Hampshire 10Q 2007 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 29, 2007


o		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: 000-20201

HAMPSHIRE GROUP, LIMITED

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		06-0967107 (I.R.S. Employer Identification No.)

1924 Pearman Dairy Road, Anderson, South Carolina (Address of principal executive offices)		29625-1303 (Zip Code)

(864) 231-1200
(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. Yeso Noþ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):


Large accelerated filero		Accelerated filerþ		Non-accelerated filero

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

Number of shares of common stock outstanding as of November 30, 2007: 7,859,505

EXPLANATORY NOTE

We were not able to file our Form 10-Q for the quarter ended September 29, 2007 in a timely manner due to delays in making prior period filings pending the completion by the Audit Committee of the Board of Directors (“Audit Committee”) of an investigation (“Audit Committee Investigation”) related to, among other things, the misuse and misappropriation of assets for personal benefit, certain related party transactions, tax reporting, internal control deficiencies and financial reporting, and accounting for expense reimbursements, in each case involving certain members of Hampshire Group, Limited’s management. The findings of the Audit Committee Investigation resulted in, among other things, the termination of the employment of certain former members of management. On May 25, 2007, the Audit Committee concluded its investigation. On May 31, 2007, the Company filed Amendment No. 1 to its Form 10-K for the fiscal year ended December 31, 2005 to, among other things, restate its consolidated financial statements for the three years then ended. On August 9, 2007, the Company filed Amendment No. 2 to its Form 10-Q for the fiscal quarter ended April 1, 2006 and also filed Forms 10-Q for the fiscal quarters ended July 1, 2006 and September 30, 2006. On September 14, 2007, the Company filed its Form 10-K (“2006 Annual Report”) for the fiscal year ended December 31, 2006. On October 30, 2007, the Company filed its Form 10-Q for the fiscal quarter ended March 31, 2007. On November 15, 2007, the Company filed its Form 10-Q for the fiscal quarter ended June 30, 2007. For additional information on the restatement and other adjustments and reclassifications, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations— Restatements and Related Mattersin the Company’s 2006 Annual Report.

HAMPSHIRE GROUP, LIMITED

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended September 29, 2007


“SAFE HARBOR” STATEMENT			ii

PART I—FINANICIAL INFORMATION			1

Item 1. Financial Statements.			1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			12

Item 3. Quantitative and Qualitative Disclosures About Market Risk.			22

Item 4. Controls and Procedures.			22

PART II—OTHER INFORMATION			23

Item 1. Legal Proceedings.			23

Item 1A. Risk Factors.			23

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			23

Item 3. Defaults Upon Senior Securities.			23

Item 4. Submission of Matters to a Vote of Security Holders.			23

Item 5. Other Information.			23

Item 6. Exhibits.			24

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

“SAFE HARBOR” STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

From time to time, we make oral and written statements that may constitute “forward looking statements” (rather than historical facts) as defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission (the “SEC”) in its rules, regulations and releases, including Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We desire to take advantage of the “safe harbor” provisions in the Private Securities Litigation Reform Act of 1995 for forward looking statements made from time to time, including, but not limited to, the forward looking statements made in this Quarterly Report on Form 10-Q (the “Quarterly Report”), as well as those made in other filings with the SEC.

Forward looking statements can be identified by our use of forward looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. Such forward looking statements are based on our management’s current plans and expectations and are subject to risks, uncertainties and changes in plans that could cause actual results to differ materially from those described in the forward looking statements. Important factors that could cause actual results to differ materially from those anticipated in our forward looking statements include, but are not limited to, those described in Part I, Item 2 of this Form 10-Q and underRisk Factorsset forth in Part I, Item 1A of our Form 10-K for the fiscal year ended December 31, 2006.

We expressly disclaim any obligation to release publicly any updates or any changes in our expectations or any changes in events, conditions or circumstances on which any forward-looking statement is based.

As used herein, except as otherwise indicated by the context, the terms “Hampshire” and “Company” are used to refer to Hampshire Group, Limited and its wholly-owned subsidiaries.

PART I—FINANICIAL INFORMATION

Item 1. Financial Statements.

Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets


(In thousands, except par value and shares)	September 29, 2007			December 31, 2006

Current assets:
Cash and cash equivalents	$	—		$	70,210
Accounts receivable, net		73,745			33,456
Other receivables		5,938			2,442
Inventories, net		70,759			22,139
Deferred tax assets		10,512			7,586
Other current assets		1,704			5,217

Total current assets		162,658			141,050
Fixed assets, net		2,611			1,964
Goodwill		8,392			8,392
Intangible assets, net		2,045			2,190
Other assets		2,876			2,309

Total assets	$	178,582		$	155,905


Current liabilities:
Current portion of long-term debt	$	50		$	49
Borrowings under credit facility		22,980			—
Accounts payable		25,642			16,826
Accrued expenses and other liabilities		18,169			30,916

Total current liabilities		66,841			47,791

Long-term debt less current portion		43			12
Other long term liabilities		7,072			525

Total liabilities		73,956			48,328


Commitments and contingencies (Note 6)		—			—

Stockholders’ equity:
Preferred stock, $0.10 par value, 1,000,000 shares authorized; none issued		—			—
Common stock, $0.10 par value, 10,000,000 shares authorized; 8,243,784 shares issued at September 29, 2007 and December 31, 2006		824			824
Additional paid-in capital		35,977			35,747
Retained earnings		76,271			79,452
Treasury stock, 384,279 shares at cost at September 29, 2007 and December 31, 2006		(8,446	)		(8,446	)

Total stockholders’ equity		104,626			107,577

Total liabilities and stockholders’ equity	$	178,582		$	155,905

See accompanying notes to the financial statements.

Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations


	For the Three Months Ended						For the Nine Months Ended
	September 29,			September 30,			September 29,			September 30,
(In thousands, except per share data)	2007			2006			2007			2006

Net sales	$	103,584		$	112,622		$	203,820		$	229,551
Cost of goods sold		77,294			82,610			152,499			172,607

Gross profit		26,290			30,012			51,321			56,944
Selling, general, and administrative expenses		19,799			21,124			55,187			55,425
Investigation, restatement, and related expenses		1,082			4,046			4,929			4,467

Income (loss) from operations		5,409			4,842			(8,795	)		(2,948	)
Other income (expense):
Interest income		116			80			1,592			1,110
Interest expense		(80	)		(74	)		(100	)		(101	)
Other, net		(213	)		(5	)		(33	)		177

Income (loss) before income taxes and extraordinary item		5,232			4,843			(7,336	)		(1,762	)
Provision (benefit) for income taxes		1,133			2,927			(5,414	)		(1,065	)

Income (loss) before extraordinary item		4,099			1,916			(1,922	)		(697	)
Extraordinary item — gain on acquisition		—			—			—			1,800

Net income (loss)	$	4,099		$	1,916		$	(1,922	)	$	1,103


Income (loss) per share before extraordinary item:
Basic	$	0.52		$	0.24		$	(0.24	)	$	(0.09	)

Diluted	$	0.52		$	0.24		$	(0.24	)	$	(0.09	)

Income per share from extraordinary item:
Basic	$	—		$	—		$	—		$	0.23

Diluted	$	—		$	—		$	—		$	0.23

Net income (loss) per share:
Basic	$	0.52		$	0.24		$	(0.24	)	$	0.14

Diluted	$	0.52		$	0.24		$	(0.24	)	$	0.14

Weighted average number of shares outstanding:
Basic weighted average number of common shares outstanding		7,860			7,849			7,860			7,857

Diluted weighted average number of common shares outstanding		7,860			7,856			7,860			7,864

See accompanying notes to the financial statements.

Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Statement of Stockholders’ Equity


					Additional										Total
	Common Stock				Paid-In		Retained			Treasury Stock					Stockholders'
(In thousands, except shares)	Shares		Amount		Capital		Earnings			Shares		Amount			Equity
Balance at December 31, 2006		8,243,784	$	824	$	35,747	$	79,452			384,279	$	(8,446	)	$	107,577
FIN 48 cumulative effect of change in accounting (Note 7)		—		—		—		(1,259	)		—		—			(1,259	)
Net loss		—		—		—		(1,922	)		—		—			(1,922	)
Tax benefits from share-based payment arrangements		—		—		230		—			—		—			230

Balance at September 29, 2007		8,243,784	$	824	$	35,977	$	76,271			384,279	$	(8,446	)	$	104,626

See accompanying notes to the financial statements.

Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows


	For the Nine Months Ended
(In thousands)	September 29, 2007			September 30, 2006
Cash flows from operating activities:
Net income (loss)	$	(1,922	)	$	1,103
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Extraordinary gain on acquisition		—			(1,800	)
Depreciation and amortization		1,057			1,042
Loss (gain) on disposition of fixed assets		(57	)		10
Deferred income tax (benefit) provision, net		(614	)		633
Deferred compensation expense, net		—			753
Excess tax benefits from share-based arrangements		(230	)		(214	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables, net		(42,883	)		(42,190	)
Inventories, net		(48,620	)		(31,699	)
Other assets		3,244			(1,824	)
Liabilities		(1,925	)		5,475

Net cash provided by (used in) operating activities		(91,950	)		(68,711	)

Cash flows from investing activities:
Proceeds from the sale of short-term investments		—			10,395
Purchases of short-term investments		—			(341	)
Purchase of securities for deferred compensation		—			(657	)
Cash used for business acquisitions, net of cash acquired		—			(2,768	)
Intangible asset acquired		(237	)		—
Capital expenditures		(1,309	)		(535	)
Proceeds from the sale of fixed assets		129			22

Net cash provided by (used in) investing activities		(1,417	)		6,116

Cash flows from financing activities:
Proceeds from credit facility		28,240			20,800
Repayments of credit facility		(5,260	)		(10,400	)
Advances repaid to factor		—			(12,775	)
Purchase of treasury stock, net		—			(593	)
Repayment of long-term debt		(53	)		(34	)
Excess tax benefits from share-based arrangements		230			214
Proceeds from issuance of stock under Company stock plans		—			20

Net cash provided by (used in) financing activities		23,157			(2,768	)

Net decrease in cash and cash equivalents		(70,210	)		(65,363	)
Cash and cash equivalents at beginning of period		70,210			65,791

Cash and cash equivalents at end of period	$	—		$	428

See accompanying notes to the financial statements.

Note 1 — Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Hampshire Group, Limited and its Subsidiaries (the “Company” or “Hampshire”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and according to instructions from the United States Securities and Exchange Commission (“SEC”) for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements included in the Company’s Form 10-K (“Form 10-K”) for the fiscal year ended December 31, 2006.

The information included herein is not necessarily indicative of the annual results that may be expected for the year ending December 31, 2007, but does reflect all adjustments (which are of a normal and recurring nature) considered, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. In addition, the Company’s revenues are usually highly seasonal, causing significant fluctuations in financial results for interim periods. The Company sells apparel throughout the year but over 65% of its annual sales historically occur in the third and fourth quarters, primarily due to the large concentration of sweaters in the product mix.

Exit Costs
The Company applies the provisions of Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“FAS No. 146”). FAS No. 146 addresses financial accounting for costs associated with exit or disposal activities. FAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability, as defined in Financial Accounting Standards Board (“FASB”) Concepts Statement No. 6, “Elements of Financial Statements,” is incurred. (See Note 8 —Dispositions, Exit Activities, and Related Matters.)

Intangible Assets
In October 2005, the Company acquired certain assets of the David Brooks business. Under terms of the purchase agreement, the Company agreed to make periodic payments based on a percentage of net sales related to the trade name of David Brooks^® over a three year period. In the nine months ended September 29, 2007, an additional $0.2 million was capitalized based on a percentage of net sales related to the trade name. (See Note 8 —Dispositions, Exit Activities, and Related Matters.)

Stock Options
The Company did not record any expense related to equity awards, as no stock-based compensation was awarded during the quarter and nine months ended September 29, 2007 or for the years ended December 31, 2006, 2005, and 2004. No stock options or other equity based compensation were exercised during the quarter and nine months ended September 29, 2007 or were outstanding at September 29, 2007.

Recent Accounting Standards
In September 2006, the FASB issued FAS No. 157, “Fair Value Measurements” (“FAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles in the United States and expands disclosures about fair value measurements. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company is currently evaluating the impact of FAS No. 157 on the Company’s financial statements, but does not expect it to have a material impact on its financial statements.

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115” (“FAS No. 159”), which is effective January 1, 2008. FAS No. 159 permits companies to choose to measure certain financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. The Company is currently evaluating the impact of FAS No. 159 on the Company’s financial statements, but does not expect it to have a material impact on its financial statements.

Presentation of Prior Years Data
Certain reclassifications have been made in the prior periods to conform to the current period presentation.

Note 2 — Inventories

Inventories at September 29, 2007 and December 31, 2006 consisted of the following:


(In thousands)	September 29, 2007			December 31, 2006
Finished goods	$	81,349		$	25,366
Work-in-process		347			225
Raw materials and supplies		535			984

Total cost		82,231			26,575
Less: reserves		(11,472	)		(4,436	)

Inventories, net	$	70,759		$	22,139

Note 3 — Investigation, restatement, and related expenses

During June 2006, the Company announced that the Audit Committee of its Board of Directors commenced an investigation (“Audit Committee Investigation”) related to, among other things, the misuse and misappropriation of assets for personal benefit, certain related party transactions, tax reporting, internal control deficiencies and financial reporting, and accounting for expense reimbursements, in each case involving certain members of the Company’s management, whose employment was subsequently terminated. Repurchases of shares of common stock under the Company’s stock repurchase plans were suspended upon the commencement of the Audit Committee Investigation. On May 25, 2007, the Audit Committee concluded its investigation. On May 31, 2007, the Company filed an amended Form 10-K for the year ended December 31, 2005 that, among other things, restated its financial statements for the fiscal years ended December 31, 2005, 2004, and 2003. The Company has also amended its Form 10-Q for the quarter ended April 1, 2006, to, among other things, restate its financial statements for the periods covered therein.

The SEC and the United States Attorney for the Southern District of New York (“U.S. Attorney’s Office”) are currently investigating certain issues identified during the Audit Committee Investigation. The Company is cooperating with both investigations.

Pending completion of the Audit Committee Investigation, the Company was not able to make timely financial statement filings with the SEC. On January 17, 2007, the Company announced that its common stock would be delisted from the Nasdaq Global Market, effective January 19, 2007, as a result of the Company’s failure to file its quarterly reports on Form 10-Q. There is no longer an established public trading market for the Company’s common stock. The Company’s common stock is currently quoted on the Pink Sheets under the symbol “HAMP.PK.” The Pink Sheets is a centralized quotation service that collects and publishes market maker quotes for over-the-counter securities in real time.

During the quarter and nine months ended September 29, 2007, the Company incurred $1.1 million and $4.9 million, respectively, in fees and expenses related to the Audit Committee Investigation, which are reflected in “Investigation, restatement, and related expenses” on the unaudited condensed consolidated statements of operations. These expenses include but are not limited to costs of the internal investigation, restatement related costs, assessment and remediation of certain tax exposures, investigations by the SEC and the U.S. Attorney’s Office, a stockholder derivative suit, Nasdaq Global Market listing related costs, and an arbitration commenced against the Company by Ludwig Kuttner, the Company’s former Chief Executive Officer and Chairman and a current Director of the Company. During the quarter and nine months ended September 30, 2006, the Company incurred $4.0 million and $4.5 million, respectively, in Investigation, restatement, and related expenses.

Fees and expenses since inception of the Audit Committee Investigation were approximately $11.1 million through September 29, 2007, with $6.2 million of the total incurred in 2006. The Company expects to incur additional costs to make current its SEC filing requirements and in connection with the investigations by the SEC and the U.S. Attorney’s Office and related matters. The Company cannot predict the total cost but believes that future costs may be material.

Note 4 — Revolving Credit Facility

The Company maintains a Revolving Credit Facility (“Revolving Credit Facility”) with six participating commercial banks, with HSBC Bank USA, NA as agent. The Revolving Credit Facility provides for up to $100 million in revolving line of credit borrowings and issuance of letters of credit. Advances under the line of credit are limited to the lesser of: (a) $100 million less outstanding letters of credit; or (b) the sum of 100% of cash deposited in a pledged account; 85% of eligible accounts receivable; 50% of eligible inventory (subject to seasonal limits) of the Company’s subsidiaries; 50% of outstanding eligible letters of credit issued through the Revolving Credit Facility, plus seasonal over advances in the periods of highest requirements.

Advances under the Revolving Credit Facility bear interest at either the bank’s prime rate less 0.25% or, at the option of the Company, a fixed rate of London Interbank Offered Rate (“LIBOR”) plus 1.80%, for a fixed term not to exceed 180 days. The Company is charged a fee of 0.125% on the unused balance of the Revolving Credit Facility.

