<PAGE>
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 June 30, 1996 Commission File No. 1-9502
STAGE II APPAREL CORP.
(Exact name of registrant as specified in its charter)
New York 13-3016967
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 Fifth Avenue
New York, New York 10118
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (212) 564-5865
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 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
---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock as of the latest practicable date.
Title of Class Outstanding at August 12, 1996
Common Stock, par value $.01 per share 4,196,462
<PAGE>
STAGE II APPAREL CORP.
INDEX
Part I. Financial Information PAGE
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995. . . . . . . . . . . . . . .2
Condensed Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1996 and 1995. . . . . . . .3
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995. . . . . . . . . . . . .4
Notes to Condensed Consolidated Financial Statements . . . . . . .5
Management's Discussion and Analysis of the Financial
Condition and Results of Operations. . . . . . . . . . . . . . .6
Part II. Other Information . . . . . . . . . . . . . . . . . . . . . .9
<PAGE>
STAGE II APPAREL CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
($ in thousands) June 30, Dec. 31,
ASSETS 1996 1995 *
---- ----
(Unaudited)
Current assets:
Cash and cash equivalents $109 $151
Accounts receivable 914 2,063
Finished goods inventory 11,214 12,507
Prepaid expenses 590 928
Prepaid income taxes and refunds receivable 740 743
----------- -----------
Total current assets 13,567 16,392
Property and equipment - at cost, less accumulated
depreciation 653 772
Marketable securities 10,003 11,123
Goodwill, less accumulated
amortization 7,843 9,230
Covenant not to compete, less accumulated
amortization 684 732
Other assets 1,116 1,287
----------- -----------
$33,866 $39,536
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to factor $13,890 $11,658
Due to bank - 1,011
Accounts payable 1,509 2,645
Notes payable - current 170 171
Income taxes payable 93 51
Accrued royalties 134 648
Other current liabilities 372 379
Current liabilities net of current assets of
discontuinued subsidary 286 -
----------- -----------
Total current liabilities 16,454 16,563
Notes payable - long term 300 384
Notes payable to shareholder - subordinated 911 911
Stockholders' equity
Preferred stock, $.01 par value, 1,000,000
shares authorized; none issued and outstanding
Common stock, $.01 par value, 9,000,000
shares authorized; 4,993,425 issued and
4,196,462 outstanding 50 50
Additional paid in capital 7,502 7,502
Retained earnings 11,320 16,308
----------- -----------
18,872 23,860
Less treasury stock at cost, 796,963 shares at
June 30, 1996 and December 31, 1995 (2,092) (2,092)
Cumulative translation adjustment (89) (90)
Allowance for decline in market value of securities
available for sale (490) -
----------- -----------
Total stockholders' equity 16,201 21,678
Commitments and contingencies - -
----------- -----------
$33,866 $39,536
----------- -----------
----------- -----------
The accompanying notes are an integral part of these condensed financial
statements.
* Condensed from audited financial statements.
