset amounts shown in the accompanying
balance sheet is dependent upon the continued operations of the Company, which
in turn is dependent upon the Company's ability to maintain the financing of its
working capital requirements on a continuing basis and to improve its future
operations.


                                       50
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997
NOTE A - RESTRUCTURING AND LIQUIDITY MATTERS - Continued

      The Company has funded its operating losses by refinancing its debt in
fiscal 1995 and increasing its capital through (a) the sale of $1 million of
non-voting convertible preferred stock to management (Note K) in fiscal 1995;
(b) the fiscal 1995 sale of treasury stock which increased equity by $2.9
million, and (c) the completion in 1996 of a $3.5 million private placement
(Note D).

      The Company has been implementing a restructuring strategy to improve
operating results and enhance its financial resources which included reducing
costs, streamlining its operations and closing its Puerto Rico plant. In
addition, management has implemented additional steps to reduce its operating
costs which it believes are sufficient to provide the Company with the ability
to continue in existence. Major elements of these action plans include:

      o     The phase-out of the GUESS? product line, completed in the second
            quarter of fiscal year 1999.

      o     The sale of the Company's Cartersville, Georgia location (Note G),
            and the relocation to more appropriate space for its packaging and
            distribution facilities.

      o     The transfer of all domestic manufacturing requirements to foreign
            manufacturing contract facilities.

      o     Staff reductions associated with the transfer of manufacturing to
            offshore contractors.

      o     The relocation of executive offices and showrooms to more
            appropriate, lower cost facilities.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. The Company

      Nantucket Industries, Inc. and its wholly-owned subsidiaries (the
"Company") design and distribute branded and private label fashion undergarments
to mass merchandisers and national chains throughout the United States.


                                       51
<PAGE>

2. Principles of Consolidation

      The consolidated financial statements include the accounts of Nantucket
Industries, Inc. and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.


                                       52
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

3. Accounts Receivable

      An allowance for doubtful accounts is provided based upon historical bad
debt experience and periodic evaluations of the aging of the accounts.

4. Property, Plant and Equipment

      Property, plant and equipment are stated at cost. Equipment under lease is
stated at the present value of the minimum lease payments at the inception of
the lease. Depreciation and amortization are provided by the straight-line
method over the estimated useful lives of the assets as follows:

                                                      Years
                                                      -----

    Buildings and improvements                        20-40
    Machinery and equipment                            3-10
    Furniture and fixtures                               10

5. Other Assets

      Other long-term assets consist primarily of capitalized loan origination
costs. These costs are being amortized over the term of the related credit
agreements. Other assets includes $196,000 and $151,000 of accumulated
amortization as of February 27, 1999 and February 28, 1998, respectively.

6. Stock Options

      As described in Note I, the Company has granted stock options for a fixed
number of shares to employees and officers at an exercise price equal to the
market value of the shares on the date of grant. As permitted by SFAS No. 123,
the Company has elected to continue to account for stock options grants in
accordance with APB No. 25 and recognizes no compensation expense for these
grants.


                                       53
<PAGE>

7.  Income Taxes

      Company and its wholly-owned subsidiaries file a consolidated federal
income tax return. Deferred income taxes arise as a result of differences
between financial statement and income tax reporting.


                                       54
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

8. Earnings (Loss) Per Common Share

      In fiscal year 1998, the Company adopted Statement of Financial Accounting
Standards No. 128 (SFAS No. 128), Earnings Per Share, which requires public
companies to present earnings per share and, if applicable, diluted earnings per
share. All comparative periods must be restated as of February 28, 1998 in
accordance with SFAS No. 128. Basic earnings per share is based on the weighted
average number of common shares outstanding without consideration of potential
common share equivalents. Diluted earnings per share is based on the weighted
average number of common and potential common shares outstanding. The
calculation takes into account the shares that may be issued upon exercise of
stock options, reduced by the shares that may be repurchased with the funds
received from the exercise, based on the average price during the year. At
February 27, 1999, the Company had 106,000 outstanding stock options and
warrants to purchase 16,500,000 shares of common stock which would potentially
dilute basic earnings per share but have not been considered for the two prior
periods as they would have had an antidilutive impact (see Note I).

9. Reporting Comprehensive Income

      In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130 (SFAS No. 130), Reporting
Comprehensive Income, which is effective for the Company's year ending February
27, 1999. SFAS No. 130 addresses the reporting and displaying of comprehensive
income and its components. Earnings (loss) per share will only be reported for
net earnings (loss), and not for comprehensive income. Adoption of SFAS No. 130
relates to disclosure within the financial statements and is not expected to
have a material effect on the Company's financial statements.

10. Segment Information

      In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131 (SFAS No. 131), Disclosure About Segments of an Enterprise and
Related Information, which is effective for the Company's year ending February
26, 1999. SFAS No. 131 changes the way public companies report information about
segments of their business in their financial statements and requires them to
report selected segment information in their quarterly reports. Adoption of SFAS
No. 131


                                       55
<PAGE>

relates to disclosure within the financial statements and is not expected to
have a material effect on the Company's financial statements.

11. Fiscal Year

      The Company's fiscal year ends on the Sunday nearest to February 28. The
fiscal years ended February 27, 1999, February 28, 1998 and March 1, 1997
contained 52 weeks.

12. Reclassification

      Certain prior year amounts have been reclassified in order to conform to
the current year's presentation.


                                       56
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

13. Use of Estimates

      In preparing the Company's financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

14. Impairment of Long-Lived Assets

      The Company applies Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of. Accordingly, when indicators of impairment are present, the
Company periodically evaluates the carrying value of property, plant and
equipment and intangibles in relation to the operating performance and future
undiscounted cash flows of the underlying business. The Company adjusts carrying
amount of the respective assets if the expected future undiscounted cash flows
are less than their book values. No impairment loss was required in fiscal years
1999, 1998 and 1997.

15. Fair Value of Financial Instruments

      Based on borrowing rates currently available to the Company for debt with
similar terms and maturities, the fair value of the Company's long-term debt
approximate the carrying value. The carrying value of all other financial
instruments potentially subject to valuation risk, principally cash, accounts
receivable and accounts payable, also approximate fair value.

NOTE C - CONCENTRATION OF RISK

      For the current fiscal year, sales to the Company's largest customer
accounted for 38.8% of net sales and 23% and 18%, respectively, for the two
prior fiscal years. Sales to the second largest customer in the current fiscal
year were 33.6% of net sales and 22% and 19%, respectively, for the two prior
fiscal years. As previously described, K mart, which represented $0 of net sales
in the current fiscal year, 16% and 40%, for the two prior fiscal years, advised
the Company it would no longer continue its commitment to the Brittania
trademark


                                       57
<PAGE>

and consequently, the Company currently has no business with this customer. No
other customer accounts for more than 10% of the Company's consolidated net
sales for fiscal 1999, 1998 and 1997.


                                       58
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE D - PRIVATE PLACEMENT

      On August 15, 1996, the Company completed a $3.5 million private placement
with an investment partnership. Terms of this transaction included the issuance
of 250,000 shares and $2,760,000 of 12.5% convertible subordinated debentures
which are due August 15, 2001.

      The convertible subordinated debentures are secured by a second mortgage
on the Company's manufacturing and distribution facility located in
Cartersville, Georgia. In conjunction with the sale of this property completed
on October 1, 1997 (see Note G), the Company prepaid $707,000 of these
debentures.

      The debentures, after giving effect to the prepayment related to the sale
of the Company's facility referred to above, were convertible into the Company's
common stock over the next five years. The investment partnership waived all
conversion rights.

      The agreement grants the investor certain registration rights for the
shares issued and the conversion shares to be issued.

      The difference between the purchase price of the shares issued and their
fair market value on August 15, 1996 aggregated $197,500. This was reflected as
deferred issue cost and will be amortized over the expected five-year term of
the subordinated convertible debentures. The prorated portion of these costs
associated with the prepaid $707,000 of these debentures was recognized in the
accounting period in which the event occurred.

      Costs associated with this private placement aggregated $409,000 including
$104,000 related to the shares issued which have been charged to paid in
capital. The remaining balance of $305,000 will be amortized over the five-year
term of the debentures.


                                       59
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE D - PRIVATE PLACEMENT - Continued

      The Company was in default in respect to interest payments due on the
subordinated debt in August 1997, and again in February 1998. In September 1997,
the Subordinated debt holder and the Company entered into an agreement to extend
the cure period on the default. This forbearance agreement was extended month by
month until May 1998. In May 1998, the Company entered into an agreement with
the debt holder to extend the cure period, with respect to $322,551 in prior
interest payment defaults and for the interest payment due in August 1998, until
December 1998. In return, the Company agreed to secure the debentures by a first
priority lien on all the assets of the Company, to the extent not otherwise
prohibited under the revolving credit facility (Note H), and to issue five-year
warrants convertible to 16,500,000 shares of the Company's stock at an exercise
price of $.10. The Company obtained an independent valuation of this
transaction, in the amount of $175,000, and this amount was expensed in fiscal
year 1998. To the extent that the Company has insufficient authorized and
unissued shares of common stock to satisfy the exercise of the warrants, the
Company shall use its best efforts to promptly cause its authorized capital to
be increased to the extent necessary to satisfy the conversion rights in full.
The Company can, at its option within the framework of the forbearance
agreement, prepay all or part of the outstanding subordinated debt at a price
equal to 125% of the principal amount paid. The Company is currently in default
for interest payments due since August 1997 on this note, including the interest
payment due February 1999. There is no forbearance agreement in effect
subsequent to December 1998 and therefore, the outstanding liability of
$2,052,986 is classified as a current liability.

