10-Q 1 b316087_10q.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 24, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______ Commission file number 0-24390 TREND - LINES, INC. (Exact name of registrant as specified in its charter) Massachusetts 04-2722797 ---------------------------- ---------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 126 Oxford Street, Lynn, Massachusetts 01901 --------------------------------------- ---------- (Address of principal executive office) (Zip Code) (781) 853 - 0900 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 12 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. Yes [ ] No [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. NUMBER OF SHARES OUTSTANDING CLASS AS OF AUGUST 24, 2001 ----- --------------------- Class A Common Stock, $.01 par value 6,010,411 Class B Common Stock, $.01 par value 4,641,082 TREND-LINES, INC. AND SUBSIDIARY INDEX Page ---- Part I - Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets August 25, 2001 (Unaudited) and February 24, 2001 3 Condensed Consolidated Statements of Operations Three Months Ended August 25, 2001 and August 26, 2000 (Unaudited) Six Months Ended August 25, 2001 and August 26, 2000 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows Six Months Ended August 25, 2001 and August 26, 2000 (Unaudited) 5 - 6 Notes to Condensed Consolidated Financial Statements 7 - 12 Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations 13 - 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 Part II - Other Information Item 1. Legal Proceedings 18 Item 2. Changes in Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 18 - 19 Signatures 20 TREND-LINES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS

The accompanying notes are an integral part of these consolidated financial statements. 3 TREND-LINES, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

See notes to condensed consolidated financial statements. 4 TREND-LINES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

See notes to condensed consolidated financial statements. 5 TREND-LINES, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The condensed consolidated financial statements of Trend-Lines, Inc. ("the Company") and subsidiaries, have been prepared in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7: "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7") and generally accepted accounting principles applicable to a going concern, which principles, except as otherwise disclosed, assume that assets will be realized and liabilities will be discharged in the normal course of business. The Company filed petitions for relief under Chapter 11 of the United States Bankruptcy Code ("Chapter 11") on August 11, 2000 (the "Filing"). See Note 2 for further information. On August 23, 2000, the Company filed various sale motions seeking Bankruptcy Court approval for the liquidation of the Golf Day division. The Company entered into an agreement with a liquidation agency (the "Agency") which called for the Agency to pay the Company 49.55% of the total retail value of the merchandise included within the sale less 1.5% for defective and/or unsalable merchandise. The Company, with the assistance of the liquidator, completed the liquidation of the inventory of GolfDay and selected furniture, fixtures and equipment by January 31, 2001. The sale generated approximately $21,100,000. From these proceeds, the Company paid $20,773,000 to the Bank of America as payment for a portion of the outstanding balance under the Bank Credit Facility discussed in Note 2. The Company has retroactively presented the operations of the GolfDay division as discontinued operations for all periods presented. See Note 7 for further information. With respect to the unaudited condensed consolidated financial statements for the three and six months ended August 25, 2001, it is the Company's opinion that all necessary adjustments (consisting of normal and recurring adjustments) have been included to present a fair statement of results for the interim periods. Certain prior-year amounts have been reclassified to conform to this year's presentation. These statements should be read in conjunction with the Company's financial statements (Form 10-K) for the fiscal year ended February 24, 2001. Due to the seasonal nature of the Company's business, operating results for the interim periods are not necessarily indicative of results that may be expected for the fiscal year ending February 23, 2002. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, pursuant to the general rules and regulations promulgated by the Securities and Exchange Commission (the "SEC"). The Company's ability to continue as a going concern is dependent upon consummation of the Company's amended plan of reorganization by the Bankruptcy Court (Note 2), ability to make plan distributions under the amended plan of reorganization, the ability to maintain compliance with debt covenants under the New Bank Credit Facility (Note 5), achievement of profitable operations, maintenance of adequate financing, and the resolution of the uncertainties of the reorganization case discussed in Note 2. In an effort to return the Company to profitability and accomplish its long-term goals, the Company disposed of its GolfDay division (See Note 7) and is currently focusing on its woodworking business. 