2
<PAGE>
STAGE II APPAREL CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
($ in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $6,075 $13,025 $15,030 $27,383
Cost of goods sold 5,199 10,480 12,309 21,635
----------- ----------- ----------- -----------
Gross profit 876 2,545 2,721 5,748
Commission and other income 247 396 360 698
Selling, general and administrative expenses 2,734 3,852 5,636 7,673
----------- ----------- ----------- -----------
Operating loss (1,611) (911) (2,555) (1,227)
Other expenses:
Interest and factoring expenses, net 331 510 885 1,031
Minority interest in profit (loss) of
subsidiary - 7 - (34)
----------- ----------- ----------- -----------
Loss before income tax benefit (1,942) (1,428) (3,440) (2,224)
Income tax (benefit) - (638) 20 (842)
----------- ----------- ----------- -----------
Net loss from continuing operations (1,942) (790) (3,460) (1,382)
Discontinued operations:
Loss on disposal of discontinued subsidary,
including a provision of $160,000 for
operating losses during the phase-out period 1,528 - 1,528 -
----------- ----------- ----------- -----------
Net loss ($3,470) ($790) ($4,988) ($1,382)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Loss per share ($0.83) ($0.19) ($1.19) ($0.33)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of shares
outstanding 4,196 4,196 4,196 4,194
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
3
<PAGE>
STAGE II APPAREL CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
Net cash used in operating activities ($2,570) ($7,711)
Cash flows from investing activities:
Purchases of property and equipment - net (4) (177)
Proceeds from sales or redemption's of
marketable securities - net 629 172
--------- ---------
Net cash provided by (used in)
investing activities 625 (5)
--------- ---------
Cash flows from financing activities:
Factor financing - net 2,232 7,578
Bank financing - net (246) 469
Repayment of notes payable (84) (78)
--------- ---------
Net cash provided by financing activities 1,902 7,969
--------- ---------
Effect of exchange rate changes on cash 1 (27)
--------- ---------
Net (decrease) increase in cash and
cash equivalents (42) 226
Cash and cash equivalents at beginning of period 151 365
--------- ---------
Cash and cash equivalents at end of period $109 $591
--------- ---------
--------- ---------
Supplemental disclosures of cash flows information:
Cash paid during the period for:
Income taxes $17 $4
--------- ---------
--------- ---------
Interest $810 $1,532
--------- ---------
--------- ---------
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE>
STAGE II APPAREL CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION - - The accompanying unaudited condensed consolidated
financial statements of Stage II Apparel Corp. (the "Company") have been
prepared in accordance with generally accepted accounting principles and,
in the opinion of management, reflect all adjustments (consisting of normal
recurring adjustments) necessary to fairly present the Company's
financial position at June 30, 1996, and its results of operations and
cash flows for the interim periods presented. The accounting policies
followed by the Company are set forth in Note 1 to the Consolidated
Financial Statements included in its Annual Report on Form 10-K for the
year ended December 31, 1995.
2. INVENTORIES - - The interim period inventories were computed using the
gross profit method.
3. DISPOSAL OF DISCONTINUED SUBSIDIARY - - In May 1996, the Company decided
to explore alternatives for disposing of its interest in Woody Sports
Apparel, Inc., a Canadian distributor of activewear in which the Company
acquired 80% of the common stock and all the preferred stock in 1993 for
approximately $1.6 million. In July 1996, the Company finalized its plan
to liquidate the operations of the Canadian subsidiary and has provided
for a loss on disposal of $1.5 million, including a provision of $160,000
for operating losses during the phase-out period and a noncash impairment
charge of $1,089,000 against goodwill of the subsidiary. See Note 4 --
New Accounting Standards.
4. NEW ACCOUNTING STANDARDS - - The Company has implemented the Financial
Accounting Standards Board's Statement No. 121, Accounting for the
Impairment of Long-Lived Assets to be Disposed Of ("FAS 121"). Under FAS
121, certain assets are required to be reviewed periodically for impairment
whenever circumstances indicate their carrying amount exceeds their fair
value and may not be recoverable. In July 1996, the Company finalized its
plan to liquidate the operations of its Canadian subsidiary. As part of
the plan of liquidation, the Company took a noncash impairment charge of
$1,089,000 against the carrying value of goodwill of the Canadian
subsidiary. See Note 3 -- Disposal of Discontinued Subsidiary. In
addition, as a result of a management realignment and related lawsuit
involving the termination of the Company's former president, the Company
recognized a noncash impairment charge of $125,000 in the second quarter of
1996 against the carrying value of prepaid salary advanced to the former
president.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("FAS 123"), which established financial accounting and
reporting standards for stock-based employee compensation plans and for
transactions in which an entity issues its equity instruments to acquire
goods and services from nonemployees. FAS 123 requires, among other
things, that compensation costs be calculated for fixed stock options at
the grant date by determining fair value using an option pricing model.
