<PAGE>
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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, 1999 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) 840-0880
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, 1999
Common Stock 4,109,267
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<PAGE>
STAGE II APPAREL CORP.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Condensed Consolidated Balance Sheets - June 30, 1999 (unaudited) and December 31, 1998 ................. 2
Condensed Consolidated Statements of Operations - Three Months and Six Months Ended
June 30, 1999 and 1998 (unaudited).................................................................... 3
Consolidated Statements of Comprehensive Income (Loss) -- Three Months and Six Months Ended
June 30, 1999 and 1998 (unaudited).................................................................... 4
Condensed Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1999 and 1998 (unaudited).................................................................... 5
Notes to Condensed Consolidated Financial Statements .................................................... 6
Management's Discussion and Analysis of Financial Condition and Results of Operations ................... 7
PART II. OTHER INFORMATION ............................................................................. 11
</TABLE>
1
<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,
1999 1998
--------- ---------
ASSETS: (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................. $ 839 $ 992
Accounts receivable ....................................................... 363 103
Finished goods inventory .................................................. 2,645 2,855
Prepaid expenses .......................................................... 138 54
------- -------
Total current assets .................................................... 3,985 4,004
Property and equipment, at cost, less accumulated depreciation .............. 55 86
Marketable securities ....................................................... 391 388
Goodwill, less accumulated amortization and impairment of $7,904 at
June 30, 1999 and $7,821 at December 31, 1998, respectively ............... 1,710 1,793
Other assets ................................................................ 798 529
------- -------
TOTAL ASSETS .............................................................. $ 6,939 $ 6,800
------- -------
------- -------
LIABILITIES:
Current liabilities:
Due to factor ............................................................. $ 2,053 $ 2,331
Accounts payable .......................................................... 944 1,031
Due to affiliate .......................................................... 175 26
Accrued royalties ......................................................... 50 80
Other current liabilities ................................................. 367 301
------- -------
Total current liabilities ............................................... 3,589 3,769
------- -------
TOTAL LIABILITIES ......................................................... 3,589 3,769
------- -------
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;
4,110 shares outstanding at June 30, 1999 and 3,904 shares outstanding at
December 31, 1998 ........................................................ 50 50
Additional paid-in capital .................................................. 7,357 7,502
Accumulated deficit ......................................................... (2,183) (2,221)
------- -------
5,224 5,331
Less treasury stock, at cost; 889 shares at June 30, 1999 and 1,089 shares at
December 31, 1998 ......................................................... (1,879) (2,302)
Accumulated other comprehensive income ...................................... 5 2
------- -------
TOTAL SHAREHOLDERS' EQUITY ................................................ 3,350 3,031
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................... $ 6,939 $ 6,800
------- -------
------- -------
</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,
------------------------ -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales................................................. $ 2,270 $ 1,653 3,861 $ 3,508
Cost of goods sold........................................ 1,634 1,219 2,710 2,656
------- --------- --------- ---------
Gross profit.............................................. 636 434 1,151 852
Commission and other income............................... 5 66 34 106
------- --------- --------- ---------
641 500 1,185 958
Selling, general and administrative expenses.............. 506 944 938 1,952
------- --------- --------- ---------
Operating income (loss)................................... 135 (444) 247 (994)
Other income (expenses):
Interest income.......................................... 15 37 30 109
Interest and factoring expenses ......................... (123) (225) (239) (438)
------- --------- --------- ---------
Net income (loss)......................................... $ 27 $ (632) $ 38 $ (1,323)
------- --------- --------- ---------
------- --------- --------- ---------
Earnings (loss) per common share:
Basic ................................................... $ .01 $ (.16) $ .01 $ (.34)
------- --------- --------- ---------
------- --------- --------- ---------
Diluted ................................................. $ .00 $ (16) $ .01 $ (.34)
------- --------- --------- ---------
------- --------- --------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
STAGE II APPAREL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss)......................................... $ 27 $ (692) $ 38 $ (1,323)
Other comprehensive income (loss):
Unrealized gains (losses) on marketable securities,
net of taxes......................................... 3 23 3 8
--------- --------- --------- ---------
Comprehensive income (loss) .............................. $ 30 $ (669) $ 41 $ (1,315)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
STAGE II APPAREL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities................................... $ 125 $ (2,029)
INVESTING ACTIVITIES:
Sale or redemption of available for sale marketable securities .................... --- 260
--------- ---------
Net cash provided by investing activities............................................. --- 260
--------- ---------
FINANCING ACTIVITIES:
Factor financing, net.............................................................. (278) 2,322
---------- ----------
Net cash provided by (used in) financing activities................................... (278) 2,322
---------- ----------
Net increase (decrease) in cash and cash equivalents.................................. (153) 553
Cash and cash equivalents at beginning of year........................................ 992 641
--------- ----------
Cash and cash equivalents at end of period............................................ $ 839 $ 1,194
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes ........................................................ $ 2 $ 2
----------- ----------
----------- ----------
Cash paid for interest, excluding factoring fees $................................. 168 $ 284
----------- ----------
----------- ----------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<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, 1999 and its
results of operations, comprehensive income (loss) 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, 1998 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. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, REPORTING COMPREHENSIVE INCOME ("FAS 130").
