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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 29, 2001

or

For the transition period from                              to                             

Commission File Number 0-23204

BOSS HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Registrant's telephone number, including area code: (309) 852-2131
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of Class Common Stock $0.25 Par Value

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        The aggregate market value of the voting stock held by non-affiliates as of March 1, 2002 was approximately $1.9 million.

        There were 1,934,904 shares of the Registrant's common stock outstanding as of March 1, 2002.

INCORPORATION BY REFERENCE

        Specified portions of the registrant's definitive proxy statement for its 2002 Annual Meeting of Stockholders are incorporated by reference in Part III hereof.

FORWARD LOOKING STATEMENTS OR INFORMATION

        Certain statements, other than statements of historical fact, included in this Annual Report, including, without limitation, the statements under "Current Developments", "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" are, or may be deemed to be, forward-looking statements that involve significant risks and uncertainties, and accordingly, there is no assurance that these expectations will be correct. These expectations are based upon many assumptions that the registrant believes to be reasonable, but such assumptions ultimately may prove to be materially inaccurate or incomplete, in whole or in part and, therefore, undue reliance should not be placed on them. Several factors which could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to: availability and pricing of goods purchased from international suppliers, unusual weather patterns which could affect domestic demand for the registrant's products, pricing policies of competitors, investment results on funds invested in marketable securities by management, the ability to attract and retain employees in key positions and uncertainties and changes in general economic conditions. All subsequent forward-looking statements attributable to the registrant or persons acting on its behalf are expressly qualified in their entirety.

PART I

Item 1. Business

        As used in this report, the terms "Boss" and "Company" refer to Boss Holdings, Inc. (the Registrant), a Delaware corporation, and its operating subsidiaries. In October 1994, under prior management, the Company completed an initial public offering under the name Vista 2000, Inc. On December 7, 1998, the Company changed its name from Vista 2000, Inc. to Boss Holdings, Inc. reflecting the tradename of its primary operating subsidiary, Boss Manufacturing Company, a Delaware corporation ("BMC") originally established in 1893.

        During 1996 and 1997, the Company undertook a restructuring which included the sale of a substantial portion of the Company's operating assets. As a result of this restructuring, Boss now operates primarily in the work gloves and protective wear business segment. In addition, the Company conducts operations in the pet supply business segment.

Work Gloves and Protective Wear

        Through BMC, the Company imports, markets and distributes gloves, boots and rainwear products serving two primary markets-consumer and industrial. The consumer market represents slightly more than 60% of BMC sales and consists of retailers ranging from convenience stores to mass merchandisers as well as grocery and hardware stores. The industrial market, which accounts for the balance of sales in this segment, includes various commercial users of gloves and protective wear. These end-users include companies in the agricultural, automotive, energy, lumber and construction industries.

        BMC primarily markets its products through distributors and manufacturer representatives. In addition, the Company sells directly through its own sales force to certain major retail customers and industrial consumers. BMC products are sold predominantly to customers in the United States, with certain products also marketed in Canada.

        The work gloves and protective wear market is intensely competitive with a high degree of price competition. BMC competes on the basis of service, quality and selection. Having participated in this

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segment for over 100 years, BMC and the Boss tradename are well known in the industry. The market for work gloves and protective wear is highly fragmented and served by a large number of domestic and foreign competitors ranging in size from small sole proprietorships to several companies substantially larger than BMC.

        Sales in the work gloves and protective wear segment have historically exhibited seasonal fluctuations. Cold weather months generally provide increased sales while warm weather historically results in slower sales activity. Because of this seasonality, sales tend to be higher in the Company's first and fourth quarters and lower during the second and third quarters.

        BMC sells to a broad customer base approximating two thousand active accounts. Accordingly, BMC has relatively little dependence on any one customer. At the end of 2001, BMC had an open order backlog of approximately $1,300,000, down about $300,000 from the previous year due in part to unseasonably warm weather during December 2001.

        The Company ceased domestic manufacturing operations during 2000 and is now primarily an importer and marketer. Finished goods in this segment are generally widely available from a number of suppliers in various countries. In recent years, pricing has declined due to excess foreign production capacity with supply exceeding demand for many of the Company's products. However, the Company has occasionally experienced limitations in the supply of certain imported products. Availability of imported goods is further subject to interruptions in shipping as well as import/export documentation and clearing. The Company does not anticipate shortages of purchased goods for resale in 2002.

        The Boss logo is an important trademark of the Company which it vigorously defends in the market. In addition, BMC has various registered names and trademarks for specific products which the Company believes add substantial value in the sales and marketing efforts associated with this segment. Additional financial information on the work gloves and protective wear segment is included in the "Notes to Consolidated Financial Statements" and in "Management's Discussion and Analysis of Financial Condition and Results of Operations".