The Company has the option of recognizing the compensation cost over the
vesting period as an expense in the consolidated statement of operations or
making pro forma disclosures in the notes to financial statements
reflecting the effects on net earnings as if the compensation cost had
been recognized in the consolidated statement of operations. The Company
adopted FAS 123 in 1996 and will make the required pro forma disclosures in
the notes to its annual financial statements.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Stage II Apparel Corp. (the "Company" or "Stage II") designs and arranges
for the manufacture of an extensive range of casual apparel and activewear,
primarily for men and boys. Stage II markets its apparel to mass merchandisers,
department stores and sporting goods and specialty stores. The Company's
apparel lines are sold under licenses for a number of nationally recognized
brand names and to a lesser extent under private and proprietary labels. Stage
II's licensed brand name apparel generally sells at a higher price and with
greater gross profit margins than its comparable private and proprietary label
apparel. The higher prices are partially offset by the additional costs of
royalty and advertising expenses incurred in accordance with the Company's
license agreements.
RECENT DEVELOPMENTS
MANAGEMENT REALIGNMENT. In April 1996, Stage II dismissed Stuart Goldman
from his positions as an executive officer of the Company and its subsidiary
Stage II Apparel Corp. of Hong Kong ("Stage II HK") and ceased paying
compensation to him under his employment agreements with the Company and Stage
II HK. Responding to these events and to a related lawsuit commenced by the
Company against Mr. Goldman in the Supreme Court of the State of New York, Mr.
Goldman resigned as a director of the Company effective May 15, 1996. See
"Other Information - - Legal Proceedings" below. Mr. Goldman had served as a
director and executive officer of Stage II since October 1994, when he was
retained in connection with the Company's acquisition of substantially all the
assets and related liabilities of Townsley Ltd., an apparel company owned by Mr.
Goldman and his wife ("Townsley").
DISPOSAL OF DISCONTINUED SUBSIDIARY. In May 1996, the Company decided to
explore alternatives for disposing of its interest in Woody Sports Apparel, Inc.
("Woody Sports"), a Canadian distributor of activewear in which Stage II
acquired 80% of the common stock and all the preferred stock in 1993 for
approximately $1.6 million. In July 1996, the Company finalized its plan to
liquidate the operations of Woody Sports and has provided for a loss on disposal
of $1.5 million, including a provision of $160,000 for operating losses during
the phase-out period and a noncash impairment charge of $1,089,000. See "Asset
Impairment under FAS 121" below.
ASSET IMPAIRMENT UNDER FAS 121. In the first half of 1996, the Company
implemented the Financial Accounting Standards Board's Statement No. 121,
Accounting for the Impairment of Long-Lived Assets to be Disposed Of ("FAS
121"). Under FAS 121, certain assets are required to be reviewed periodically
for impairment whenever circumstances indicate their carrying amount exceeds
their fair value and may not be recoverable. In July 1996, the Company
finalized its plan to liquidate the operations of its Canadian subsidiary. As
part of the plan of liquidation, the Company took a noncash impairment charge of
$1,089,000 against the carrying value of goodwill of the Canadian subsidiary.
See "Disposal of Discontinued Subsidiary" above. In addition, as a result of a
management realignment and related lawsuit involving the termination of the
Company's former president, the Company recognized a noncash impairment charge
of $125,000 in the second quarter of 1996 against the carrying value of prepaid
salary advanced to Mr. Goldman.. See "Management Realignment" above.
EMPLOYEE STOCK OPTIONS. In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation ("FAS 123"), which established
financial accounting and reporting standards for stock-based employee
compensation plans and for transactions in which an entity issues its equity
instruments to acquire goods and services from nonemployees. FAS 123
requires, among other things, that compensation costs be calculated for fixed
stock options at the grant date by determining fair value using an option
pricing model. The Company has the option of recognizing he compensation cost
over the vesting period as an expense in the consolidated statement of
operations or making pro forma disclosures in the notes to financial
statements reflecting the effects on net earnings as if the compensations
cost had been recognized in the consolidated
6
<PAGE>
statements reflecting the effects on net earnings as if the compensation cost
had been recognized in the consolidated statement of operations. The Company
adopted FAS 123 in 1996 and will make the required pro forma disclosures in
the notes to its annual financial statements
RESULTS OF OPERATIONS
SEASONALITY. The Company experiences some seasonal business fluctuations
due primarily to its product mix. While sales of the Company's products are
made throughout the year, Stage II's largest sales volume in 1995 and 1994
occurred in the third quarter. The following table reflects these quarterly
fluctuations, which should not be construed as indicative of future sales
volumes.
