<PAGE> 1
UNITED STATES
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 September 30, 1997 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 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
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 October 31, 1997
Common Stock 3,991,967
<PAGE> 2
STAGE II APPAREL CORP.
INDEX
Part I. Financial Information Page
Condensed Consolidated Balance Sheets -
September 30,1997 (unaudited) and December 31, 1996 ...................... 2
Condensed Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1997
and 1996 (unaudited) ..................................................... 3
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 (unaudited) ................ 4
Notes to Condensed Consolidated Financial Statements ....................... 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................................... 7
Part II. Other Information ................................................ 11
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
STAGE II APPAREL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Sept. 30, Dec. 31,
1997 1996
-------- --------
(Unaudited)
ASSETS:
Cash ............................................. $ 454 $ 429
Restricted cash .................................. 662 --
Accounts receivable .............................. 823 1,334
Finished goods inventory ......................... 4,531 5,130
Prepaid expenses ................................. 618 374
Prepaid income taxes and refunds receivable ...... 112 130
-------- --------
Total current assets ........................... 7,200 7,397
Property and equipment, at cost, less
accumulated depreciation ....................... 522 585
Marketable securities ............................ 3,292 8,655
Goodwill, less accumulated amortization .......... 7,226 7,558
Covenant not to compete, less accumulated
amortization ................................... 266 300
Other assets ..................................... 720 1,314
-------- --------
TOTAL ASSETS ................................... $ 19,226 $ 25,809
======== ========
LIABILITIES:
Due to factor .................................... $ 5,197 $ 7,174
Due to bank ...................................... -- 434
Accounts payable ................................. 481 1,838
Notes payable - current .......................... 170 185
Notes payable to shareholder - current ........... 350 411
Income taxes payable ............................. -- 8
Accrued royalties ................................ 83 182
Other current liabilities ........................ 886 488
-------- --------
Total current liabilities .............. 7,167 10,720
Notes payable - long term ........................ -- 199
Notes payable to shareholder - long term ......... -- 500
-------- --------
TOTAL LIABILITIES .............................. 7,167 11,419
======== ========
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000 shares
authorized; none issued and outstanding ........ -- --
Common stock, $.01 par value, 9,000 shares
authorized; 4,993 shares issued and 3,992
shares outstanding at Sept. 30, 1997 and
4,196 at Dec. 31, 1996, ........................ 50 50
Additional paid-in capital ....................... 7,502 7,502
Retained earnings ................................ 7,015 9,346
14,567 16,898
Less treasury stock, at cost; 1001 shares at
Sept.30, 1997 and 797 at Dec. 31, 1996 ......... (2,297) (2,092)
Allowance for decline in market value of
securities available for sale .................. (85) (329)
Cumulative translation adjustment ................ (126) (87)
-------- --------
TOTAL SHAREHOLDERS' EQUITY ..................... 12,059 14,390
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....... $ 19,226 $ 25,809
======== ========
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 4
STAGE II APPAREL CORP. AND SUBSIDIARIES
Condensed Consolidated Statement of Operations
($ in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales ............................................. 5,718 10,397 12,133 24,527
Cost of goods sold .................................... 4,423 8,271 9,861 19,943
------- ------- ------- -------
Gross profit .......................................... 1,295 2,126 2,272 4,584
Commission and other income .......................... 318 355 513 715
Selling, general and administrative ................... 1,437 2,116 4,859 7,167
------- ------- ------- -------
Operating income (loss) ............................... 176 365 (2,074) (1,868)
Interest and factoring expenses ....................... 321 622 679 1,897
Interest income ....................................... 73 194 211 594
Loss on sale of securities ............................ -- -- 285 --
------- ------- ------- -------
Income (loss) before income tax (benefit) ............. (72) (63) (2,827) (3,171)
Income tax (benefit) .................................. -- (75) (9) (55)
------- ------- ------- -------
Income (loss)before extraordinary items from continuing
operations ............................................ (72) 12 (2,818) (3,116)
Extraordinary item- gain on extinguishment of debt .... 205 -- 205 --
Discontinued operations:
Gain (loss) on disposal of discontinued subsidiary,
including a provision of $160,000 for operating loss
during phase-out period ............................. -- -- 290 (1,860)