The loan is collateralized principally by the trade accounts receivable and inventories of the Company’s subsidiaries and a pledge of the common stock of such subsidiaries. At September 29, 2007, outstanding borrowings were $23.0 million with approximately $33.5 million outstanding under letters of credit. Borrowing availability was approximately $43.5 million at September 29, 2007.

The term of the Revolving Credit Facility, which was to mature on April 30, 2007, was extended to December 31, 2007. As of March 31, 2007, the Company entered into Amendment No. 5 and Waiver to Credit Agreement (the “Amendment”) with respect to its Revolving Credit Facility, by and among the Company, the Guarantors party thereto, HSBC Bank USA, National Association, as Agent for the Banks, and the Banks named therein (the “Banks”). Pursuant to the Amendment, the Banks and the Company agreed, in consideration for $25,000 and the payment of the Agent’s legal fees and expenses, to, among other things, extend the Revolving Credit Facility to December 31, 2007. The Company is currently in negotiations with its lenders regarding the renewal of the Revolving Credit Facility.

As of July 25, 2007 and August 31, 2007, the Company entered into additional waivers with respect to the Revolving Credit Facility with the Banks. In consideration for certain fees and the payment of the Agent’s legal fees and expenses, the waivers allowed the Company to postpone further the requirement to deliver to the Banks the Company’s financial statements as long as it met rescheduled reporting requirements for 2006 and 2007.

In addition, to the extent a breach of a representation or other term of the Revolving Credit Facility was caused by the restatement of the Company’s prior financial statements, the Banks waived compliance with such provisions as long as the restated financial statements were delivered in accordance with the rescheduled requirements and the restated financial statements did not demonstrate non-compliance with any financial covenant as of any quarter-end test date occurring subsequent to June 29, 2006. The Company has been in compliance with financial covenants related to financial statements for quarter end test dates subsequent to June 29, 2006.

On August 9, 2007, the Company met the 2006 rescheduled quarterly reporting requirements and filed Forms 10-Q for the quarters ended April 1, 2006 (Restated), July 1, 2006, and September 30, 2006. On September 14, 2007, the Company met the 2006 rescheduled annual reporting requirement and filed a Form 10-K for the period ended December 31, 2006. On October 30, 2007 and November 15, 2007, the Company met rescheduled quarterly reporting requirements and filed Forms 10-Q for the periods ended March 31, 2007 and June 30, 2007, respectively.

The remaining rescheduled quarterly reporting requirement was for the period ended September 29, 2007 and had an extended delivery date of December 10, 2007. The quarterly reporting requirement corresponded with the filing date for this Form 10-Q that includes these unaudited condensed consolidated financial statements, which is being filed concurrently with the delivery of the rescheduled report.

Note 5 — Earnings (Loss) Per Share

Set forth in the table below is the reconciliation by year of the numerator (income or loss) and the denominator (shares) for the computation of basic and diluted earnings per share:


	Numerator			Denominator		Per Share
(In thousands, except per share data)	Income (Loss)			Shares		Amount
Three months ended September 29, 2007:
Basic net income	$	4,099			7,860	$	0.52
Effect of dilutive securities:
Stock options		—			—		—

Diluted net income	$	4,099			7,860	$	0.52


Three months ended September 30, 2006:
Basic net income	$	1,916			7,849	$	0.24
Effect of dilutive securities:
Stock options		—			7		—

Diluted net income	$	1,916			7,856	$	0.24

Nine months ended September 29, 2007:
Basic net loss	$	(1,922	)		7,860	$	(0.24	)
Effect of dilutive securities:
Stock options		—			—		—

Diluted net loss	$	(1,922	)		7,860	$	(0.24	)

Nine months ended September 30, 2006:
Loss before extraordinary item	$	(697	)		7,857	$	(0.09	)
Extraordinary item — gain on acquisition		1,800			—		0.23

Basic net income		1,103			7,857		0.14
Effect of dilutive securities:
Stock options		—			7		—

Diluted net income	$	1,103			7,864	$	0.14

There were no stock options outstanding during the three and nine month periods ended September 29, 2007.

Note 6 — Commitments and Contingencies

On July 18, 2006, a stockholder derivative suit was filed in the United States District Court for the District of South Carolina naming as defendants Mr. Kuttner and Roger Clark, the former Principal Accounting Officer and Vice President, and Directors Joel Goldberg, Michael Jackson, Harvey Sperry, and Irwin Winter, as well as naming the Company as a nominal defendant. The complaint alleged, among other things, that the named individual defendants breached their fiduciary duties to the Company, abused control relationships, engaged in gross mismanagement of the Company, wasted Company assets and were unjustly enriched. On September 19, 2006, the defendants filed motions to dismiss the complaint for failure to meet the pleading requirements for derivative actions. The plaintiff filed an amended complaint on November 15, 2006, adding Charles Clayton, the former Chief Financial Officer, Treasurer, and Senior Vice President, as a defendant, and the defendants again moved to dismiss. Following oral argument, the court provided the plaintiff an additional opportunity to amend the complaint. The plaintiff filed a second amended complaint on January 10, 2007, and the defendants renewed their motions to dismiss. On April 13, 2007, the court granted the defendants’ motions and dismissed the suit. No appeal was taken. On May 23, 2007, the Plaintiff’s counsel made a formal “demand” that the Company institute legal proceedings against certain of its current and/or former officers and directors within 90 days. The Company subsequently responded rejecting the demand for artificial deadlines and reaffirmed its commitment to take all necessary and appropriate actions in the best interests of its shareholders.

On August 17, 2006, Mr. Kuttner filed a Demand for Arbitration with the American Arbitration Association claiming that his suspension “effectively terminated” his employment with the Company without cause and that therefore he is entitled, pursuant to his employment agreement with the Company, to unpaid compensation, including salary, accrued bonus and unreimbursed expenses, a termination benefit, and continued health, dental and life insurance coverage in the aggregate amount of $7.5 million. The arbitration proceeding was stayed in February 2007 at Mr. Kuttner’s request pending the outcome of discussions between Mr. Kuttner and the Company, but resumed in July 2007 when Mr. Kuttner filed an amended statement of claim. The Company intends to contest vigorously Mr. Kuttner’s claim. In addition, the Company is currently evaluating claims it may have against Mr. Kuttner, including claims for misappropriation, breach of the duty of loyalty, and disgorgement of bonuses and net gain on stock sales pursuant to the Sarbanes-Oxley Act. In his amended claim, Mr. Kuttner seeks a declaratory judgment that he is not liable to the Company for such claims. At Mr. Kuttner’s request and due to the ongoing discussions regarding the Company’s and Mr. Kuttner’s respective claims, the parties agreed to adjourn the arbitration proceedings until January 2008.

Prior to 2003, the Company was advised that certain of its suppliers would not be able to deliver finished product as agreed. In connection with this situation, the Company established a reserve in the amount of $7.5 million during 2002 for costs of past inventory purchases which had not yet been paid to the supplier and other matters arising from these events and has accordingly adjusted the reserve for ongoing activity. The reserve balance was $5.1 million at September 29, 2007 for such unresolved matters.

The Company has bonus agreements with certain members of current and former management which are contingent upon the release of the aforementioned reserve established for past inventory purchases. If the Company determines that this reserve is no longer needed and is released, the bonus payments could be as much as $0.6 million.

New Facility Lease and Related Credit Facility Amendment
The Company entered into a fifteen year, six month lease of approximately 77,000 square feet of office space in New York, New York in July 2007. The lease provides for minimum payments of $59.8 million over the lease term, and the Company estimates capital expenditures related to the new facility will be made in fiscal year 2007 and fiscal year 2008 in an amount not to exceed $8.5 million, net of landlord allowances. The Company estimates it will incur approximately $1.3 million in non-cash lease amortization expense in 2007 related to the lease. Future minimum contractual obligations related to the lease are as follows:


(In thousands)	Total		2007		2008		2009		2010		2011		Thereafter
Facility lease	$	59,830	$	—	$	2,905	$	3,486	$	3,646	$	3,678	$	46,115

In connection with the new facility lease, the Company entered into Amendment No. 6 to the Revolving Credit Facility (“Amendment No. 6”). Pursuant to Amendment No. 6, the Banks and the Company agreed that the expenditure by the Company of up to an aggregate of $8.5 million, net of landlord allowances, for tenant improvements to the leased premises (in addition to certain tenant improvements to the leased premises to be funded by the landlord) will not be deemed to be “Consolidated Capital Expenditures” within the meaning of the Revolving Credit Facility for purposes of determining the Company’s compliance with the consolidated fixed charge coverage ratio and the restriction on capital expenditures under the Revolving Credit Facility.

The Company is from time to time involved in other litigation incidental to the conduct of its business, none of which is expected to be material to its business, financial condition, or operations.