6 The information set forth in these financial statements is unaudited and may be subject to normal year end adjustments. In the opinion of management, the information reflects all adjustments, which consist of normal recurring accruals, that are considered necessary to present a fair statement of the results of operations of Trend-Lines, Inc. (the "Company") for the interim periods presented. The operating results for the three and six months ended August 25, 2001 are not necessarily indicative of the results to be expected for the fiscal year ending February 23, 2002. 2. Reorganization Plan In the Chapter 11 case, substantially all liabilities as of the date of the Filing were subject to settlement under the First Amended Joint Reorganization Plan of Trend-Lines, Inc. and the Official Committee of Unsecured Creditors (the "Plan") that was confirmed by the Bankruptcy Court on October 17, 2001. On October 29, 2001, the effective date of the Plan (the "Effective Date") the Company emerged from bankruptcy and merged into its wholly-owned subsidiary Woodworkers Warehouse, Inc. Woodworkers Warehouse, Inc., became the surviving corporation. The following is a brief summary of how the Plan organized and treated certain Company liabilities: Class 1 - Bank of America Bank Credit Facility The Bank Credit Facility discussed in Note 5 issued to the Company by the Bank of America was a secured claim and was impaired under the Plan. On October 29, 2001 as part of the Plan, the outstanding balance under the Bank Credit Facility was paid in full in connection with the closing of a new senior secured revolving credit facility referred to as the Exit Financing Facility. See Note 6 for the terms of the Exit Financing Facility. Class 2 - Other Secured Claims These secured claims consist of various vendors who leased furniture, fixtures and equipment for retail stores and the corporate offices of the Company. These holders received (a) some or all of the collateral securing the leases, (b) cash in an amount equal to the proceeds received from the sale of the collateral or (c) such other treatment as was agreed upon by the Company and the Bankruptcy Committee and the holder. In the event the value of the collateral securing a Class 2 claim was less than the total amount of the claim, the difference was treated as a Class 5 general unsecured claim. Class 3- Other Priority Claims These claims are claims other than administrative, professional fee or priority tax claims entitled to priority pursuant to Section 507(a) of the Bankruptcy Code and were deemed to be unimpaired by Plan. These claims were entitled to payment in full. Class 4 - Convenience Claims These claims consist of claims that would otherwise be a Class 5 General Unsecured Claim that is equal to or less than $2,000 or reduced to $2,000 pursuant to the election by the holder of the Claim. These claims have deemed to be impaired by the Plan. Each holder of a Class 5 claim will receive cash in an amount equal to 25% of such claim. Class 5 - General Unsecured Claims These claims are general unsecured, pre-petition trade claims, reclamation claims, lease rejection claims and any deficiency claims of BankofAmerica and the Other Secured Claims. The Company estimated the total amount of Class 5 claims to be $55,000,000. Each holder of a claim in Class 5 will receive in full satisfaction of such allowed claims, its pro rata share, based on the principal amount of each holder's claim, of $2,000,000 on January 15, 2002 and 5,280,000 shares of new common stock on the Effective Date. 7 Class 6 - Common Stock Equity Interest and Claims On the Effective Date, all common stock equity interests were extinguished and the certificates and all other documents representing such common stock equity interests were deemed cancelled and of no force or effect. The holders of the common stock equity interests did not receive or retain any interest or property under the Plan. The foregoing description is qualified in its entirety by the Plan, as filed as an exhibit to the Form 8-K of Woodworkers Warehouse, Inc., the successor of Trend-Lines, Inc., on October 31, 2001 and included as an exhibit hereto by reference. All amounts presented in the accompanying financial statements may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determination as to the security of certain claims, the value of any collateral securing such claims, or other events. The Company expects to reflect the reorganization plan using fresh-start accounting in its financial statements for the interim period ending November 25, 2001. 3. Reorganization Items The Company provided for or incurred the following income (expense) items during the three and six months ended August 25, 2001, directly associated with the Chapter 11 reorganization proceedings (in thousands):