FAS 130 establishes standards for reporting and display of comprehensive income
and its components in financial statements. Appropriate items in the
accompanying consolidated financial statements for the quarter and six months
ended June 30, 1998 have been reclassified to conform to the provisions of FAS
130.
NOTE 4. EARNINGS (LOSS) PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128, EARNINGS PER SHARE ("FAS 128"). Under FAS 128, companies that are publicly
held or have complex capital structures are required to present basic and
diluted earnings per share ("EPS") on the face of the income statement. FAS 128
replaces the presentation of primary EPS with a presentation of basic EPS and,
if applicable, diluted EPS. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted and the resulting additional shares are dilutive
because their inclusion decreases the amount of EPS.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
General. Stage II Apparel Corp. (the "Company" or "Stage II") designs
and distributes an extensive range of casual apparel, activewear and collection
sportswear for men and boys. The Company markets its apparel to sporting goods,
specialty and department 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 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 six 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 have been
replaced with a new exclusive license for the ADOLFO brand in 1998 and the
STANLEY BLACKER brand in August 1999. In addition, the Company has increased
emphasis on its own proprietary labels, primarily TIMBER RUN and, commencing in
1999, the CROSS COLOURS trademark. See "Recent Developments" below.
In general, the Company's licensed brand name apparel sells at a higher
price and with greater gross profit margins than comparable non-branded apparel.
These advantages are partially offset by royalty and advertising expenses
incurred in accordance with the Company's license agreements. These costs are
included in selling, general and administrative ("SG&A") expenses. The new
management team that joined the Company as part of a change of control
transaction in May 1998 (the "Change of Control Transaction") plans to add
apparel lines that retain the advantages of brand name recognition without the
high costs associated with Stage II's prior licenses.
TURNAROUND STRATEGY
Stage II incurred net losses in each year since 1994. To reverse this
trend, the Company's new management adopted a turnaround strategy that includes
the following components:
- INCREASING SALES -- by restructuring the Company's sales force by
division or brand name to promote a more highly motivated sales staff with a
deeper knowledge of each product line and targeted customer base
- INCREASING PROFIT MARGINS -- by reducing manufacturing inefficiencies,
with greater control of inventories, to lower the Company's cost of sales while
creating faster inventory turn, thereby avoiding unnecessary markdowns
- LOWERING FACTORING CHARGES -- by adding more stringent financial controls
with a view to reducing factoring charges and debt levels
- PROMOTING ADMINISTRATIVE EFFICIENCIES -- by continuing the cost cutting
efforts undertaken by prior management, but on a more aggressive basis where
appropriate, with a minimum objective of bringing overhead costs in line with
sales
- OPTIMIZING FINANCIAL EFFICIENCIES -- by prioritizing the collection
of accounts receivable and the management of returns and allowances
- INCREASING PRODUCTIVITY -- by reducing the Company's cost of management
below prior ratios as a percentage of sales while increasing organizational
efficiencies, with a greater use of stock options to offset substantial
reductions in salary levels.
7
<PAGE>
The success of the turnaround strategy implemented by the Company's new
management contributed to a return to profitable operations in the last two
quarters of 1998 before giving effect to lease cancellation and relocation
expenses of $561,000, writeoffs of accounts receivable and other noncash or
nonrecurring items that added $209,000 to SG&A expenses in the third quarter and
$560,000 in the fourth quarter of 1998. For the first and second quarters of
1999, Stage II realized net income of $11,000 and $27,000, respectively, on net
sales of $1.6 million and $2.3 million, respectively, marking the Company's
first profitable six-month period since 1993.
RECENT DEVELOPMENTS
OFFICE RELOCATION. In July 1998, Stage II 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
required a fee of $325,000 and was effective as of July 15, 1998. The fee,
together with related relocation costs and leasehold improvement writeoffs
aggregated $561,000, were recognized in the third quarter of 1998, contributing
to the Company's reported net loss for the quarter. The new lease arrangements
cover 3,000 square feet through 2003 at a total annual cost of approximately
$80,000. This represents an annual savings to the Company over $330,000 and
contributed to Stage II's return to profitability in the first two quarters of
1999.