NOTE E - UNUSUAL (CREDIT) CHARGE

      In November, 1992, the Company acquired Phoenix Associates, Inc., a
manufacturing facility in Puerto Rico, pursuant to a stock purchase agreement.
Phoenix had been an exclusive contractor for the Company, manufacturing many of
the Company's product lines. A portion of the purchase price was subordinated
debt payable to the former owners of Phoenix, of which $300,000 was due February
2, 1998. In April, 1993, the Company discovered an inventory variance of
$1,700,000, principally attributable to unrecorded manufacturing and material
cost variance at the Puerto Rico facility, which were incurred prior to the


                                       60
<PAGE>

Company's acquisition of this facility. As a result, the Company initiated an
action against the former owners of the facility as more fully described in Note
L. Accordingly, in fiscal 1995 the Company eliminated this payable and reflected
such reduction as an unusual credit in the 1995 financial statements.

      In March of fiscal 1994, the Company terminated the employment contracts
of its Chairman and Vice-Chairman. In accordance with the underlying agreement,
they were paid in aggregate of approximately $400,000 per year in severance and
other benefits, through February 27, 1999.

      As of February 27, 1999, the accued unusual charge of $95,833 represents
payments due under the termination agreements to the former Chairman and
Vice-Chairman. As of October 1997, pending negotiation of more favorable terms,
payment under these agreements was suspended (see Note L).


                                       61
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE F - INVENTORIES

      Inventories are recorded at the lower of cost or market value using the
first in-first-out (FIFO) cost flow method, and are summarized as follows:

                                   February 27,      February 28,
                                        1999              1998
                                   ------------      ------------
     Raw materials                   $       --        $  166,646
     Work in process                         --           756,959
     Finished goods                   1,108,860         2,166,778
                                     ----------        ----------

                                     $1,108,860        $3,090,383
                                     ==========        ==========

NOTE G - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are summarized as follows:

                                    February 27,     February 28,
                                       1999              1998
                                    ------------     ------------
     Land                            $       --        $       --
     Buildings and improvements          26,034             9,130
     Machinery and equipment          1,485,090         3,384,115
     Furniture and fixtures             142,489           791,242
                                     ----------        ----------
                                      1,653,613         4,184,487
     Less accumulated
     depreciation                     1,115,090         3,226,412
                                     ----------        ----------

                                     $  538,523        $  948,075
                                     ==========        ==========


                                       62
<PAGE>

      On October 1, 1997, the Company completed the consolidation if its
facilities and sold its 152,000 square foot manufacturing and distribution
facility in Cartersville, Georgia for cash aggregating $2,850,000. The Company
reflected a gain on the sale in its third fiscal quarter of $793,000. The
proceeds were used to pay the $525,000 financing secured by this property, to
prepay $707,000 of the convertible subordinated debentures secured by a second
mortgage on this property, and to pay a $176,000 prepayment penalty incurred
from the prepayment of the subordinated debt. The remaining proceeds were
utilized to reduce the revolving credit financing.


                                       63
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE H - LONG-TERM DEBT AND NOTES PAYABLE

1. Revolving Credit

The Company has a $15 million revolving credit facility which expired in March,
1998, and has been extended to August 31, 1999. The revolving credit agreement
provides for loans based upon eligible accounts receivable and inventory, a
$3,000,000 letter of credit facility and purchase money term loans of up to 75%
of the orderly liquidation value of newly acquired and eligible equipment.
Borrowings bear interest at 2-3/4% above prime. The agreement requires, among
other provisions, the maintenance of minimum working capital and net worth
levels and also contains restrictions regarding payment of dividends. Borrowings
under the agreement are collateralized by substantially all of the assets of the
Company. At February 27, 1999, the revolving credit facility was not utilized,
and the Company was not in compliance with the net worth and working capital
covenants.

2. Capital Leases

The Company leases equipment under capital leases. A schedule of the yearly
minimum rental payments is as follows:

          February 2000                          $ 64,488
          February 2001                            64,488
          February 2002                             2,857
                                                 --------
         Total minimum lease payments             131,833
         Less amount representing interest        (11,131)
                                                 --------

         Present value of net minimum lease
         payments                                 120,702
         Less current maturities                  (56,452)
                                                 --------
         Long-term capital lease obligation      $ 64,250
                                                 ========

      At February 27, 1999, the Company has approximately $96,709 of equipment
under capital lease with accumulated depreciation of approximately $29,013.


                                       64
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE  I - NET EARNINGS (LOSS) PER COMMON SHARE

      The following table sets forth the computation of basic and diluted loss
per share:
<TABLE>
<CAPTION>

                                                          February 27,      February 28,        March 1,
                                                              1999              1999              1998
                                                          ------------     -------------     -------------
<S>                                                       <C>              <C>               <C>
     Net earnings (loss) attributable to common
       stockholders                                       $   937,480      $ (4,664,705)     $ (2,746,515)

     Accrued dividends on
       preference shares                                      (81,103)          (84,603)          (82,274)
                                                          -----------      ------------      ------------
     Numerator for basic and
       diluted net earnings
       (loss) per common share
       - earnings (loss)
       attributable
       to common stockholders                             $   856,377      $ (4,749,308)     $ (2,828,789)
                                                          ===========      ============      ============
     Denominator for basic and diluted net earnings
       (loss) per common share - weighted average
       shares outstanding                                 $ 3,238,796         3,238,796      $  4,124,785
                                                          ===========      ============      ============

     Basic and diluted net
       earnings (loss) per
       share                                              $                $       0.26      $      (1.47)
                                                          ===========      ============      ============
</TABLE>


                                       65
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE J - INCOME TAXES

      Deferred income taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Deferred tax assets and
liabilities are measured using enacted tax rates. Significant components of the
Company's deferred taxes at February 27, 1999 and February 28, 1998 are as
follows:

                                                February 27,      February 28,
                                                    1999              1998
                                                ------------      ------------
       Deferred tax assets
         Net operating loss carryforward        $ 6,987,000       $ 7,150,000
         Accrued severance                           36,000           257,000
         Excess of tax basis over book
         basis of inventories                            --           333,000
         Capitalized inventory costs                 22,000            63,000
         Other                                      121,000           127,000
                                                -----------       -----------
                                                  7,166,000         7,930,000
       Deferred tax liabilities
         Difference between the book
         and tax basis of property,
         plant and equipment                        331,000           366,000
                                                -----------       -----------

         Net deferred tax asset                   6,835,000         7,564,000
         Valuation allowance                     (6,835,000)       (7,564,000)
                                                -----------       -----------
         Net deferred taxes                     $        --       $        --


                                       66
<PAGE>

      The Company anticipates utilizing its deferred tax assets only to the
extent of its deferred tax liabilities. Accordingly, the Company has fully
reserved all remaining deferred tax assets, which it cannot presently utilize.
The decrease in valuation allowance of $729,000 is equal to the decrease in net
deferred tax assets.

      For tax purposes at February 27, 1999, the Company's net operating loss
carryforward was $18,405,000, which, if unused, will expire from 2009 to 2013.
Certain tax regulations relating to the change in ownership may limit the
Company's ability to utilize its net operating loss carryforward if the
ownership change, as computed under each regulation, exceeds 50%. Through
February 27, 1999, the change in ownership was less than 50%.

      There was no income tax provision (benefit) for the fiscal years 1999,
1998 and 1997.


                                       67
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE J - INCOME TAXES - Continued

      The following is a reconciliation of the normal expected statutory federal
income tax rate to the effective rate reported in the financial statements.
<TABLE>
<CAPTION>

                                            February 27,      February 28,       March 1,
                                               1999               1998             1997
                                            ------------      -----------        --------
    <S>                                        <C>               <C>              <C>
    Computed "expected" provision for
       Federal income taxes                   (35.0)%           (35.0)%          (35.0)%
       Valuation allowance                     35.0              35.0             35.0
                                               ----              ----             ----
       Actual provision for
       income taxes                              --%               --%              --%
                                               ====              ====             ====
</TABLE>

NOTE K - STOCKHOLDERS' EQUITY

1. Stock Options

      The 1972 stock option plan, as amended, provides for the issuance of
options to purchase up to 340,000 shares of common stock at the market value of
the date of grant. Options are exercisable up to ten years from the date of
grant and vest at 20% per year.

      The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation costs have been recognized for grants made under
the Company's stock option plan. Had compensation cost been determined based on
the fair value, as determined in accordance with the requirements of SFAS No.
123, at the date of grant of stock option awards, the increase in the net loss
for fiscal 1999, 1998 and 1997 would be $91,000, $91,000 and $91,000,
respectively. In fiscal 1999, 1998 and 1997 there were no awards of stock
options. During the initial phase-in period of SFAS No. 123, such compensation
may not be representative of the future effects of applying this statement.