Note 7 — Taxes

FASB Interpretation No. 48
On January 1, 2007, the Company adopted the provisions of FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company determine whether the benefits of tax positions are more likely than not to be sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not to be sustained upon audit, the Company recognizes the largest amount of the benefit that is more likely than not to be sustained in the financial statements. For tax positions that are not more likely than not to be sustained upon audit, the Company does not recognize any portion of the benefit in the financial statements. The Company recognizes interest and penalties associated with uncertain tax positions as a component of taxes on income in the consolidated statement of operations.

As a result of the implementation of FIN 48, the Company recognized an increase of $4.7 million in the liability for unrecognized tax benefits, which was accounted for as a $1.3 million decrease to the January 1, 2007 balance of retained earnings. As of January 1, 2007, after the implementation of FIN 48, the Company’s liability for unrecognized tax benefits was $8.7 million, excluding liabilities for interest and penalties. If the Company were to recognize these benefits, the effective tax rate would reflect a favorable net impact of $5.6 million. In addition, at January 1, 2007, liabilities for accrued interest and penalties relating to the unrecognized tax benefits totaled $3.1 million. As of September 29, 2007, the Company’s consolidated balance sheet reflects a liability for unrecognized tax benefits of $5.4 million, excluding liabilities for interest and penalties. If the Company were to recognize these benefits, the effective tax rate would reflect a favorable net impact of $2.8 million. Accrued interest and penalties included in the consolidated balance sheet was $2.6 million as of September 29, 2007. The Company anticipates that total unrecognized tax benefits will decrease by approximately $2.1 million, including interest and penalties of approximately $0.6 million, due to the settlement of certain issues or the lapsing of statutes within twelve months from September 29, 2007.

The statute of limitations with respect to the Company’s 2002 federal income tax return lapsed in June 2007, and the related net tax benefits of $1.4 million, including interest of $0.3 million net of tax benefits, were recognized in the quarter then ended. In addition, the statute of limitations with respect to the Company’s 2003 federal income tax return lapsed in September 2007 and the related net tax benefits of $1.3 million, including interest of $0.3 million net of tax benefits, were recognized in the quarter then ended. With limited exceptions, the statute of limitations for state income tax returns has lapsed for periods 2001 and prior.

Other Tax Matters
In February 2007, the Company entered into a voluntary disclosure agreement with certain state and local taxing authorities to resolve certain income nexus tax liabilities. The total amount of these settlements was approximately $0.8 million, including interest.

In August 2007, the Company was informed by a state taxing authority that it was going to audit payroll withholding taxes of one of the Company’s subsidiaries for the years 2004 and 2005.

In October 2007, the Company received notice from the Internal Revenue Service that it had completed its examination of the Company’s 2004 and 2005 tax returns. The settlement amount related to the examination was approximately $0.3 million, including interest.

Note 8 — Dispositions, Exit Activities, and Related Matters

Sale of David Brooks Assets and Certain Marisa Christina Rights
On November 2, 2007, the Company sold the trade name, inventory, certain other assets, and assigned certain obligations of its David Brooks division for approximately $5.6 million in cash. The buyer assumed Hampshire’s obligation to make payments through 2008 based on a percentage of the net sales of products bearing the name David Brooks^®. The Company estimates that it will incur a loss of approximately $0.7 million on the sale of David Brooks, which includes approximately $0.2 million of personnel severance costs. On the same day, the Company sold the world wide rights, excluding Japan, to the Marisa Christina trademarks as well as other rights for $0.2 million, which the Company estimates will be recognized as a gain. In connection with these transactions, Hampshire entered into a consent and waiver to the Revolving Credit Facility pursuant to which the Banks agreed to waive compliance with the terms of the Revolving Credit Facility to the extent that such terms would prohibit these transactions.

It was previously disclosed that the Company determined in May 2007 to cease domestic activities of Marisa Christina. Operating activities related to fulfilling Marisa Christina commitments are expected to continue into December 2007.

Marisa Christina Exit Costs
During the three and nine month periods ended September 29, 2007, the following summarizes the exit costs associated with Marisa Christina recognized by the Company:


	Three Months Ended		Nine Months Ended
(In thousands)	September 29, 2007		September 29, 2007
Personnel reductions	$	—	$	212
Vendor settlements		—		696

End of period	$	—	$	908

A reconciliation of the beginning and ending liability balances for exit costs included in the liabilities section of the unaudited condensed consolidated balance sheet for the three and nine month periods ended September 29, 2007 is shown as follows:


	Three Months Ended September 29, 2007
	Personnel			Vendor
(In thousands)	Reductions			Settlements			Total
Beginning of period	$	145		$	609		$	754
Costs charged to expense		—			—			—
Costs paid or settled		(145	)		(435	)		(580	)

End of period	$	—		$	174		$	174


	Nine Months Ended September 29, 2007
	Personnel			Vendor
(In thousands)	Reductions			Settlements			Total
Beginning of period	$	—		$	—		$	—
Costs charged to expense		212			696			908
Costs paid or settled		(212	)		(522	)		(734	)

End of period	$	—		$	174		$	174

Vendor settlement costs and personnel reductions are charged to “Cost of goods sold” and “Selling, general, and administrative expenses,” respectively, on the unaudited condensed consolidated statements of operations.

Personnel Reductions
There were no charges recognized during the three months ended September 29, 2007. During the nine months ended September 29, 2007, the Company recognized charges of $0.2 million for a reduction in personnel related to exiting the domestic operations of Marisa Christina, which represents approximately 12 employees primarily located in the New York metropolitan region.

Vendor Settlements
There were no charges recognized during the three months ended September 29, 2007. During the nine months ended September 29, 2007, the Company recognized $0.7 million of vendor settlement expenses. These costs are related to settlements with vendors of previously issued Marisa Christina purchase orders.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion contains statements that are forward-looking. These statements are based on expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed elsewhere in this report. This discussion should be read in conjunction with the discussion of forward-looking statements, the financial statements, and the related notes and the other statistical information included in this report.

DISCUSSION OF FORWARD-LOOKING STATEMENTS

This report contains statements which may constitute “forward-looking statements” (rather than historical facts) as defined in the Private Securities Litigation Reform Act of 1995 or by the SEC in its rules, regulations and releases, including Section 27A of the Securities Act of 1933, as amended and Section 21E of the Exchange Act, as amended. Such forward-looking statements are based on our management’s current plans and expectations and are subject to risks, uncertainties and changes in plans that could cause actual results to differ materially from those described in the forward-looking statements. The words “may,” “will,” “expect,” “anticipate,” “estimate,” “believe,” “continue” or other similar words are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ from those anticipated in any forward-looking statements include, but are not limited to, those described in our Annual Report for the fiscal year ended December 31, 2006 under Item 1A —Risk Factors, and include the following risk factors:

	•		Decreases in business from or the loss of any one of our key customers;

	•		Financial instability experienced by our customers;

	•		Loss or inability to renew certain licenses;

	•		Change in consumer preferences and fashion trends, which could negatively affect acceptance of our products by retailers and consumers;

	•		Use of foreign suppliers for raw materials and manufacture of our products;

	•		Failure of our manufacturers to use acceptable ethical business practices;

	•		Failure to deliver quality products in a timely manner;

	•		Problems with our distribution system and our ability to deliver products;

	•		Labor disruptions at port, our suppliers, manufacturers, or distribution facilities;

	•		Chargebacks and margin support payments;

	•		Failure, inadequacy, interruption, or security lapse of our information technology;

	•		Failure to compete successfully in a highly competitive and fragmented industry;

	•		Challenges integrating the Shane Hunter business or any other businesses we may acquire;

	•		An ongoing dispute with our former Chief Executive Officer and Chairman;

	•		Ownership of a significant portion of our common stock by our former Chief Executive Officer and Chairman could determine the outcome of matters presented to stockholders for approval;

	•		Unanticipated expenses beyond the amount reserved on our balance sheet or unanticipated cash payments related to the ultimate resolution of income and other possible tax liabilities;

	•		Future defaults under our credit facility;

	•		Loss of certain key personnel which could negatively impact our ability to manage our business;

	•		Material weaknesses in our internal control over financial reporting;

	•		Investigations by the SEC and the United States Attorney of the Southern District of New York (“U.S. Attorney’s Office”); and

	•		Potential future restatements of our prior financial statements.

OVERVIEW

We are engaged in the apparel business through three wholly owned subsidiaries: Hampshire Designers, which primarily designs and sells women’s and men’s sweaters; Item-Eyes, which designs and sells a broad line of women’s woven and knit related separates; and Shane Hunter, which designs and sells apparel to mass merchant retailers.