------- ------- ------- -------
Net income (loss) ..................................... 133 12 (2,323) (4,976)
Net income ( loss) per common share:
Income (loss) from continuing operations ............ $ (0.02) $ 0.00 $ (0.67) $ (0.74)
Extraordinary items-extinguishment of debt .......... $ 0.05 $ 0.00 $ 0.05 $ 0.00
Gain (loss) from discontinued operations ........... $ 0.00 $ 0.00 $ 0.07 $ 0.00
------- ------- ------- -------
$ 0.03 $ 0.00 $ (0.55) $ (1.18)
======= ======= ======= =======
Weighted average number of shares outstanding ........ 4,174 4,196 4,187 4,196
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements
3
<PAGE> 5
STAGE II APPAREL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
-------------
1997 1996
---- ----
Net cash used in operating activities .................. ($1,862) $ 325
Investing Activities:
Purchase and sale of property and equipment, net ..... (46) (8)
Sale or redemption of marketable securities ......... 6,219 771
------- -------
Net cash provided by investing activities ............. 6,173 763
------- -------
Financing Activities:
Factor financing; net .................................. (1,976) (758)
Repayment of notes ..................................... (970) (84)
Purchase of Treasury Stock ............................. (204) --
Bank financing, net .................................... (434) (196)
------- -------
Net cash provided by (used in) financing activities .... (3,584) (1,038)
------- -------
Effects of exchange rate changes on cash ............... (40) --
------- -------
Net increase in cash ................................... 687 50
Cash at beginning of year .............................. 429 151
------- -------
Cash at end of period .................................. $ 1,116 $ 201
======= =======
Supplemental disclosure of cash flows information:
Cash paid for income taxes ........................... $ 10 $ 17
======= =======
Cash paid for interest, excluding factoring fees ..... $ 501 $ 1,265
======= =======
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 6
STAGE II APPAREL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 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 September 30, 1997 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, 1996 and are incorporated herein by reference.
Note 2. Finished Goods Inventory
Finished goods inventories for the interim periods presented were computed
using the gross profit margin method.
Note 3. Discontinued Operations
In July 1996, the Company finalized its plan to liquidate the operations
of Woody Sports Apparel, Inc., its 80% owned Canadian subsidiary ("Woody
Sports"). The operations of Woody Sports have been accounted for as discontinued
operations because the subsidiary dealt with a separate and distinct class of
customers from those of the Company's continuing operations. As of a result, the
Company provided for an estimated loss on disposal of $1.5 million at December
31, 1996, consisting of a provision of $326,000 for operating losses during the
phase-out period and a noncash impairment charge of $1.2 million against
goodwill of the subsidiary. The Company's consolidated statements of operations
for the nine months ended September 30, 1996 have been restated to account for
the operations of the discontinued subsidiary separately from continuing
operations. The Company's consolidated balance sheets have not been
reclassified. Assets and liabilities of Woody Sports included in the
consolidated balance sheets at September 30, 1997 and December 31, 1996 were as
follows:
(In thousands)
Sept. 30, Dec. 31,
1997 1996
--------- --------
(Unaudited)
Current assets ................................ $ -- $ 769
Current liabilities ........................... -- (996)
Noncurrent assets ............................. -- --
Noncurrent liabilities ........................ -- --
5
<PAGE> 7
Note 4. New Credit Agreement
In April 1997, the Company replaced its factoring arrangement (the "Prior
Agreement") with a new facility under a factoring agreement (the "Credit
Agreement") with Milberg Factors Corp. (the "Factor"). In connection with the
refinancing, Stage II repaid $6 million of its borrowings under the Prior
Agreement with repatriated earnings of its Hong Kong subsidiary ("Stage II HK")
and refinanced the balance of net direct borrowings aggregating $1.8 million
under the Credit Agreement.
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 prime.
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, restricted cash and the remaining marketable securities of Stage II
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
to fund the Company's foreign manufacturing orders. The aggregate amount of
letters of credit and borrowings 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 $17 million. The Credit
Agreement is scheduled to expire on April 29,1998, subject to automatic one-year
renewal terms unless terminated at the option of either party.
Note 5. Litigation Settlement
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, Ltd.
("Townsley") and related parties to recoup damages incurred in connection with
their 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 and subsequent termination of
Mr. Goldman as President of the Company and Stage II HK. In September 1996, Mr.