                                       68
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE K - STOCKHOLDERS' EQUITY - Continued

      A summary of option activity for the years ended February 28, 1999,
February 28, 1998 and March 1, 1997 is as follows:

                                             Number of     Weighted Average
                                              Options       Exercise Price
                                             ---------     ----------------
       Balance, March 1, 1997                 264,000           $4.95
         Forfeited                            (11,000)          $3.37
                                              -------           -----

       Balance, March 1, 1997                 253,000           $5.02
         Forfeited                            (78,500)          $5.43
                                              -------           -----

       Balance, February 28, 1998             174,500           $4.84
         Forfeited                            (68,500)          $4.51
                                              -------           -----

       Balance, February 27, 1999             106,000           $5.05
                                              =======           =====

      At February 27, 1999 the status of outstanding stock options is summarized
as follows:

                                          Weighted average
         Exercise         Options            remaining              Options
          Prices        Outstanding      contractual life         exercisable
         --------       -----------      ------------------       -----------
           $3.37           31,000            6.7 years               18,600
           $5.75           75,000            5.7 years               60,000
                          -------                                    ------

                          106,000                                    78,600
                          =======                                    ======


                                       69
<PAGE>

The weighted average fair value at date of grant for those options granted in
fiscal 1996 was $2.34. The fair value of each option at date of grant was
estimated using the Black-Scholes options pricing model utilizing the following
weighted average assumptions:

       Dividend yield                                         0%
       Risk-free interest rate                             6.23%
       Expected life after vesting period               10 years
       Expected volatility                                   58%


                                       70
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE K - STOCKHOLDERS' EQUITY - Continued

3. Issuance of Preferred Stock

      On March 22, 1994, the Company sold to its management group 5,000 shares
of non-voting convertible preferred stock for $1,000,000. These shares are
convertible into 200,000 shares of common stock at the rate of $5.00 per share.
These shares provide for cumulative dividends at a floating rate equal to the
prime rate. Such dividends were convertible into common stock at the rate of
$5.00 per share. The conversion rights were waived in May 1998. These shares are
redeemable, at the option of the Company, on or after February 27, 1999 and have
a liquidation preference of $200 per share. As of February 27, 1999 and February
28, 1998 dividends in arrears were $408,384 and $327,281, respectively.

4. Issuance of Treasury Stock

      In connection with the Company's refinancing on March 22, 1994, (Note D),
the Company entered into a $2,000,000 term loan agreement with a financial
institution. Pursuant to the agreement, the Company issued to the bank 10,000
treasury common shares related to mandatory prepayments, which were not made.

5. Grant of Warrants

      Warrants have been granted to NAN Investors LP to purchase 16,500,000
shares of the Company's Common Stock for $.10 per share, with a five-year term
effective May 21, 1998.

NOTE L - COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

1. Lease Commitments

      Minimum rental commitments under noncancellable leases (excluding
escalation) having a term of more than one year are as follows:


                                       71
<PAGE>

         Fiscal year ending
               2000                                $ 258,000
               2001                                  260,000
               2002                                  265,000
               2003                                  202,000
               2004                                    3,000
                                                   ---------

                                                   $ 988,000
                                                   =========

Rental expense under operating leases, including escalation amounts was
approximately $249,000, $228,007 and $266,000 for the fiscal years ended
February 27, 1999, February 27, 1998 and March 1, 1997, respectively.


                                       72
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE L - COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
- Continued

2. Agreement with Principal Stockholders

On March 1, 1994, in connection with the restructuring described in Note A, the
Company entered into agreements with its two principal stockholders and a group
of employees (the "Management Group"). The agreements provide, among other
things, for:

      The reimbursement of the principal stockholders, limited to $1.50 per
      share to the extent that the gross proceeds per share from the sale of
      common stock by the stockholders during the two-year period beginning
      September 1, 1994 are less than $5.00 per share. Such guaranty is
      applicable to a maximum of 150,000 shares sold by such stockholders,
      subject to reductions under certain circumstances. The principal
      stockholders sold 157,875 shares including 88,400 at prices below $5.00
      per share: 37,125 shares in the fiscal year ended March 1, 1997 and 51,275
      shares in the year ended March 2, 1996 which resulted in a charge to
      operating results of $12,000 and $35,000, respectively.

      Warrants to purchase up to 157,875 shares of common stock equal to the
      number of shares sold by the principal stockholders. The exercise price
      per share of such warrants would equal the gross proceeds per share from
      the corresponding sale by the principal stockholders. Such warrants expire
      on February 28, 2000. As of May 14, 1999, these warrants have not been
      requested to be issued, nor have they been issued.

      The contribution to the Company of life insurance policies with a cash
      value of $535,000 which, if borrowed by the Company, would be repaid by
      the two principal stockholders.

      The cancellation of the outstanding stock options and incentive awards of
      the Group members and the principal stockholders and the authorization to
      issue options to Group members to purchase 150,000 shares of common stock
      based upon certain terms and conditions.


                                       73
<PAGE>

3. Trademark Licensing Agreements

Royalties including minimum licensing payments to GUESS?, Inc. which owns 9.9%
of the outstanding common stock of the Company, aggregated $74,000 in fiscal
1999, $840,000 in fiscal 1998 and $294,000 in fiscal 1997. Due to the lack of
capital resources necessary to develop and support the GUESS? product line, the
Company discontinued its GUESS? division in the first quarter of fiscal year
1999. The GUESS? license was terminated as of March 31, 1998.

Royalty payments including agreement minimums for product sold under the ARROW
brand aggregated $250,000 in fiscal 1999, $250,000 in fiscal 1998 and $315,000
in fiscal 1997. As of March 12, 1999, the Company reached an agreement with the
licensor to terminate the ARROW license agreement. No payment of sales
royalties, or guaranteed minimum royalties were required to be made after
January 1, 1999. The licensor made payment of $50,000 to the Company to settle
any and all outstanding issues connected with the termination of the licensing
agreement.


                                       74
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE L - COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
- Continued

4. Litigation

In September 1993, the Company filed an action against the former owners of
Phoenix Associates, Inc. (Phoenix). The Company sought compensatory damages of
approximately $4.0 million plus declaratory and injunctive relief for acts of
alleged securities fraud, fraudulent conveyances, breach of fiduciary trust and
unfair competition in connection with the acquisition of the common stock of
Phoenix.

Additionally, the Company has filed a demand for arbitration which seeks
compensatory damages of $4.0 million, rescission of the stock purchase
agreement, rescission of an employment agreement and other matters, all on
account of alleged breaches of the stock employment agreement, fraudulent
misrepresentation and breach of fiduciary duties.

In November 1993, the former owners of Phoenix filed counter claims against the
Company alleging improper termination with regard to their employment agreement
and breach of the stock purchase agreement. The Company settled this litigation
and realized $675,000 from this matter which is included in the accompanying
statement of operations for 1999 under the caption "Other income."

On December 9, 1997, a former officer and director of the Company filed a
complaint against the Company in the State Court of Fulton County, State of
Georgia relating to payments allegedly due him under the March 18, 1994
Severance Agreement, and was seeking damages in the amount of $219,472. The
Company reached a settlement with the officer in the amount of $100,000 plus an
amount based on reaching a certain level of recovery, if any, from the Levi
Strauss litigation. Based on the settlement with Levi's, no additional accrual
to the former officer and director was necessary.


                                       75
<PAGE>

On January 15, 1998, in the Supreme court of the State of New York, Westchester
County, a Director of the Company filed a complaint against the Company for
breach of the March 18, 1994 Severance Agreement, and seeking damages in the
amount of $559,456 plus applicable interest and legal fees which was accrued as
of February 28, 1998. The Company on March 9, 1998, filed counterclaims in a
significantly larger amount. In April 1999, the Company reached a settlement
with the Director for $75,000 which resulted in the reduction of approximately
$530,000 in the accrued unusual charge this reduction is included in the
accompanying Statement of Operations under the caption "Other Income."


                                       76
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE L - COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
- Continued

4. Litigation - Continued

The Company is subject to other legal proceedings and claims, which arise, in
the ordinary course of its business. In the opinion of management, other legal
proceedings and claims in which the Company is defendant will be successfully
defended or resolved without a material adverse effect on the consolidated
financial position or results of operations of the Company. The Company with
respect to the aforementioned litigation at February 27, 1999 has made no
provision in the accompanying financial statements.

5. Letters of Credit

At February 27, 1999, the Company had outstanding letters of credit, primarily
with foreign banks of approximately $597,000 for purposes of collateralizing the
Company's obligations for inventory purchases.

NOTE M - RETIREMENT PLAN

The Company has a 401(k) plan for the benefit of all qualified employees. No
contribution was made for fiscal years 1999, 1998 and 1997.

NOTE N - BRITTANIA LITIGATION

Beginning in September, 1988, the Company became a licensee of Brittania
Sportswear, Ltd., a wholly-owned subsidiary of Levi Strauss & Co., to
manufacture and market men's underwear and other products under the trademark
"Brittania from Levi Strauss & Co". Sales under this license aggregated $0 in
fiscal year 1999, $4.5 million in fiscal 1998, and $14.9 million in fiscal 1997.

As of January 1, 1997, the license was renewed for a five-year term, including
automatic renewals of two years if certain minimum sales levels were achieved.
On January 22, 1997, Levi's announced its intention to sell Brittania. In light
of the actions announced by Levi's, K mart, the largest retailer of the


                                       77
<PAGE>

Brittania brand and the Company's largest customer accounting for approximately
$11 million of the Company's fiscal 1997 sales of Brittania product, advised the
Company that it would no longer continue its on-going commitment to the
Britannia trademark.