4. (Loss) Earnings Per Share Data Basic (loss) earnings per share is computed by dividing the net (loss) income available to common shareholders by the weighted average number of shares of common stock outstanding. For the purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of common stock outstanding and the dilutive effect of common stock equivalents such as stock options and warrants. For the quarter ended August 25, 2001 no options to purchase common stock were included in the earnings per share calculation as their effect would have been antidilutive. 8 Below is a summary of the shares used in calculating basic and diluted (loss) earnings per share

5. Bank Credit Facility At August 25, 2001 the Company had approximately $42.6 million of borrowings outstanding and approximately $120,000 of letters of credit outstanding. The Company continued to utilize the bank's cash collateral to fund operations in bankruptcy. The bank has a security interest in substantially all assets of the Company. At August 25, 2001, the Company was not in compliance with the financial covenants of the facility, and continued to use cash collateral to fun its operations (with court approval). Pursuant to an amendment and waiver dated as of June 9, 2000 the bank amended the credit facility with respect to the financial covenants and advance rates for future periods. The amended credit facility bore interest at the bank's reference rate plus 0.75% (7.25% at August 25, 2001) or LIBOR plus 2.25% (8.01% at August 25, 2001). The amended credit facility allowed for borrowings up to $100 million based on a percentage of inventory (the "Advance Rate"). Borrowings include 50% of the amount reserved for outstanding letters of credit. The amended credit facility also gave the bank warrants for the purchase of 200,000 shares of the Company's Class A Common Stock, exercisable at the lowest price during the 60 - day period starting June 9, 2000. The valuation of these warrants was deemed to be immaterial. As of August 25, 2001, the warrants were not exercised and were canceled in connection with the Plan discussed in Note 2. Pursuant to the Plan discussed in Note 2, on October 29, 2001, the Company entered into a $30.0 million Senior Secured Revolving facility with the Bank of America (the "Exit Financing Facility"). The Exit Financing Facility bears interest equal to LIBOR plus 3.25% (9.01% at August 24, 2001) or the rate plus 1.00% (7.50% at August 24, 2001). Under the Exit Financing Facility, the Company borrowing base through March 31, 2002 is up to 65% of the cost value of eligible store and warehouse inventory, plus 50% of the value of inventory covered by Merchandise Letters of Credit, plus 85% of the value of eligible credit card and trade accounts receivable plus $500,000 against the value of the Company's Seabrook, NH facility plus an overadvance capability equal to $3.0 million for 60 days from the Effective Date, $2.5 million for the next thirty days and $2.0 million thereafter with amortization of $166,667 per month beginning February 28, 2002. After March 31, 2002 the company's borrowing base is equal to 65% of the cost of eligible store and warehouse inventory or 85% of the OLV value of the inventory from an appraiser acceptable to BankofAmerica, plus 50% of the value of inventory covered by Merchandise Letters of Credit plus 85% of the value of eligible credit card and trade accounts receivable plus $500,000 against the value of the Company's Seabrook, NH facility until the facility is sold. The Exit Financing Facility matures on October 29, 2003. 9 6. Selected Information By Business Segment The Company disposed of its golf business on August 10, 2000. As a result, the segment information below has been realigned to reflect the Company's results from continuing operations. Information as to the operations of the different business segments with respect to sales and operating income is set forth below for quarter ended and six months ended August 25, 2001 and August 26, 2000 (in thousands):

The Company sells its products through its Woodworker's Warehouse retail stores and its catalog. These businesses have been aggregated into their respective reportable segments based on the management reporting structure. 7. DISCONTINUED OPERATIONS As discussed in Note 1, the Company disposed of its golf business. Pursuant to Accounting Principles Board (APB) Opinion No. 30, REPORTING RESULTS OF OPERATIONS--REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS, (APB 30) the consolidated financial statements of the Company have been presented to reflect the disposition of the golf business as a discontinued operation. Accordingly, revenues, expenses, and cash flows of the golf division have been excluded from the respective captions in the accompanying consolidated statements of operations and consolidated statements of cash flows. The net assets and liabilities of the golf business have been reported as "Net assets or liabilities of discontinued operations" in the accompanying consolidated balance sheets; the net operating (losses) income of the golf business have been reported as "Net (loss) income from discontinued operations" in the accompanying consolidated statements of operations; the net loss from the disposal of the golf business has been presented as "Net loss on disposal"; and the net cash flows of the golf division have been reported as "Net cash provided by (used in) discontinued operations" in the accompanying consolidated statements of cash flows. Net sales for the golf business were approximately $25,500 and $51,400 for the three and six month periods ended August 26, 2000. There were no net sales from the golf business during the three and six month periods ended August 25, 2001. Net assets (liabilities) of discontinued operations were as follows (in thousands): 10 August 25, February 24, 2001 2001 -------- -------- Accounts receivable, net $ 1,802 $ 2,607 Pre-petition accounts payable 13,620 13,620 Post-petition accounts payable -- 7 Accrued expenses 2,129 2,571 Deferred liabilities 452 451 -------- -------- $(14,399) $(14,042) ======== ======== 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales for the second quarter of fiscal 2001 decreased by $11.3 million, or 32.9%, from $34.5 million for the second quarter of fiscal 2000 to $23.1 million. Net retail sales for the second quarter of fiscal 2001 decreased $9.4 million or 30.3% from $31.2 million for the second quarter of fiscal 2000 to $21.8 million. The retail sales decrease was attributable to implications from the Company's bankruptcy filing in August 2000. Catalog sales for the second quarter of fiscal 2001 decreased $1.9 million, or 58.6%, from $3.2 million for the second quarter of fiscal 2000 to $1.3 million. Catalog sales were impacted due to fewer catalogs being mailed during the period. Net sales for the six months of fiscal 2001 decreased by $28.4 million, or 36.1%, from $78.6 million for the first six months of fiscal 2000 to $50.2 million. Net retail sales for the first six months of fiscal 2001 decreased $23.4 million or 33.1%% from $70.7 million for the first six months of fiscal 2000 to $47.3 million. The retail sales decrease was attributable to implications from the Company's bankruptcy filing in August 2000. Catalog sales for the first six months of fiscal 2001 decreased $5.0 million, or 63.8%, from $7.9 million for the first six months of fiscal 2000 to $2.9 million. Catalog sales were impacted due to fewer catalogs being mailed during the period. The following table presents net sales and gross margin data of the Company for the periods indicated: Three Months Ended Six Months Ended August 25, August 26, August 25, August 26, 2001 2000 2001 2000 ------- ------- ------- ------- (In thousands, except percentage data) Net Sales: Retail $21,801 $31,275 $47,349 $70,714 Catalog 1,325 3,200 2,860 7,893 ------- ------- ------- ------- Total $23,126 $34,475 $50,209 $78,607 ------- ------- ------- ------- Gross Margin 30.0% 25.1% 29.9% 26.3% ======= ======= ======= ======= Gross profit for the second quarter of fiscal 2001 decreased $1.8 million, or 20.0%, from $8.7 million for the second quarter of fiscal 2000 to $6.9 million. As a percentage of net sales, gross profit increased 4.9% from 25.1% of net sales for the second quarter of fiscal 2000 to 30.0% of net sales in the second quarter of fiscal 2001. Aggressive promotional advertising and the change in sales mix is the primary cause for the change in gross margin. Gross profit for the first six months of fiscal 2001 decreased $5.7 million, or 27.3%, from $20.7 million for the first six months of fiscal 2000 to $15.0 million for the first six months of fiscal 2001. As a percentage of net sales, gross profit increased 3.7% from 26.3% of net sales for the first six months of fiscal 2000 to 30.0% of net sales in the first six months of fiscal 2001. 12 Selling, general and administrative expenses for the second quarter of fiscal 2001 decreased $8.2 million, or 48.7%, from $16.8 million for the second quarter of fiscal 2000 to $8.6 million for the second quarter of fiscal 2001. The decrease in selling, general and administrative expenses is primarily related cost reductions resulting from the Company's reorganization. Selling, general and administrative expenses for the first six months of fiscal 2001 decreased $9.4 million, or 33.0%, from $28.6 million for the first six months of fiscal 2000 to $19.2 million for the first six months of fiscal 2001. The decrease in selling, general and administrative expenses is primarily related cost reductions resulting from the Company's reorganization. Reorganization expenses for the first six months of fiscal 2001 decreased $0.7 million from $0.5 million for the first six months of fiscal 2000 to $(0.2) million for the first six months of fiscal 2001. These amounts related directly to the Chapter 11 proceedings and associated restructuring of our operations and are discussed in Note 2 to the Condensed Consolidated Financial Statements. Interest expense for the second quarter of fiscal 2001, net of interest income, decreased by $0.4 million from $1.2 million in the second quarter of fiscal 2000 to $0.8 million in the second quarter of fiscal 