U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended July 31, 1996
Transition Report pursuant to Section 13 or 15(d) the Exchange Act
For the transition period from __________ to _____________
Commission file Number 0-10593
CANDIE'S, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2481903
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2975 Westchester Avenue, Purchase, New York 10577
(Address of principal executive offices)
(914)694-8600
(Issuer's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 _____
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 15, 1996, 9,639,677 shares of Common Stock, par value $.001 per
share were outstanding.
Transitional small business disclosure format (check one):
YES _____ NO __X__
<PAGE>
CANDIE'S, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
FOR THE PERIOD ENDED July 31, 1996
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets at July 31, 1996 3-4
and January 31, 1996 (unaudited)
Condensed Consolidated Statements of Income for the 5
Three Months Ended July 31, 1996 and 1995 (unaudited)
Condensed Consolidated Statements of Income for the 6
Six Months Ended July 31, 1996 and 1995 (unaudited)
Condensed Consolidated Statements of Stockholders Equity 7
for the Six Months Ended July 31, 1996 (unaudited)
Condensed Consolidated Statements of Cash Flows for 8-9
the Six Months Ended July 31, 1996 and 1995 (unaudited)
Notes to Condensed Consolidated Financial Statements 10-15
ITEM 2.
Management's Discussion and Analysis of Financial 16-17
Condition and Results of Operations
PART II. OTHER INFORMATION 18
SIGNATURES 19
2
<PAGE>
Candie's, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
PART I.
ITEM 1. July 31, January 31,
1996 1996
---------------------------
Assets
Current assets:
Cash and cash equivalents $ 118,125 $ 204,996
Accounts receivable, net of allowances of
$180,000 (July) and $64,000 (January) 4,081,772 1,228,812
Inventories 3,851,672 3,999,946
Due from factor 377,661 --
Prepaid expenses 720,411 534,909
---------------------------
Total current assets 9,149,641 5,968,663
---------------------------
Property and equipment -net 211,597 121,068
---------------------------
Other assets:
Noncompetition agreements 354,582 374,466
Trademark 4,690,058 4,831,466
Other 629,779 450,150
---------------------------
Total other assets 5,674,419 5,656,082
---------------------------
Total assets $15,035,657 $11,745,813
===========================
See accompanying notes to consolidated financial statements.
3
<PAGE>
Candie's, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
July 31, January 31,
1996 1996
---------------------------
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable-trade $ 7,128,097 $ 1,874,412
Due to factor -- 1,299,096
Accrued expenses 453,054 1,183,515
Accounts payable-trade, expected to be
refinanced with common stock (Note 11) 1,680,000 1,680,000
---------------------------
Total current liabilities 9,261,151 6,037,023
Long-term liabilities 122,000 122,436
---------------------------
Total liabilities 9,383,151 6,159,459
---------------------------
Commitments, contingencies and other matters
Stockholders' equity:
Preferred stock, $.01 par value--shares authorized
5,000,000; none issued or outstanding
Common stock, $.001 par value--shares authorized
30,000,000; shares issued: 8,767,939 and
8,745,738 at July 31, 1996 and January 31, 1996 8,768 8,746
Additional paid-in capital 10,093,230 10,043,301
Deficit, since February 28, 1993, (deficit eliminated
$27,696,007) (4,449,492) (4,465,693)
---------------------------
Total stockholders' equity 5,652,506 5,586,354
---------------------------
Total liabilities and stockholders' equity $15,035,657 $11,745,813
===========================
</TABLE>
4
<PAGE>
Candie's, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
July 31, July 31
1996 1995
---------------------------
<S> <C> <C>
Net revenues $15,041,826 $13,838,530
Cost of goods sold 12,488,759 10,226,117
---------------------------
Gross profit 2,553,067 3,612,413
---------------------------
Operating expenses:
Selling expenses 1,262,242 1,166,349
General and administrative expenses 842,635 956,584
---------------------------
2,104,877 2,122,933
---------------------------
Operating income 448,190 1,489,480
Other income (deductions):
Other 198,000 (113,000)
Interest expense - net (206,651) (211,456)
---------------------------
(8,651) (324,456)
Income before provision for income taxes 439,539 1,165,024
Provision for income taxes -- 59,379
---------------------------
Net income $ 439,539 $ 1,105,645
===========================
Net income per share $.05 $.12
===========================
Weighted average number of common shares outstanding 8,767,939 9,456,112
===========================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Candie's, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 31, July 31
1996 1995
---------------------------
<S> <C> <C>
Net revenues $21,300,199 $19,591,133