The Company filed a lawsuit against Levi Strauss & Co. and Brittania Sportswear,
Ltd., alleging that the licensor breached various obligations under the
licensing agreement, including without limitation its covenant of good faith and
fair dealing. The Company agreed to settle this litigation in June 1998 and
realized approximately $725,000 in gross value from this matter which is
included in the accompanying statement of operations under the caption "Other
income."


                                       78
<PAGE>

                   Nantucket Industries, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
             February 27, 1999, February 28, 1998 and March 1, 1997

NOTE O - SUBSEQUENT EVENT (UNAUDITED)

Subsequent to year-ended February 27, 1999, the Company ceased all operations
and sold certain inventory and fixed assets as well as turned over the
collection of all accounts receivable to the primary lender of the Company in
order to satisfy a portion of the outstanding debt secured by the assets. The
carrying value of the inventory and fixed assets sold was approximately
$1,000,000. The Company expects to seek relief from the remaining debt
outstanding, to all creditors, through a voluntary petition under Chapter 11 of
the United States Bankruptcy Code in February 2000. Pending Bankruptcy Court
approval of the Disclosure Statement as adequate, the Company intends to solicit
votes on the Plan of Reorganization ("the Plan") from the Company's secured
lenders and stockholders. From the Filing Date of the Plan until the Effective
Date of the Plan, the Company will operate its business as a
debtor-in-possession subject to the jurisdiction of the Bankruptcy Court.


                                       79

<PAGE>

ITEM 9. CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
        FINANCIAL DISCLOSURE

      None in last two years.


                                       80
<PAGE>

                                    PART III


ITEM 10. DIRECTORS  AND  EXECUTIVE  OFFICERS,  PROMOTERS  AND CONTROL  PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Directors, Executive Officers and Significant Employees

      The following  sets forth,  as of June 1, 2001,  the names and ages of all
directors,  executive officers,  and other significant employees of the Company;
the date when each director was appointed;  and all positions and offices in the
Company  held by each.  Each  director  will hold  office  until the next annual
meeting of  shareholders  and until his or her  successor  has been  elected and
qualified: Name Age Positions Held Date Appointed Director

                                                            Date
                                   Positions                Appointed
Name                     Age       Held                     Director
----------------------   ---       ---------------          -------------
John H. Treglia          58        Director, President,     Jan. 18, 2000
                                   And Secretary

Dr. Frank J. Castanaro   50        Director                 Feb. 17, 2000

George D. Gold           79        Director                 1966

Marsha Ellis             40        Treasurer and Chief      Jan. 18, 2000
                                   Accounting Officer

      Set forth below is information regarding the principal occupations of each
current  director  during the past five years or more.  None of the directors or
principal  executive officers holds the position of director in any other public
company.

      Mr. Treglia is a graduate of Iona College, from which he received a BBA in
Accounting  in  1964.  Since  January  18,  2000  he has  served  as  president,
secretary, and a director of the Company, devoting such time to the business and
affairs of the Company as is required for the  performance  of his duties.  From
1964 until 1971, Mr. Treglia was employed as an accountant by Ernst & Ernst and,
thereafter,  founded and operated several businesses in various areas. From 1994
through 1998, Mr. Treglia served as a consultant to several companies which were
in Chapter 11. These included J.R.B.  Contracting,  Inc., Laguardia Contracting,
and  Melli-Borrelli  Associates.  In 1996, Mr. Treglia  founded  Accutone In., a
company engaged in the business of manufacturing and distributing  hearing aids.
He has served as its president and CEO since such time.

      George J. Gold has been a director of the company  since 1966.  During his
tenure  with the  Company he has  served as its  Chairman  of the  Board,  Chief
Executive Officer, and Treasurer of the company. He resigned all positions other
than Director on March 18, 1994.

      Dr. Castanaro received a Bachelor of Science degree from the University of
Scranton in 1974.  In 1978 he graduated  from  Georgetown  University  School of
Dentistry  and has been in private  practice as a dentist  since such time.  Dr.
Castanaro was  appointed as a director of the company on February 17, 2000.  Dr.
Castanaro has assisted two large ophthalmology practices to introduce and expand
their activities in Laser therapy, including, but not limited to, Lasik


                                       81
<PAGE>

procedures.  Dr.  Castanaro  presently  practices  dentistry in partnership with
Dr.'s  Joseph C. and John B.  Fontana  in  Peekskill,  New York,  and has a solo
practice in Yonkers,  New York. Dr. Castanaro is a member of the American Dental
Association,  the Dental  Society of the State of New York,  the Ninth  District
Dental Society, and the Peekskill-Yorktown Dental Society.

      Marsha Ellis has served as treasurer and chief  accounting  officer of the
Company  since  January 18,  2000.  Miss Ellis  attended  North  Carolina  State
University  at which  she  studied  accounting  and  computer  sciences.  She is
currently employed full time as comptroller of St. Ives Country Club. Miss Ellis
served as  assistant  controller  of the company from 1994 until it ceased doing
business in October of 1999. Since January 18,2000 she has kept that position on
a part time basis  devoting  much of her time to the business and affairs of the
Company as is required for the  performance of her duties.  From 1986 until 1993
Ms. Ellis was a manager in the  Accounting  Department  of The  British-American
International Services Group of Companies.

Resignations of Officers and Directors
During the Fiscal Year February 2000

      On June 22,  1999,  during the fiscal  year prior to that  covered by this
report,  Stephen  Samberg  submitted  his  resignation  as chairman,  CEO, and a
director  of the  Company.  As of such date,  the Company was left with only one
executive  officer,  Nicholas  J.  Dmytryszyn,  who served in the  positions  of
secretary,  CFO, and treasurer.  Members of the Company's former management have
advised  present  management that Mr.  Dmytryszyn  resigned all of his positions
with the Company some time in October 1999.  The board of directors did not take
any action to fill the vacancies caused by the  resignations of Messrs.  Samberg
and Dmytryszyn. Therefore, from October 1999 until January 18, 2000 (see below),
the Company had no executive officers in place.

Resolution to Reorganize the Company Under Chapter 11
And Appointment of John H. Treglia to Administer Same

      Prior to the fiscal year  covered by this  report at a special  meeting of
the board of  directors,  held on  January  18,  2000,  the  Company's  board of
directors reviewed the Company's  insolvent state, its total absence of business
operations since October 1999 and the lack of prospects to improve its financial
and  operational  positions.  In  light  of  the  company's  poor  position  and
prospects, the board approved the filing of a Voluntarily petition under Chapter
11 of the United  States  Bankruptcy  Code in the Federal Court for the Southern
District of New York for the purpose or reorganizing the business and affairs of
the  Corporation  through  a  merger  with or  acquisition  of a new and  viable
business.

      In connection with the projected reorganization of the Company with a new,
viable  business,  John H.  Treglia,  was  appointed  as a director  to fill the
vacancy  caused by the  resignation  of James H.  Carey,  which had  occurred on
October 8, 1999.  Upon the  appointment  of Mr.  Treglia,  the  Company's  board
consisted  of Mr.  Treglia  and four  members of the former  management,  Steven
Schneider,  Marc Feder,  Kenneth Klein, and George J. Gold. Mr. Treglia,  who is
the president and a controlling  shareholder of Accutone Inc., a company engaged
in the  business  of  manufacturing  and  distributing  hearing  aids,  was also
appointed  President and  Secretary of the company and of it four  subsidiaries.
Management is seeking merger or acquisition  candidates in order to continue the
existence of the Company.  It management is unsuccessful in finding at least one
appropriate  candidate,  the company and its  subsidiaries  will cease to exist.
Management  has not  identified  any  specific  business  or even  any  specific
industry for the company or any of its


                                       82
<PAGE>

subsidiaries  and has not made or entered  into any definite  plans,  proposals,
arrangements,   or   understandings   with  respect  to  any  possible  business
combination or opportunity nor has it made  application to the Bankruptcy  Court
for approval of any particular merger or acquisition.  However, Accutone Inc., a
company controlled by John H. Treglia, the Company's current president,  will be
among the companies and businesses which management will consider with regard to
the possibility of an acquisition or merger transaction with the Company. If the
Company  should  ultimately  acquire a business or  property  from any member of
management,  the  terms of such  acquisition  might  not be the  result of arm's
length  negotiations.  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  is  such  transactions  were
effected on an arms length basis.

Appointment of Marsha Ellis as Treasurer and Chief Accounting Officer

      Prior to the fiscal year covered by this  report,  at the January 18, 2000
special meeting of the board of directors,  Marsha Ellis,  the former  assistant
comptroller  of the  company,  was  appointed  treasurer  and  chief  accounting
officer, of the Company.

Resignation of Three Directors and Appointment of Dr. F.J. Castanaro to Board

      Prior to the fiscal year covered by this report, at a meeting of the board
of directors  held on February 17, 2000,  Marc Feder  resigned his position as a
director  of the  Company  and the  remaining  directors  present at the meeting
appointed Dr. Frank J.  Castanaro to fill the vacancy on the board caused by Mr.
Feder's resignation.  Subsequent to the said meeting, two more directors, Steven
Schneider and Kenneth Klein also resigned  from the board.  The  resignation  of
Messrs.  Feder,  Klein, and Schneider were submitted in light of the termination
of the Company's former business and the projected reorganization of the Company
through a Chapter 11 proceeding.

Section 16(a) ownership Reporting Compliance

      To the best knowledge of current  management and the members of management
who resigned in February  2000,  during the fiscal year ended February 27, 2000,
the Company did not receive any Forms 3 or 4 or any amendments thereto,  nor did
any  director,  officer or  beneficial  owner of more than 10% of the  company's
equity  securities fail to file, on a timely basis,  reports required by Section
16(a) of the Exchange Act.

