FABRIC MAKER BECOMING ACCOUNTING FIRM.

Byline: Deborah Adamson Daily News Staff Writer

Talk about a metamorphosis.

Organik Technologies started out as a maker of a supersoft, shrink-free cotton fabric. Its casual clothing once captured the interest of national retailers such as Nordstrom and J.C. Penney before the company fell into bankruptcy.

But like a caterpillar emerging from its cocoon as a butterfly, Organik on Thursday said it will be transforming into a publicly held accounting firm.

``Organik's product was not commercially feasible to manufacture. It was too expensive,'' said Dan Lezak, a turnaround expert serving as the interim chief executive hired to revive the ailing firm.

Under a reorganization plan submitted to the U.S. Bankruptcy Court, Organik will be restructured into an accounting firm by acquiring small CPA companies with annual revenues of less than $1 million. Ten firms representing about 40 accountants have expressed an interest in a merger or alliance with CPA Alliance Inc., Organik's proposed new name.

In addition, Organik is creating three public shell companies, meaning they will exist but won't have actual operations. These three unnamed companies will be set aside for later use by the accountants who join CPA Alliance.

If the court approves the plan, Organik will leave Chapter 11 bankruptcy in 60 days as CPA Alliance. The company filed for bankruptcy in November 1997.

Under the plan, every eight shares held by Organik stockholders will be exchanged for one unit. Each unit comprises one share and one warrant of CPA Alliance and one share and one warrant of each of the three shell companies.

Unsecured creditors will get one unit for every $5 of court-approved claims. If the plan is approved, the company's $1.2 million debt will become equity with about six million common shares outstanding.