SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter ended (Commission File Number): 1-4814
September 30, 1999
ARIS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
New York 22-1715274
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1411 Broadway, New York, New York 10018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 642-4300
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15 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 _X_ NO ___
Number of shares of Common Stock outstanding 79,237,234
As of November 11, 1999
<PAGE>
ARIS INDUSTRIES, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
a. Consolidated Condensed Balance Sheets as
of September 30, 1999 and December 31,
1998 3
b. Consolidated Condensed Statements of
Operations for the Nine Months Ended
September 30, 1999 and September 30, 1998
4
b. Consolidated Condensed Statements of
Operations for the Three Months Ended
September 30, 1999 and September 30, 1998
5
c. Consolidated Condensed Statements of Cash
Flows for the Nine Months Ended September
30, 1999 and September 30, 1998 6
d. Notes to Consolidated Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults upon Senior Securities 22
Item 4. Submission of Matters to a Vote of
Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
<PAGE>
ARIS INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1999 December 31,
ASSETS (Unaudited) 1998
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 766,000 $ 1,112,000
Receivables, net 60,179,000 29,905,000
Inventories 30,349,000 26,371,000
Prepaid expenses and other current assets 3,224,000 1,753,000
------------- -------------
Total current assets 94,518,000 59,141,000
PROPERTY, PLANT AND EQUIPMENT, NET 10,123,000 1,094,000
GOODWILL 34,198,000 19,325,000
OTHER ASSETS 2,275,000 2,095,000
------------- -------------
TOTAL ASSETS $ 141,114,000 $ 81,655,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade acceptances payable $ 1,120,000 $ 5,178,000
Accounts payable - trade 11,286,000 1,512,000
Accrued expenses and other current liabilities 8,371,000 8,370,000
Current portion of long term debt 2,853,000 1,083,000
Line of credit payable 55,053,000 33,900,000
------------- -------------
Total current liabilities 78,683,000 50,043,000
OTHER LIABILITIES 4,428,000 1,082,000
LONG TERM DEBT, LESS CURRENT PORTION 15,442,000 16,438,000
------------- -------------
Total Liabilities 98,553,000 67,563,000
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value: 100,000,000 shares authorized;
79,081,188 issued and outstanding at September 30, 1999
and 14,956,377 issued and outstanding at December 31, 1998 791,000 151,000
Preferred stock, $.01 par value: 10,000,000 shares authorized;
none issued and outstanding at September 30, 1999, -- --
Additional paid-in capital 80,153,000 44,757,000
Unearned stock based compensation (435,000)
Accumulated deficit (37,948,000) (30,816,000)
------------- -------------
Total stockholders' equity 42,561,000 14,092,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 141,114,000 $ 81,655,000
============= =============
</TABLE>
See accompanying notes to consolidated condensed financial statements
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<PAGE>
ARIS INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Nine
Months Ended Months Ended
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
NET SALES $ 116,326,000 $ 80,153,000
COST OF SALES (84,440,000) (58,770,000)
------------- -------------
Gross Profit 31,886,000 21,383,000
Commission and Licensing Income 1,359,000 810,000
------------- -------------
INCOME BEFORE OPERATING EXPENSES,
INTEREST EXPENSE, INCOME TAX BENEFIT
AND EXTRAORDINARY ITEM 33,245,000 22,193,000
SELLING AND ADMINISTRATIVE EXPENSES (29,256,000) (20,643,000)
START-UP COSTS OF NEW LICENSING OPERATIONS (215,000)
RESTRUCTURING AND OTHER CHARGES (8,309,000) --
------------- -------------
(LOSS) INCOME BEFORE INTEREST EXPENSE, INCOME TAX
BENEFIT AND EXTRAORDINARY ITEM (4,535,000) 1,550,000
INTEREST EXPENSE, NET (2,734,000) (3,590,000)
------------- -------------
LOSS BEFORE INCOME TAX BENEFIT AND
EXTRAORDINARY ITEM (7,269,000) (2,040,000)
INCOME TAX BENEFIT 137,000 101,000
------------- -------------
LOSS BEFORE EXTRAORDINARY ITEM (7,132,000) (1,939,000)
EXTRAORDINARY ITEM:
Gain on debt forgiveness, net -- 522,000
------------- -------------
NET LOSS ($ 7,132,000) ($ 1,417,000)
============= =============
PER SHARE DATA:
Weighted average shares outstanding - Basic 47,168,340 14,907,573
Weighted average shares outstanding - Diluted 47,168,340 14,907,573
Basic loss per share:
Loss before extraordinary item ($ 0.15) ($ 0.13)
Extraordinary item -- 0.04
------------- -------------
Net loss ($ 0.15) ($ 0.09)
============= =============
Diluted loss per share:
Loss before extraordinary item ($ 0.15) ($ 0.13)
Extraordinary item -- 0.04
------------- -------------
Net loss ($ 0.15) ($ 0.09)
============= =============
</TABLE>
See accompanying notes to consolidated condensed financial statements
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<PAGE>
ARIS INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Three
Months Ended Months Ended
September 30, September 30,
1999 1998
------------ ------------
NET SALES $ 62,869,000 $ 42,808,000
COST OF SALES (44,551,000) (30,722,000)
------------ ------------
Gross Profit 18,318,000 12,086,000
Commission and Licensing Income 823,000 332,000
------------ ------------
INCOME BEFORE OPERATING EXPENSES,
INTEREST EXPENSE AND INCOME TAX PROVISION 19,141,000 12,418,000
SELLING AND ADMINISTRATIVE EXPENSES (13,748,000) (8,149,000)
START-UP COSTS OF NEW LICENSING OPERATIONS (215,000) --
RESTRUCTURING AND OTHER CHARGES (308,000) --
------------ ------------
INCOME BEFORE INTEREST EXPENSE AND
INCOME TAX PROVISION 4,870,000 4,269,000
INTEREST EXPENSE, NET (1,145,000) (1,557,000)
------------ ------------
INCOME BEFORE INCOME TAX PROVISION 3,725,000 2,712,000
INCOME TAX PROVISION (450,000) (74,000)
------------ ------------
NET INCOME $ 3,275,000 $ 2,638,000
============ ============
PER SHARE DATA:
Weighted average shares outstanding - Basic 67,602,335 14,910,525
Weighted average shares outstanding - Diluted 71,169,801 15,943,110
Income per share:
------------ ------------
Basic $ 0.05 $ 0.18
============ ============
------------ ------------
Diluted $ 0.05 $ 0.17
============ ============
See accompanying notes to consolidated condensed financial statements
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<PAGE>
ARIS INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Nine
Months Ended Months Ended
September 30, September 30,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 7,132,000) ($ 1,417,000)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,400,000 1,248,000
Issuance of notes in lieu of interest 108,000 151,000