ITEM 11. EXECUTIVE COMPENSATION

Compensation of Directors

      Until June of 2000,  when the board of directors  eliminated  compensation
for directors  other than those employed by the Company,  such persons were paid
$5,000  annually  and an  additional  $500 for each Board or  committee  meeting
attended  in person.  No payments  made  during the fiscal  year ended  February
27, 2001.

Compensation Committee Interlocks and Insider Participation

      The  Compensation  Committee  was  disbanded  in May 1998.  As of the date
hereof, the


                                       83
<PAGE>

Board of Directors has not established a new  Compensation  Committee and it has
no plans to do so until such time as the financial position and prospects of the
Company improve significantly.

SUMMARY COMPENSATION TABLE

      The Summary Compensation Table shows compensation  information for each of
the fiscal  years ended  February 28, 2001 and February 27, 2000 for all persons
who served as the Company's chief executive officer. No other executive officers
of the Company  received  compensation  in excess of $100,000  during the fiscal
year ended February 27, 2000.

      To the best  knowledge of current  management,  prior to and/or during the
fiscal year ended  February  27, 2000 the Company had in effect a 401(k)  Profit
Sharing  Plan, a Long Term  Incentive  Plan and one or more Stock Option and SAR
Plans and/or granted stock options outside of specific Plans therefore.  As part
of the  projected  reorganization  under  chapter 11, all existing  compensation
plans and rights to purchase  securities of the Company arising  thereunder will
be terminated, as will all outstanding stock options; any funds or assets in the
company's  401(k) Profit  Sharing Plan and any other  compensation  plan holding
funds or assets of former  employees  will be distributed by the Trustees of any
such  plans to the  beneficial  owners  thereof  and all such Plans will also be
terminated.

                               ANNUAL COMPENSATION

Name and Principal Position        Year           Salary
---------------------------        ----           ------

John H. Treglia                    2001           $ -0-
President, Chief Executive         2000              0
Officer, Secretary and             1999            N/A
Director

ITEM NO. 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

      The  following  table sets  forth  information  as of June 1,  2001,  with
respect to the persons known to the Company to be the beneficial  owners of more
than 5% of the common stock, $.10 par value of the Company.

                             PRINCIPAL SHAREHOLDERS

      The  Company  knows  of  no  person,   other  than  those  listed  in  the
Management's  Shareholdings  Table,  below,  who owns more than 5% of the common
stock of the Company.

Security Ownership of Management

      The  following  table sets  forth  information  as of June 1,  2001,  with
respect to the beneficial ownership of the Common Stock, $. 10 par value, of the
Company by each of the  executive  officers and directors of the company and all
executive officers and directors as a group:


                                       84

<PAGE>

                         MANAGEMENT SHAREHOLDINGS TABLE

--------------------------------------------------------------------------------
                Name and                 Amount and
 Title          Address of               Nature of
  of            Beneficial               Beneficial          Percent of
 Class          Owner                    Ownership           Class (1)
-------         ----------               ----------          -----------
Common          George J. Gold           359,078 (2)            11.09%
Stock           209 Sterling Road
                Harrison, NY 10528

Common          John H. Treglia             -0-                   -0-%
Stock           45 Ludlow Street
                Suite 602
                Yonkers, NY 10705

Common          Dr. Frank J. Castanaro      -0-                   -0-%
Stock           970 North Broadway
                Suite 108
                Yonkers, NY 10701

Common          Marsha Ellis                -0-                   -0-%
Stock           3680 Chartwell Drive
                Suwanee, GA 30024

All directors and
  Officers as a
Group (4 persons)

----------
(Notes to Table Appear on Following Page)

Pursuant  to the rules of the  Securities  and  Exchange  commission,  shares of
Common  Stock  which an  individual  or member  of a group has right to  acquire
within 60 days  pursuant to the exercise of options or warrants are deemed to be
outstanding  for the purpose of computing  the  ownership of such  individual or
group,  but are not deemed to be  outstanding  for the purpose of computing  the
percentage ownership of any other person; shown in the table. Accordingly, where
applicable,  each individual or group member's rights to acquire shares pursuant
to the exercise of options or warrants are noted below.

(2)   All such shares are subject to the Nantucket Industries Stock Voting Trust
      u/i/d March 22, 1994 the  "Voting  Trust").  In  addition,  the  severance
      agreement with Mr. Gold provided for the company to issue,  as of April 1,
      1997,  warrants  for the  purchase of up to a total of $157,875  shares to
      George J. Gold and Donald D. Gold. Such warrants have not yet been issued.


                                       85
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following is a description of any transactions  during the fiscal year ended
February 27, 2001 or any presently proposed  transactions,  to which the Company
was or is to be a party,  in which the amount  involved in such  transaction (or
series of  transactions)  was  $60,000  or more and  which any of the  following
persons  had or is to have a  direct  or  indirect  material  interest:  (I) any
director or executive  officer of the  Company;  (ii) any person who owns or has
the right to acquire 5% or more of the issued and  outstanding  common  stock of
the Company;  and (iii) any member of the immediate  family of any such persons.
Current  management  is not  aware of any  requirements,  which may have been in
effect  prior  to  January  2000,  with  respect  to  the  approval  of  related
transactions by independent directors. Because of its current limited management
resources,  the company does not presently have any  requirement  respecting the
necessity  for  independent  directors  to  approve  transactions  with  related
parties.  All  transactions  are  approved by the vote of the  majority,  or the
unanimous written consent,  of the full board of directors.  J all member so the
board of directors  all members of the board of directors,  individually  and/or
collectively,  could  have  possible  conflicts  of  interest  with  respect  to
transactions with related parties.

Employment Agreement with John H. Treglia

On April 3, 2000, the Company entered into an employment  agreement with John H.
Treglia,  its President and CEO. The agreement  provides for an annual salary in
the amount of  $150,000  and a term of three  years.  Mr.  Treglia has agreed to
waive  the  right  to be paid in cash  until,  in the  opinion  of the  board of
directors, the Company has sufficient financial resources to make such payments.
In lieu of cash salary  payments,  Mr. Treglia may accept shares of common stock
at, or at a discount  from the market  price.  His  agreements  provides for the
possibility  of both  increases in salary and the payment of bonuses at the sole
discretion  of the  board  of  directors,  participation  in any  pension  plan,
profit-sharing  plan, life  insurance,  hospitalization  of surgical  program or
insurance  program  hereafter  adopted by the  Company  (to the extent  that the
employee  is eligible to do so under the  provisions  of such plan or  program),
reimbursement  of  business  related   expenses,   for  the   non-disclosure  of
information   which  the   Company   deems  to  be   confidential   to  it,  for
non-competition  with the Company for the two-year period following  termination
of  employment  with the company and for various  other terms and  conditions of
employment.  The Company  does not intend to provide any of its  employees  with
medical,  hospital  or life  insurance  benefits  until the  board of  directors
determines that it has sufficient financial resources to do so.

                                     PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

      The following is a list of all exhibits and financial  statement schedules
filed as part of this report,  certain of which documents have been incorporated
by reference to documents previously filed on behalf of the Company.


                                       86
<PAGE>

Financial Statements

      The financial statements filed as a part of this report are as follows:

Consolidated balance Sheets -
February 28, 2001, February 27, 2000 and February 27, 1999                 24

Consolidated Statements of Operations - years Ended
February 28, 2001, February 27, 2000 and February 27, 1999                 25

Consolidated Statements of Stockholders' Equity - Years Ended
February 28, 2001, February 27, 2000 and February 27, 1999                 26

Consolidated Statements of Cash Flows - Years Ended
February 28, 2001, February 27, 2000 and February 27, 1999                 27

Notes to Consolidated Financial Statements                                 28

Report of Independent Certified Public Accounts -
Grant Thornton LLP                                                         41

Consolidated Balance Sheets -
February 27, 1999 and February 28, 1998                                    42

Consolidated Statements of Operations -
Year Ended February 27, 1999, February 28, 1998, and March 1, 1997         44

Consolidated Statements of Stockholders' Equity -
Years Ended February 27, 1999, February 28, 1998 and March 1, 1997        45

Consolidated Statements of Cash Flows - Years Ended
February 27, 1999, February 28, 1998 and March 1, 1997                     47

Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedule                                        49

Reports on Form 8-K

      No  reports on Form 8-K have been  filed  during  the last  quarter of the
period covered by this report.


                                       87
<PAGE>

Exhibits

      Exhibits which, in their  entirety,  are  incorporated by reference to any
report, exhibit or other filing previously made with the Securities and Exchange
Commission  are  designated by an asterisk (*) and the location of such material
is included in its description.

<TABLE>
<CAPTION>
Exhibit                                                                                             Page
 No.           Description                                                                          No.

<S>            <C>                                                                                  <C>
(3)(a)         Certificate of Incorporation as currently in effect (filed as Exhibit 3 (a)            *
               to Form 10-K Report for the fiscal year ended February 27, 1988 (the "1988
               10-K").

(3)(b)         By-laws as currently in effect (filed as Exhibit 3(b) to the Form 8K dated             *
               August 15, 1996).

(3)(c)         Certificate of Incorporation of Nantucket Hosiery Mills Corp. filed March 1,
               2000.

(3)(d)         Nantucket Hosiery Mills Inc. filed February 25, 2000.