QUARTERLY NET SALES
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
(In thousands)
1996 $ 8,955 $ 6,075 $ - $ - $ -
1995 14,358 13,025 21,623 14,815 63,821
1994 14,296 11,116 21,736 18,045 65,193
1993 17,096 12,878 18,211 18,188 66,373
THREE MONTHS ENDED JUNE 30, 1996 AND 1995. Net sales of $6,075,000 for the
second quarter of 1996 decreased by 53.4% from $13,025,000 in the corresponding
quarter of 1995. The decrease reflects the general downturn in the retail
trade, the termination of certain licenses and a planned reduction in volume in
anticipation of the continuing weak retail trade.
Cost of goods sold as a percentage of sales increased by 5.1% from the
corresponding quarter last year. The increase resulted from higher levels of
promotional sales in response to the continuing weak retail trade and the sell-
off of merchandise under discontinued licenses.
Selling, general and administrative expenses for the second quarter of 1996
decreased by 29.0% to $2,734,000 compared to $3,852,000 for the same quarter of
1995, primarily from a reduction in variable costs associated with lower sales
volumes and a cost reduction plan adopted in the second quarter of the year.
Selling, general and administrative expenses as a percentage of sales increased
to 45.0% for the second quarter of 1996 compared to 29.6% in the same quarter
last year.
Interest expense, net of interest income, decreased by $179,000 or 35.1%
for the current quarter compared to the second quarter of 1995, reflecting
decreased levels of financing.
The Company recognized a loss from operations of $1,942,000 before income
taxes in the second quarter of 1996, compared to a loss before taxes of $790,000
for the corresponding quarter last year, reflecting the forgoing trends and, for
the current period, an impairment charge of $125,000 against the carrying value
of prepaid salary under FAS 121. See "Recent Developments --Asset Impairment
under FAS 121" above.
In the second quarter of 1996 the Company provided for the liquidation
Woody Sports. The provision totaled $1,528,000, including $160,000 for
operating losses during the phase-out period and a noncash impairment charge of
$1,089,000 against the carrying value of goodwill of the Canadian subsidiary.
See "Recent Developments -- Disposal of Discontinued Subsidiary" and "Recent
Developments -- Asset Impairment under FAS 121" above.
After accounting for the nonrecurring charge for the disposal of the
discontinued subsidiary the loss per share was $.83 for the current quarter
versus $.19 for the second quarter of 1995.
7
<PAGE>
SIX MONTHS ENDED JUNE 30, 1996 AND 1995. Net sales of $15,030,000 for the
first six months of 1996 decreased by 45.1% from $27,383,000 in the
corresponding period of 1995. The decrease reflects the general downturn in the
retail trade, the termination of certain licenses and a planned reduction in
volume in anticipation of the continuing weak retail trade.
Cost of goods sold as a percentage of sales increased by 2.9% from the
corresponding period last year. The increase resulted from higher levels of
promotional sales in response to the continuing weak retail trade.
Selling, general and administrative expenses for the first six months of
1996 decreased by 26.5% to $5,636,000 compared to $7,673,000 for the same period
of 1995, primarily from a reduction in variable costs associated with lower
sales volumes. Selling, general and administrative expenses as a percentage of
sales increased to 37.5% for the first six months of 1996 compared to 28.0% in
the same period last year.
Interest expense, net of interest income, decreased by $146,000 or 14.2%
for the first six months of 1996 compared to the period of 1995, reflecting
decreased levels of financing.
The Company recognized a loss from operations of $3,440,000 before income
taxes in the first six months of 1996, compared to a loss before taxes of
$2,224,000 for the corresponding period last year, reflecting the forgoing
trends and, for the current period, an impairment charge of $125,000 against
the carrying value of prepaid salary under FAS 121. See "Recent
Developments --Asset Impairment under FAS 121" above.
Provision for income taxes decreased to 0.2% in the first six months of
1996 compared to 37.9% in the year-earlier period.