INTERNET SALES. In March 1999, Stage II launched a website on the
Internet for sales of its branded and proprietary apparel lines to retailers in
the United States. Over time, the facility is expected to enhance the Company's
visibility to the trade and provide a convenient sourcing tool to its customers.
If successful, it could also reduce the Company's dependence on commissioned
salesmen, resulting in higher gross profit margins. While sales on the website
have been modest to date, the Company believes additional customers use the
facility as a virtual showroom and then follow up with orders via phone or fax,
avoiding the time and expense of traveling to the Company's showroom in New York
City.
PRODUCT INNOVATION. In May 1999, Stage II completed the acquisition of
the CROSS COLOURS trademark, a pioneer brand in the early development of young
men's urban fashion. The brand was originally launched in 1989 and achieved
rapid success in the early 1990s by creating a fresh new urban look in the youth
fashion forward market. The Company has developed its own lines of CROSS COLOURS
products internally, with a view toward expanding the availability of lifestyle
urban streetwear to a wider audience, targeting mass merchandisers at price
points below fashion forward levels. In addition to its own CROSS COLOURS
apparel lines, Stage II also plans to license a wide variety of retail items
under this brand, focusing on kids' and juniors' activewear, footwear,
accessories and home products. The CROSS COLOURS licensing campaign is expected
to begin during 1999.
NEW LICENSE AGREEMENT. In August 1999, the Company obtained an
exclusive license to use the STANLEY BLACKER label for men's activewear,
swimwear, jeans, sleepwear and loungewear, as well as various categories of
accessories. With this established prestige brand, Stage II expects to increase
its presence in the higher end markets with a wider distribution channel for the
covered categories, upgrading its product mix to further improve overall
margins.
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.
8
<PAGE>
QUARTERLY NET SALES
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1999 ......................... $ 1,591 $ 2,270 $ --- $ --- $ ---
1998 ......................... 1,855 1,653 4,130 2,229 9,867
1997 ......................... 4,067 2,348 5,718 4,414 16,547
</TABLE>
QUARTERS ENDED JUNE 30, 1999 AND 1998. Net sales of $2.3 million for
the second quarter of 1999 increased by 37.3% from $1.7 million in the
corresponding quarter of 1998. The increase primarily reflects a restructuring
the Company's sales force by division or brand name to promote a more highly
motivated team with a deeper knowledge of each product line and targeted
customer base.
Cost of goods sold as a percentage of sales decreased to 72.0% in the
second quarter of 1999 compared to 73.7% in the same quarter last year. The
decrease reflects improved arrangements with new manufacturing sources, higher
gross profit margins on the Company's revamped apparel lines, greater
concentration on core customer accounts and tighter inventory controls.
Commission and other income decreased by 92.4% during the second
quarter of 1999 compared to the second quarter of 1998, reflecting a decrease in
emphasis on the Company's lower margin sales agency business.
SG&A expenses of $506,000 for the second quarter of 1999 decreased by
46.4% compared to $944,000 for the corresponding quarter of 1998, primarily
attributable to a cost cutting plan adopted as part of the Company's turnaround
strategy. See "Turnaround Strategy" above. As a percentage of sales, SG&A
expenses were 22.3% in the second quarter of 1999 compared to 57.1% in the same
quarter last year. Stage II anticipates a continuation in this trend as a result
of an estimated $330,000 in annual savings from its office relocation in July
1998 and other cost cutting measures adopted by new management following the
Change of Control Transaction.
Interest and factoring expenses, net of interest income, aggregated
$108,000 or 4.8% of sales in the second quarter of 1999 compared to $188,000 or
11.4% of sales in the corresponding quarter last year. The decrease reflects a
reduction in borrowing levels.
The Company realized net income of $27,000 or $.01 per share in the
second quarter of 1999 compared to a net loss of $632,000 or $.16 per share in
the corresponding quarter of 1998, reflecting the foregoing trends.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998. Net sales of $3.9 million for
the first six months of 1999 increased by 10.1% from $3.5 million in the
corresponding period in 1998. The increase primarily reflects a restructuring
the Company's sales force by division or brand name to promote a more highly
motivated team with a deeper knowledge of each product line and targeted
customer base.