(4)(a)         Specimen Stock Certificate (filed as Exhibit 4(b) to Registration                      *
               Statement on Form S-1, No. 2-87229 filed October 17, 1983
               (the "1983 Form S-1).

(4)(b)         Share Purchase Rights Agreement, dated as of September 6, 1988, between the            *
               Company and State Street Bank and Trust Company (filed as Exhibit 4(a) to
               Form 8-K Report dated as of September 6, 1988), as amended by the following:
               Amendment No. 1 dated October 3, 1988 (filed as Exhibit 9 to Schedule 14D-9
               Amendment No. I dated October 4, 1988), Amendment No. 2 dated October 18,
               1988 (filed as Exhibit 14 to Schedule 14D-9 Amendment No. 2 dated October
               19, 1988) and Amendment No. 3 dated November 1, 1988 (filed as Exhibit 4(c)
               to Form 10-K Report for the fiscal year ended February 25, 1989 (the " 1989
               10K"), Amendment No. 4 dated as of November 17, 1988 (filed as Exhibit 1 to
               Amendment No. 1 to Form 8-A, dated November 18, 1988) and Amendment dated as
               of August 15, 1994 (filed as Exhibit 4(e) to Form 8-K dated August 19, 1994).

 (4)(c)        Note Acquisition Rights Agreement dated as of September 6, 1988 between the            *
               Company and State Street Bank and Trust Company, as amended on September 19,
               1988 (filed as Exhibit 4(b) to From 8-K Report dated September 6, 1988) as
               amended by the following: Amendment No. 2 dated October 3, 1988 (filed as
               Exhibit 10 to Schedule 14D-9 Amendment No. 2 dated October 4, 1988),
               Amendment No.3 dated October 18, 1988
</TABLE>


                                       88
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>                                                                                  <C>

               (filed as Exhibit 15 to Schedule 14D-9 Amendment No. 2 dated October 19,
               1988), Amendment No. 4 dated November 1, 1988, (filed as Exhibit 4(d) to the
               1989 10-K) and Amendment No. 5 dated as of November 17, 1988 (filed as
               Exhibit 2 to Amendment No. 1 to Form 8-A, dated November 18, 1988).

(4)(d)         Certificate of Designation, Preferences and Rights of Non-Voting Convertible           *
               Preferred Stock of Nantucket Industries, Inc. (filed as Exhibit 4 to Form
               8-K Current Report dated March 22, 1994 (the "1994 8-K").

(4)(e)         Common Stock Purchase Agreement dated as of August 18, 1994 by and among               *
               Registrant, Guess?, Inc., the Maurice Marciano 1990 Children's Trust, the
               Paul Marciano Trust u/t/d 2/20/86, the Armand Marciano Trust u/t/d 2/20/86
               and The Samberg Group, L.L.C. (filed as Exhibit 4(d) to Form 8-K dated
               August 19, 1994).

(4)(f)         Common Stock and Convertible Subordinated Debenture Purchase Agreement dated           *
               as of August 13, 1996 by and among Nantucket Industries, Inc. and NAN
               Investors, L.P. (filed as Exhibit 4(f) to the Form 8-K dated August 15,
               1996).

(4)(g)         Sixth Amendment dated as of August 15, 1996 to that certain Rights Agreement           *
               dated as of September 6, 1988 between Nantucket Industries, Inc., and State
               Street Bank & Trust Company (filed as Exhibit 4(g) to the Form 8-K dated
               August 15, 1996).

(9)            Voting Trust Agreement by and among the Samberg Group, L.L.C., George Gold,            *
               Donald Gold, Stephen Samberg, Stephen Sussman, Robert Polen, Ray Wathen,
               Nantucket Industries, Inc., Robert Rosen and Joseph Mazzella dated as of
               March 21, 1994 (filed as Exhibit 99(b) to 1994 8-K).

(10)(a)        Nantucket Industries, Inc. Savings Plan effective June 1, 1988 by and                  *
               between the Registrant and George Gold and Donald Gold as Trustees,
               Amendment No. 1 thereto dated June 22, 1990 and Amendment No. 2 thereto
               dated November 19, 1990 (filed as Exhibit (10)(a) to Form 10-K Report for
               the fiscal year ended February 29, 1992 (the " 1992 10-K")).

(10)(b)        Incentive Stock Option Plan (filed as Exhibit 10(d) to the 1988 10-K).                 *

(10)(c)        1988 Nantucket Industries, Inc. Nonstatutory Stock Option Plan (filed as               *
               Exhibit 10(c) to the 1989 10-K).

(10)(e)(i)     Trademark Agreement between Registrant and Faberge,                                    *
</TABLE>


                                       89
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>                                                                                  <C>

               Incorporated dated November 1, 1980 ("Trademark Agreement") regarding the
               trademarks "Faberge" and "BRUT" for use with men's and boy's underwear and
               bathing suits (filed as Exhibit 10(g)(i) to 1987 10-K); Amendment dated
               November 16, 1982 regarding the trademark "BRUT 33" (filed as Exhibit 10(m)
               to 1983 S-1); Letter dated August 24, 1983 from Faberge to Registrant with
               respect to renewal of the Trademark Agreement for an additional five year
               period (filed as Exhibit 10(g)(iii) to 1987 10-K); Amendment dated May 6,
               1983 regarding the trademarks "BRUT Medallion Design" and "Brut Royale"
               (filed as Exhibit 10(k)(ii) to 1983 S-1; Amendment dated December 5, 1983
               (filed as Exhibit 10(g)(iv) to the Form 10-K Report for the fiscal year
               ended March 3, 1984 (the " 1984 10-K"); Amendment dated October 3 1, 1984
               (filed as Exhibit 10(g)(xiii) to the Form 10-K Report for the fiscal year
               ended March 2, 198 5 (the "1985 10-K")); Amendment dated March 14, 1986
               extending license to include swimwear tops (filed as Exhibit 10(g)(v) to the
               1986 10-K; Amendment dated April 25, 1984 (filed as Exhibit 10(g)(v) to the
               1984 10-K); Letter dated December 31, 1987, extending term of Trademark
               Agreement for an additional five year period and deleting men's and boy's
               bathing suits from coverage (filed as Exhibit 10(g)(iii) to the 1988 10-K);
               extension dated February 24, 1989, extending expiration date of the
               Trademark Agreement to February 28, 1998 (filed as Exhibit 10(e)(ii) to the
               1989 10-K).

(10)(e)(ii)    Intentionally omitted.

(10)(e)(iii)   License Agreement between the Company and BRITTANIA Sportswear, Ltd.                   *
               (subsidiary of Levi Strauss) dated September 6, 1988 for the manufacture and
               sale of men's and ladies' underwear under the "BRITTANIA" trademark (filed
               as Exhibit 19 to Form 10-Q for the Quarter ended August 27, 1988).

(10)(e)(iv)    License Agreement between the Company and BRITTANIA Sportswear, Ltd.                   *
               (subsidiary of Levi Strauss) dated December 31, 1991 for the manufacture and
               sale of men's and ladies' underwear under the "BRITTANIA" trademark (filed
               as Exhibit 10(e)(iv) to Form 10-K for the fiscal year ending February 26,
               1994.

(10)(e)(v)     Amendment dated January 31, 1996 to License Agreement between the Registrant           *
               and BRITTANIA Sportswear, Ltd. (subsidiary of Levi Strauss) for the
               manufacture and sale of men's and ladies' loungewear under the "BRITTANIA"
               trademark.

(10)(e)(vi)    Intentionally omitted.
</TABLE>


                                       90
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>                                                                                  <C>
(10)(e)(vii)   License Agreement between the Company and Brittania Sportswear Limited, a              *
               subsidiary of Levi Strauss & Co. effective as of January 1, 1997,
               extending the Company's license through December 31, 1999, for
               the manufacture and sale of men's underwear and loungewear under
               the 'BRITTANIA" trademark (filed as Exhibit 10(e)(iii) to the
               Form 10-Q for the quarter ended August 31, 1996).

(10)(f)        Modification and Extension of Lease dated November 30, 1982 between                    *
               Registrant and Satti Development Corp. (filed as Exhibit 10(1) to the 1983
               10-K); (i) amendment dated February 16, 1988 extending term of lease through
               April 30, 1993 (filed as Exhibit 10(h) to the 1988 10-K); (ii) amendment
               dated August 15, 1991 expanding dernised premises, extending term of lease
               through May 31, 1997 and modifying annual rental (filed as Exhibit 10(f)(ii)
               to 1992 Form 10-K).

(10)(f)(i)     Intentionally omitted.

(10)(g)        Promissory Notes from George J. Gold and Donald D. Gold to Registrant (filed           *
               as Exhibit 10(s) to 1983 S-1).

(10)(h)        Intentionally omitted.