Forgiveness of debt -- (522,000)
Impairment of goodwill and other intangibles 3,750,000
Stock based compensation recognized 97,000
Change in assets and liabilities, net of business acquired:
Increase in receivables (28,538,000) (15,798,000)
Decrease / (increase) in inventories 6,329,000 (19,736,000)
(Increase) / decrease in prepaid expenses and other current assets (1,140,000) 701,000
(Increase) / decrease in other assets (119,000) 12,000
Decrease in trade acceptances payable (4,058,000) (2,442,000)
Increase in accounts payable--trade (21,000) 229,000
Decrease in accrued expenses and other current liabilities (4,798,000) (2,018,000)
Increase / (decrease) in other liabilities 703,000 (179,000)
------------ ------------
Net cash used in operating activities (33,419,000) (39,771,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,400,000) (267,000)
Payment for acquisition of Lola, Inc., net of
cash acquired of $153,000 (10,247,000) --
------------ ------------
Net cash used in investing activities (12,647,000) (267,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common and preferred stock 20,000,000 --
Stock options exercised 264,000 --
Stock issuance cost paid (1,461,000) --
Proceeds from long term loan 10,000,000 --
Increase in deferred financing costs (406,000) --
Repayment of long-term debt (4,583,000) (1,302,000)
Net proceeds/(repayments) on bank line of credit 21,153,000 40,795,000
Book overdraft 753,000 --
------------ ------------
Net cash provided by financing activities 45,720,000 39,493,000
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (346,000) (545,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,112,000 1,372,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 766,000 $ 827,000
============ ============
Supplemental schedule of non-cash investing and financing activities:
The Company acquired the capital Stock of Lola, Inc., for $20,955,000. In
conjunction with the acquisition liabilities were assumed as follows:
Fair value of the assets acquired $ 36,984,000
Cash paid for assets acquired (10,400,000)
Issued 6,500,000 Common Shares valued at $1.50 per share (9,750,000)
Granted options to purchase 1,150,000 shares of Common Stock (805,000)
------------
Liabilities assumed $ 16,029,000
============
Capital lease obligations incurred $ 1,850,000
============
Exchange of Series B Secured Notes for Common Stock $ 4,864,154
============
</TABLE>
See accompanying notes to consolidated condensed financial statements
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<PAGE>
ARIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements for the three and nine month
periods ended September 30, 1999 and September 30, 1998 are unaudited and
reflect all adjustments consisting of normal recurring adjustments except for
start up costs, restructuring and other charges (See Notes 5 & 6) which are in
the opinion of management necessary for a fair presentation of financial
position, operating results and cash flows for the period.
The Consolidated Condensed Balance Sheet as of December 31, 1998 was derived
from audited financial statements but does not include all disclosures required
by generally accepted accounting principles. The accompanying consolidated
condensed financial statements have been prepared in accordance with accounting
standards appropriate for interim financial statements and should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. The
operating results for the three and nine months ended September 30, 1999 are not
necessarily indicative of the operating results for the year ending December 31,
1999.
2. THE SIMON TRANSACTION
On February 26, 1999, the Company issued: (i) 24,107,145 shares of Common Stock
of the Company and 2,093,790 shares of Series A Preferred Stock of the Company
(which shares were converted into 20,937,900 shares of Common Stock on July 29,
1999), for $20,000,000 and (ii) redeemed the Series B Junior Secured Note (which
represented a total indebtedness of $10,658,000) in exchange for $4,000,000 in
cash and an aggregate of 5,892,856 shares of Common Stock and 512,113 shares of
Series A Preferred Stock (which shares were converted into 5,121,130 shares of
Common Stock on July 29, 1999), (the "Simon Purchase Transaction"). In
connection with the Simon Purchase Transaction, the Company also issued 700,000
shares of Common Stock to a third party as a condition to its consent to the
transaction. In addition, the Company paid approximately $1,451,000 in cash and
issued 250,000 shares of common stock to cover the costs associated with the
transaction.
3. ACQUISITIONS
On August 10, 1999, the Company consummated the merger of Lola, Inc. ("Lola"), a
California corporation, with and into Europe Craft
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<PAGE>
Imports, Inc. ("ECI"), a New Jersey corporation (the "Merger"), that is wholly
owned by the Company, as reported on the Company's Form 8Ks' filed on August 10,
1999 and October 25, 1999. Concurrently with the closing ECI contributed all of
the assets formerly owned by Lola to XOXO Clothing Company, Incorporated, a
Delaware corporation ("XOXO") that is wholly owned by ECI. Lola's business
consists principally of the manufacture and sale of women's apparel and
accessories principally under the "XOXO" name.
In connection with the Merger, Company paid to Lola's shareholders $10,000,000
in cash and issued 6,500,000 shares of the Company's common stock, valued at
$1.50 per share at the time of the acquisition, and granted options to purchase
1,150,000 shares of the Company's common stock (valued at approximately
$805,000). In addition, the Company incurred acquisition expenses which
approximated $400,000. The Merger was accounted for under the purchase method of
accounting. The excess of Purchase Price over the cost of the net assets
acquired amounted to $19,333,000 of which $790,000 was allocated to the
inventory and the balance of $18,543,000 to goodwill. The goodwill is being
amortized over a twenty year useful life using the straight line method. From
the date of the acquisition the operations of XOXO have been included in the
consolidated operations of the Company. In conjunction with the merger the
Company obtained a $10,000,000 term loan and increased its line of credit from
$65,000,000 to $80,000,000 with a financial institution.
The following unaudited pro forma consolidated condensed statement of operations
for the nine months ended September 30, 1999 and 1998, respectively, are
presented as if the acquisition of Lola, Inc. had been made at the beginning of
each period presented. The unaudited pro forma information is not necessarily
indicative of either the results of operations that would have occurred had the
purchase been made during the periods presented or the future results of the
combined operations.