Pet Supplies

        The Warren Pet ("Warren") division of the Company's Boss Manufacturing Holdings, Inc. subsidiary imports, markets and distributes a line of pet supplies to various retail outlets. Products in this line include dog and cat toys, collars and leads, chains and rawhide products. Warren markets its product line primarily to hardware retailers utilizing a network of regional distributors. Essentially all sales are within the United States.

        The pet supplies industry is extremely competitive. A small group of companies including Hartz Mountain Corporation and Sergeant's Pet Products division of ConAgra dominate the industry. Warren competes primarily in selected market niches by focusing on customer service and favorable pricing.

        Warren generally has multiple sources of supply for substantially all of its product requirements. The finished goods purchased by Warren have generally been readily available in sufficient quantities. However, Warren is subject to the same potential for product interruptions noted in the work gloves and protective wear segment. Because of the nature and size of Warren's operations, the open order backlog was not material at the end of 2001 or 2000.

        Additional financial information on the pet supplies segment is included in the "Notes to Consolidated Financial Statements" and in "Management's Discussion and Analysis of Financial Condition and Results of Operations".

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Environmental Matters

        The Company is subject to various federal, state and local regulations concerning the environment. Efforts to maintain compliance with such regulations have not required expenditures material to the Company's overall operating performance or financial condition.

Employees

        As of December 29, 2001, Boss employed approximately 120 full-time associates, down from 130 at the end of 2000. Of these, about 20 hourly associates located at the BMC distribution facility in Springfield, Illinois were represented by the UNITE labor organization under a collective bargaining agreement. At year-end, approximately 112 associates were located in the United States with 8 located in Canada.

        The Company's employment declined slightly in 2001 due to on-going efforts to promote efficiency in each functional area. The Company believes its employee relations are excellent as evidenced by relatively low turnover rates at most facilities. However, attracting and retaining employees has become more difficult in recent years. The Company's past success in this area cannot assure attainment of future employment objectives.

Item 2. Properties

        The following table shows the location, general character, square footage, annual rent and lease expiration date of the principal operating facilities owned or leased by the Company as of December 29, 2001. The principal executive offices are located in Kewanee, Illinois.

        The above properties are predominantly used in the work gloves and protective wear segment. The Company believes the above listed facilities provide adequate distribution capacity to provide for anticipated demand. Utilization of the various facilities fluctuates significantly during the year based on order and inventory levels. The Company considers its properties to be adequate to carry on the Company's business.

Item 3. Legal Proceedings

        The Company is a party to various legal actions incident to the normal operations of its business. These lawsuits primarily involve claims for damages arising out of commercial disputes. Management believes the ultimate disposition of these matters should not materially impair the Company's consolidated financial position or liquidity.

        In July, 1996, the Company sued its former president, Richard Smyth, in a matter styled Boss Holdings, Inc. (formerly Vista 2000, Inc.) v. Richard Smyth, filed in the Superior Court of Cobb County, Georgia. The Company alleged breach of contract, conversion of company funds, unjust enrichment,

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breach of fiduciary duty and fraud by Mr. Smyth, claiming damages and seeking recovery of funds alleged to be converted by Mr. Smyth. In August, 1999, the Company received a consent judgment against Mr. Smyth in the principal sum of $997,800. The Company agreed not to pursue collection of the judgment in exchange for a $50,000 initial cash payment received from Mr. Smyth at the time of settlement and timely receipt of future monthly and lump sum settlement payments from Mr. Smyth. The payment obligations of Mr. Smyth under the settlement agreement were secured by a mortgage on his home residence. During 2001, Mr. Smyth defaulted in payments under the settlement agreement and filed for bankruptcy. The Company subsequently obtained a final judgment in foreclosure of its mortgage on Smyth's residence and has foreclosed on the property. The Company will continue to pursue collection through a sale of the foreclosed property.

Item 4. Submission of Matters to a Vote of Security Holders

        The Company submitted no matters for security holder voting during the fourth quarter of 2001.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

        The Company's common stock (symbol: BSHI) is currently listed on the Over-the-Counter (OTC) Bulletin Board. Prior to December 8, 1998, the Company's common stock symbol was VIST.

        The Company's common stock is not listed on any national stock exchange or on NASDAQ. The OTC Bulletin Board is a regulated quotation service that displays real-time quotes, last-sale prices and volume information for non-listed (over-the-counter) equity securities. The OTC Bulletin Board is a reporting system for participating market makers, not an issuer listing service, and should not be confused with the NASDAQ Stock Market. Participating market makers in the bulletin board system enter quotes and trade reports on a closed computer network and the information is made publicly available through numerous websites and other locations. The OTC Bulletin Board is distinct from the "pink sheets" published by the National Quotation Bureau which also report on transactions in non-listed equity securities.

        Stockholders of record at February 28, 2002 numbered approximately 2,350. The Company has not paid cash dividends on its Common Stock in the past and currently plans to retain earnings, if any, for business development and expansion.