In the second quarter of 1996 the Company provided for the liquidation
Woody Sports. The provision totaled $1,528,000, including $160,000 for
operating losses during the phase-out period and a noncash impairment charge of
$1,089,000 against the carrying value of goodwill of the Canadian subsidiary.
See "Recent Developments -- Disposal of Discontinued Subsidiary" and "Recent
Developments -- Asset Impairment under FAS 121" above.
After accounting for the nonrecurring charge for the disposal of the
discontinued subsidiary the loss per share was $1.19 for the current period
versus $.33 for the first six months of 1995.
The results of operations for the quarter and six months ended June 30,
1996 are not necessarily indicative of operating results to be expected for the
full year.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY. Net cash used in Stage II's operating activities during the six
months of 1996 aggregated $2,570,000. The Company's cash position during the
period was increased by the sale of marketable securities netting $629,000 and
borrowings of $2,232,000 from the Company's factor. During the period, $4,000
was expended on purchases of equipment, $84,000 was paid to noteholders and
$246,000 was repaid on bank borrowings by Woody Sports. As a result of these
activities, the Company's cash and cash equivalents decreased from $151,000 at
December 31, 1995 to $109,000 at June 30, 1996, while its working capital
deficiency increased from $171,000 to $2,888,000.
CAPITAL RESOURCES. The Company had retained earnings of $4,401,000 at June
30, 1996, including unremitted earnings of Stage II HK in the amount of
$11,796,000, of which $10,003,000 is invested in marketable fixed-income
securities. Stage II HK has paid only local (i.e., foreign) taxes associated
with its unremitted earnings, which would be subject to the current U.S. tax
rate on those funds (less the amount previously paid in local taxes) if they
were to be repatriated and made available for domestic use. There are no
restrictions on the repatriation of these unremitted earnings, other than their
being subject to domestic taxation upon repatriation. Stage II has no present
intention of repatriating Stage II HK's remaining unremitted earnings, except to
the extent includable for United States income tax purposes. In addition, the
Company has no present intention of disposing of Stage II HK's marketable
fixed-income
8
<PAGE>
securities before their scheduled maturities. Because these investments are
primarily in long-term fixed-income securities, they have been classified as
long-term assets. Should Stage II decide in the future to sell these securities
or to make current use of the funds, the Company would recognize a gain or loss
equal to the amount by which their current market value exceeded or was less
than the its investment in the securities.
Stage II has a factoring agreement (the "Credit Agreement") with Republic
Factors Corp. (the "Factor"). The Credit Agreement provides a revolving credit
facility for short-term borrowings by the Company at a floating interest rate
equal to 1/2% above the prime rate of Republic National Bank. Borrowings under
the Credit Agreement are payable upon demand and secured by the Company's
inventory, accounts receivable, cash surrender value of officers life insurance
and the marketable securities of Stage II of HK. The Factor purchases the
Company's accounts receivable that it has preapproved, without recourse except
in cases where there are merchandise returns or billing or merchandise disputes
in the normal course of business. In addition, the Factor is responsible for
the accounting and collection of all accounts receivable sold to it by the
Company. The Factor receives a commission under the Credit Agreement in an
amount less than 1% of net receivables purchased by the Factor. The Credit
Agreement also provides for the issuance of letters of credit by a banking
affiliate of the Factor to fund the Company's foreign manufacturing orders. The
aggregate amount of borrowings and letters of credit available under the Credit
Agreement are determined from time to time based upon the requirements of the
Company, with a borrowing and letter of credit limit up to approximately
$18,000,000. The Company has the right of termination upon its anniversary date
with 30 days' prior written notice, while the Factor may terminate the Credit
Agreement for any reason at any time, without penalty, upon thirty days' prior
written notice. The Credit Agreement is scheduled to expire on December 31,
1996.
At June 30, 1996, the Company's net direct borrowings under the Credit
Agreement aggregated $13,890,000. As of that date, the Company had no material
commitments for capital expenditures.
Woody Sports has established a line of credit secured by an assignment of
its accounts receivable and inventories, a general security agreement and an
assignment and postponement of inter-company notes and receivables. The credit
facility provides for borrowings at a floating interest rate equal to 1/2% above
the lender's prime. At June 30, 1996, the subsidiary's net direct borrowings
under its line of credit aggregated $765,000. As of that date, the subsidiary
had no material commitments for capital expenditures.