Nine Months Ended Nine Months Ended
September 30, 1999 September 30, 1998
------------------ ------------------
Net sales $174,913,000 $139,616,000
Loss before income
tax benefit (7,751,000) (1,932,000)
Net loss (7,626,000) (1,910,000)
4. DEBT
The Company's long-term indebtedness consists of its obligations to BNY
Financial Corporation ("BNY")under the Series A Junior Secured Note Agreement
dated June 30, 1993, pursuant to which BNY is owed $7,442,000 including
$1,042,000, representing the quarterly interest payments that were deferred for
the period February 1, 1996 through January 31, 1998 by agreement with BNY in
September 1997, plus interest at the rate of 7% per annum, with a final maturity
date of November 3, 2002. The principal of BNY's Note is payable on November 3
of each year as follows:
Year Amount
1999 $ 500,000
2000 600,000
2001 1,100,000
2002 5,242,000
BNY is also entitled to receive mandatory prepayments based upon 50% of certain
"excess cash flows" of the Company as defined in the Company's note agreements
with BNY. The Company's interest payments to BNY scheduled for May 3, August 2
and November 1, 1999 and the Company's principal payment scheduled for November
3, 1999 were paid in cash on their due dates.
-8-
<PAGE>
The Company entered into a credit facility with The CIT Commercial Services
Group, Inc. and other financial institutions, which provides a revolving credit
facility of up to $65,000,000, for working capital loans and letters of credit,
limited in the aggregate to specified percentages of eligible factored
receivables and inventory. The credit facility has a maturity date of February
26, 2002. The new line of credit is collateralized by liens on substantially all
of the assets of the Company and its subsidiaries. For revolving credit loans,
interest will accrue at the bank's prime rate. For Eurodollar loans, interest
will accrue at a rate per annum equal to the Eurodollar rate (as defined) plus
2.5%. The credit facility contains various financial and other covenants and
conditions, including, but not limited to, limitations on paying dividends,
making acquisitions and incurring additional indebtedness.
In connection with the XOXO transaction (See Note 3), the Company's loan
agreement was amended in August 1999 to increase the revolving credit line to
$80,000,000, and to provide for a term loan of $10,000,000. The term loan bears
interest at prime plus one-half percent and is payable in quarterly installments
of $500,000, plus interest, commencing January 1, 2000, with a balloon payment
of $5,500,000 on February 26, 2002, the maturity date. The Company is required
to make certain mandatory prepayments based upon "excess cash flows" as defined
in the amendment to the loan agreement.
5. START-UP COSTS OF NEW LICENSING OPERATIONS
Commencing with the third quarter ended September 30, 1999 the Company incurred
$215,000 of start-up costs relating to various executed license agreements
without any related revenue. These start-up costs consist of salaries, samples
and related supplies directly attributable to the new licensed operations. Such
cost will continue to be incurred through fiscal 1999 and 2000.
6. RESTRUCTURING AND OTHER CHARGES
In connection with the Simon Purchase Transaction, the Company was required to
obtain consents from the licensor of its Perry Ellis licenses. As a condition to
granting its consent, such licensor required that the term of several licenses
be shortened. In the opinion of management and based upon future forecasted
results of the Perry Ellis product line, the remaining value of the associated
goodwill pertaining to licenses of $3,750,000 acquired in connection with the
Davco acquisition will not be recoverable. In addition, on March 29, 1999 the
Company made a severance payment of approximately $2,401,000 pursuant to the
Retention Agreement between the Company and its former President. The Company
recognized these restructuring charges in the March 31, 1999 quarter.
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<PAGE>
During the quarters ended June 30, 1999 and September 30, 1999, the Company
incurred charges of $1,850,000 and $308,000, respectively, in connection with
the restructuring of its operations. Additional costs are expected to be
incurred through the remainder of fiscal 1999. The major components of the
restructuring charges relate to severance pay, estimated costs to exit and
sub-lease certain facilities and impairment charges related to plant and
equipment at the facilities to be vacated.
7. INVENTORIES
September 30, 1999 December 31, 1998
(In Thousands) (In Thousands)
Finished Goods $ 24,034 $ 26,371
Work-in process 2,653 -0-
Raw materials 3,662 -0-
----------- -----------
$ 30,349 $ 26,371
=========== ===========
8. INCOME TAXES
The Company had a significant net operating loss carryforward ("NOL") at
December 31, 1998. The Company believes the NOL will be available to offset
federal taxable income for the period January 1, 1999 through February 26, 1999
(the date of the closing of the Simon Purchase Transaction), including any
taxable income due to cancellation of indebtedness in connection with the
redemption by the Company from AIF of the Series B Junior Secured Note on
February 26, 1999. However, due to the change of ownership resulting from the
Simon Purchase Transaction, the Company's use of any remaining net operating
loss carryforward from and after February 27, 1999 will be severely limited.
9. PER SHARE DATA
The Company computes earnings per share in accordance with the provisions of
SFAS No. 128, Earnings per share. SFAS No. 128 requires the dual presentation of
basic and diluted earnings per share ("EPS"). Basic EPS excludes dilution and is
computed by dividing net income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if stock options or other contracts to
issue common stock were exercised and resulted in the issuance of common stock
that then shared in the earnings of the Company. Diluted EPS is computed using
the treasury stock method when the effect of common stock equivalents would be
dilutive.
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<PAGE>
- --------------------------------------------------------------------------------
Income Shares Per-
(Numerator) (Denominator) Share
Amount
- --------------------------------------------------------------------------------
Nine Months Ended 9/30/99
Basic EPS
Loss before extraordinary
item ............................ $(7,132,000) 47,163,508 $(0.15)
Effect of Dilutive Securities
Stock Options -- --
Warrants -- --
----------- ----------
Diluted EPS
Loss before extraordinary
item ............................ $(7,132,000) 47,163,508 $(0.15)
- --------------------------------------------------------------------------------
Nine Months Ended 9/30/98
Basic EPS
loss before extraordinary
item ............................ $(1,939,000) 14,907,573 $(0.13)
Effect of Dilutive Securities
Stock Options -- --
Warrants -- --
----------- ----------
Diluted EPS
Loss before extraordinary
item ............................ $(1,939,000) 14,907,573 $(0.13)
- --------------------------------------------------------------------------------
Options and warrants to purchase 9,832,611 and 2,289,345 shares of Common Stock
were outstanding as of September 30, 1999 and September 30, 1998, respectively,
but were not included in the computation of diluted earnings per share because
the effect would be anti-dilutive.