Cost of goods sold 17,116,458 14,467,552
---------------------------
Gross profit 4,183,741 5,123,581
---------------------------
Operating expenses:
Selling expenses 2,404,570 2,329,552
General and administrative expenses 1,614,426 1,759,100
---------------------------
4,018,996 4,088,652
---------------------------
Operating income 164,745 1,034,929
Other income (deductions):
Other 198,000 (113,000)
Interest expense -- net (346,544) (385,903)
---------------------------
(148,544) (498,903)
Income before provision for income taxes 16,201 536,026
Provision for income taxes -- 60,100
---------------------------
Net income $ 16,201 $ 475,926
===========================
Net income per share $.00 $.05
===========================
Weighted average number of common shares outstanding 8,759,059 9,370,562
===========================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
Candie's, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
July 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Additional
Common stock Paid-In Retained
Shares Amount Capital Deficit Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 31, 1996 8,745,738 $8,746 $10,043,301 $(4,465,693) $5,586,354
Issuance of common stock in
connection with retirement plan 22,201 22 49,929 -- 49,951
Net income for the period ended
July 31, 1996 -- -- -- 16,201 16,201
------------------------------------------------------------------
Balance at July 31, 1996 8,767,939 $8,768 $10,093,230 $(4,449,492) $5,652,506
==================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
Candie's, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended
July 31, July 31,
1996 1995
--------------------------
Cash flows from operating activities:
Net income $ 16,201 $ 475,926
Items in net income affecting cash:
Depreciation and amortization 215,462 209,481
Provision for allowances and bad debts expense 46,541 73,788
Sale of joint venture interest (198,000) --
Changes in operating assets and liabilities:
Accounts receivable (2,899,501) (3,214,083)
Inventories 148,274 (272,735)
Prepaid expenses (185,502) (779,671)
Other assets -- (119,971)
Due to factor (1,676,757) (258,464)
Accounts payable - trade 5,303,636 3,809,453
Accrued expenses (730,461) (85,487)
Long term liabilities (436) (75,241)
--------------------------
Net cash provided by (used in) operating activities 39,457 (237,004)
--------------------------
See accompanying notes to consolidated financial statements.
8
<PAGE>
Candie's, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(unaudited)
Six Months Ended
July 31, July 31,
1996 1995
----------------------
Cash flows used in investing activities:
Capital expenditures $(126,328) $ (2,811)
----------------------
Net cash used in investing activities (126,328) (2,811)
----------------------
Cash flows from financing activities:
Proceeds from warrants -- 37,501
Proceeds from notes payable -- 600,000
----------------------
Net cash provided by financing activities -- 637,501
----------------------
Net (decrease) increase in cash and cash equivalents (86,871) 397,686
Cash and cash equivalents, beginning of period 204,996 --
----------------------
Cash and cash equivalents, end of period $ 118,125 $ 397,686
======================
Supplemental cash flow information:
Cash paid during the period for interest $ 346,544 $ 353,365
======================
Cash paid during the period for income taxes $ 42,301 $ 41,421
======================
Supplemental disclosures of non cash activities:
The Company issued 22,201 shares of common stock for the six months ended July
31, 1996, as a matching contribution in connection with the Company's retirement
plan. The matching contribution of $49,951 was accrued at January 31, 1996.
The Company recorded a gain of $198,000 for the six months ended July 31, 1996,
in connection with the sale of its ownership interest in a joint venture
agreement with Urethane Technologies, Inc. ("UTI") in exchange for 175,000
shares of UTI common stock.
9
<PAGE>
Candie's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
July 31, 1996
1. Basis of Presentation and Description of Business
Candie's, Inc., the Registrant, together with its subsidiaries is referred to
herein as Candie's or the "Company."
The condensed consolidated financial statements included herein are unaudited
and include all adjustments (consisting of normal recurring accruals) which are,
in the opinion of management, necessary for a fair presentation of the results
of operations of the interim period pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included under generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures in such financial statements are adequate
to make the information presented not misleading. These condensed consolidated
statements should be read in conjunction with the Company's financial statement
and the notes thereto included in the Company's Annual Report on Form 10-KSB for
the fiscal year ended January 31, 1996.