Quarterly Stock Prices

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Item 6. Selected Financial Data

        The following table contains selected consolidated financial data for the five year period ended December 29, 2001 as derived from the consolidated financial statements of the Company. This table should be read in conjunction with "Management's Discussion and Analysis of Results of Operations and Financial Condition" and the Company's audited Consolidated Financial Statements and Notes thereto appearing elsewhere herein.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Sales

2001 Compared to 2000

        Consolidated sales for 2001 totaled $33,737,000, a decrease of $2,692,000, or 7.4%, from 2000. The Company experienced sales declines in each business segment due primarily to lower selling prices and unfavorable weather conditions.

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        In the Company's primary segment, work gloves and protective wear, sales declined $1,894,000, or 5.8%, in 2001 compared to the previous year. Despite the addition of certain significant customers in the Company's consumer market, domestic revenues in this market were down 5.5% on essentially unchanged unit sales during the year. Weather patterns hampered the Company's efforts with weather much colder than normal in the spring reducing sales of seasonal gardening products. Winter weather at the end of 2001, however, was unusually warm, one of the warmest winters on record, causing reduced sales of winter products during the fourth quarter which is historically the Company's peak sales season.

        Sales in the industrial market declined approximately 5% despite unit sales growth of over 17%. Though the Company expanded its customer base and increased unit volume, revenue in this market decreased because of lower selling prices and increased sales of relatively low priced goods. The industry continues to experience declining costs on imported goods due to excess foreign productive capacity. During 2001, the Company improved market share with respect to disposable gloves and certain other low-priced, commodity gloves.

        Management anticipates the deflationary trend in the work gloves and protective wear segment to continue during 2002. Certain foreign governmental fees associated with importing products from many of the Company's suppliers are scheduled to be eliminated during the first quarter of the year which may further reduce the cost of selected imported goods. In addition, the slow-down in economic activity during 2001 has reduced demand for many industrial goods.

        Sales in the Company's pet supplies segment declined to $2,301,000 in 2001, down $333,000, or 12.6%, from the previous year. The primary cause of this reduction in sales was the loss of two major customers during 2000 which caused a continued sales decline in 2001 as expected. The new management team in this segment has added customers which are expected to make up approximately one third of the revenue loss associated with the customers lost in 2000 with additional customer additions expected during 2002.

        Sales in the Company's corporate and other segment consist primarily of the Company's Boss Balloon revenues. Management has changed the distribution method in this business in an effort to improve market coverage while reducing reliance on field sales representation with direct store servicing. This change temporarily disrupted business with certain accounts and has not yet resulted in improved market share. Management plans to review this operation and evaluate alternatives to improve sales during the year.

2000 Compared to 1999

        Consolidated sales for 2000 increased $405,000, or 1.1%, from 1999 to a total of $36,429,000. This increase was attributable to improved sales in the Company's work gloves and protective wear segment partially offset by lower sales in the pet supplies and corporate and other segments.

        Sales in the Company's work gloves and protective wear segment increased $1,718,000, or 5.6%, in 2000 compared to the prior year. The Company's restructuring of its sales force and more aggressive sales efforts during the year were successful in broadening the Company's customer base in both the consumer and industrial markets. In addition, glove sales benefited from colder weather during the fourth quarter of 2000 in comparison to 1999. While the increase in customers and colder weather increased volume during 2000, pricing continued to fall through the year because of excess foreign productive capacity. Revenues increased 7.6% in the consumer market on unit volume growth of approximately 14%, while industrial market sales increased 2.2% on unit volume growth of roughly 17%.

        In the pet supplies segment, sales totaled $2,634,000 for 2000, a decline of $1,082,000, or 29.1%. During the year, Warren lost its two largest customers which accounted for 50% of 1999 sales. The loss

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of these two accounts significantly reduced 2000 sales. Management completed the installation of a new sales team with industry experience during the third quarter of 2000 to aggressively pursue new business.

        Sales in the Company's corporate and other segment consist primarily of the Company's Boss Balloon revenues. In this segment, 2000 sales declined by $231,000, or 14.6%. The Company changed its balloon distribution focus during the year in an effort to improve market coverage. However, this change resulted in a disruption of business to certain accounts during the second half of the year. The Company also changed its sales management in this segment during the fourth quarter of 2000 to provide a more experienced sales team.

Gross Margin

2001 Compared to 2000

        As expected, the Company's gross margin during 2001 improved significantly as a percentage of sales compared to the previous year. Consolidated gross margin increased to $12,146,000, up $188,000 despite lower sales during the year. Total gross margin increased to 36% of sales, an increase of 3.2% for the year. This increase was due primarily to the elimination of domestic manufacturing in 2000 in the work gloves and protective wear segment. The gross margin in this segment improved 4.1% due to the elimination of manufacturing operational losses and relatively higher margins on imported goods previously manufactured domestically.