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<PAGE>
- --------------------------------------------------------------------------------
Income Shares Per-
(Numerator) (Denominator) Share
Amount
- --------------------------------------------------------------------------------
Three Months Ended
9/30/99
Basic EPS
Net income $3,275,000 67,588,259 $0.05
Effect of Dilutive Securities
Stock Options -- 2,985,765
Warrants -- 581,701
---------- ----------
Diluted EPS
Net income $3,275,000 71,155,725 $0.05
- --------------------------------------------------------------------------------
Three Months Ended
9/30/98
Basic EPS
Net income $2,683,000 14,910,525 $0.18
Effect of Dilutive Securities
Stock Options -- 455,366
Warrants -- 577,219
---------- ----------
Diluted EPS
Net income $2,683,000 15,943,110 $0.17
- --------------------------------------------------------------------------------
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<PAGE>
10. COMMITMENTS AND CONTINGENCIES
Licensing Agreements
During 1999, the Company signed four licensing agreements to manufacture and
distribute apparel products bearing the licensors' trade name. The agreements
range from five to eleven years, subject to renewal for additional periods, and
require the Company to make minimum royalty payments, along with additional
royalty payments in the range of 4% to 8% based on a percentage of defined
sales. The following is a schedule of the minimum royalty payments due under the
new agreements:
1999..................... $ 340,000
2000..................... 1 455,000
2001..................... 4,100,000
2002..................... 5,579,000
2003..................... 6,410,000
2004..................... 6,754,000
2005 & Thereafter ....... 11,707,000
Contingencies
The Company, in the ordinary course of its business, is the subject of, or a
party to, various pending or threatened legal actions. While it is not possible
at this time to predict the outcome of any litigation, in the opinion of
management, any ultimate liability arising from these actions will not have a
material effect on the financial position, results of operations or cash flows
of the Company.
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<PAGE>
ARIS INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Introduction
The following analysis of the financial condition and results of operations of
Aris Industries, Inc. (the "Company") for the three and nine month periods ended
September 30, 1999 and September 30, 1998 should be read in conjunction with the
consolidated condensed financial statements, including the notes thereto,
included on pages 3 through 13 of this report.
FORWARD LOOKING STATEMENTS
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature, are
intended to be, and are hereby identified as, "forward looking statements" for
purposes of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934, as amended by Public Law 104-67. The Company cautions readers that
forward looking statements, including without limitation, those relating to the
Company's future business prospects, revenues, working capital, liquidity,
capital needs, interest costs, and income, are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
indicated in the forward looking statements, due to several important factors
herein identified, among others, and other risks and factors identified from
time to time in the Company's reports filed with the Securities and Exchange
Commission.
YEAR 2000 COMPLIANCE
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a 2
digit year is commonly referred to as the Year 2000 Compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process certain
date based information. The Company's Year 2000 Project (Project) is addressing
the issue of computer programs and embedded computer chips being unable to
distinguish between the year 1900 and the year 2000 ("Y2K").
The Project has been divided into three major areas; 1) IBM AS400, 2)
Application Software, and 3) PC Hardware and software. The general phases common
to all sections are: 1) inventorying Year 2000 items; 2) assigning priorities to
inventoried items; 3) assessing the Year 2000 compliance of items determined to
be material to the Company; 4) repairing or replacing material items that are
determined not to be Year 2000 compliant; 5) testing material items and 6)
designing and implementing contingency and business continuation plans. Internal
resources are being used to
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<PAGE>
make required modifications and test Year 2000 Compliance. The Company has
completed the installation of the RLM (Ron Lynn Apparel Software System) on
schedule. The existing software system will continue to be utilized to
systematically wind down the Fall 1999 shipping period. At the completion of the
Fall 1999 shipping period remaining inventories will be transferred to the RLM
system prior to year end.
The IBM AS400's are the backbone of the Company's computer system. The Company
currently maintains 100% of its inventory valuation and tracking, order
processing and picking/shipping functions on the AS400. In addition, the Company
also maintains the bulk of its accounting records on the AS400. The Company has
received certification from the vendor that the AS400 is Y2K compliant.
The Company has replaced where required its existing Software with the Complete
Suite of Applications from "RLM" (Ron Lynn Management Accounting Software).
Management believes that RLM Software provides a complete Y2K Solution for an
AS400 System and allows the Company to create a fully integrated systems
environment. In addition, the Company will continue to utilize the "Premenos"
Electronic Document Interchange Software System which processes document
interchanges between the Company and retailers. This system will be upgraded
using internal resources. The Company has identified 100% of the programs/ sub
system routines in these two applications that require modification. These
upgrades have been tested and completed.
The final section of the Y2K Project has also been completed with the
replacement of all non-Y2K compliant personal computers. The Company has
standardized on HP (Hewlitt Packard) Vectra desktop systems wherever possible.
All software needed to assure Y2K compliance has been completed. The Company
does not anticipate many Y2K issues in this area since approximately 90% of the
software in use is off the shelf retail software (spreadsheet, word processing
packages, etc.) that is already Y2K compliant.
The total cost to the Company of these Y2K Compliance activities was
approximately $800,000 which includes the cost of a programmer, consultants as
well as costs for software upgrades and third party contractors/suppliers and PC
replacements. The Company funded these activities through operating cash flows.
These costs were derived utilizing continued availability of certain third party
modification plans and other factors. However, there can be no guarantee that
these objectives will be achieved; actual results could differ from those plans.
Due to the general uncertainty inherent in the Y2K problem, resulting in part
from the uncertainty of the Year 2000 readiness of third-party suppliers and
customers, the Company is unable to determine at this time whether the
consequences of Y2K failures will have a material impact on the Company's
results of operations,
-15-
<PAGE>
liquidity or financial condition. The Y2K project is expected to significantly
reduce the Company's level of uncertainty about the Year 2000. The Company
believes that with the completion of the Project as scheduled the possibility of
significant interruptions of normal operations should be reduced.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company had working capital of approximately
$15,835,000 as compared to $9,098,000 at December 31, 1998. The increase in
working capital was due to the capital infusion provided by the Simon Purchase
Transaction, less transaction costs, offset by the Company's net loss incurred
in the nine months ended September 30, 1999. During this period, the Company
financed its capital expenditures and business acquisition principally through
credit facilities and the issuance of common stock.
On October 21, 1998, the Company entered into amendments of its agreements with
BNY and AIF-II providing that payment of scheduled interest payments otherwise
due to such lenders on November 3, 1998 and the scheduled principal payment of
$300,000 otherwise due to BNY on November 3, 1998 would be deferred until
February 1, 1999. Pursuant to agreements with BNY the payments due February 1,
1999 were paid on February 26, 1999 upon the closing of the Simon Purchase
Transaction. The Company's interest payments to BNY scheduled for May 3, August
2 and November 1, 1999 and the Company's principal payment scheduled for
November 3, 1999 were paid in cash on their due dates.