Our products, both branded and private label, are marketed in the moderate and better markets through multiple channels of distribution including national and regional department stores, and mass merchant retailers. Customers in the United States represented more than 99% of revenues in each of the last three fiscal years. Sales outside of the United States were principally to a customer in Canada.

We believe that our Company, through Hampshire Designers and our other subsidiaries, is one of the largest designers and marketers of sweaters for women and men in North America. We sell apparel throughout the year, but over 65% of our annual sales historically occur in the third and fourth quarters, primarily due to the large concentration of sweaters in the product mix. Unseasonable weather, particularly warm weather in the autumn and winter, can have a disproportionately negative impact on our margins as sales of sweaters by our customers may require discounts or allowances. We diversified our product line with the purchase of Item-Eyes in 2000 and Shane Hunter in 2006.

Our primary strength is our ability to design, develop, source, and deliver quality products within a given price range, while providing superior levels of customer service. We have developed international sourcing abilities which permit us to deliver quality merchandise at a competitive price to our customers.

Our subsidiaries source the manufacture of their products through manufacturers primarily located in Southeast Asia. Our products are subject to increased prices for the products we source, but we have historically been able to maintain our gross margin by achieving sourcing efficiencies, controlling costs in other parts of our operations and, when necessary, passing along a portion of our cost increases to our customers through higher selling prices. We purchase our products from international suppliers primarily using letters of credit in U.S. dollars, a method we expect to continue to employ in the future.

With our dependence on international sources, the failure of any of these manufacturers to ship products in a timely manner, failure of the manufacturers to meet required quality standards, or delays in the shipments including clearing U.S. Customs could cause us to miss delivery dates to customers. The failure to make timely deliveries of quality products could result in customers either canceling the orders or demanding reduced prices for late delivery. Currency fluctuations could also expose us to higher costs.

The apparel market is highly competitive. Competition is primarily based on product design, price, quality, and service. While we face competition from domestic manufacturers and distributors, our primary competition comes from manufacturers located in Southeast Asia, some of whom also manufacture our products. We also compete for private label programs with the internal sourcing departments of many of our customers.

AUDIT COMMITTEE INVESTIGATION AND RELATED MATTERS

During June 2006, we announced that the Audit Committee of our Board of Directors (“Board”) commenced an investigation related to, among other things, the misuse and misappropriation of assets for personal benefit, certain related party transactions, tax reporting, internal control deficiencies and financial reporting, and accounting for expense reimbursements, in each case involving certain members of the Company’s management, whose employment was subsequently terminated.

On May 25, 2007, the Audit Committee concluded its investigation. On May 31, 2007, we filed an amended Form 10-K for the year ended December 31, 2005 that, among other things, restated our financial statements for the fiscal years ended December 31, 2005, 2004, and 2003. The total adjustments to net income as a result of the findings were approximately $(1.4) million or $(0.17) per basic and $(0.16) per diluted share, $(2.4) million or $(0.30) per basic and $(0.29) per diluted share, and $(1.9) million or $(0.21) per basic and $(0.20) per diluted share for the fiscal years ended December 31, 2005, 2004, and 2003, respectively, and $(2.0) million to earnings prior to 2003.

We also amended our Form 10-Q for the quarter ended April 1, 2006, to, among other things, restate our financial statements for the periods covered therein.

The SEC and the U.S. Attorney’s Office are currently investigating certain issues identified during the Audit Committee Investigation. We are cooperating with the investigations of the SEC and U.S. Attorney’s Office. Fees and expenses since inception of the Audit Committee Investigation and related matters were approximately $11.1 million through September 29, 2007, with $6.2 million of the total incurred in 2006. These expenses include, but are not limited to, costs of the internal investigation, restatement related costs, assessment and remediation of certain tax exposures, investigations by the SEC and the U.S. Attorney’s Office, the stockholder derivative suit, Nasdaq Global Market listing related costs, and an arbitration commenced against the Company by Ludwig Kuttner, the Company’s former Chief Executive Officer and Chairman and a current Director of the Company, and are reflected in “Investigation, restatement, and related expenses” on the unaudited condensed consolidated statements of operations. (SeeResults of Operations.)

We expect to incur additional costs to make current our SEC filing requirements and in connection with the investigations by the SEC and the U.S. Attorney’s Office, and related matters. We cannot predict the total cost but believe that future costs may be material.

Legal and Compliance Matters

On July 18, 2006, a stockholder derivative suit was filed in the United States District Court for the District of South Carolina naming as defendants Mr. Kuttner and Roger Clark, the former Principal Accounting Officer and Vice President, and Directors Joel Goldberg, Michael Jackson, Harvey Sperry, and Irwin Winter, as well as naming the Company as a nominal defendant. The complaint alleged, among other things, that the named individual defendants breached their fiduciary duties to the Company, abused control relationships, engaged in gross mismanagement of the Company, wasted Company assets and were unjustly enriched. On September 19, 2006, the defendants filed motions to dismiss the complaint for failure to meet the pleading requirements for derivative actions. The plaintiff filed an amended complaint on November 15, 2006, adding Charles Clayton, the former Chief Financial Officer, Treasurer, and Senior Vice President as a defendant, and the defendants again moved to dismiss. Following oral argument, the court provided the plaintiff an additional opportunity to amend the complaint. The plaintiff filed a second amended complaint on January 10, 2007, and the defendants renewed their motions to dismiss. On April 13, 2007, the court granted the defendants’ motions and dismissed the suit. No appeal was taken. On May 23, 2007, the Plaintiff’s counsel made a formal “demand” that the Company institute legal proceedings against certain of its current and/or former officers and directors within 90 days. The Company subsequently responded rejecting the demand for artificial deadlines and reaffirmed its commitment to take all necessary and appropriate actions in the best interests of its shareholders.

The Company is from time to time involved in other litigation incidental to the conduct of its business, none of which is expected to be material to its business, financial condition, or operations.

In February 2007, we entered into a voluntary disclosure agreement with certain state and local taxing authorities to resolve certain income nexus tax liabilities. The total amount of these settlements was approximately $0.8 million, including interest.

In August 2007, we were informed by a state taxing authority that it was going to audit payroll withholding taxes of one of our subsidiaries for the years 2004 and 2005.

In October 2007, the Company received notice from the Internal Revenue Service that it completed its examination of the Company’s 2004 and 2005 tax returns. The settlement amount related to the examination was approximately $0.3 million, including interest.

The statute of limitations for U.S. federal income tax returns has lapsed for periods 2003 and prior. With limited exceptions, the statute of limitations for state income tax returns has lapsed for periods 2001 and prior.

Delisting

Pending completion of the Audit Committee Investigation, we were not able to make timely financial statement filings with the SEC. On January 17, 2007, we announced that our common stock would be delisted from the Nasdaq Global Market, effective January 19, 2007, as a result of the failure to file Quarterly Reports on Form 10-Q. There is no longer an established public trading market for our common stock. Our common stock is currently quoted on the Pink Sheets under the symbol “HAMP.PK.” The Pink Sheets is a centralized quotation service that collects and publishes market maker quotes for over-the-counter securities in real time.

Revolving Credit Facility Extension

We maintain a Revolving Credit Agreement (“Revolving Credit Facility”) with six participating commercial banks. The term of the Revolving Credit Facility, which was to mature on April 30, 2007, was extended to December 31, 2007.

As of March 31, 2007, we entered into Amendment No. 5 and Waiver to Credit Agreement (the “Amendment”) with respect to that certain Credit Agreement and Guaranty, dated as of August 15, 2003 and amended as of December 29, 2004, November 10, 2005, August 8, 2006, October 13, 2006, and December 29, 2006, by and among us, the Guarantors party thereto, HSBC Bank USA, National Association, as Agent for the Banks, and the Banks named therein (the “Banks”). Pursuant to the Amendment, we and the Banks agreed, in consideration for $25,000 and the payment of the Agent’s legal fees and expenses, to, among other things, extend the term of the Revolving Credit Facility to December 31, 2007.

While the Company can provide no assurances, management believes that it will be able to renew the Revolving Credit Facility on comparable terms and that the borrowings available to it, under the current and future credit facilities along with cash flow from operations, will provide adequate resources to meet our capital requirements and operational needs for the foreseeable future.

Rescheduled Credit Facility Reporting Requirements

As of July 25, 2007 and August 31, 2007, we entered into additional waivers with respect to the Revolving Credit Facility with the Banks. In consideration for certain fees and the payment of the Agent’s legal fees and expenses, the waivers allowed us to postpone further the requirement to deliver to the Banks our financial statements as long as we met rescheduled reporting requirements for 2006 and 2007.