(10)(i)        Amended and Restated Credit Agreement dated December 8, 1989, between                  *
               Registrant and Manufacturers Hanover Trust Company ("MHTC") for the
               borrowing of up to $11,500,000 of which $8,500,000 is on a revolving credit
               basis until March 5, 1993, the balance to be used against letters of credit
               issued by NIETC for the benefit of the Registrant; $8,500,000 Note dated
               December 8, 1989, from Registrant to MHTC; Continuing Letter of Credit
               Security Agreement dated December 8, 1989, between Registrant and MHTC.
               (filed as Exhibit 10(i) to the Form 10-K Report for the fiscal year ended
               March 3, 1990 (the " 1990 10-K") Omitted exhibits to said Agreement will be
               furnished to the Commission upon request. (i) First Amendment dated August
               1, 1990 to Loan Agreement between Registrant and M]HTC (filed as Exhibit
               10(i)(i) to the Form 10-K Report for the fiscal year ended March 2, 1991);
               (ii) Second Amendment and Waiver dated as of May 23, 1991 to Loan Agreement
               between Registrant and MHTC (filed as Exhibit (10)(i)(ii) to the 1992 Form
               10-K); (iii) Fifth Amendment and Waiver dated as of February 22, 1993, to
               Amended and Restated Credit Agreement dated as of December 8, 1989, between
               the Registrant and Chemical Bank, as successor by merger to MHTC (filed as
               Exhibit (iii) to the Form 8-K dated March 4, 1993); (iv) Sixth Amendment and
               Waiver dated as of March 4, 1993, to Amended and Restated Credit Agreement
               (filed as Exhibit 10(k)(iv) to 1993 10-K).
</TABLE>


                                       91
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>                                                                                  <C>
(10)(j)(i)     Revolving Credit Agreement dated as of December 30, 1993 by and between                *
               Chemical Bank, Nantucket Industries, Inc., Nantucket Mills, Inc. and
               Nantucket Management Corporation (the "Credit Agreement") (filed as Exhibit
               10(j)(i) to the 1994 Form 10-K).

(10)(j)(ii)    First Amendment to Credit Agreement dated as of February 28, 1994 by and               *
               between Chemical Bank, Nantucket Industries, Inc., Nantucket Mills, Inc. and
               Nantucket Management Corporation (filed as Exhibit 10(j)(ii) to the 1994
               10-K).

(10)(j)(iii)   Second Amendment to Credit Agreement dated as of March 17, 1994 by and                 *
               between Chemical Bank, Nantucket Industries, Inc., Nantucket Mills, Inc. and
               Nantucket Management Corporation (filed as Exhibit 10(j)(iii) to the 1994
               10-K).

(10)(k)        Intentionally omitted.

(10)(n)        Intentionally omitted.

(10)(o)        Intentionally omitted.

(10)(q)        Intentionally omitted.

(10)(s)        Intentionally omitted.

(10)(t)        Intentionally omitted.

(10)(u)        Intentionally omitted.

(10)(v)        Sublicense Agreement dated November 20, 1991 by and among Dawson Consumer              *
               Products, Inc., Registrant and PGH Company regarding the use of the
               trademark "Adolfo" on men's high fashion underwear briefs (filed as Exhibit
               (10)(v) to the 1992 Form 10-K).

(10(w)         Sublicense Agreement dated October 16, 1992 by and among Salant Corporation,           *
               Dawson Consumer Products, Inc. and the Registrant regarding the use of the
               trademark "John Henry" on men's high fashion underwear briefs (filed as
               Exhibit (10)(w) to the 1992 Form 10-K).

(10)(x)        Employment Agreement dated May 26, 1992 by and between the Registrant and              *
               Stephen P. Sussman (filed as Exhibit 10(x) to the Form 10Q Report for
               November 28, 1992) as amended by the Amendment dated August 8, 1994 (filed
               as Exhibit 99(a) to Form 8-K dated August 19, 1994).
</TABLE>


                                       92
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>                                                                                  <C>
(10)(x)(i)     Amendment No. 2 dated August 9, 1996 to that certain Employment Agreement              *
               dated as of May 26, 1992 by and between Nantucket Industries, Inc. and
               Stephen P. Sussman (filed as Exhibit 99(a) to the Form 8-K dated August 15,
               1996).

(10)(y)        Purchase and Sale Agreement dated as of July 31, 1997 by and among Mimms               *
               Investments, a Georgia general partnership and Nantucket Industries, Inc.
               regarding the sale of the Registrant's property at 200 Cook St.,
               Cartersville, GA.(filed as Exhibit (10)(y) to 10Q report for August 30,
               1997).

(10)(y)(i)     Amendment dated August 14, 1997 to Purchase and Sale Agreement dated as of             *
               July 31, 1997 by and among Mimms Investments, a Georgia general partnership
               regarding the sale of the Registrants property located at 200 Cook St.,
               Cartersville, GA (filed as Exhibit (10)(y)(i) to 10Q report for August 30,
               1997).

(10)(y)(ii)    Amendment dated August 27, 1997 to Purchase and Sale Agreement dated as of             *
               July 31, 1997 by and among MimmsInvestments, a Georgia general partnership
               regarding the sale of the  Registrants property located at 200 Cook St.,
               Cartersville, GA (filed as Exhibit (10)(y)(ii) to 10Q report for August
               31,1997).

(10)(z)(i)     Intentionally omitted.

(10)(z)(ii)    Amended and Restated Employment Agreement by and between Nantucket                     *
               Industries, Inc. and Stephen M. Samberg (filed as Exhibit 10(z)(ii) to the
               1994 Form 10-K) as amended by the Amendment dated August 8, 1994 (filed as
               Exhibit 99(c) to Form 8-K dated August 19, 1994).

(10)(z)(iii)   Amendment No. 2 dated August 9, 1996 to that certain Employment Agreement              *
               dated as of March 18, 1994 by and between Nantucket Industries, Inc. and
               Stephen M. Samberg (filed as Exhibit 99(c) to the Form 8-K dated August 15,
               1996).

(10)(z)(iv)    Amendment No. 3 dated July 1, 1997 to that certain Employment Agreement                *
               dated as of March 18, 1994 by and between Nantucket Industries, Inc and
               Stephen M. Samberg (filed as Exhibit (10)(z)(iv) to 1998 10-K).

(10)(aa)       License Agreement dated October 5, 1992 between Cluett Peabody & Co., Inc.             *
               and Registrant with respect to the ARROW trademark (filed as Exhibit 2 to
               Form 10Q Report for November 28, 1992).
</TABLE>


                                       93
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>                                                                                  <C>
(10)(bb)       License Agreement dated December 9, 1992 between GUESS?, Inc. and Registrant           *
               with respect to the GUESS? trademark (filed as Exhibit 3 to Form 10Q Report
               for November 28, 1992).

(10)(cc)       Registrant's 1992 Long-Term Stock Option Plan (filed as Exhibit 4 to Form              *
               10Q Report for November 28, 1992).

(10)(dd)       Registrant's 1992 Executive Performance Benefit Plan (filed as Exhibit 5 to            *
               Form 10Q for November 28, 1992).

(10)(ee)       Management Agreement made as of January 1, 1993 by and between Nantucket               *
               Management Corp. (a subsidiary of Registrant) and Registrant (filed as
               Exhibit 10(ee) to 1993 10-K).

(10)(ff)       License Agreement dated December 21, 1992 between Registrant and McGregor              *
               Corporation with respect to the Botany 500 Trademark (filed as Exhibit
               10(ff) to 1993 10-K).

(10)(ff)(I)    Letter Agreement dated July 10, 1995 amending License Agreement between the            *
               Registrant and McGregor Corporation with respect to the Botany 500 Trademark
               (filed as Exhibit 10(ff) to 1993 10-K).

(10)(gg)       Severance Agreement dated as of March 18, 1994 by and among Nantucket                  *
               Industries George J. Gold and Donald Gold (filed as Exhibit 10(gg)(i) to the
               Form 10K Report for the fiscal year ended February 25, 1995). (Filed as
               Exhibit 10(gg) to the 1994 Form 10-K) as amended by the Amendment dated
               August 17, 1994 (filed as Exhibit 99(b) to Form 8-K dated August 19, 1994).

(10)(gg)(i)    Letter dated February 28, 1995 amending Severance Agreement by and among               *
               Registrant, George J. Gold and Donald D. Gold (filed as Exhibit 10(gg)(i) to
               the Form 10-K Report for the fiscal year ended February 25, 1995).

(10)(gg)(ii)   Third Amendment dated August 9, 1996 to that certain Severance Agreement               *
               dated as of March 18, 1994 by and among Nantucket Industries, Inc. George J.
               Gold and Donald D. Gold (filed as Exhibit 99(b) to the Form 8-K dated August
               15, 1996).

(10)(hh)       Agreement dated as of March 1, 1994 by and among the Samberg Group, L.L.C.,            *
               George J. Gold, Donald D. Gold, Stephen M. Samberg, Stephen P. Sussman,
               Robert Polen, Raymond L. Wathen and Nantucket Industries, Inc. (filed as
               Exhibit 10(hh) to the 1994 Form 10-K).

(10)(ii)       Loan and Security Agreement by and between                                             *

</TABLE>


                                       94
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>                                                                                  <C>
               Nantucket Industries,  Inc. and Congress Financial Corp. dated as of March 21,
               1994 (filed as Exhibit 99(b) to 1994 8-K).

(10)(ii)(i)    Amendment No. 2 dated July 31, 1996, to Loan and Security Agreement dated as           *
               of March 21, 1994, among Nantucket Industries, Inc. and Congress Financial
               Corp. (filed as Exhibit 99(o) to the Form 8-K dated August 15, 1996).

(10)(ii)(ii)   Amendment No. 3 dated August 15, 1996, to Loan and Security Agreement dated            *
               as of March 21, 1994, among Nantucket Industries, Inc. and Congress
               Financial Corp. (filed as Exhibit 99(p) to the Form 8-K dated August 15, 1996).