On February 26, 1999 simultaneous, with the closing of the Simon Purchase
Transaction, the Company and its subsidiaries entered into a Financing Agreement
with CIT Commercial Services Group, Inc. ("CIT") and certain other financial
institutions, whereby such lenders agreed to provide a revolving credit facility
of up to $65,000,000 for working capital, loans and letters of credit financing,
which expire on February 26, 2002. The obligations under the Financing
Agreements are collateralized by liens on substantially all of the assets of the
Company and its subsidiaries. The revolving credit facility provided by such
Financing Agreement replaced ECI and ECI Sportswear's prior working capital
facilities. For revolving credit loans, interest will accrue at the bank's prime
rate. For Eurodollar loans, interest will accrue at a rate per annum equal to
the Eurodollar rate plus 2.5%. The agreement evidencing the new line of credit
contains various financial and other covenants and conditions, including, but
not limited to, limitations on paying dividends, making acquisitions and
incurring additional indebtedness. As of September 30, 1999 the Company had
availability under the facility of approximately $7,500,000 and was incurring
interest at prime or
-16-
<PAGE>
8.25%.
The Company's long-term indebtedness consists of its obligations to BNY
Financial Corporation ("BNY")under the Series A Junior Secured Note Agreement
dated June 30, 1993, pursuant to which BNY is owed $7,442,000 including
$1,042,000, representing the quarterly interest payments that were deferred for
the period February 1, 1996 through January 31, 1998 by agreement with BNY in
September 1997, plus interest at the rate of 7% per annum, with a final maturity
date of November 3, 2002. The principal of BNY's Note is payable on November 3
of each year as follows:
Year Amount
1999 $ 500,000
2000 600,000
2001 1,100,000
2002 5,242,000
The Company made the 1999 principal payment on its due date. BNY is also
entitled to receive mandatory prepayments based upon 50% of certain "excess cash
flows" of the Company as defined in the Company's note agreements with BNY.
In connection with the XOXO transaction, the Company's loan agreement was
amended to increase the revolving credit line to $80,000,000, and to provide for
a term loan of $10,000,000. The term loan bears interest at prime plus one-half
percent and is payable in quarterly installments of $500,000, plus interest,
commencing January 1, 2000, with a balloon payment of $5,500,000 on February 26,
2002, the maturity date. The Company is required to make certain mandatory
prepayments based upon "excess cash flows" as defined in the amendment to the
loan agreement.
As a result of the Simon Purchase Transaction and the CIT Financing Agreement,
the Company believes it has adequate liquidity and capital resources to meet its
requirements for at least the next twelve months.
RESULTS OF OPERATIONS
The Company reported net income of $3,275,000 and a net loss of $7,132,000 for
the three and nine month periods ended September 30, 1999 respectively, compared
to net income of $2,638,000 and a net loss of $1,417,000, respectively for the
three and nine month periods ended September 30, 1998.
The increase in profit for the three month period was primarily due to
improvements in operations attributable to increased sales and margins relating
to the "FUBU" and "Members Only" product lines along with a reduction of
interest expense due to the conversion of Apollo debt to equity and the
reduction of borrowing due to the infusion of funds from the Simon Transaction.
This was partially
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<PAGE>
offset by the Company's restructuring, purchase accounting adjustments and other
charges relating to the consolidation of operations and facilities. Such charges
primarily consisted of severance pay, estimated cost to exit and sub-lease
certain facilities and impairment charges related to property and equipment at
the facilities to be vacated. In addition, the Company has entered into new
licensing arrangements which have and will continue to incur start-up costs
without related revenue.
The increase in the loss for the nine month period was primarily due to
restructuring and other charges which consisted of (i) $2,401,000 relating to a
severance payment made pursuant to the Retention Agreement between the Company
and its former President, (ii) a non-recurring charge of $3,750,000 in
connection with the write off of impaired goodwill and (iii) additional charges
of $2,373,000 relating to the consolidation of the Company's operations and
facilities as previously discussed. This loss was offset by an improvement in
operations attributable to increased sales and margins along with a reduction of
interest expense due to the conversion of Apollo debt to equity and the
reduction of borrowing due to the infusion of funds from the Simon Purchase
Transaction. In addition, the Company has entered into new licensing
arrangements which have and will continue to incur start- up costs without
related revenue.
NET SALES
The Company's net sales increased from $42,808,000 during the three months ended
September 30, 1998 to $62,869,000 during the three months ended September 30,
1999. This increase of $20,061,000 was primarily a result of the inclusion of
XOXO's sales of $15,467,000 from August 10, 1999, the date of the XOXO
acquisition. In addition, there were sales increases in most of the Company's
product lines including the "FUBU" license of $2,688,000, the Company's own
"Members Only" label of $2,555,000 and the "Perry Ellis" product line of $
717,000 compared to the third quarter of last year. These increases were
partially offset by a $1,366,000 decrease in private label sales and the phase
out of various product lines including the "Jeffrey Banks" product line.
The Company's net sales increased from $80,153,000 during the nine months ended
September 30, 1998 to $116,326,000 during the nine months ended September 30,
1999. This increase of $36,173,000 was a result of increased sales of products
under the "FUBU" license which amounted to $29,480,000 during the year as
compared to the nine months of last year which reflected the Company's initial
shipment of the "FUBU" products to the marketplace. In addition, there was an
increase in sales due to the inclusion XOXO sales of $15,467,000 from August 10,
1999 the date of the XOXO acquisition. These increases in sales were partially
offset by a decrease in sales of the Members Only product line in the amount of
approximately $4,074,000, a reduction of $1,857,000 in the
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<PAGE>
Company's "Perry Ellis" product lines which have suffered a lack of consumer
demand along with a reduction of private label sales and the phase out of
various product lines, including the "Jeffrey Banks" product lines resulting in
a decrease of sales in the approximate amount of $2,843,000.
GROSS PROFIT
Gross Profit for the three months ended September 30, 1999 was $18,318,000 or
29.1% of net sales compared to $12,086,000 or 28.2% of net sales for the three
months ended September 30, 1998. Gross profit was positively impacted by sales
of higher margin XOXO branded products included from August 10, 1999 the date of
the XOXO acquisition and "FUBU" product lines partially offset by the weak
performance of the Company's "Perry Ellis America" brand which suffered from a
lack of consumer demand. In addition, gross profit was negatively impacted by a
purchase accounting adjustment of $790,000 or 1.3% of net sales relating to the
write up of the acquired company's inventory up to net realizable value.