2000 Compared to 1999

        On a consolidated basis, the Company's gross margin in 2000 totaled $11,958,000, an increase of $1,701,000 from 1999. As a percentage of sales, consolidated gross margin increased to 32.8%, up 4.3% from the prior year on improved margins in each segment. In the work gloves and protective wear segment, gross margin percentage increased from 26.9% in 1999 to 31.1% in 2000 due to higher margins on imported goods previously manufactured by the Company at its Greenville, Alabama facility, lower cost on imported finished goods purchased during the year and reduced operating losses from manufacturing facilities closed in 2000. The favorable impact of these factors was partially offset by inventory write-downs which resulted from declining purchase cost on finished goods during the year. Because of higher sales and improved gross margin percentage, gross margin increased by $1,824,000 in the work gloves and protective wear segment in 2000 compared to the previous year.

        In the pet supplies segment, gross margin declined to $1,099,000 during 2000, a reduction of $233,000 from the previous year due to lower sales in this segment. On a percentage basis, gross margin improved 5.9% during 2000, totaling 41.7% for the year, due to the importation of certain goods previously manufactured by the Company or purchased from domestic suppliers. In the corporate and other segment, gross margin improved by $110,000 for 2000 compared to 1999 totaling $784,000 for the year despite lower sales. Gross margin percentage improved from 42.5% in 1999 to 57.9% in 2000 as the Company realized improved margins on imported balloons for the full year.

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Operating Expenses

2001 Compared to 2000

        During 2001, operating expenses declined $97,000, less than 1%, from the prior year on a consolidated basis. While down in total, operating expenses increased as a percentage of sales due to the Company's decline in 2001 revenues.

        In the work gloves and protective wear segment, operating expenses increased $39,000. Though certain sales related and administrative expenses, notably commission expense, declined in 2001, these decreases were more than offset by increased warehousing and freight expenses. The increase in unit volume during 2001 was a significant factor in the escalation of warehousing and freight expense. The weight of products shipped and freight rates increased during the year. In addition, the units received, processed and shipped increased resulting in higher warehousing expense.

        Operating expenses were essentially unchanged in the pet supplies segment. Declines in commission and administrative expenses were offset by increased bad debt expense attributable primarily to the bankruptcy of a customer. Corporate and other operating expenses declined $148,000 due to lower commission expenses in the Company's balloon operations as well as reduced corporate office administrative expenses.

2000 Compared to 1999

        Operating expenses totaled $11,914,000 in 2000, down $133,000 from 1999. This reduction coupled with the Company's increased sales resulted in a 0.7% reduction in operating expenses as a percentage of sales. The decline in operating expense resulted from reduced expenditures in the corporate and other segment attributable to lower franchise taxes, lower professional fees and reduced expenditures for annual meeting and other shareholder related expenses.

        In the work gloves and protective wear segment, operating expenses increased by $299,000 during 2000, though such expenses declined slightly as a percentage of sales. Certain sales and volume related expenses such as outbound freight, warehousing expense and commissions increased in comparison to the prior year. In addition, warehousing expenses in the Company's Canadian operations increased due to the termination of certain manufacturing operations which previously absorbed such costs. These increases were partially offset by reduced selling and administrative payroll expenses as well as lower system consulting expenses in 2000. Operating expenses increased $62,000 in the pet supplies segment during 2000 due primarily to increased warehousing and handling expenses.

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Operating Earnings Before Asset Sales and Writedowns

2001 Compared to 2000

        Despite lower sales in all business segments, the Company increased operating earnings on a consolidated basis for 2001 to $329,000, up $285,000 from 2000. This improvement was primarily attributable to improved margins and the elimination of manufacturing operating losses in the Company's work gloves and protective wear segment. Operating earnings in this segment increased to $1,049,000, up $639,000 from 2000.

        Operating earnings declined $185,000 in the pet supplies segment due to lower sales attributable to the loss of customers in 2000. In the corporate and other segment, operating earnings declined due primarily to lower balloon sales.

2000 Compared to 1999

        The Company returned to profitability from an operating earnings standpoint in 2000 earning $44,000 for the year, up substantially from the loss of $1,790,000 in 1999. Operating earnings in the Company's primary line of business, work gloves and protective wear, rebounded to $410,000 in 2000, up from a loss of $1,117,000 in 1999 on improved sales and margins. In addition, the Company realized a substantial improvement in the corporate and other segment due to reduced corporate operating expenses and improved margins in the Company's balloon operations. Pet supplies operating earnings declined because of lower sales due to the loss of customers during the year.