Goldman and his co-defendants filed an answer denying Stage II's claims in the
lawsuit and asserting various counterclaims. During September 1997, the parties
agreed to settle the lawsuit for a payment from the Company of approximately
$1.15 million, partially offset by the relinquishment of 292,135 shares of the
Company's common stock issued as part of the purchase price for the Townsley
assets. The settlement payments were completed by the Company in November 1997.
6
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Stage II Apparel Corp. (the "Company" or "Stage II") designs and
distributes an extensive range of men's and boy's casual apparel and activewear.
The Company markets its apparel to mass merchandisers under nationally
recognized brand names as well as proprietary and private labels. The Company's
products are produced to its specifications by various independent manufacturers
in the Far East, United States, Africa and Europe. Stage II also acts as
purchasing agent for various major retailing customers.
The Company has historically developed its product lines primarily through
the acquisition of exclusive and non-exclusive license rights to nationally
recognized brand names for sales of its apparel in the United States. In 1996,
the Company streamlined its operations to focus on its most popular labels,
relinquishing its license rights for four brand name lines, renewing its
Spalding license and adding a new exclusive license for the Dunlop brand. Stage
II has also increased its emphasis on proprietary and private label sales,
including its own Timber Run label, and has entered into manufacturing
arrangements with Unique Sports Generation ("Unique Sports") for NBA brand
apparel. In April 1997, Stage II expanded its arrangements with Unique Sports to
add NFL brand sportswear. Sales of the Company's new product lines are not
expected to add significant revenues until the fourth quarter of 1997.
In general, the Company's established brand name apparel sells at a higher
price and with greater gross profit margins than its comparable non-branded
apparel. These advantages are partially offset by royalty and advertising
expenses incurred in accordance with the Company's license agreements for its
brand name apparel. These expenses are included in selling, general and
administrative ("SG&A") expenses. The Company's net losses in 1996 and in the
first half of 1997 were primarily caused by difficulties in reducing fixed SG&A
costs, maintaining strong profit margins in the face of intensified competition
and overall weakness in the retail apparel market. As part of its strategy for
returning to profitability, in addition to consolidating its licensing
arrangements, the Company has systematically reduced the scope of its operations
to concentrate on its most successful products, eliminated highly promotional
merchandise, trimmed SG&A expenses, added new commission sales personnel,
realigned management to focus on its core product lines and expanded into more
promising manufacturing agreements.
Recent Developments
Discontinued Operations. 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 Stage II acquired 80% of the common
stock and all the preferred stock in 1993 for approximately $1.6 million. During
the third quarter of 1996, the Company finalized its plan to liquidate the
operations of Woody Sports and provided for a loss on disposal of $1.5 million,
comprised of a provision of $326,000 for operating losses during the phase-out
period and a non cash impairment charge of $1.1 million against goodwill of the
subsidiary and .1 million against prepaid salaries. The Company's consolidated
statements of operations for the quarter ended September 30, 1996 have been
restated to account for the operations of Woody Sports as discontinued
operations in view of the Company's decision to dispose of its interest in the
subsidiary. The liquidation of Woody Sports was completed in the third quarter
of 1997.
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 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 exceed their
fair value and may not be recoverable. In July 1996, as part of the plan of
liquidation for Woody Sports, the Company took a noncash impairment charge of
$1.2 million against the assets of the Canadian subsidiary. See "Discontinued
Operations" above.
7
<PAGE> 9
Litigation Settlement. In April 1996, the Company and its Hong Kong
subsidiary "(Stage II HK") commenced a lawsuit in the Supreme Court of the State
of New York against Stuart Goldman, Townsley, Ltd. ("Townsley") and related
parties to recoup damages incurred in connection with their 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 and subsequent termination of Mr. Goldman as President of the
Company and Stage II HK. In September 1996, Mr. Goldman and his co-defendants
filed an answer denying Stage II's claims in the lawsuit and asserting various
counterclaims. During September 1997, the parties agreed to settle the lawsuit
for a payment from the Company of approximately $1.15 million, partially offset
by the relinquishment of 292,135 shares of the Company's common stock issued as
part of the purchase price for the Townsley assets. The settlement payments were
completed by the Company in November 1997.