Gross Profit for the nine months ended September 30, 1999 was $31,886,000 or
27.4% of net sales compared to $21,383,000 or 26.7% of net sales for the nine
months ended September 30, 1998. Gross profit was positively impacted by sales
of higher margin XOXO branded products included from August 10, 1999 the date of
the XOXO acquisition and sales of the Company's "FUBU" product lines partially
offset by the weak performance of the Company's "Perry Ellis America" brand
which suffered from a lack of consumer demand which caused the Company to
liquidate prior season inventory at reduced prices. In addition, gross profit
was negatively impacted by a purchase accounting adjustment of $790,000 or 0.7%
of net sales relating to the write up of the acquired company's inventory up to
net realizable value.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and Administrative expenses were $13,748,000 or 21.9% of net sales for
the three months ended September 30, 1999 as compared to $8,149,000 or 19.0% of
net sales for the three months ended September 30, 1998. The increase in Selling
and Administrative expenses was attributable to the inclusion of XOXO's Selling
and Administrative expenses included from August 10, 1999 the date of the
acquisition along with increased fixed and variable expenses relating to of the
"FUBU" licensed product line. In addition, expenses of approximately $1,000,000
or 1.6% of net sales were incurred in connection with the consolidation of the
Company's warehousing into a new facility which resulted in additional expenses
concurrently with the phase out of the old facilities. These expenses consisted
of rent, payroll, utilities and other expenses.
Selling and Administrative expenses were $29,256,000 or 25.1% of
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<PAGE>
net sales for the nine months ended September 30, 1999 as compared to
$20,643,000 or 25.7% of net sales for the nine months ended September 30, 1998.
The increase in Selling and Administrative expenses was attributable to the
inclusion of XOXO's Selling and Administrative expenses included from August 10,
1999 the date of the acquisition along with increased fixed and variable
expenses relating to of the "FUBU" licensed product line. In addition, expenses
of approximately $1,200,000 or 1.0% of net sales were incurred in connection
with the consolidation of the Company's warehousing into a new facility which
resulted in additional expenses concurrently with the phase out of the old
facilities. These expenses consisted of rent, payroll, utilities and other
expenses.
START-UP COSTS OF NEW LICENSING OPERATIONS
Commencing with the third quarter ended September 30, 1999 the Company incurred
$215,000 of start-up costs relating to various executed license agreements
without any related revenue. These start-up costs consist of salaries, samples
and related supplies directly attributable to the newly licensed operations.
Such costs will continue to be incurred through the remainder of the current
year and during subsequent quarters of next year.
RESTRUCTURING AND OTHER CHARGES
During the first quarter ended March 31, 1999 the Company incurred a
restructuring charge of $2,401,000 relating to a severance payment made pursuant
to the Retention Agreement between the Company and its former President and
recorded a restructuring charge of $3,750,000 in connection with the write off
of impaired goodwill. In the quarters ended June 30, 1999 and September 30, 1999
the Company incurred additional restructuring and other charges of $1,850,000
and $308,000, respectively, relating to the continuing consolidation of its
operations and facilities. During the remainder of fiscal 1999, the Company
expects to incur additional restructuring charges as the result of the
continuing consolidation of its operations and facilities.
INTEREST EXPENSE
Interest expense for the three months ended September 30, 1999 decreased by
$412,000 or 26.5% compared to the three month period ended September 30, 1998.
This decrease was primarily due to the conversion of Apollo debt to equity and
the reduction of borrowings resulting from the infusion of funds from the Simon
Transaction offset partially by an increase in interest expense due to an
increase in the prime lending rate to 8.25%.
Interest expense for the nine months ended September 30, 1999 decreased by
$856,000 or 23.8% compared to the nine month period ended September 30, 1998.
This decrease was primarily due to the conversion of Apollo debt to equity and
the reduction of borrowings
-20-
<PAGE>
resulting from the infusion of funds from the Simon Purchase Transaction offset
partially by an increase in interest expense due to an increase in the prime
lending rate to 8.25%.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2 Changes in Securities
On February 26, 1999, (i) The Simon Group acquired 24,107,145 shares of Common
Stock and 2,093,790 shares of Series A Preferred Stock (convertible into
20,937,790 shares of Common Stock) for $20,000,000 and (ii) the Company redeemed
from AIF the Series B Junior Secured Note of the Company including all accrued
interest thereon (representing a total indebtedness of $10,700,000) in exchange
for $4,000,000 in cash plus 5,892,856 shares of Common Stock and 512,113 shares
of Series A Preferred Stock (convertible into 5,121,130 shares of Common Stock).
All such shares were sold to The Simon Group and AIF in a private, negotiated
transaction, exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act"), as a transaction not involving
any public offering. On July 29, 1999, pursuant to the increase in authorized
Aris Common Shares to 100,000,000, approved at the June 17, 1999 Annual Meeting
of Stockholders, all of the Company's outstanding Preferred Stock was converted
into 26,059,030 shares of Aris Common Stock on July 29, 1999.
In March 1999, the Company issued 700,000 shares of Common Stock to Warnaco,
Inc. in consideration for Warnaco's consent to the Simon Purchase Transaction.
In March 1999, the Company issued 250,000 shares of Common Stock to Shapiro
Forman & Allen LLP, in partial payment for services rendered by such law firm to
The Simon Group in connection with the Simon Purchase Transaction, which
services, under the terms of the Purchase Agreement, were to be paid for by the
Company. These share issuances were exempt from registration pursuant to Section
4(2) of the Securities Act as transactions not involving any public offering.
On August 10, 1999, the Company issued 6,500,000 shares of its common stock to
the owners of Lola, Inc. in connection with the merger of Lola with and into a
subsidiary of the Company. The issuance of these shares were exempt from
registration pursuant to Section 4(2) of the Securities Act as transactions not
involving any public offerings.
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<PAGE>
Item 3. Defaults upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company held on June 17, 1999 all
of the current members of the Board of Directors, Arnold H. Simon, Debra Simon,
David Fidlon, Howard Schneider and Robert Katz were re-elected by the
stockholders. A new member to the Board of Directors, Mark Weiner, was also
elected to the board.
In addition, at such Annual Meeting of Stockholders, the other three proposals
were approved by the stockholders with votes as follows:
Ratification of the amendment of the Company's certificate of incorporation
to provide that the number of shares that may be issued be increased to
100,000,000 shares of Common Stock and 10,000,000 shares of Preferred
Stock; 64,969,766 shares voted in favor, 46,948 against and 1,103,555
abstentions.