The Company believes that its internally generated funds and funds
available under the Credit Agreement will be sufficient to meet its foreseeable
working capital requirements. Stage II may reborrow amounts repaid under its
Credit Agreement or seek other external means to finance in the future.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In April 1996 , the Company and Stage II HK commenced a lawsuit in the
Supreme Court of the State of New York against Stuart Goldman, Townsley and
related parties to recoup damages incurred in connection with the October 1994
acquisition of substantially all the assets and related liabilities of Townsley,
the purchase of all the capital stock of Townsley's Hong Kong subsidiary and the
related employment of Mr. Goldman as President of Stage II and Stage II HK. See
"Recent Developments -- Management Realignment" above. The Company is also
seeking to rescind its six-year employment agreement with Mr. Goldman entered
into in connection with the Townsley acquisition and the related seven-year
employment agreement between Stage II HK and Mr. Goldman. The lawsuit is based
on alleged misrepresentations in connection with the Townsley acquisition and
breach of Mr. Goldman's fiduciary duties and contractual obligations under his
employment agreements. The compensatory and punitive damages sought by Stage II
and Stage II HK in the lawsuit exceed $20 million.
In June 1996, Mr. Goldman and his co-defendants filed an answer denying
Stage II's claims in the lawsuit and asserting various counterclaims, including
(i) $2 million in compensation for the unexpired terms of Mr. Goldman's
9
<PAGE>
employment agreements, (ii) $.5 million in payment of the deferred purchase
price for Townsley assets, (iii) $.4 million in compensatory damages plus $5
million in punitive damages for alleged misrepresentations in connection with
the issuance of the Company's common stock as part of the purchase price for
Townsley assets and (iv) $2 million in compensatory damages plus $5 million in
punitive damages in connection with Mr. Goldman's guaranty of a portion of the
Company's obligations to its Factor. Stage II believes that its claims have
merit and that Mr. Goldman's counterclaims are without merit. The Company
intends to vigorously contest the counterclaims but cannot predict the outcome
of the lawsuit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 24, 1996, the Company held its annual meeting of shareholders. All
of the incumbent Class I directors listed in the Company's proxy statement were
re-elected. The number of votes cast for and against each nominee are set forth
below.
VOTES FOR VOTES AGAINST
Steven R. Clark. . . . . . . . . . . . . . . . . . 3,030,050 2,900
Stephen Jelin. . . . . . . . . . . . . . . . . . . 3,029,650 3,300
Harold Lazarus . . . . . . . . . . . . . . . . . . 3,029,650 3,300
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K.
(a) EXHIBITS. None.
(b) REPORTS ON FORM 8 - K. The Company filed a Current Report on Form
8-K dated May 20, 1996 relating to its
lawsuit against Stuart Goldman, Townsley and
related defendants.
10
<PAGE>
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.
STAGE II APPAREL CORP.
Date: August 20, 1996 BY: /s/ Jack Clark
------------------------
Jack Clark
Chairman of the Board
(Duly Authorized Officer)
Date: August 20, 1996 BY: /s/ Thomas S. Hammill
------------------------
Thomas S. Hammill
Treasurer
(Duly Authorized Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 109
<SECURITIES> 10,003
<RECEIVABLES> 914
<ALLOWANCES> 0
<INVENTORY> 11,214
<CURRENT-ASSETS> 13,567
<PP&E> 653
<DEPRECIATION> 0
<TOTAL-ASSETS> 33,866
<CURRENT-LIABILITIES> 16,454
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 7,502
<TOTAL-LIABILITY-AND-EQUITY> 33,866
<SALES> 15,030
<TOTAL-REVENUES> 0
<CGS> 12,309
<TOTAL-COSTS> 5,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 885
<INCOME-PRETAX> (3,440)
<INCOME-TAX> 20
<INCOME-CONTINUING> (3,460)
<DISCONTINUED> (1,528)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,988)
<EPS-PRIMARY> (1.19)
<EPS-DILUTED> 0
</TABLE>