Asset Sales and Writedowns

        In response to declining demand for domestically produced gloves, the Company closed and disposed of its Greenville, Alabama production facility during the third quarter of 2000 following a disposition plan established by management in the fourth quarter of 1999. The Company recorded a charge of $1,100,000 in the fourth quarter of 1999 to provide for estimated losses and disposition costs in closing the Greenville operation. Because the Greenville facility was closed approximately two months later than originally planned, certain Greenville operating costs were charged to expense during 2000.

        In addition to closing the Greenville plant, the Company also ceased manufacturing at its Juarez, Mexico plant during the third quarter of 2000 and sold its facilities in Juarez during 2001. The Company recorded no significant gain or loss on this disposition of facilities.

Other Income (Expense)

        The Company's interest income totaled $77,000 in 2001, down $89,000 from 2000. Interest income decreased due in large part to lower interest rates with rates declining steadily during the year. Lower interest rates also resulted in reduced interest expense. Interest expense declined to $298,000 in 2001, down $53,000 from 2000. Lower interest rates more than offset increased borrowing during the second and third quarters which resulted from borrowings to support higher inventory levels.

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        In the first quarter of 2001, the Company realized a gain of approximately $120,000 upon collection of a favorable jury verdict in litigation involving the Company's 1996 sale of its Family Safety Products, Inc. subsidiary's assets. This litigation was concluded at that time.

        The Company recognized a $406,000 gain in the fourth quarter of 2001 in connection with the receipt of Principal Financial Group, Inc ("PFG") stock. As a policyholder, the Company retains certain contractual interests in PFG. During October 2001, PFG converted from a mutual insurance company into a stock enterprise through a demutualization transaction. To complete the demutualization, PFG issued consideration in the form of stock to existing participating policyholders in exchange for their mutual membership rights. The Company received approximately 22,000 PFG shares and recorded a gain of $18.50 per share based on PFG's Initial Public Offering price. Management may sell this stock at any time based upon its evaluation of market conditions. Until disposition, any changes in the market value of the PFG stock will be reflected in "Comprehensive Earnings" in the Company's Consolidated Statement of Stockholders' Equity.

        During 1999, the Company recorded a net gain of $1,165,000 from a legal settlement with Hugo Boss A.G. Gross proceeds from this settlement were $2,000,000, with this total offset by various legal and other estimated compliance costs associated with the settlement. During 2000, the Company recorded an additional gain of $150,000 because actual compliance costs were lower than originally estimated.

Income Tax Expense

        During 2001, the Company recorded an income tax benefit of $89,000 due primarily to state income tax refunds expected in connection with certain state filing method changes. Because of losses in prior years, the Company had minimal federal income tax expense in 2001 and has available substantial net operating loss carryforwards for federal income tax purposes. These carryforwards have certain limitations due to a change in control experienced in 1996.

Liquidity and Capital Resources

2001 Compared to 2000

        The Company generated $2,275,000 in cash flow from operating activities during 2001, an increase of $6,628,000 from 2000. The improved cash flow was largely attributable to lower accounts receivable, reduced inventory, less cash required in connection with accrued liabilities and improved earnings. Accounts receivable declined in 2001 because of lower December sales due in large part to warmer weather in comparison to the previous year. Management reduced inventory levels in the fourth quarter of 2001 in anticipation of lower demand in the slowing economy. Cash required to fund accrued liabilities declined substantially in 2001 due primarily to the completion of facility closings in 2000.

        Net cash used by investing activities totaled $45,000 in 2001. This compares to $698,000 in cash provided by investing activities in 2000 when the Company received cash from the sale of facilities closed during the year. The Company's purchases of property and equipment were very limited in 2001, totaling only $47,000, and consisted primarily of information technology upgrades and facility improvements.

        The Company used the bulk of the cash generated by operating activities to pay down its revolving line of credit and long-term obligations. Consequently, financing activities consumed $2,231,000 of cash. This compares to cash provided by financing activities of $1,725,000 in 2000 when the Company borrowed funds to meet working capital requirements.

        The Company ended 2001 with $2,039,000 in cash and $515,000 in marketable securities. Outstanding borrowings on the Company's $10,000,000 revolving credit facility totaled $762,000 at the end of 2001, down from $2,780,000 in the previous year. The Company's availability under this facility,

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due to certain collateral limitations, totaled $6,248,000 as of December 29, 2001. The Company ended the year with ample liquidity and expects to have adequate liquidity to provide for anticipated obligations during 2002 from funds currently available. During 2002, the Company anticipates increased capital expenditure requirements to improve its headquarters facilities and provide certain system enhancements to upgrade communications, streamline record storage and augment networking capabilities. Such capital expenditures are anticipated to total approximately $250,000 to $450,000 in 2002.

        To improve its return on funds, the Company may invest a material portion of its cash in marketable securities. These securities may include stocks, bonds and other securities traded on major U.S. exchanges or NASDAQ. Such investments involve risk and may result in losses which could be significant to the Company in the event of unfavorable market conditions or unanticipated results.