Ratification of the amendment of the Aris 1993 Stock Incentive Plan, to
increase the shares reserved for grants and awards under such Plan from
3,500,000 to 7,000,000; 68,411,162 shares voted in favor, 43,358 against
and 1,990 abstentions.
Ratification of the reincorporation of the Company from New York to
Delaware under the name Lifestyle Apparel Group, Ltd.; 49,266,157 shares
voted in favor, 16,832,618 against and 1,494 abstentions.
The Board of Directors does not intend to effect the name change or
re-incorporation.
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed herein as part of this report:
1. Certificate of Amendment of Certificate of Incorporation of Aris
Industries, Inc.
(b) Reports on Form 8-K
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<PAGE>
(a) The Company filed a Form 8-K on August 10, 1999, reporting the
acquisition of Lola, Inc. The Company filed an amendment to the Form 8-K on
October 25, 1999, containing the required Financial Statements and Pro-
Forma Financial Information in connection with the acquisition of Lola,
Inc.
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<PAGE>
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.
ARIS INDUSTRIES, INC.
(Registrant)
Date: November 12, 1999 By /s/
-------------------------------
David Fidlon,
Chief Operating Officer
By /s/
-------------------------------
Paul Spector,
Secretary / Treasurer
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<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Filed as Indicated Exhibit to
Document Referenced in
Exhibit No. Description Footnote No.
----------- ----------- ------------
<S> <C> <C>
2. Second Amended Joint Plan of Reorganization dated March (3)
26, 1993, as amended May 11 and June 9, 1993
(Note: Annexes omitted)
3.3 Restated Certificate of Incorporation filed on June 30, 1993 (3)
3.4 Amended and Restated By-Laws effective June 30, 1993 (3)
3.5 Amended and Restated Certificate of Incorporation filed on (22)
July 29, 1999 increasing the authorized shares
4.1 Specimen Certificate Evidencing Common Stock. (1)
10.67 Series A Junior Secured Note Agreement dated as of June 30, (3)
1993 between Registrant and BNY Financial Corporation.
10.68 Series A Junior Secured Note dated as of June 30, 1993 (3)
issued by Registrant to BNY Financial Corporation.
10.72 Secondary Pledge Agreement dated as of June 30, 1993 (3)
between Registrant, BNY Financial Corporation and AIF II,
L.P.
10.75 Shareholders Agreement dated as of June 30, 1993 among (3)
Registrant and the Subject Shareholders Referred to Therein.
10.76 Equity Registration Rights Agreement dated as of June 30, (3)
1993 among Registrant and the Holders of Registrable Shares
Referred to Therein.
10.79 Severance Agreement dated April 3, 1991 between Registrant (3)
and Paul Spector.
10.80 1993 Stock Incentive Plan of Registrant, as amended by (3)
Amendment No. 1 thereto dated June 24, 1993.
10.81 Form of Indemnification Agreement dated as of June 30, (3)
1993 between Registrant and each member of Registrant's
Board of Directors.
10.82 Letter Agreement dated February 8, 1993 among James G. (3)
Goren, Alexander M. Goren, Charles S. Ramat, and David
Schreiber and Ora Ramat as Trustees for the Benefit of Hana
Leah Ramat and Abraham Ramat.
10.84 Stipulated Entry Liquidating Claims dated March 10, 1993 (3)
among The Marcade Group Inc., Robert K. Lifton, Howard
L. Weingrow, and JAG Consulting Co. Ltd.
10.86 Letter Agreement dated October 29, 1992 among The (3)
Marcade Group Inc., Above The Belt, Inc., Europe Craft
Imports, Inc., Perry Manufacturing Company, Apollo
Investment Fund, L.P., AIF II, L.P., and Altus Finance.
10.93 Consent dated May 1, 1996 to Series A Junior Secured Note (9)
Agreement dated as of June 30, 1993 between Registrant and
BNY Financial Corporation.
10.95 Stock Purchase Agreement dated as of September 19, 1996 (10)
between Aris Industries, Inc., as Seller, Page Holding
Company, as Buyer, and Perry Manufacturing Company,
with respect to the stock of Perry Manufacturing Company.
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
Filed as Indicated Exhibit to
Document Referenced in
Exhibit No. Description Footnote No.
----------- ----------- ------------
<S> <C> <C>
10.99 Warrant dated September 30, 1996 issued by Aris Industries, (10)
Inc. to Heller Financial, Inc.
10.100 Letter dated December 18, 1996 from the Registrant to (11)
Charles S. Ramat.
10.101 Amendment dated May 5, 1997 to Series A Junior Secured (11)
Note Agreement dated as of June 30, 1993 between
Registrant and BNY Financial Corporation.
10.103 Amendment dated June 18, 1997 to Series A Junior Secured (13)
Note Agreement dated as of June 30, 1993 between
Registrant and BNY Financial Corporation.
10.105 Asset Purchase Agreement dated as of July 15, 1997 among (14)
Davco Industries, Inc., as Seller, Steven Arnold and
Christopher Healy as Shareholders of Seller, and Aris
Management Corp. (n/k/a ECI Sportswear, Inc.) , as
Purchaser.
10.106 Shareholders Agreement dated as of July 15, 1997 among (14)
Davco Industries, Inc., Steven Arnold, Christopher Healy,
Aris Management Corp. (n/k/a ECI Sportswear, Inc.), the
Registrant, Apollo Aris Partners, L.P. and Charles S. Ramat.
10.107 Amendment dated July 18, 1997 to Series A Junior Secured (14)
Note Agreement dated as of June 30, 1993 between
Registrant and BNY Financial Corporation.
10.109 Amendment executed September 12, 1997 to Series A and (15)
Series B Junior Secured Note Agreements dated as of June
30, 1993 between Registrant, BNY Financial Corporation and
AIF, L.P.
10.111 Securities Purchase Agreement, dated as of February 26, (17)
1999, between Aris Industries, Inc., Apollo Aris Partners,
L.P., AIF, L.P., The Simon Group, L.L.C. and Arnold Simon.
10.112 Shareholders Agreement, dated as of February 26, 1999, (17)
between Aris Industries, Inc., Apollo Aris Partners, L.P., AIF,
L.P., The Simon Group, L.L.C. and Charles S. Ramat.
10.113 Equity Registration Rights Agreement, dated as of February (17)
26, 1999, between Aris Industries, Inc., Apollo Aris Partners,
L.P., AIF, L.P., The Simon Group, L.L.C. and Charles S.
Ramat.
10.114 Retention Agreement dated as of February 18, 1999 by and (17)
between Aris Industries, Inc. and Charles S. Ramat.