In addition, to the extent a breach of a representation or other term of the Revolving Credit Facility was caused by the restatement of our prior financial statements, the Banks waived compliance with such provisions as long as the restated financial statements were delivered in accordance with the rescheduled requirements and the restated financial statements did not demonstrate non-compliance with any financial covenant as of any quarter-end test date occurring subsequent to June 29, 2006. We have been in compliance with financial covenants related to financial statements for quarter end test dates subsequent to June 29, 2006.

On August 9, 2007, we met the 2006 rescheduled quarterly reporting requirements and filed Forms 10-Q for the quarters ended April 1, 2006 (Restated), July 1, 2006, and September 30, 2006. On September 14, 2007, we met the 2006 rescheduled annual reporting requirements and filed a Form 10-K for the period ended December 31, 2006. On October 30, 2007 and November 15, 2007, we met rescheduled quarterly reporting requirements and filed Form 10-Q for the periods ended March 31, 2007 and June 30, 2007, respectively.

The remaining rescheduled quarterly reporting requirement was for the period ended September 29, 2007 and had an extended delivery date of December 10, 2007. The quarterly reporting requirement corresponded with the filing date for this Form 10-Q, which is being filed concurrently with the delivery of the rescheduled report.

OTHER MATTERS

New Facility Lease and Related Credit Facility Amendment

We entered into a fifteen year, six month lease of approximately 77,000 square feet of office space in New York, New York on July 11, 2007. The office space addresses present as well as future operational needs and allows the consolidation of operations currently dispersed over a number of locations in New York, which will provide certain divisions with the opportunity to capitalize on synergies currently unavailable to them. We believe that over the term of the lease our costs will be lower than had we elected to maintain the current leasing arrangements. The lease provides for minimum payments of $59.8 million over the lease term, and we estimate capital expenditures related to the new facility will be made in fiscal year 2007 and fiscal year 2008 in an amount not to exceed $8.5 million, net of landlord allowances. Future minimum contractual obligations related to the lease are as follows:


(in thousands)	Total		2007		2008		2009		2010		2011		Thereafter
Facility lease	$	59,830	$	—	$	2,905	$	3,486	$	3,646	$	3,678	$	46,115

Our possession of the facility commenced in September 2007 and lease payments begin in 2008. The lease includes rent escalations commencing in 2010. The lease is being amortized on a straight-line basis over the expected lease term, including any rent holidays and rent escalations. We estimate we will incur approximately $1.3 million in non-cash lease amortization expense in 2007 related to the lease.

In connection with the new facility lease, we entered into Amendment No. 6 to the Revolving Credit Facility (“Amendment No. 6”) with respect to the Revolving Credit Facility. Pursuant to Amendment No. 6, we and the Banks agreed that the expenditure by us of up to an aggregate of $8.5 million, net of landlord allowances, for tenant improvements to the leased premises (in addition to certain tenant improvements to the leased premises to be funded by the landlord) will not be deemed to be “Consolidated Capital Expenditures” within the meaning of the Revolving Credit Facility for purposes of determining our compliance with the consolidated fixed charge coverage ratio and the restriction on capital expenditures under the Revolving Credit Facility.

Acquisitions, Dispositions, Exit Activities, and Related Matters

Acquisitions

On October 3, 2005, we acquired certain assets of the David Brooks business as part of the expansion of the women’s better market strategy of former management. The assets purchased, consisting primarily of inventory and trade name, were acquired for $2.5 million in cash. Under the terms of the purchase agreement, we are required to make additional payments to the seller through 2008 based on a percentage of the net sales of products bearing the name David Brooks^®. The business is located in Brockton, Massachusetts with sales offices and showrooms in several major U.S. cities.

On January 5, 2006, we purchased substantially all of the assets and assumed a majority of the liabilities and business of Shane-Hunter, Inc. as of January 1, 2006. The purchase price for the net assets and business was $2.0 million. Shane Hunter is based in San Francisco, with an office in Los Angeles, California, and is primarily engaged in the sale of junior’s and children’s apparel to mass merchant retailers. The principals of Shane-Hunter, Inc. have continued with the business as its co-presidents.

On May 20, 2006, we acquired Marisa Christina, Incorporated (“Marisa Christina”) as part of the expansion of the women’s better market strategy of former management, after which time it continued to operate as a wholly-owned subsidiary of Hampshire. Upon completion of the acquisition, each outstanding share of Marisa Christina common stock was converted into the right to receive $0.65 per share less a pro rata portion of the transaction costs incurred by Marisa Christina, representing an aggregate purchase price of approximately $4.8 million. We determined Marisa Christina had a net asset value of $6.6 million, which included $4.1 million of cash acquired. Therefore, pursuant to Statement of Financial Accounting Standards No. 141, “Business Combinations,” we recorded a $1.8 million extraordinary gain for the amount by which the net assets acquired exceeded the purchase price.

Exit Activities

Sale of David Brooks Assets and Certain Marisa Christina Rights
On November 2, 2007, the Company sold inventory, trade name, certain other assets, and assigned certain obligations of its David Brooks division for approximately $5.6 million in cash. The buyer assumed our obligation to make payments through 2008 based on a percentage of the net sales of products bearing the name David Brooks^®. The Company estimates that it will incur a loss of approximately $0.7 million on the sale of David Brooks, which includes $0.2 million of personnel severance costs. On the same day, the Company sold the world wide rights, excluding Japan, to the Marisa Christina trademarks as well as other rights for $0.2 million which we estimate will be recognized as a gain. In connection with these transactions, we entered into a consent and waiver to the Revolving Credit Facility pursuant to which the Banks agreed to waive compliance with terms of the Revolving Credit Facility to the extent that such terms would prohibit these transactions.

Both Marisa Christina and David Brooks were acquired as part of the expansion of its women’s better market strategy of former management. David Brooks’ and Marisa Christina’s total net sales, SG&A expenses, and operating losses for fiscal year 2006 were $18.0 million, $8.5 million, and $1.3 million, respectively. For the nine months ended September 29, 2007, their total net sales, SG&A expenses, and operating losses were $11.0 million, $6.4 million, and $3.4 million, respectively.

We previously disclosed that the Company determined in May 2007 to cease domestic activities of Marisa Christina. Operating activities related to fulfilling Marisa Christina commitments are expected to continue into December 2007.

Marisa Christina Exit Costs
During the three and nine month periods ended September 29, 2007, the following summarizes the exit costs associated with Marisa Christina recognized by the Company:


	Three Months Ended		Nine Months Ended
(In thousands)	September 29, 2007		September 29, 2007
Personnel reductions	$	—	$	212
Vendor settlements		—		696

End of period	$	—	$	908


	Three Months Ended September 29, 2007
	Personnel			Vendor
(In thousands)	Reductions			Settlements			Total
Beginning of period	$	145		$	609		$	754
Costs charged to expense		—			—			—
Costs paid or settled		(145	)		(435	)		(580	)

End of period	$	—		$	174		$	174


	Nine Months Ended September 29, 2007
	Personnel			Vendor
(In thousands)	Reductions			Settlements			Total
Beginning of period	$	—		$	—		$	—
Costs charged to expense		212			696			908
Costs paid or settled		(212	)		(522	)		(734	)

End of period	$	—		$	174		$	174

RESULTS OF OPERATIONS

Quarterly Comparison — Three Months Ended September 29, 2007 and September 30, 2006

Net Sales
Net sales decreased 8.0% to $103.6 million compared with $112.6 million for the same period last year. The $9.0 million decline was primarily the result of a decrease in volume of 10.4% during the three months ended September 29, 2007, compared with the same period last year. Offsetting the volume reduction in net sales was a 2.7% increase in the average selling price in the current period as compared with the same period last year.

The decline in net sales was primarily attributable to a retail environment that resulted in customers delaying deliveries to the fourth quarter that historically shipped during the third quarter. Additionally, the closing of Marisa Christina during fiscal 2007 resulted in decreased volume in the third quarter. Low margin products discontinued in 2007 accounted for the balance of the decline.

We do not know whether the sales declines in our continuing businesses will be as significant for the three months ended December 31, 2007 as they were in the three months ended September 29, 2007. There will be a decline in Marisa Christina’s and David Brooks’ 2007 fourth quarter net sales as compared to 2006 fourth quarter net sales because we exited these businesses.

Gross Profit
Gross profit for the three months ended September 29, 2007 was $26.3 million compared with $30.0 million for the same period last year, a decrease of $3.7 million or 12.3%. As a percentage of net sales, gross profit percentage was 25.4% for the nine-month period of 2007 compared with 26.6% for the same period last year.