        On a longer term basis, the Company expects to generate sufficient cash from operations to meet the needs of its existing business operations. However, certain potential growth and expansion plans, if implemented, could require the Company to consider additional funding sources such as increased bank lines of credit, the issuance of additional capital stock, or the issuance of public or private debt. There can be no assurance that any of these funding sources will be available to the Company when and if required.

        Following is a table summarizing the Company's contractual obligations and commercial commitments:

2000 Compared to 1999

        During 2000, operating activities used cash of $4,353,000, compared to providing cash of $4,158,000 in 1999. The most significant factor impacting this change in operating cash flows was inventory levels. The Company increased inventory by $1,544,000 in 2000 as compared to reducing inventory by $4,077,000 in the prior year. The reduction in inventory at the end of 1999 resulted in reduced shipping performance during the first quarter of 2000 causing management to increase inventory levels. In addition, the Company increased inventory quantities of certain goods in preparation for the closing of its manufacturing facility in Alabama.

        Reductions in accrued liabilities during 2000 consumed $2,169,000 of operating cash flow. The Company completely liquidated its $1,100,000 Greenville, Alabama disposition reserve during the year. Additional reductions in accrued liabilities were attributable to Hugo Boss settlement compliance costs, closing costs associated with the Juarez, Mexico facility and health claim costs on a terminated policy. Operating cash flows were also negatively impacted in 2000 by a $1,295,000 increase in accounts receivable attributable to significantly higher December 2000 sales in comparison to 1999.

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        Investing activities provided cash of $698,000 in 2000, up $283,000 from the prior year. The Company received $770,000 in cash proceeds from the disposition of Greenville, Alabama facilities closed during the year. After completing the installation of year 2000 compliant computer systems in 1999, the Company significantly reduced capital expenditures in 2000. Capital expenditures during the year totaled $72,000, down from $623,000 in the previous year. Capital expenditures were generally geared toward upgrading and maintaining the distribution center in Kewanee and obtaining needed material handling equipment.

        In the financing activities area, the Company paid down long-term obligations by $222,000. These payments were primarily on the Springfield, Illinois distribution center mortgage and the new computer system lease. Because of the cash used by operating activities and cash used to pay down long-term obligations, the Company increased borrowings on its revolving line of credit by $1,947,000 during 2000.

Inflation

        The Company does not believe that the moderate rates of inflation experienced in the United States over the last three years have had a material effect on its net sales or profitability. The Company obtains finished goods from various foreign countries which have experienced deflationary conditions during the last three years, thereby decreasing the Company's cost of goods sold for many items, particularly in the work gloves and protective wear segment. The Company believes such price changes have increased price competition in this segment.

Overview and Outlook for 2002

        Operating results continued to improve in 2001 with the Company completing a second year of profitability despite a very challenging and competitive environment. The Company benefited from improved margins during the year, as expected. This improvement was attributable in large part to the recent management initiative to eliminate domestic manufacturing.

        Margins also benefited from lower acquisition cost on imported goods in the work gloves and protective wear segment. Unfortunately, the extremely competitive environment in this segment coupled with lower acquisition cost has resulted in constantly falling selling prices in recent years. Lower unit selling prices have made revenue growth extremely difficult to attain. With the elimination of certain export fees in 2002 by one of the world's largest exporting countries, management anticipates further unit price reductions in the coming year.

        In addition to lower selling prices during 2001 and the overall economic slowdown, the Company struggled with unfavorable weather conditions. The spring of 2001 was relatively cold which depressed sales of garden products. However, the late fall and early winter season was among the warmest on record, causing lower than normal demand for winter products.

        The unit volume of products shipped by the Company increased significantly during the year reflecting the Company's addition of several significant customers in both the consumer and industrial markets it serves. This growth in unit volume was overshadowed by lower selling prices. Despite lower revenues, overall profitability increased because of improved margins.

        The Company ended the year in a substantially improved financial position with debt down significantly and borrowings on the revolving line of credit at an historic low. Management believes the Company is financially well positioned to deal with potential market instability.

        Management intends to continue its focus on expanding the Company's base of business and increasing unit volume to counter the revenue challenge presented by lower selling prices. In addition, the Company expects to offer certain new, complementary products to existing customers in an effort to expand revenues. During 2002, management plans to evaluate the Company's subsidiary operations to determine the best course of action to improve overall profitability. To further broaden the

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Company's base of business, management plans to evaluate potential acquisition opportunities during the year. The Company can provide no assurance as to the success of these growth plans.

Market Risk

        The Company's primary market risk exposure consists of changes in short-term prime and LIBOR interest rates on certain borrowings that bear interest at floating rates. These debt instruments include a $1,337,000 mortgage note payable and the Company's revolving line of credit, on which the Company had borrowed $762,000 at December 29, 2001. The effective annual interest rates on these facilities as of December 29, 2001 were 4.0% and 4.4% respectively. Based on the principal indebtedness outstanding as of December 29, 2001, an increase of one percent per annum in the effective interest rate would increase the Company's annual interest expense on such indebtedness by approximately $21,000. The Company's borrowings on its revolving line of credit fluctuate during the year depending on working capital requirements.