Results of Operations
Seasonality. Stage II experiences some seasonal business fluctuations due
primarily to seasonal buying patterns for its product mix of casual apparel and
activewear. While sales of the Company's products are made throughout the year,
the largest sales volume has historically occurred in the third quarter. The
following table reflects these quarterly fluctuations, which have been restated
to account for the operations of Woody Sports as discontinued operations and
should not be construed as indicative of future net sales.
Quarterly Net Sales
(In thousands)
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -------
1997 ............ $ 4,067 $ 2,348 $ 5,718 -- --
1996 ............ 8,437 5,693 10,397 8,901 33,428
1995 ............ 14,015 12,233 20,387 13,542 60,177
1994 ............ 13,150 10,040 20,124 16,246 59,560
Quarter Ended September 30, 1997 and 1996. Net sales from continuing
operations of $5.7 million for the third quarter of 1997 decreased by 45.0% from
$10.4 million in the corresponding quarter of 1996. The decrease primarily
reflects the termination of certain brand name apparel licenses in 1996 and a
planned reduction in the scope of the Company's operations. Approximately $3.9
million or 84.0% of the sales decline was attributable to the relinquishment of
four brand name apparel licenses in 1996. Sales of replacement brand name and
proprietary lines began to offset the decline in the third quarter of 1997.
Cost of goods sold as a percentage of net sales decreased to 77.4% in the
third quarter of 1997 compared to 79.6% in the same quarter last year. The
decrease reflects higher gross profit margins on the Company's revamped apparel
lines.
Commission and other income decreased by $37,000 or 10.4% during the third
quarter of 1997 compared to the corresponding prior quarter, reflecting a
decrease in the Company's sales agency business.
8
<PAGE> 10
SG&A expenses for the third quarter of 1997 decreased by 32.1% to $1.4
million compared to $2.1 million for the third quarter of 1996, primarily from a
reduction in variable costs associated with lower sales volumes and a cost
reduction plan adopted in the third quarter of 1996 as part of the Company's
redirection of its business. SG&A expenses as a percentage of net sales
increased to 25.1% for the third quarter of 1997 compared to 20.4% in the
corresponding prior quarter, reflecting a faster decline in sales than the
Company's ability to reduce fixed SG&A expenses.
Interest and factoring expenses aggregated $321,000 or 5.6% of sales in
the third quarter of 1997 compared to $622,000 or 6.0% of sales in the
corresponding quarter last year, representing a decrease of $301,000 or 48.4%.
The decrease reflects lower borrowing levels and interest rates.
The Company realized a $205,000 gain from the extinguishment of debt
relating to the Townsley settlement in the third quarter of 1997. See "Recent
Developments-Litigation Settlement."
The Company realized net income from continuing operations in the third
quarters of 1997 and 1996 aggregating $133,000 and $12,000, respectively,
reflecting the foregoing trends. In the third quarter of 1997, the Company's net
income was $.03 per share compared to $.00 per share for the same quarter last
year.
Nine Months Ended September 30, 1997 and 1996. Net sales of $12.1 million
for the first nine months of 1997 decreased by 50.5% from $24.5 million in the
corresponding period last year. The decrease reflects 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 in the first nine months of
1997 and 1996 remained constant at 81.3%.
SG&A expenses for the first nine months of 1997 decreased by 32.2% to $4.9
million compared to $7.2 million for the same period of 1996, primarily from a
reduction in variable costs associated with lower sales volumes. SG&A expenses
as a percentage of sales increased to 40.0% for the first nine months of 1997
compared to 29.2 % in the same period last year, reflecting a faster decline in
sales than the Company's ability to reduce fixed SG&A expenses.
Interest and factoring expenses decreased by $1.2 million or 64.2% for the
first nine months of 1997 compared to the same period of 1996, reflecting a
reduction of current debt.
The Company realized a $205,000 gain from the extinguishment of debt
relating to the Townsley settlement in the third quarter of 1997."See Recent
Developments-Litigation Settlement."
The Company recognized a loss from continuing operations of $2.6 million
before income taxes in the first nine months of 1997, compared to a loss before
taxes of $3.2 million for the corresponding period last year, reflecting the
foregoing trends. The loss for the prior period included an impairment charge of
$125,000 against the carrying value of prepaid salaries under FAS 121. See
"Recent Developments -- Asset impairment under FAS 121" above. After accounting
for the disposal of the Company's discontinued subsidiary, the loss was $.55 per
share for the current period versus $1.18 per share for the first nine months of
1996.
The results of operations for the quarter and nine months ended September
30, 1997 are not necessarily indicative of operating results to be expected for
the full year.
9
<PAGE> 11
Liquidity and Capital Resources
Liquidity. Net cash used by Stage II's operating activities during the
first nine months of 1997 aggregated $1.9 million The Company's cash position
during the period was increased by Factor advances of 4.0 million and the sale
of marketable securities held by Stage II HK netting $6.2 million. During the
period, $6.0 million was repaid to the Company's factor and $434,000 was repaid
on bank borrowings by Woody Sports.
Capital Resources. The Company had retained earnings of $9.3 million at
December 31, 1996, including unremitted earnings of Stage II HK in the amount of
$11.7 million, of which $8.6 million was invested in marketable fixed-income
securities. Stage II HK has paid only local (i.e., foreign) taxes associated
with its unremitted earnings, which are subject to the current U.S. tax rate
(less the amount previously paid in local taxes) when repatriated and made
available for domestic use.
During the nine months of 1997, the Company repatriated $6.2 million of
Stage II HK's retained earnings to reduce short term debt. The repatriation did
not trigger domestic taxes due to the availability of net operating losses to
offset the taxable income created, although a loss of $285,000 was incurred from
the related sale of securities.
During the first four months of 1997, Stage II maintained a factoring
agreement with Republic Factors Corp. (the "Prior Facility"). In April 1997, the
Company replaced the Prior Facility with a new facility under a factoring
agreement (the "Credit Agreement") with Milberg Factors Corp. (the "Factor"). In
connection with the refinancing, Stage II repaid $6 million of its borrowings
under the Prior Agreement with repatriated earnings of Stage II HK and
refinanced the balance of net direct borrowings aggregating $1.8 million under
the Credit Agreement.
The Credit Agreement provides a revolving credit facility for short term
borrowings by Stage II at a floating interest rate equal to 1/2% above the prime
rate. 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, restricted cash and the marketable securities of Stage
II 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
to fund the Company's foreign manufacturing orders. The aggregate amount of
letters of credit and borrowings 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 $17 million. The Credit
Agreement is scheduled to expire on December 31, 1997, subject to automatic
one-year renewal terms unless terminated at the option of either party.
The Company believes that its internally generated funds and borrowings
available under its 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 its operations in the
future. As of September 30, 1997, Stage II had no material capital expenditure
requirements.
10
<PAGE> 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
During the third quarter of 1997, the Company entered into settlement
agreement for a pending lawsuit involving its Townsley acquisition. See
"Management's Discussion and Analysis of Financial Position and Results of
Operations--Recent Developments- Litigation Settlement."
Item 6. Exhibits and Reports on Form 8 - K.
(a) Exhibits.
None
(b) Reports on Form 8-K
On July 31, 1997, the Company filed a current report on form 8-K in
connection with a change in its certifying accountants.
11
<PAGE> 13
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: November 10, 1997 By: /s/ Jack Clark
--------------------------------
Jack Clark
Chairman of the Board
(Duly Authorized Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 454
<SECURITIES> 3,292
<RECEIVABLES> 823
<ALLOWANCES> 248
<INVENTORY> 4,531
<CURRENT-ASSETS> 7,200
<PP&E> 1,456
<DEPRECIATION> 934
<TOTAL-ASSETS> 19,226
<CURRENT-LIABILITIES> 7,167
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 12,009
<TOTAL-LIABILITY-AND-EQUITY> 19,226
<SALES> 12,133
<TOTAL-REVENUES> 13,352
<CGS> 9,861
<TOTAL-COSTS> 15,399
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 679
<INCOME-PRETAX> (2,827)
<INCOME-TAX> (9)
<INCOME-CONTINUING> (2,818)
<DISCONTINUED> 290
<EXTRAORDINARY> 205
<CHANGES> 0
<NET-INCOME> 2,323
<EPS-PRIMARY> (.55)
<EPS-DILUTED> 0
</TABLE>