10.115 Financing Agreement dated February 26, 1999 by and among (18)
the Company and its Subsidiaries and CIT Commercial
Group, Inc. and the other Financial Industries named therein.
10.116 Employment Agreement effective as of March 1, 1999 with (19)
Arnold Simon
10.117 Employment Agreement effective as of March 1, 1999 with (19)
David Fidlon
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
Filed as Indicated Exhibit to
Document Referenced in
Exhibit No. Description Footnote No.
----------- ----------- ------------
<S> <C> <C>
10.118 Agreement of Lease made as of April 22, 1999 by and (19)
between Erika Realty Trust, as Landlord, and Registrant, as
Tenant, for premises located at 89 West Rodney French
Blvd., New Bedford, Ma.
10.119 First Amendment to CIT Financing Agreement dated as of (20)
March 25, 1999.
10.120 Employment Agreement effective as of June 7, 1999 with (20)
Joseph Purritano
10.121 Agreement and Plan of Merger dated July 19, 1999 by and (21)
among Aris Industries, Inc., XOXO Acquisition Corp. and
Lola, Inc. and its shareholders.
10.122 Amendment No. 1 to Agreement and Plan of Merger (21)
10.123 Employment Agreement by and among the Registrant, ECI, (21)
ECI Sportswear, Inc. and XOXO and Gregg Fiene, dated
August 10, 1999
10.124 Employment Agreement by and among the Refistrant, ECI, (21)
ECI Sportswear, Inc. and XOXO and Hollis Fiene, dated
August 10, 1999
10.125 Shareholders' Agreement by and among the Registrant, The (21)
Simon Group, LLC, Gregg Fiene, Michele Bohbot and Lynn
Hanson, dated August 10, 1999
10.126 Amendment No. 2 to Financing Agreement by and among (21)
Aris Industries, Inc., Europe Craft Imports, Inc., ECI
Sportswear, Inc., Stetson Clothing Company, Inc., XOXO;
the Financial Institutions from time to time party to the
Financing Agreement, as Lenders; and the CIT
Group/Commercial Services, Inc. as Agent, dated August 10,
1999
</TABLE>
(1) Filed as the indicated Exhibit to the Annual Report of the Company on Form
10-K for the fiscal year ended February 2, 1991 and incorporated herein by
reference.
(2) Omitted.
(3) Filed as the indicated Exhibit to the Report on Form 8-K dated June 30,
1993 and incorporated herein by reference.
(4) Omitted.
(5) Filed as the indicated Exhibit to the Report on Form 8-K dated June 12,
1995 and incorporated herein by reference.
(6) Filed as the indicated Exhibit to the Report on Form 8-K dated October 27,
1995 and incorporated herein by reference.
(7) Filed as the indicated Exhibit to the Report on Form 8-K dated February 2,
1996 and incorporated herein by reference.
(8) Omitted.
-27-
<PAGE>
(9) Filed as the indicated Exhibit to the Report on Form 8-K dated May 1, 1996
and incorporated herein by reference.
(10) Filed as the indicated Exhibit to the Report on Form 8-K dated September
30, 1996 and incorporated herein by reference.
(11) Filed as the indicated Exhibit to the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1996 and incorporated herein by
reference.
(12) Omitted.
(13) Filed as the indicated Exhibit to the Report on Form 8-K dated June 18,
1997 and incorporated herein by reference.
(14) Filed as the indicated Exhibit to the Report on Form 8-K dated July 15,
1997 and incorporated herein by reference.
(15) Filed as the indicated Exhibit to the Report on Form 8-K dated September
12, 1997 and incorporated herein by reference.
(16) Omitted.
(17) Filed as the indicated Exhibit to the Report on Form 8-K dated February 26,
1999 and incorporated herein by reference.
(18) Filed as the indicated Exhibit to the Annual Report of the Company on Form
10-K for the year ended December 31, 1998 and incorporated herein by
reference.
(19) Filed as the indicated Exhibit to the Report on Form 10-Q dated March 31,
1999 and incorporated herein by reference.
(20) Filed as the indicated Exhibit to the Report on Form 10Q dated June 30,
1999 and incorporated herein by reference.
(21) Filed as the indicated Exhibit to the Report on Form 8-K dated August 10,
1999 and incorporated herein by reference
(22) Filed herewith.
-28-
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ARIS INDUSTRIES, INC.
(Under Section 805 of the Business Corporation Law)
We, the undersigned, being the President and Assistant Secretary,
respectively, of Aris Industries, Inc., hereby certify that:
FIRST: The name of the corporation (hereinafter referred to as the
"Corporation") is ARIS INDUSTRIES, INC.
SECOND: The Certificate of Incorporation of the Corporation was filed with
the Department of State on March 6, 1947 under the name Uniroy of Hempstead,
Inc. The Restated Certificate of Incorporation of the Corporation was filed on
June 30, 1993.
THIRD: The amendment of the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to increase the number of shares of
common stock, par value $.01 per share, that the Corporation is authorized to
issue, from 50,000,000 to 100,000,000 shares.
FOURTH: To accomplish the foregoing amendment, Article "THIRD" of the
Certificate of Incorporation of the Corporation with respect to capital stock of
the Corporation is amended by deleting Paragraphs 1(a) and (b) and replacing
them with the following:
1. The aggregate number of shares of the capital stock which the
Corporation shall have authority to issue is One Hundred Ten Million
(110,000,000) shares, consisting of:
<PAGE>
(a) One Hundred Million (100,000,000) shares of Common Stock, par
value $.01 per share (the "Common Stock"); and
(b) Ten Million (10,000,000) shares of Preferred Stock, par value $.01
per share (the "Preferred Stock").
FIFTH: The foregoing amendment of the Certificate of Incorporation of the
Corporation was authorized by the Board of Directors of the Corporation, at a
duly called and convened meeting on April 12, 1999, followed by the affirmative
vote of a majority of all outstanding shares of the Corporation entitled to vote
at a duly called and convened meeting of shareholders on June 17, 1999.
IN WITNESS WHEREOF, we have subscribed this document on the set forth
below, and do hereby affirm, under the penalty of perjury on this 27th day of
July, 1999.
---------------------------------------
David Fidlon, President
---------------------------------------
Robert W. Forman, Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 766,000
<SECURITIES> 0
<RECEIVABLES> 60,179,000
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0
0
<COMMON> 791,000
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<INCOME-TAX> 137,000
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<NET-INCOME> (7,132,000)
<EPS-BASIC> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