        In addition, the Company is subject to equity market risk exposure with regard to marketable securities that its owns or may own in the future, including its PFG stock which is classified as an available-for-sale security in the Company's financial statements. All investments in marketable securities are subject to price fluctuations typical for such equity investments until disposition. At December 29, 2001 the fair market value of the Company's available-for-sale securities totaled $515,000.

        The Company has no investments in derivative financial instruments and generally makes its purchases of imported goods in U.S. dollars to minimize foreign exchange risk.

Item 8. Financial Statements and Supplementary Data

        The following consolidated financial statements and schedules of the Company and its Accountants' Opinion are set forth in Part IV, Item 14, of this Report:

(i)

Unqualified Opinion of Independent Accountants dated February 15, 2002.



(ii)

Consolidated Balance Sheets—as of December 29, 2001 and December 30, 2000.



(iii)

Consolidated Statements of Operations, Cash Flows and Stockholders' Equity for the years ended December 29, 2001, December 30, 2000 and December 25, 1999.



(iv)

Notes to the Consolidated Financial Statements.



(v)

Schedule II—Valuation and Qualifying Accounts.

Item 9. Changes in And Disagreements With Auditors on Accounting And Financial Disclosures

        Not applicable.

13

PART III

Item 10. Directors and Executive Officers of the Registrant

        The information appearing in the Company's Definitive Proxy Statement prepared in connection with its 2002 Annual Meeting of Stockholders (the "Proxy Statement") under the captions "Election of Directors", "Executive Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated herein by reference. The Proxy Statement is to be filed no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 11. Executive Compensation

        The information appearing in the Proxy Statement under the caption "Executive Compensation" is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

        The information appearing in the Proxy Statement under the caption "Security Ownership of Certain Beneficial Owners and Management" is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

        The information appearing in the Proxy Statement under the caption "Certain Relationships and Related Transactions" is incorporated herein by reference.

PART IV

Item 14. Exhibits, Financial Statements And Reports on Form 8-K

14

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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.

        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 and on the dates indicated.

15

INDEX TO EXHIBITS

A

Incorporated herein by reference from the Company's Registration Statement on Form SB-2 (Registration No. 33-73118-A).

B

Incorporated herein by reference from the Company's report on Form 10-K for the year ended December 26, 1998.

C

Incorporated herein by reference from the Company's report on Form 10-Q for the quarter ended July 1, 2000.

D

Incorporated herein by reference from the Company's registration statement on Form S-8 dated February 1, 2001.

16

FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BOSS HOLDINGS, INC. AND SUBSIDIARIES
December 29, 2001 and December 30, 2000

Report of Independent Certified Public Accountants

Board of Directors
Boss Holdings, Inc.

        We have audited the accompanying consolidated balance sheets of Boss Holdings, Inc. and Subsidiaries as of December 29, 2001 and December 30, 2000, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 29, 2001. 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 auditing standards generally accepted in the United States of America. 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 Boss Holdings, Inc. and Subsidiaries as of December 29, 2001 and December 30, 2000, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 29, 2001 in conformity with accounting principles generally accepted in the United States of America.

        We have also audited Schedule II of Boss Holdings, Inc. and Subsidiaries for each of the three years in the period ended December 29, 2001. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein.

/s/ GRANT THORNTON LLP
Atlanta, Georgia
February 15, 2002

F-1

Boss Holdings, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands except per share data)

The accompanying notes are an integral part of these statements.

F-2

Boss Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollar amounts in thousands except per share data)

The accompanying notes are an integral part of these statements.

F-3

Boss Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

Years ended December 29, 2001, December 30, 2000 and December 25, 1999

(Dollars and share amounts in thousands)

The accompanying notes are an integral part of this statement.

F-4

Boss Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)

The accompanying notes are an integral part of these statements.

F-5

The accompanying notes are an integral part of these statements.

F-6

Boss Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 29, 2001, and December 30, 2000

(Dollar amounts in thousands except per share data)

(1)    Nature of Business and Summary of Significant Accounting Policies

Nature of Business

        Boss Holdings, Inc. and its subsidiaries are engaged primarily in the import, marketing and distribution of gloves, boots, rainwear and pet products. Customers, located throughout North America, include retailers ranging from convenience stores to mass merchandisers and various commercial users.

Principles of Consolidation

        The accompanying consolidated financial statements include the accounts of Boss Holdings, Inc. ("BHI"), and its wholly owned subsidiary, Boss Manufacturing Holdings, Inc. and subsidiaries ("BMHI") (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. Certain prior year amounts have been reclassified to conform to the current year presentation.