Selling, General, and Administrative Expenses
SG&A expenses were $19.8 million versus $21.1 million for the same period last year. The decline in SG&A from the prior period primarily reflects the termination of Marisa Christina’s domestic operations.

Investigation, Restatement, and Related Expenses
Investigation, restatement, and related expenses (“IRR”) were approximately $1.1 million in the quarter ended September 29, 2007 as compared with $4.0 million for the same period last year. The investigation commenced in June 2006, and activity related to it peaked in the quarter ended September 30, 2006, which accounted for significantly higher prior period IRR expenses as compared with the current period. We expect to incur significant additional costs, consisting primarily of professional fees, in 2007 to become current with SEC filing requirements and in connection with the investigations by the SEC and the U.S. Attorney’s Office, the arbitration, and related matters.

Income Taxes
The statute of limitations with respect to the Company’s 2003 federal tax returns lapsed in September 2007. The related net tax benefit of $1.3 million was recognized in the third quarter. Excluding the $1.3 million in benefit recognized, the effective income tax rate was 46.2% for the quarter ended September 29, 2007, compared with 60.4% for the same period last year. The higher effective tax rate in the prior period primarily resulted from the impact of non-deductible tax items and income tax reserves associated with the restatement.

Year-to-Date Comparison — Nine Months Ended September 29, 2007 and September 30, 2006

Net Sales
Net sales decreased 11.2% to $203.8 million compared with $229.6 million for the same period last year. The $25.8 million decline was primarily the result of a decrease in volume of 15.7% during the nine months ended September 29, 2007, compared with the same period last year. Offsetting the volume reduction in net sales was a 5.4% increase in the average selling price in the current period as compared with the same period last year.

Third quarter 2007 activity accounted for approximately $9.0 million of the decline in net sales. The decline was primarily attributable to a retail environment that resulted in customers delaying deliveries to the fourth quarter that historically shipped during the third quarter. Additionally, the closing of Marisa Christina during fiscal 2007 resulted in decreased volume in the third quarter. Low margin products discontinued in 2007 accounted for the balance of the decline in the third quarter.

The balance of the year to date decline was attributable to lower first quarter unit volumes in our mass merchant and our women’s related separates division not offset by shipments in subsequent periods. The majority of the decline at our mass merchant division was attributed to lower shipments to one customer in the first quarter of 2007. A decrease in shipments at our women’s related separates division to several customers primarily in the first quarter accounted for a majority of the reduction. The balance of the decrease in net sales was primarily the result of a decline in off price sales to discounters.

We do not know whether the sales declines in our continuing businesses will be as significant for the 2007 fiscal year as they were in the first nine months of 2007. There will be a decline in Marisa Christina’s and David Brooks’ 2007 fourth quarter net sales as compared to 2006 fourth quarter net sales because we exited these businesses.

Gross Profit
Gross profit for the nine months ended September 29, 2007 was $51.3 million compared with $56.9 million for the same period last year, a decrease of $5.6 million or 9.8%. As a percentage of net sales, gross profit percentage was 25.2% for the nine-month period of 2007 compared with 24.8% for the same period last year.

The decline in gross profit was less than the decline in net sales primarily due to the mix of product shipped in the current period. Our women’s related separates division, in particular, reflected better margins in 2007 as its gross profit increased even though net sales declined $8.9 million from the prior year. This was attributable to reductions in costs and planned changes in the mix of product, which also included a reduction in low margin off price shipments to discounters.

We do not know whether the 2007 gross profit will continue to exceed 2006 gross profit as a percentage of net sales, but we expect Marisa Christina’s and David Brooks’ gross profit to decline as compared with the prior year due to the decision to exit these underperforming businesses during 2007.

Income Taxes
Due to the operating losses, we had an income tax benefit for the nine months ended September 29, 2007 of $5.4 million compared with $1.1 million for the same period last year. The statute of limitations with respect to the Company’s 2002 and 2003 federal tax returns lapsed in June 2007 and September 2007, respectively. The related net tax benefits for 2002 of $1.4 million and for 2003 of $1.3 million were recognized in the second and third quarters, respectively. Excluding the $2.7 million in benefits recognized, the effective income tax rate was 37.0% for the nine months ended September 29, 2007, compared with 60.4% for the same period last year. The higher effective tax rate in the prior period primarily resulted from the impact of non-deductible tax items and income tax reserves associated with the restatement.

Extraordinary Income
In the nine months ended September 30, 2006, an extraordinary gain related to the acquisition of Marisa Christina was recorded in accordance and as required by accounting principles generally accepted in the United States of America. The Company determined an overall asset value for Marisa Christina of $6.6 million, which exceeded the purchase price of $4.8 million and resulted in extraordinary gain from the acquisition in the amount of $1.8 million. See Note 8 —Dispositions, Exit Activities, and Related Mattersto the Consolidated Financial Statements andAcquisitions, Dispositions, and Related Mattersabove.

LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity and capital requirements are to fund working capital for current operations, which consists primarily of funding the seasonal buildup in inventories and accounts receivable. Due to the seasonality of our business, we generally reach our maximum working capital requirement during the third quarter of the year. Our liquidity and capital requirements are primarily met from funds generated from operations and borrowings under our Revolving Credit Facility.

Net cash used by operating activities was $91.9 million for the nine months ended September 29, 2007 as compared with $68.7 million for the same period last year. The change was primarily the result of cash used by operating assets and liabilities and a net loss in the current period as compared with the prior period.

Net cash used in investing activities was $1.4 million for the nine months ended September 29, 2007 as compared with $6.1 million provided for the same period last year. Proceeds from short-term investments were the primary reason cash was provided by investing activities in the prior period.

Net cash provided by financing activities was $23.2 million for the nine months ended September 29, 2007 compared with $2.8 million used in financing activities for the same period last year. The change in cash from the prior period was primarily due to $12.8 million paid in the prior period for advances from a lender that factored trade receivables assumed as part of the Shane Hunter acquisition in January 2006 and $12.6 million more in net borrowings from the Revolving Credit Facility in the current period as compared with the same period in the prior year.

We maintain a Revolving Credit Facility with six participating commercial banks. The Revolving Credit Facility provides for secured borrowings of up to $100 million in revolving line of credit borrowings and letters of credit. Advances under the line of credit are limited to the lesser of: (a) $100 million less outstanding letters of credit; or (b) the sum of 100% of cash deposited in a pledged account; 85% of eligible accounts receivable; 50% of eligible inventory (subject to seasonal limits); and 50% of outstanding eligible letters of credit issued pursuant to the Revolving Credit Facility, plus seasonal over advances in the periods of highest requirements.

Advances under the Revolving Credit Facility bear interest at either the bank’s prime rate less 0.25% or, at our option, a fixed rate of the London Interbank Offered Rate or LIBOR plus 1.80%, for a fixed term. The loan is collateralized by the trade accounts receivable, inventory, cash on deposit in a pledged account, if any, and a pledge of the common stock of the subsidiaries. At September 29, 2007, we had $23.0 million in outstanding borrowings, and $33.5 million outstanding under letters of credit and no cash deposited in a pledged account. At September 29, 2007, we had availability under the Revolving Credit Facility for borrowing of approximately $43.5 million.

The Revolving Credit Facility contains financial covenants and covenants that restrict certain payments. The financial performance covenants require, among other things, that we maintain specified levels of consolidated net worth, not exceed a specified consolidated leverage ratio, achieve a specified fixed charge ratio, and limit capital expenditures and restricted payments to a specified maximum amount. The Revolving Credit Facility also requires the delivery of periodic financial statements to the banks.

The Revolving Credit Facility contains an aggregate limit of $10.0 million on the repurchase of our common stock. As of September 29, 2007, we had repurchased a net amount of $8.4 million of our common stock. The Board approved the purchase of up to 1.4 million shares of our outstanding stock. Purchases of shares of common stock were suspended upon the commencement of the Audit Committee Investigation.

The Revolving Credit Facility is scheduled to mature on December 31, 2007. While the Company can provide no assurances, management believes that it will be able to renew the Revolving Credit Facility on comparable terms and that the borrowings available to it, under the current and future credit facilities along with cash flow from operations, will provide adequate resources to meet our capital requirements and operational needs for the foreseeable future.

OFF-BALANCE SHEET ARRANGEMENTS

We utilize letters of credit and are party to operating leases. It is currently not our general business practice to have material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance-sheet arrangements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to our critical accounting policies and estimates as set forth in the Annual Report for the year ended December 31, 2006.