Cost of goods sold as a percentage of sales decreased to 70.2% in the
first half of 1999 compared to 75.7% in the same period last year. The decrease
reflects improved arrangements with new manufacturing sources, higher gross
profit margins on the Company's revamped apparel lines, greater concentration on
core customer accounts and tighter inventory controls.
Commission and other income decreased by 67.9% during the first half of
1999 compared to the corresponding prior period, reflecting a decrease in
emphasis on the Company's sales agency business.
9
<PAGE>
SG&A expenses of $938,000 for the first six months of 1999 decreased by
51.9% compared to $1,952,000 for the first six months of 1998, primarily
attributable to a cost cutting plan adopted as part of the Company's turnaround
strategy. See "Turnaround Strategy" above. As a percentage of sales, SG&A
expenses were 24.3% in the first two quarters of 1999 compared to 55.6% in the
same period last year. Stage II anticipates a continuation in this trend as a
result of an estimated $330,000 in annual savings from its office relocation in
July 1998 and other cost cutting measures adopted by new management following
the Change of Control Transaction.
Interest and factoring expenses, net of interest income, aggregated
$209.000 or 5.4% of sales in the first half of 1999 compared to $329,000 or 9.4%
of sales in the corresponding period last year. The decrease reflects a
reduction in borrowing levels.
The Company realized net income of $38,000 or $.01 per share in the
first six months of 1999 compared to a net loss of $1,323,000 or $.34 per share
in the corresponding period in 1998, reflecting the foregoing trends.
The results of operations for the quarter and six months ended June 30,
1999 are not necessarily indicative of operating results to be expected for the
full year.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY. Net cash provided by Stage II's operating activities during
the first six months of 1999 aggregated $125,000. The Company's cash position
decreased from $992,000 at December 31, 1998 to $839,000 at June 30, 1999, due
primarily to reduced factor debt.
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 from the repatriation. In 1998, the Company sold marketable
securities netting $3.0 million, all of which was used to reduce short term
debt. At June 30, 1999, the Company retained marketable securities with a
carrying value of $391,000.
In connection with the Change of Control Transaction, Stage II obtained
a new factoring and credit facility with The CIT Group/Commercial Services, Inc.
(the "Credit Facility") to replace its prior credit facility. The agreements
covering the Credit Facility provide 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 sold to it by Stage II. The factor
receives a commission under the Credit Facility in an amount less than 1% of the
net receivables it purchases. The agreements covering the Credit Facility also
provide 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
Facility are 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 Credit Facility are determined from time to time
by the factor based upon the Company's financing requirements and financial
performance. The agreements covering the Credit Facility 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, 1999, the Company's net direct borrowings under the
Credit Facility aggregated $2.1 million. This reflects a reduction of $4.9
million from mid-year 1998 debt levels. The reduction was primarily attributable
to debt repayments of $3 million from the sale of marketable securities and a
substantial reduction of inventory since the Change of Control Transaction.
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, 1999, the Company had no material capital expenditure
requirements.
10
<PAGE>
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.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 27, 1999, the Company held its annual meeting of shareholders.
All of the incumbent Class II 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>
Barry Fertel 1,778,644 10,300
Jon Siskind 1,778,644 10,300
</TABLE>
The shareholders also approved the Company's 1998 Incentive Stock
Option Plan 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>
748,007 36,600 7,400
</TABLE>
ITEM 6.EXHIBITS AND REPORTS ON FORM 8 - K.
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER: EXHIBIT
<S> <C>
27.1 Financial Data Schedule
</TABLE>
(b) REPORTS ON FORM 8-K.
None
11
<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 9, 1999 By: /s/ RICHARD SISKIND
-------------------------
Richard Siskind
Chief Executive Officer
(Duly Authorized Officer)
(Principal Executive Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q OF STAGE II APPAREL CORP.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 839
<SECURITIES> 391
<RECEIVABLES> 363
<ALLOWANCES> 0
<INVENTORY> 2645
<CURRENT-ASSETS> 3,985
<PP&E> 55
<DEPRECIATION> 7,904
<TOTAL-ASSETS> 6,939
<CURRENT-LIABILITIES> 3,589
<BONDS> 0
0
0
<COMMON> 7,407
<OTHER-SE> (2,183)
<TOTAL-LIABILITY-AND-EQUITY> 6,939
<SALES> 2,270
<TOTAL-REVENUES> 2,290
<CGS> 1,634
<TOTAL-COSTS> 506
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123
<INCOME-PRETAX> 27
<INCOME-TAX> 0
<INCOME-CONTINUING> 27
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27
<EPS-BASIC> .01
<EPS-DILUTED> .00
</TABLE>