2001. The decrease in interest expense is attributable to the increase in the amount outstanding under the Company's existing bank credit facility. Interest expense for the first six months of fiscal 2001, net of interest income, decreased by $1.2 million from $2.6 million in the first six months of fiscal 2000 to $1.8 million in the first six months of fiscal 2001. The decrease in interest expense is attributable to the increase in the amount outstanding under the Company's existing bank credit facility. Liquidity and Capital Resources The Company's working capital deficiency increased by $3.9 million, from $34.1 million as of February 24, 2001 to $38.0 million as of August 25, 2001. The increase resulted primarily from a decrease in inventories of $10.4 million which was offset by an increase in accounts receivable of $2.8 million and a decrease in the bank credit facility of $4.9 million. During the six month period ended August 25, 2001, the cash provided by operating activities was $2.7 million, primarily due to a proceeds received from the sale of leased assets of $4.5 million. The net cash used in investing activities was approximately $0.2 million. The use of cash was an increase in other assets. The net cash used in financing activities was approximately $5.2 million and was primarily attributable to the decrease in borrowings on the Company's bank credit facility of $4.9 million. At August 25, 2001, the Company had approximately $42.6 million of borrowings outstanding and approximately $0.1 million of letters of credit outstanding. The bank has a security interest in substantially all assets of the Company. At August 25, 2001, the Company was not in compliance with their financial covenants and continued to utilize the bank's cash collateral to fund its operations while in bankruptcy. 13 On June 9, 2000, prior to the Company filing for bankruptcy, pursuant to an amendment and waiver dated as of June 9, 2000 the bank amended the credit facility with respect to the financial covenants and advance rates for future periods. The amended credit facility will bear interest at the bank's reference rate plus 0.75% (7.25% at August 25, 2001) or LIBOR plus 2.25% (8.01% at August 25, 2001). The amended credit facility allows for borrowings up to $100 million based on a percentage of inventory (the "Advance Rate"). Borrowings include 50% of the amount reserved for outstanding letters of credit. Pursuant to the Plan discussed in Note 2, on October 29, 2001, the Company entered into a $30.0 million Senior Secured Revolving facility with the Bank of America (the "Exit Financing Facility"). The Exit Financing Facility bears interest equal to LIBOR plus 3.25% (9.01% at August 24, 2001) or the rate plus 1.00% (7.50% at August 24, 2001). Under the Exit Financing Facility, the Company borrowing base through March 31, 2002 is up to 65% of the cost value of eligible store and warehouse inventory, plus 50% of the value of inventory covered by Merchandise Letters of Credit, plus 85% of the value of eligible credit card and trade accounts receivable plus $500,000 against the value of the Company's Seabrook, NH facility plus an overadvance capability equal to $3.0 million for 60 days from the Effective Date, $2.5 million for the next thirty days and $2.0 million thereafter with amortization of $166,667 per month beginning February 28, 2002. After March 31, 2002 the company's borrowing base is equal to 65% of the cost of eligible store and warehouse inventory or 85% of the OLV value of the inventory from an appraiser acceptable to BankofAmerica, plus 50% of the value of inventory covered by Merchandise Letters of Credit plus 85% of the value of eligible credit card and trade accounts receivable plus $500,000 against the value of the Company's Seabrook, NH facility until the facility is sold. The Exit Financing Facility matures on October 29, 2003. Impact of Inflation The Company does not believe that inflation has had a material impact on its net sales or results of operations. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Statements included in this report that do not relate to present or historical conditions are "forward-looking statements" within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Additional oral or written forward-looking statements may be made by the Company from time to time, and such statements may be included in documents other than this report that are filed with the Securities and Exchange Commission. Such forward-looking statements involve risks and uncertainties that could cause results or outcomes to differ materially from those expressed in such forward-looking statements. Forward-looking statements in this report and elsewhere may include without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions and adequacy of resources and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "forecasts," "intends," "possible," "expects," "estimates," "anticipates," or "plans" and similar expressions are intended to identify forward-looking statements. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) the Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) increased competition, a change in the retail business in the tool sector or a change in the Company's merchandise mix; (iii) a change in the Company's advertising, pricing policies or its net product costs after all discounts and incentives; (iv) the Company's plans and results of operations will be affected by the Company's ability to manage its growth and inventory; (v) the Company's continued compliance with the financial covenants under it's bank credit facility, as the same may be in effect from time to time; (vi) the Company's ability to achieve its plans and strategies of growth will be dependent on maintaining adequate bank and other financing; and (vii) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. 14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the market risk associated with the Company's financial instruments. The Company is exposed to market risk from changes in interest rates which may adversely affect the Company's financial position, results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposures through its regular operating and financing activities. The Company does not use financial instruments for trading or other speculative purposes and is not party to any leveraged financial instruments. The Company is exposed to interest rate risk primarily through its borrowings under the Exit Financing Facility (see Note 5 to the Condensed Consolidated Financial Statements). 15 Part II - Other Information Item 1. Legal Proceedings The Company filed a petition in the United States Bankruptcy Court for the District of Massachusetts under Chapter 11 of the United States Bankruptcy Code on August 11, 2000. The First Amended Joint Reorganization Plan of Trend-Lines, Inc. and the Official Committee of Unsecured Creditors (the "Plan") dated as of September 7, 2001, as modified by the Joint Motion to Approve Nonmaterial Modification to the First Amended Joint Reorganization Plan of Trend-Lines, Inc. and the Official Committee of Unsecured Creditors, was confirmed by the Bankruptcy Court on October 17, 2001. The Effective Date of the Plan was October 29, 2001 (the "Effective Date"). On the Effective Date, the Company emerged from bankruptcy and merged into its wholly-owned subsidiary, Woodworkers Warehouse, Inc. Woodworkers Warehouse, Inc. became the surviving corporation. Item 2. Changes in Securities and Use of Proceeds In connection with the reorganization under the Plan, on the Effective Date, all common stock equity interests were extinguished and the certificates and all other documents representing such common stock equity interests were deemed cancelled and of no force or effect. Item 3. Defaults Upon Senior Securities Due to the bankruptcy filing the Company was in default under their bank credit facility as of August 24, 2001. On October 29, 2001 the Company emerged from bankruptcy and entered into the Exit Financing Facility with BankofAmerica. Item 4. Submission of matters to a Vote of Security Holders Not applicable Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number 2.1 Order Confirming First Amended Joint Reorganization Plan of Trend-Lines, Inc. and the Official Committee of Unsecured Creditors, dated as of October 17, 2001, filed as an exhibit to Woodworkers Warehouse, Inc.'s Form 8-K as filed with the Securities and Exchange Commission on October 31, 2001, and incorporated herein by reference. 2.2 First Amended Joint Reorganization Plan of Trend-Lines, Inc. and the Official Committee of Unsecured Creditors, dated as of September 7, 2001, filed as an exhibit to Woodworkers Warehouse, Inc.'s Form 8-K as filed with the Securities and Exchange Commission on October 31, 2001, and incorporated herein by reference. 16 2.3 Joint Motion to Approve Nonmaterial Modification to First Amended Joint Reorganization Plan of Trend-Lines, Inc. and the Official Committee of Unsecured Creditors, dated as of October 11, 2001, filed as an exhibit to Woodworkers Warehouse, Inc.'s Form 8-K as filed with the Securities and Exchange Commission on October 31, 2001, and incorporated herein by reference. 2.4 First Amended Disclosure Statement with Respect to First Amended Joint Reorganization Plan of Trend-Lines, Inc. and the Official Committee of Unsecured Creditors, dated as of September 7, 2001, filed as an exhibit to Woodworkers Warehouse, Inc.'s Form 8-K as filed with the Securities and Exchange Commission on October 31, 2001, and incorporated herein by reference. 27 Financial Data Schedule (furnished to the Securities and Exchange Commission for Electronic Data Gathering, Analysis and Retrieval [Edgar] purposes only) (b) Reports on Form 8-K - not applicable 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TREND-LINES, INC. Registrant By: Woodworkers Warehouse, Inc., as successor to Trend-Lines, Inc. Date: 1/14/02 /s/ Walter S. Spokowski ------------------------------------- Walter S. Spokowski (Chief Executive Officer) /s/ Ronald L. Franklin ------------------------------------- Ronald L. Franklin (Executive Vice President, Chief Financial Officer) 18

TREND LINES INC 10-Q