RECENT ACCOUNTING PRONOUNCEMENTS

On January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that we determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, we recognize the largest amount of the benefit that is more likely than not of being sustained in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, we do not recognize any portion of the benefit in the financial statements. We recognize interest and penalties associated with uncertain tax positions as a component of taxes on income in the consolidated statement of operations.

The Company anticipates that total unrecognized tax benefits will decrease by approximately $2.1 million, including interest and penalties of approximately $0.6 million, due to the settlement of certain issues or the lapsing of statutes within twelve months from September 29, 2007.

The statute of limitations with respect to the Company’s 2002 federal income tax return lapsed in June 2007, and the related net tax benefits of $1.4 million, including interest of $0.3 million net of tax benefits, were recognized in the quarter then ended. In addition, the statute of limitations for assessments with respect to the Company’s 2003 federal income tax return lapsed in September 2007 and the related net tax benefits of $1.3 million, including interest of $0.3 million net of tax benefits, were recognized in the quarter then ended. With limited exceptions, the statute of limitations for state income tax returns has lapsed for periods 2001 and prior.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles in the United States and expands disclosures about fair value measurements. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We are currently evaluating the impact of FAS No. 157 on our financial statements, but do not expect it to have a material impact on the financial statements.

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115” (“FAS No. 159”), which is effective January 1, 2008. FAS No. 159 permits companies to choose to measure certain financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. We are currently evaluating the impact of FAS No. 159 on our financial statements, but do not expect it to have a material impact on the financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk in the area of changing interest rates. We are also exposed to market risk due to increased costs of our products. During the first nine months of fiscal year 2007, there were no significant changes in our exposure to market risks. See Item 7A in our Annual Report for the year ended December 31, 2006, which was filed with the SEC on September 14, 2007, for a discussion regarding our exposure to market risks. The impact of a hypothetical 100 basis point increase in interest rates on our variable rate debt (borrowings under the Revolving Credit Facility) would have had no effect in the nine months ended September 29, 2007 and September 30, 2006 due to the fact that there were minimal short-term borrowings during such periods.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of its disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that were in place, as of September 29, 2007. Based on the evaluation performed, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, because of one of the material weaknesses that management identified in our internal controls over financial reporting as of December 31, 2006, which was not remediated as of September 29, 2007, our disclosure controls and procedures were not effective at a reasonable level as of September 29, 2007.

The Public Company Accounting Oversight Board Auditing Standard No. 2 defines a material weakness as a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the Company’s financial statements will not be prevented or detected.

In connection with the evaluation described above, the Company’s management identified a material weakness as of December 31, 2006, which was not remediated as of September 29, 2007, as follows:

•

Aggregation of Control Deficiencies at our Shane Hunter Subsidiary
The Company failed to maintain effective internal controls related to accounting, financial reporting, and information technology at its Shane Hunter division, which was acquired on January 5, 2006. These deficiencies included a lack of timely and sufficient financial statement account reconciliation and analysis, a lack of sufficient support resources within the accounting and finance group, and lack of properly updated and maintained information technology systems. In addition, the initial acquisition accounting was not properly performed due to limitations on information available and the other control deficiencies denoted herein.

Changes in Internal Control Over Financial Reporting
There were changes in the Company’s internal control over financial reporting during the three months ended September 29, 2007 that did not materially affect, or are reasonably likely to not materially affect, the Company’s internal control over financial reporting as outlined in “Remediation of Material Weaknesses in Internal Controls Over Financial Reporting.”

Remediation of Material Weakness in Internal Controls Over Financial Reporting

During the quarter ended September 29, 2007, the Company was actively engaged in implementation and remediation efforts to address the material weakness in the Company’s internal controls over financial reporting.

Subsequent to September 29, 2007, the Company has been actively engaged in implementation and remediation efforts to address the material weakness in the Company’s internal controls over financial reporting as of September 29, 2007. These remediation efforts, outlined below, are specifically designed to address the material weakness identified by the Company’s management:

•

Implemented enhanced procedures and controls at the Shane Hunter division around the accounting and financial reporting process as well as the financial review process at the corporate level. These enhancements include but are not limited to formalization of the procedures for the financial statement close process and providing more corporate oversight in both the areas of accounting and information technology. In addition, the Company has evaluated the division’s information technology infrastructure and intends to upgrade these systems.

In addition, the more enhanced reconciliation procedures and detailed reviews implemented to address these issues subsequent to September 29, 2007 will continue to be performed in the future to ensure these matters are remediated.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of litigation and certain related matters, please see Note 6 of Part I, Item 1, entitledCommitments and Contingencies, and Part I, Item 2 entitledLegal and Compliance Matters.

Item 1A. Risk Factors.

There have been no material changes to the Company’s risk factors as set forth in the Annual Report for the year ended December 31, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES
COMMON STOCK, $0.10 PAR VALUE

Maximum

Total Number of

Number of Shares

Total

Shares Purchased

that May Yet be

Number of

Average

as Part of Publicly

Purchased Under

Shares

Price Paid

Announced Plans

Such Plans or

Period

Purchased

per Share

or Programs

Programs

July 1 — July 31, 2007

—

Aug. 1 — Aug. 31, 2007

—

Sept. 1 — Sept. 29, 2007

—

Total

—

1,036,490

Purchases may be made for up to 400,000 and 1,000,000 shares of common stock under plans announced on March 17, 2005 and April 26, 2006, respectively. The plans do not have an expiration date. The Company suspended purchases under the plans upon the commencement of the Audit Committee Investigation.

Item 3. Defaults Upon Senior Securities.

During the third quarter of 2007, there were no defaults upon the Company’s senior securities. For a discussion of certain waivers and amendments to the credit facility see Notes 4 and 6 of Part I, Item 1, entitledRevolving Credit FacilityandCommitments and Contingencies, respectively,and Part I, Item II, entitledRevolving Credit Facility Extension,Rescheduled Credit Facility Reporting Requirements, andNew Facility Lease and Related Credit Facility Amendment.

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

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

(a) The following exhibits are filed as part of this Report:

	10.1		Amendment No. 6 and waiver, dated as of July 11, 2007, to that certain Credit Agreement and Guaranty, dated as of August 15, 2003 and amended as of December 29, 2004, November 10, 2005, August 8, 2006, October 13, 2006, December 29, 2006, and March 30, 2007 by and among the Company, the Guarantors party thereto, HSBC Bank USA, National Association, as Agent for the Banks, and the Banks named therein (incorporated by reference to Exhibit 10.2 to the Company’s Current Report (File No. 000-20201) on Form 8-K filed on July 17, 2007).

	10.2		Waiver, dated as of July 25, 2007, to that certain Credit Agreement and Guaranty, dated as of August 15, 2003 and amended as of December 29, 2004, November 10, 2005, August 8, 2006, October 13, 2006, December 29, 2006, March 30, 2007, and July 11, 2007 by and among the Company, the Guarantors party thereto, HSBC Bank USA, National Association, as Agent for the Banks, and the Banks named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report (File No. 000-20201) on Form 8-K filed on July 27, 2007).

	10.3		Waiver, dated as of August 31, 2007, to that certain Credit Agreement and Guaranty, dated as of August 15, 2003 and amended as of December 29, 2004, November 10, 2005, August 8, 2006, October 13, 2006, December 29, 2006, March 30, 2007, July 11, 2007 and July 25, 2007 by and among the Company, the Guarantors party thereto, HSBC Bank USA, National Association, as Agent for the Banks, and the Banks named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report (File No. 000-20201) on Form 8-K filed on August 31, 2007).

	10.4		Lease Agreement between CHARNEY-FPG 114 41ST STREET, LLC and Hampshire Group, Limited, dated as of July 11, 2007 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report (File No. 000-20201) on Form 8-K filed on July 17, 2007).

	31.1		Certification of Interim Chief Executive Officer pursuant to Item 601(b) (31) of Regulation S-K as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2		Certification of Chief Financial Officer pursuant to Item 601(b) (31) of Regulation S-K as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32.1		Certification of Interim Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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.


	Hampshire Group, Limited

Date: December 7, 2007	By:	/s/ Michael S. Culang

		Michael S. Culang
		Interim Chief Executive Officer and President

		/s/ Jonathan W. Norwood

		Jonathan W. Norwood
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

INDEX TO EXHIBITS


EXHIBIT
NUMBER		DESCRIPTION

31.1		Certification of Interim Chief Executive Officer pursuant to Item 601(b) (31) of Regulation S-K as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Item 601(b) (31) of Regulation S-K as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Interim Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Hampshire Inactive 10-Q2007 Q3 Quarterly report

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