Fiscal Year

        The Company maintains a ⁵²/53-week year ending on the last Saturday of the calendar year. Fiscal years 2001 and 1999 each contained 52 weeks, while 2000 contained 53 weeks.

Use of Estimates in the Preparation of Financial Statements

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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 these estimates.

Cash and Cash Equivalents

        Cash and cash equivalents consist of cash on hand, time deposits, and liquid debt instruments such as commercial paper with maturities of three months or less from the date of purchase.

Marketable Securities

        The Company classifies marketable equity securities as available-for-sale securities, as defined by the Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities ("SFAS 115"). In accordance with the provisions of SFAS 115, marketable securities are stated at fair value with net unrealized gains and losses included in accumulated other comprehensive earnings (deficit). See Note 10, "Available-for-Sale Securities," for further discussion.

Revenue Recognition

        The Company recognizes revenue and provides for the estimated cost of returns and allowances in the period goods ship to the customer. Sales in any single foreign geographic area or to any single customer did not exceed 10% of net sales for 2001, 2000 or 1999.

Shipping and Handling Fees and Costs

        The Company adopted Emerging Issues Task Force ("EITF") 00-10, Accounting for Shipping and Handling Fees and Costs. EITF 00-10 requires significant shipping and handling costs not classified as

F-7

cost of sales to be disclosed in both the amount of such costs and the line item that includes them in the consolidated statements of operations. Cost of sales includes shipping and handling costs associated with inbound freight. Operating expenses include shipping and handling costs associated with outbound freight of $1,793, $1,720 and $1,568 for 2001, 2000 and 1999, respectively.

Inventories

        The Company states inventory at the lower of cost or market using the first-in, first-out ("FIFO") method. During the fourth quarter of 2001, the domestic operations of the work gloves and protective wear segment (comprising approximately 80% of total inventories) changed from the last-in, first-out ("LIFO") method to FIFO. The Company has been experiencing reduced costs in this segment resulting from a combination of buying improvements, increased imports and market conditions. Management believes the change in accounting principle provides a better measurement of operating results by maintaining an effective matching of revenues and expenses. The net effect of the change in accounting principle was not material to the financial statements, and accordingly, no retroactive restatement of prior years' financial statements was required.

Warranty Costs and Returns

        The Company provides for estimated warranty costs and returns at the time of sale. Accrued costs of warranty obligations and returns are classified as accrued liabilities and are immaterial to the financial statements as a whole.

Property, Equipment and Depreciation

        Property and equipment are recorded at historical cost. The Company provides for depreciation using the straight-line method over the following estimated useful lives:

        Depreciation expense was $382, $456 and $474 for 2001, 2000 and 1999, respectively.

Income Taxes

        The Company accounts for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates applied to taxable income. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred income tax assets when it is more likely than not that the asset will not be realized.

F-8

Fair Value of Financial Instruments

        The Company's financial instruments consist of cash equivalents, marketable securities and long-term debt. The carrying value of cash equivalents approximates fair value due to the relatively short period to maturity of the instruments. The carrying value of marketable securities equals fair value based on the quoted market prices of shares held by the Company. The carrying value of long-term obligations approximates fair value based upon borrowing rates currently available to the Company for borrowings with comparable maturities.

Foreign Currency Translation

        Financial statements of the Company's Canadian subsidiary are translated into U.S. dollars using fiscal year-end exchange rates for assets and liabilities, and average exchange rates during the year for the results of operations. Translation adjustments of the Canadian accounts are reported as a separate component of other comprehensive earnings within stockholders' equity.

        Exchange rate adjustments related to foreign currency transactions are recognized in income as incurred and were not significant in any of the reported periods.

Advertising Costs

        The Company generally expenses the cost of advertising the first time advertising takes place. Costs of trade shows and developing advertising materials are expensed at the time of the trade shows or as the advertising materials are produced and distributed to customers. Advertising expense for 2001, 2000 and 1999 was $968, $924 and $807, respectively.

Systems Development Costs

        In 1999, the Company adopted AICPA Statement of Position ("SOP") 98-1, Accounting for the Costs of Computer Systems Developed or Obtained for Internal Use. Pursuant to SOP 98-1, the Company capitalizes certain systems development costs that meet established criteria and amortizes these amounts over a three-year period.

        The Company capitalized systems development costs of $0, $0 and $427 for 2001, 2000 and 1999, respectively.

Earnings (Loss) Per Share

        Basic net earnings (loss) per common share is based upon the weighted average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is based upon the weighted average number of common shares outstanding plus dilutive potential common shares, including options and warrants outstanding during the period.

F-9

(2)    Inventories

(3)    Property and Equipment

(4)    Long-Term Obligations

Long-Term Debt

F-10

        Scheduled principal payments of long-term debt are as follows: