<PAGE>
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 June 30, 1998 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.)
1385 Broadway
New York, New York 10018
(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 July 31, 1998
Common Stock 3,903,267
<PAGE>
STAGE II APPAREL CORP.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
<S> <C>
Condensed Consolidated Balance Sheets - June 30, 1998 (unaudited) and December 31, 1997..................... 2
Condensed Consolidated Statements of Operations - Three Months and Six Months Ended
June 30, 1998 and 1997 (unaudited)....................................................................... 3
Condensed Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1998 and 1997 (unaudited)....................................................................... 4
Notes to Condensed Consolidated Financial Statements........................................................ 5
Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 6
Part II. Other Information................................................................................. 10
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
STAGE II APPAREL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1998 1997
---------- ----------
ASSETS:
<S> <C> <C>
Cash and cash equivalents.......................................................... $ 1,194 $ 641
Restricted cash.................................................................... --- 679
Accounts receivable................................................................ 636 496
Finished goods inventory........................................................... 4,462 2,496
Prepaid expenses................................................................... 251 214
Prepaid income taxes and refunds receivable........................................ 30 30
--------- ---------
Total current assets............................................................. 6,573 4,556
Property and equipment, at cost, less accumulated depreciation..................... 436 500
Marketable securities.............................................................. 3,000 3,325
Goodwill, less accumulated amortization and impairment of $7,719 at
June 30, 1998 and $7,654 at December 31, 1997, respectively...................... 1,895 1,960
Other assets...................................................................... 736 837
--------- ---------
TOTAL ASSETS..................................................................... $ 12,639 $ 11,178
--------- ---------
--------- ---------
LIABILITIES:
Due to factor...................................................................... $ 6,972 $ 4,650
Accounts payable................................................................... 1,495 850
Accrued royalties.................................................................. 40 78
Other current liabilities.......................................................... 120 273
--------- ---------
Total current liabilities........................................................ 8,626 5,851
Long term liabilities.............................................................. -- --
--------- ---------
TOTAL LIABILITIES................................................................ 8,626 5,851
--------- ---------
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 3,903 shares outstanding at June 30, 1998 and December 31, 1997.............. 50 50
Additional paid-in capital......................................................... 7,502 7,502
Retained earnings (deficit)........................................................ (1,225) 97
--------- ---------
6,327 7,649
Less treasury stock, at cost; 1,089 shares at June 30, 1998 and
December 31, 1997................................................................ (2,302) (2,302)
Allowance for decline in market value of securities available for sale............. (12) (20)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY....................................................... 4,013 5,327
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................................... $ 12,639 $ 11,178
--------- ---------
--------- ---------
</TABLE>
See Notes to Condensed Consolidated 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,
------------------------ --------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales................................................... $ 1,653 $ 2,348 $ 3,508 $ 6,415
Cost of goods sold.......................................... 1,219 2,048 2,656 5,438
--------- --------- --------- ---------
Gross profit................................................ 434 300 852 977
Commission and other income................................. 66 110 106 195
--------- --------- --------- ---------
500 410 958 1,172
Selling, general and administrative expenses................ 944 1,763 1,952 3,422
Loss on sale of marketable securities....................... -- 252 -- 285
--------- --------- --------- ---------
Operating loss.............................................. (444) (1,605) (994) (2,535)
Other income (expenses):
Interest income.......................................... 37 61 109 138
Interest and factoring expenses.......................... (225) (134) (438) (358)
--------- --------- --------- ---------
Loss from continuing operations before
income tax benefit....................................... (632) (1,678) (1,323) (2,755)
Income taxes (benefit)...................................... -- -- -- (9)
--------- --------- --------- ----------
Loss from continuing operations............................. (632) (1,678) (1,323) (2,746)
--------- --------- --------- ---------
Discontinued operations:
Gain on disposal of discontinued subsidiary.............. -- 290 -- 290
--------- --------- --------- ---------
Net loss.................................................... $ (632) $ (1,388) $ (1,323) $ (2,456)
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic and dilutive net loss per common share:
Loss from continuing operations.......................... (.16) (.40) (.34) (.65)
Gain from discontinued operations........................ -- .07 -- .07
--------- --------- --------- ---------
(.16) $ (.33) $ (.34) $ (.58)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares outstanding.................. 3,903 4,196 3,903 4,196
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
STAGE II APPAREL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net cash used in operating activities................................................... $ (2,029) $ (3,884)
Investing Activities:
Purchase and sale of property and equipment, net..................................... -- (5)
Sale or redemption of available for sale marketable securities....................... 260 6,219
--------- ---------
Net cash provided by (used in) investing activities..................................... 260 6,214
--------- ---------
Financing Activities:
Factor financing, net................................................................ 2,322 (1,894)
Repayment of notes................................................................... -- (170)
Bank financing, net.................................................................. -- (434)
--------- ---------
Net cash provided by (used in) financing activities..................................... 2,322 (2,498)
--------- ---------
Effects of exchange rate changes on cash................................................ -- (46)
--------- ---------
Net increase (decrease) in cash......................................................... 553 (214)
Cash at beginning of year............................................................... 641 429
--------- ---------
Cash at end of period................................................................... $ 1,194 $ 215
--------- ---------
--------- ---------
Supplemental disclosure of cash flows information:
Cash paid for income taxes........................................................... $ 2 $ 10
--------- ---------
--------- ---------
Cash paid for interest, excluding factoring fees..................................... $ 284 $ 367
--------- ---------
--------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
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 June 30, 1998 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, 1997 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 method.
Note 3. Change of Control -- On May 11, 1998, the Company consummated
the transactions contemplated by its Stock Purchase Agreement dated as of
February 26, 1998 with three of its principal shareholders (the "Founders") and
Richard Siskind (the "Purchase Agreement"). Pursuant to the Purchase Agreement,
Mr. Siskind acquired approximately 1.9 million shares (the "Control Shares") of
the Company's common stock from the Founders in consideration for their release
from guarantees of the Company's indebtedness to its factor and their receipt of
options to reacquire a total of 1.5 million Control Shares (the "Founder
Options"). The Control Shares represent 48.7% of the Company's common stock
outstanding as of the date of the closing. The transactions contemplated by the
Purchase Agreement (the "Change of Control Transactions") also include the
employment of Mr. Siskind as CEO of the Company and the reconstitution of the
Company's board of directors with his designees. In July 1998, Founder Options
for 1.35 million Control Shares were acquired from the Founders by Jon Siskind,
an officer and director of the Company.
Note 4. New Credit Facility -- In connection with the Change of Control
Transactions, the Company obtained a new factoring and credit facility arranged
by Mr. Siskind with The CIT Group/Commercial Services, Inc. (the "Credit
Facility") to replace its prior facility. The Credit Facility provides for the
factor to purchase the Company's accounts receivable that it has preapproved,
without recourse except in cases of 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
purchased from the Company. The factor receives a commission under the Credit
Agreement in an amount less than 1% of the net receivables it purchases. The
Credit Facility also provides for the issuance of letters of credit to fund the
Company's foreign manufacturing orders and for short term borrowings at a
floating interest rate equal to 1/2% above the prime rate. The Company's
obligations under the Credit Agreement are payable upon demand and secured by
its inventory, accounts receivable and marketable securities. The aggregate
amount of letters of credit and borrowings available under the Credit Facility
are determined from time to time by the factor based upon the Company's
financing requirements and financial performance.
Note 5. Office Relocation -- In July 1998, the Company obtained a
cancellation of its New York City office lease, which covered 10,800 square feet
for a term through 2006 at an average annual rent of $343,000 plus electricity,
taxes and expense escalations. The lease cancellation was effective as of July
15, 1998, subject to payment of a $325,000 cancellation fee in four installments
through October 1, 1998. In connection with the cancellation, the Company
relocated its administrative and sales offices to 1385 Broadway, New York, New
York, where it obtained leases for 3,000 square feet through 2003 at a total
annual cost of approximately $80,000, representing an annual savings to the
Company over $330,000.
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
distributes an extensive range of men's and boy's casual apparel and activewear.
The Company markets its apparel primarily to sporting goods and specialty
stores, mass merchandisers and wholesale membership clubs 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 Asia, 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.
During the last three years, the Company streamlined its operations to focus on
its most popular labels, relinquishing its license rights for five brand name
lines, liquidating its Canadian and Hong Kong subsidiaries and discontinuing its
arrangements with a licensee of NBA and NFL brand sportswear. The relinquished
lines were replaced with a new exclusive license for the Dunlop brand late in
1996. Stage II has also increased its emphasis on proprietary and private label
sales, including its own Timber Run, Pro Tour and Main Event labels.
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 costs are included in selling,
general and administrative ("SG&A") expenses. Difficulties in reducing SG&A
expenses and maintaining strong gross profit margins in the face of intensified
competition, consolidation and overall weakness in the retail apparel market
contributed to the Company's net losses in 1997, 1996 and 1995 aggregating $9.2
million, $7.0 million and $3.3 million, respectively. These losses included
noncash charges for asset writedowns aggregating $5.3 million in 1997 and $1.7
million in 1996. Although the Company sustained an additional loss of $1.0
million in the first half of 1998, it was less than half the loss incurred in
the first half of 1997.
Recent Developments
Recurring Losses. Stage II has financed its losses over the last three
years with borrowings under its credit facility that have been reduced from time
to time with repatriated earnings of its Hong Kong subsidiary aggregating $9.4
million in 1997, of which $6.0 million was used to repay short term debt, and
$3.4 million in 1996, all of which was used for debt reduction. As part of its
strategy for returning to profitability, in addition to consolidating its
licensing arrangements, reducing the scope of its operations to concentrate on
its most successful products and trimming overhead expenses, the Company has
added new commission sales personnel and realigned management to focus on its
core product lines. In addition to these efforts, the Company has been seeking
to implement strategic changes to reverse the decline in its business. These
efforts have been undertaken with a view in increasing shareholder values by
bringing in a new management team, cutting expenses and adding new apparel
licenses or business lines to the Company's reduced asset base.
Change of Control. To implement these objectives, Stage II entered
into a stock purchase agreement (the "Purchase Agreement") in February 1998
with three of its founders (the "Founders") and Richard Siskind, the
principal shareholder and CEO of several companies engaged in various
segments of the apparel industry. The transactions contemplated by the
Purchase Agreement (the "Change of Control Transactions") were consummated on
May 11, 1998 and included the sale to Mr. Siskind of approximately 1.9
million shares of the Company's common stock ("Common Stock") held by the
Founders (the "Control Shares") in consideration for their release from
guarantees of the Company's indebtedness to its factor and their receipt of
options to reacquire a total of 1.5 million Control Shares from Mr. Siskind
at exercise prices ranging from $.50 to $1.50 per share (the "Founders
Options"). The Control Shares represent 48.7% of the Common
6
<PAGE>
Stock outstanding as of the date of this Report. In July 1998, Founder
Options for 1.35 million Control Shares were acquired from the Founders by Jon
Siskind, an officer and director of the Company.
Other Change of Control Transactions. In addition to the sale of the
Control Shares, the Change of Control Transactions included (i) the Company's
issuance to Richard Siskind of options to purchase up to 1.5 million shares of
Common Stock on the same terms as the Founders Options, exercisable only to the
extent the Founders Options are exercised, (ii) the Company's issuance to Mr.
Siskind of options to purchase up to 900,000 shares of Common Stock at an
exercise price of $.75 per share, (iii) the reconstitution of the Company's
board of directors with designees of Mr. Siskind, (iv) the addition of a new
management team headed by Mr. Siskind and (v) the arrangement by Mr. Siskind of
a new credit facility for the Company. See "Liquidity and Capital Resources."
All of the options issued to Mr. Siskind were approved by the shareholders of
the Company at its 1998 annual meeting.
Office Relocation. In July 1998, the Company obtained a cancellation of
its office lease at 350 Fifth Avenue in New York City and relocated its
administrative and sales offices to 1385 Broadway, New York, New York. The
cancelled lease covered 10,800 square feet for a term through 2006 at an average
annual rent of $343,000 plus electricity, taxes and expense escalations. In the
absence of the cancellation, the Company's estimated future obligations under
the lease would have aggregated approximately $4 million. The lease cancellation
was effective as of July 15, 1998, subject to payment of a $325,000 cancellation
fee in four installments through October 1, 1998. The Company's new lease
arrangements cover 3,000 square feet through 2003 at a total annual cost of
approximately $80,000, representing an annual savings to the Company over
$330,000.
New Adolfo License. In August 1998, Stage II added an exclusive Adolfo
license for men's sportswear and activewear. The Company expects to allocate
substantial resources to build the new line and believes the favorable terms of
the license, coupled with the recent addition of a new sales manager, will
contribute to the planned rebuilding of its core business.
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 should not be
construed as indicative of future net sales.
Quarterly Net Sales
(In thousands)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
--------- --------- --------- --------- ---------
<C> <C> <C> <C> <C> <C>
1998............................. $ 1,855 $ 1,653 $ -- $ -- $ --
1997............................. 4,067 2,348 5,718 4,414 16,547
1996............................. 8,437 5,693 10,397 8,901 33,428
</TABLE>
Quarters Ended June 30, 1998 and 1997. Net sales of $1.7 million for
the second quarter of 1998 decreased by 29.6% from $2.3 million in the
corresponding quarter of 1997. The decrease primarily reflects the termination
of unprofitable apparel divisions as part of the planned reduction in the scope
of operations, as well as the elimination of lower margin customer accounts with
a longer term view of strengthening gross profits. The decline in net sales for
the second quarter of 1998 was also influenced by temporary disruptions in the
Company's factoring arrangements in connection with the Change of Control
Transactions. See "Recent Developments."
7
<PAGE>
Cost of goods sold as a percentage of sales decreased to 73.7% in the
second quarter of 1998 compared to 87.2% in the same quarter last year. The
decrease reflects higher gross profit margins on the Company's new apparel
lines, greater concentration on core customer accounts and tighter inventory
controls.
Commission and other income decreased by $44,000 or 40.0% during the
second quarter of 1998 compared to the corresponding prior quarter, reflecting a
reduction in the Company's sales agency business.
SG&A expenses of $.9 million for the second quarter of 1998 decreased
by 46.5% compared to $1.8 million for the second quarter of 1997, primarily from
a reduction in variable costs associated with lower sales volumes and a cost
reduction plan adopted as part of the Company's redirection of its business.
SG&A expenses as a percentage of sales decreased to 57.1% for the second quarter
of 1998 compared to 75.1% in the corresponding prior quarter, reflecting the
Company's ability to reduce fixed SG&A expenses at a greater rate than the
decline in sales. As a result of its office relocation in July 1998 and other
cost cutting measures adopted by new management following the Change of Control
Transactions, the Company anticipates a continuation in this trend for the
balance of the year.
Interest and factoring expenses, net of interest income, aggregated
$188,000 or 11.4% of sales in the second quarter of 1998 compared to $73,000 or
3.1% of sales in the corresponding quarter last year. The increase reflects
higher borrowing levels and nonrecurring refinancing costs. See "Liquidity and
Capital Resources" below.
The Company recognized net losses of $.6 million or $.16 per share
based on 3,903,000 average common shares outstanding in the second quarter of
1998 and $1.4 million or $.33 per share based on 4,196,000 average common shares
outstanding in the corresponding quarter of 1997, reflecting the foregoing
trends.
Six Months Ended June 30, 1998 and 1997. Net sales of $3.5 million for
the six months ended June 30, 1998 decreased by 45.3% from $6.4 million in the
corresponding period in 1997. The decrease primarily reflects the termination of
unprofitable apparel divisions as part of the planned reduction in the scope of
operations, as well as the elimination of lower margin customer accounts with a
longer term view of strengthening gross profits. The decline in net sales for
the second quarter of 1998 was also influenced by temporary disruptions in the
Company's factoring arrangements in connection with the Change of Control
Transactions. See "Recent Developments."
Cost of goods sold as a percentage of sales decreased to 75.7% in the
first six months of 1998 compared to 84.8% in the same period last year. The
decrease reflects higher gross profit margins on the Company's new apparel
lines, greater concentration on core customer accounts and tighter inventory
controls.
Commission and other income decreased by $89,000 or 45.6% during the
first half of 1998 compared to the corresponding prior period, reflecting a
decline in the Company's sales agency business.
SG&A expenses of $2.0 million for the first six months of 1998
decreased by 43.0% compared to $3.4 million for the corresponding period in
1997, primarily from a reduction in variable costs associated with lower sales
volumes and a cost reduction plan adopted as part of the Company's redirection
of its business. SG&A expenses as a percentage of sales increased to 55.6 for
the first half of 1998 compared to 53.3% in the corresponding prior period,
reflecting a faster decline in sales than the Company's ability to reduce fixed
SG&A expenses during the first quarter of 1998, partially offset by a reversal
in this trend during the second quarter this year.
Interest and factoring expenses, net of interest income, aggregated
$329,000 or 9.4% of sales in the first half of 1998 compared to $220,000 or 3.4%
of sales in the corresponding quarter last year. The increase reflects higher
borrowing levels and nonrecurring refinancing costs. See "Liquidity and Capital
Resources" below.
The Company recognized net losses of $1.3 million or $.34 per share
based on 3,903,000 average common shares outstanding in the first half of 1998
and $2.5 million or $.58 per share based on 4,196,000 average common shares
outstanding in the corresponding period in 1997, reflecting the foregoing
trends.
8
<PAGE>
The results of operations for the quarter and six months ended June 30,
1998 are not necessarily indicative of operating results to be expected for the
full year.
Liquidity and Capital Resources
Liquidity. Net cash used by Stage II's operating activities during the
first six months of 1998 aggregated $2.0 million. Primarily as a result of
factor financing aggregating $2.3 million, the Company's cash position increased
46.3% from $.6 million at December 31, 1997 to $1.2 million at June 30, 1998.
Capital Resources. During 1997, the Company repatriated all of its Hong
Kong subsidiary's cash and marketable securities aggregating $9.3 million, of
which $6.0 million was used 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.
Prior to the Change of Control Transactions, Stage II maintained a
credit facility (the "Prior Credit Facility") under a factoring agreement with
Milberg Factors Corp. The Prior Credit Facility provided for the factor to
purchase the Company's accounts receivable that it had preapproved, without
recourse except in cases of merchandise returns or billing or merchandise
disputes in the normal course of business. In addition, the factor was
responsible for the accounting and collection of all accounts receivable sold to
it by the Company. The factor received a commission under the Prior Credit
Facility in an amount less than 1% of the net receivables it purchased. The
Prior Credit Facility also provided for the issuance of letters of credit to
fund the Company's foreign manufacturing orders and for short term borrowings at
a floating interest rate equal to 1/2% above the prime rate. The Company's
obligations under the Prior Credit Facility were payable on demand and secured
by its inventory, accounts receivable and marketable securities. The aggregate
amount of letters of credit and borrowings available under the Prior Credit
Facility were determined from time to time by the factor based upon the
Company's financing requirements and financial performance.
In connection with the Change of Control Transactions, Stage II
obtained a new factoring and credit facility arranged by Mr. Siskind with The
CIT Group/Commercial Services, Inc. (the "Credit Facility") to replace the Prior
Credit Facility. See "Recent Developments." The agreements covering the Credit
Facility provide for substantially the same terms and conditions as the Prior
Credit Facility. Those agreements may be terminated without penalty by the
Company on May 31, 2000 or the end of any subsequent contract year upon 60 days
notice. As of June 30, 1998, the Company's net direct borrowings under the
Credit Facility aggregated $7.0 million.
The Company believes that its internally generated funds and borrowings
available under its Credit Facility 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 June 30, 1998, the Company had no material capital expenditure
requirements.
Forward Looking Statements
This Report includes forward looking statements within the meaning of
Section 21E of the Securities Exchange Act relating to matters such as
anticipated operating and financial performance, business prospects,
developments and results of the Company. Actual performance, prospects,
developments and results may differ materially from anticipated results due to
economic conditions and other risks, uncertainties and circumstances partly or
totally outside the control of the Company, including risks of inflation,
fluctuations in market demand for the Company's products and changes in the
level of future expenses for the manufacturing and distribution of those
products. Words such as "anticipated," "expect," "intend" and similar
expressions are intended to identify forward looking statements, all of which
are subject to these risks and uncertainties.
9
<PAGE>
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On June 26, 1998, the Company held its annual meeting of shareholders.
All of the incumbent Class I directors listed in the Company's proxy statement
for the meeting were reelected. The number of votes cast for and against each
nominee are set forth below.
<TABLE>
<CAPTION>
Votes
Votes For Withheld
---------- --------
<S> <C> <C>
Richard Siskind 3,728,502 12,050
Robert Greenberg 3,728,502 12,050
Beverly Roseman 3,728,502 12,050
</TABLE>
The shareholders also approved the Company's 1998 Nonqualified Stock
Option Plans at the annual meeting. The number of votes cast on this proposal
are set forth below.
<TABLE>
<CAPTION>
Votes Votes
Votes For Withheld Abstaining
---------- --------- ----------
<S> <C> <C> <C>
2,457,699 68,500 15,600
</TABLE>
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 11, 1998.
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 12, 1998 By: /s/ Michael Hanrahan
---------------------
Michael Hanrahan
Chief Financial Officer
(Duly Authorized Officer)
(Principal Financial Officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,194
<SECURITIES> 3,000
<RECEIVABLES> 636
<ALLOWANCES> 199
<INVENTORY> 4,462
<CURRENT-ASSETS> 6,573
<PP&E> 436
<DEPRECIATION> 954
<TOTAL-ASSETS> 12,639
<CURRENT-LIABILITIES> 8,626
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 3,963
<TOTAL-LIABILITY-AND-EQUITY> 12,639
<SALES> 3,508
<TOTAL-REVENUES> 3,614
<CGS> 2,656
<TOTAL-COSTS> 4,608
<OTHER-EXPENSES> 438
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 284
<INCOME-PRETAX> (1,323)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,323)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,323)
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