(10)(ii)(iii)  Amendment No.4 dated March 18, 1997 to Loan and Security Agreement dated as            *
               of March 21, 1994 among Nantucket Industries, Inc and Congress Financial
               Corp (filed as Exhibit (10)(ii)(ih) to 10Q report for August 30, 1997).

(10)(ii)(iv)   Amendment No. 5 dated March 31, 1997 to Loan and Security Agreement dated as           *
               of March 21, 1994 among Nantucket Industries, Inc and Congress Financial
               Corp (filed as Exhibit (10)(ii)(iv) to 10Q report for August 30, 1997).

(10)(ii)(v)    Amendment No. 6 dated May 4, 1997, to Loan and Security Agreement dated as             *
               of March 21, 1994, among Nantucket Industries, Inc and Congress Financial
               Corp (filed as Exhibit (10)(ii)(v) to 10Q report for August 30, 1997).

(10)(ii)(vi)   Extention dated March 20, 1998 to the Loan and Security Agreement dated as             *
               of March 21, 1994, among Nantucket Industries, Inc and Congress Financial
               Corp.(filed as Exhibit (10)(ii)(vi) to 1998 10-K).

(10)(ii)(vii)  Extention No. 2 dated May 20, 1998 to the Loan and Security Agreement dated            *
               as of March 21, 1994, among Nantucket Industries. Inc and Congress Financial
               Corp. (filed as Exhibit (10)(ii)(vii) to 1998 10-K).

(10)(jj)       Guaranty by Nantucket Mills, Inc. in favor of Congress Financial Corp. dated           *
               as of March 21, 1994 (filed as Exhibit 99(c) to 1994 8-K).

(10)(kk)       General Security Agreement by Nantucket Mifls, Inc. in favor of Congress               *
               Financial Corp. dated as of March 21, 1994 (filed as Exhibit 99(d) to 1994
               8-K).

(10)(ll)       Guarantee of Nantucket Management Corporation in favor of Congress Financial           *
               Corp. dated as of March 21, 1994 (filed as Exhibit 99(e) to 1994 8-K).
</TABLE>


                                       95
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>                                                                                  <C>
(10)(mm)       General Security Agreement by Nantucket Management Corporation in favor of             *
               Congress Financial Corp. dated as of March 21, 1994 (filed as Exhibit 99(f)
               to 1994 8-K).

(10)(nn)       Amended and Restated Credit Agreement by and among Chemical Bank, Nantucket            *
               Industries, Inc., Nantucket Nfills, Inc. and Nantucket Management
               Corporation dated as of March 21, 1994 (filed as Exhibit 99(g) to 1994 8-K)
               and amended by the Amendment dated as of August 18, 1994 (filed as Exhibit
               99(e) to the Form 8-K dated August 19, 1994).

(10)(oo)       Amended and Restated Security Agreement by and between Nantucket Industries,           *
               Inc. and Chemical Bank dated as of March 21, 1994 (filed as Exhibit 99(h) to
               1994 Form 8-K).

(10)(pp)       Amended and Restated Security Agreement by and between Nantucket Mills, Inc.           *
               and Chemical Bank dated as of March 21 1994 (filed as Exhibit 99(i) to 1994
               8-K).

(10)(qq)       Security Agreement by and between Management Corporation and Chemical Bank             *
               dated as of March 21, 1994 (filed as Exhibit 99(j) to 1994 8-K).

(10)(rr)       Deed to Secure Debt, Security Agreement and Assignment of Leases and Rents             *
               by Nantucket Industries, Inc. to Chemical Bank dated as of June 8, 1994
               (filed as Exhibit 10(ss) to the 1994 Form 10-K). and Assignment of Leases
               and Rents by Nantucket Industries, Inc. to Congress Financial Corporation
               dated June 8, 1994 (filed as Exhibit 10(rr) to the 1994 Form 10-K).

(10)(ss)       Deed to Secure Debt, Security Agreement and Assignment of Leases and Rents             *
               by Nantucket Industries, Inc. to Chemical Bank dated as of June 8, 1994
               (filed as Exhibit 10(ss) to the 1994 Form 10-K).

(10)(tt)       Employment Agreement dated November 23, 1994 by and between Registrant and             *
               Raymond L. Wathen (filed as Exhibit 10(tt) to Form 10-K Report for the
               fiscal year ended February 25, 1995).

(10)(tt)(i)    Amendment to Employment Agreement entered into as of January 1, 1996 between           *
               Registrant and Raymond L. Wathen.

(10)(uu)       Employment Agreement dated July 1, 1994 by and between Registrant and Ronald           *
               S. Hoffman (filed as Exhibit 10(uu) to Form 10-K Report for the fiscal year
               ended February 25, 1995).
</TABLE>


                                       96
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>                                                                                  <C>
(10)(uu)(i)    Letter Agreement dated June 12, 1995 between Registrant and Ronald S.                  *
               Hoffman, extending the term of his employment to June 30, 1996.

(10)(uu)(ii)   Letter Agreement dated August 9, 1996 between Registrant and Ronald S.                 *
               Hoffman amending the change of control provision in his employment agreement
               (filed as Exhibit 99(e) to the Form 8-K dated August 15, 1996).

(10)(uu)(iv)   Letter Agreement dated as of June 30, 1996 between Registrant and Ronald S.            *
               Hoffman, extending the term of his employment to June 30, 1997 (filed as
               Exhibit 99(j) to the Form 8-K dated August 15, 1996).

(10)(vv)       Employment Agreement dated as of January 1996 by and between Registrant and            *
               Joseph Visconti.

(10)(vv)(i)    Amendment dated August 9, 1996 to that certain Employment Agreement dated as           *
               of January 1, 1996 by and between Nantucket Industries, Inc and Joseph
               Visconti (filed as Exhibit 99(d) to the Form 8-K dated August 15, 1996).

(10)(vv)(ii)   Amendment No. 2 dated as of July 1, 1997 to that certain Employment                    *
               Agreement dated as of January 1, 1996 by and between Nantucket Industries
               and Joseph Visconti (filed as Exhibit (10)(vv)(ii) to the 1998 10-K Form).

(10)(ww)       First Amendment, dated as of December 15, 1995 to Amended and Restated                 *
               Credit Agreement dated as of March 21, 1994, among Nantucket Industries,
               Inc. and its subsidiaries and Chemical Bank (filed as Exhibit (10)(w) to
               Form 10-Q Report for the quarter ended November 25, 1995).

(10)(xx)       Complaint filed on March 7, 1997 with Superior Court of California for the             *
               County of San Francisco C.A. No. 985160, Nantucket Industries, Inc. v. Levi
               Strauss & Co., and Brittania Sportswear Limited (filed as Exhibit 99(q) to
               the Form 8-K dated March 7, 1997).

(10)(zz)       Press Release dated March 10, 1997 (filed as Exhibit 99(r) to the Form 8-K             *
               dated March 7, 1997).

(10)(aaa)      Lease between Registrant and First Industrial LP dated December 3, 1997                *
               (filed as Exhibit 99(s) to Form 8-K dated November 26, 1997.

(10)(bbb)      Letter Agreement dated September 30, 1997 from Nantucket Industries, Inc. to           *
               NAN Investers, LP (filed as Exhibit 99(t) to the 10Q report for November 29,
               1997.)
</TABLE>


                                       97
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>                                                                                  <C>
(10)(bbb)(i)   Letter Agreement No. 2 dated May 19, 1998 from Nantucket Industries to NAN             *
               Investers LP (filed as Exhibit (10)(bbb)(i)  to 1998 Form 10-K).

(10)(ccc)      Termination of License Agreement dated March 25, 1998 between GUESS? Inc.              *
               and the Registrant (filed as Exhibit (10)(ccc) to 1998 Form 10-K).

(10)(ddd)      Employment Agreement, dated April 3, 2000, between John H. Treglia and                 *
               Company.

16(a)          Letter, dated June 8, 2000, of Grant Thornton LLP regarding change in                  *
               certifying accountant.

23(a)          Consent of Grant Thornton LLP dated June 14, 2000.                                     *
</TABLE>


                                       98
<PAGE>

                                   SIGNATURES

      Pursuant to the  requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  in the City of New
York, State of New York.

                                           NANTUCKET INDUSTRIES, INC.

June 7, 2001                               By /s/ John Treglia
                                              ----------------------------------
                                              John Treglia, President, Secretary
                                              and CFO

June 7, 2001                               By /s/ Marsha Ellis
                                              ----------------------------------
                                              Marsha Ellis, Treasurer and
                                              Chief Accounting Officer

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities on the dates indicated.

June 7, 2001                                  /s/ John Treglia
                                              ----------------------------------
                                              John H. Treglia, Director

June 7, 2001                                  /s/ Frank J. Castanaro
                                              ----------------------------------
                                              Frank J. Castanaro, Director

June 7, 2001
                                              ----------------------------------
                                              George J. Gold, Director


                                       99
<PAGE>

                                                   Commission File Number 1-8509
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION

                                 Washington, DC

                -----------------------------------------------

                                   FORM 10-K

                                 Annual Report

                           For the Fiscal Year Ended

                               February 27, 2000

                 -----------------------------------------------

                           NANTUCKET INDUSTRIES, INC.

              (Exact Name of the Company as Specified in Charter)

                                    EXHIBITS


                                      100
<PAGE>

                     INDEX OF EXHIBITS BEING FILED HEREWITH

There are no Exhibits for this period.


                                      101