The consolidated financial statements include the accounts of Candie's, Inc. and
its wholly owned subsidiaries, Bright Star Footwear, Inc. ("Bright Star"),
Ponca, Ltd. ("Ponca"), Yulong Co., Ltd. ("Yulong"), and the Company's 60% owned
subsidiary Intercontinental Trading Group, Inc. ("ITG"), (collectively, the
"Company"). Yulong was formed on July 21, 1995. Ponca was formed March 15, 1994.
All intercompany transactions and balances have been eliminated from the
consolidated financial statements for all periods presented.
The Company designs, markets, imports and distributes a variety of
moderately-priced, leisure and fashion footwear for women and girls under the
trademarks CANDIE'S(R), BONGO(R), LUCKY BRAND(R), ASPEN(R) and certain others.
The Company is a licensee of the BONGO, LUCKY BRAND and ASPEN trademarks. The
Company's product line also includes a wide variety of workboots, hiking shoes
and men's leisure shoes designed, marketed and distributed by Bright Star. The
Company sells to retailers throughout the United States.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported periods.
Actual results could differ from those estimates.
Inventories
Inventories, which consist entirely of finished goods, are valued at the lower
of cost or market. Cost is determined by the first-in, first-out ("FIFO")
method.
10
<PAGE>
Candie's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is computed over the
estimated useful lives of the assets (5-10 years) using accelerated methods.
Goodwill and Candies Trademark
Goodwill in the amount of $551,093, represents the excess amount paid over the
fair value of assets acquired related to the acquisition of Bright Star and is
being amortized over fifteen years. Accumulated amortization at July 31, 1996
and January 31, 1996 was approximately $226,000 and $208,000, respectively.
The Candie's trademark is stated at cost, net of amortization, as determined by
its fair value relative to other assets and liabilities at the time of a quasi
reorganization. The quasi reorganization was approved by the Company's
stockholders effective February 28, 1993. In connection with the quasi
reorganization, the Company's assets, liabilities and capital accounts were
adjusted to eliminate the stockholders' deficiency. The trademark is being
amortized over twenty years.
The Company believes that the goodwill and trademark have continuing value, as
evidenced by sales and expected profitability of the related products, which
will be realized over the course of its useful life.
Revenue Recognition
Revenue, which include product sales and commissions, on an agency basis, is
recognized when the related goods have been shipped and legal title has passed
to the customer. Commissions and licensing income received amounted to
$1,616,013 and $1,682,468 for the six months ended July 31, 1996 and 1995
respectively.
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123, " Accounting for
Stock-Based Compensation" ("SFAS 123"). SFAS 123 is effective for fiscal years
beginning after December 31, 1995 and prescribes accounting and reporting
standards for all stock-based compensation plans, including employee stock
options, restricted stock, employee stock purchase plans and stock appreciation
rights.
11
<PAGE>
Candie's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Stock-Based Compensation (continued)
SFAS 123 requires compensation expense to be recorded (i) using the new fair
value method or (ii) using existing accounting rules prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") and related interpretations with pro forma disclosure of what net
income and earnings per share would have been had the Company adopted the new
fair value method. The Company continues to account for its stock based
compensation plans in accordance with the provisions of APB 25.
Taxes on Income
The Company uses the liability method of accounting for income taxes under
Financial Accounting Statement No. 109 "Accounting for Income Taxes" ("FASB
109").
Earnings Per Share
Net income (loss) per common share is computed on the basis of the weighted
average number of shares of common stock and common stock equivalents
outstanding during each year, retroactively adjusted to give effect to all stock
splits. Common stock equivalents include stock options and warrants and the
computation of net income (loss) per common share includes the dilutive effect
of stock options and warrants, as appropriate, adjusted for treasury shares
assumed to be purchased from the proceeds using the modified treasury stock
method. Fully diluted net income (loss) per common share is not materially
different from primary net income (loss) per common share.
Reclassifications
Certain amounts from the July 31, 1995 financial statements have been
reclassified to conform to the current year's presentation.
Cash Flows
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with an initial maturity of three months or
less to be cash equivalents.
3. Acquisition of Bright Star Footwear, Inc.
In connection with the acquisition of Bright Star in 1991, the Company entered
into noncompete agreements with Bright Star's former Chairman and President
whereby the Company paid $1,225,000 and issued $2,275,000 of notes to such
individuals. At February 23, 1993, in connection with a quasi-reorganization,
the Company wrote down this asset by $1,718,000. The agreements are being
amortized over their respective terms. Accumulated amortization related to these
agreements was $1,428,000 and $1,408,000 at July 31, 1996 and January 31, 1996,
respectively.
12
<PAGE>
Candie's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Prepaid Expenses
Prepaid expenses consist of the following:
July 31, January 31,
1996 1996
-------- --------
Advertising and marketing $345,278 $236,087
Royalties 12,285 113,185
Trade shows 130,459 94,340
Store opening costs 78,888 --
Other 153,501 91,297
-------- --------
Totals $720,411 $534,909
======== ========
The Company records national advertising campaign costs as an expense upon the
first showing of the related advertising and other advertising costs when
incurred. Advertising expenses for the six months ended July 31, 1996 and 1995
amounted to $331,442 and $243,242, respectively.
5. Property and Equipment
Major classes of property and equipment consist of the following:
July 31, January 31,
1996 1996
-------- --------
Furniture, fixtures and equipment $934,203 $807,875
Transportation equipment 20,750 20,750
-------- --------
954,953 828,625
Less: accumulated depreciation 743,356 707,557
-------- --------
Net property and equipment $211,597 $121,068
======== ========
6. Factor Agreement
On April 2, 1993, the Company entered into an accounts receivable factoring
agreement. The agreement provides the Company with the ability to borrow funds
from the factor, limited to 80% of eligible accounts receivable and 50% of
eligible finished goods inventory (to a maximum of $7 million in inventory) in
which the factor has a security interest. The agreement also provides for the
opening of documentary letters of credit (up to a maximum of $2.5 million) to
suppliers, on behalf of the Company. The total credit facility is limited to $10
million. The factor requires a deposit equal to 43% of the amount of the letter
of credit to be opened. Borrowings bear interest at the rate of one and one-half
percent (1-1/2%) over the existing prime rate established by the Philadelphia
National Bank. The Company's President has personally guaranteed any and all
borrowings with the factor.
13
<PAGE>
Candie's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Factor Agreement (continued)
Due to factor is comprised as follows:
July 31, January 31,
1996 1996
------------------------------
Accounts receivable assigned $ 8,087,799 $ 4,804,121
Outstanding advances 7,710,138 6,103,217
------------------------------
Due (from) to factor $ (377,661) $ 1,299,096
==============================
Although the Company obtains credit insurance on the majority of its customers,
the Company may incur losses on accounts receivable as a result of customer
chargebacks and disputes.
7. Long-Term Liabilities
At July 31 1996 maturities of long term liabilities consist principally of
deferred rents.
8. Related Party Transactions
The Company entered into a Services Allocation Agreement with New Retail
Concepts, Inc. ("NRC"), (a significant shareholder of the Company, and an entity
whose principal shareholder is the Company's President) pursuant to which the
Company will provide NRC with financial, marketing, sales and other business
services for which NRC will be charged an allocation of the Company's expenses,
including employees' salaries associated with such services. Pursuant to such
agreement, NRC paid the Company $50,000 during the six months ended July 31,
1996 and 1995, respectively.
9. Leases
In August 1994, the Company entered into a new lease agreement and relocated its
corporate headquarters to Purchase, NY.
Rent expense was approximately $118,000 for the six months ended July 31, 1996
and 1995, respectively. As of July 31, 1996, future net minimum lease payments
under noncancelable operating lease agreements are as follows:
1997 $115,000
1998 255,000
1999 283,000
2000 289,000
2001 48,000
--------
$990,000
========
14
<PAGE>
Candie's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Retirement Plans
The Company sponsors a 401(k) Savings Plan (the "Savings Plan") which covers all
eligible full-time employees. Participants may elect to make pretax
contributions subject to applicable limits. At its discretion, the Company may
contribute additional amounts to the Savings Plan.
11. Other
a.) On April 3, 1996 the Company entered into an agreement (the "Vendor
Agreement") with Redwood Shoe Co., a principal supplier of footwear products
(the "Vendor") to satisfy in full, certain trade payables (the "Payables")
amounting to $1,680,000. Under the terms of the Vendor Agreement, the Company
has agreed to; (i) issue 1,050,000 shares of the Company's Common Stock (the
"Vendor Shares") with certain registration rights; (ii) issue an option to
purchase 75,000 shares of the Company's Common Stock at $1.75 per share; and
(iii) make a future payment of $50,000. The Company agreed to file a
registration statement (the "Registration") covering the Vendor Shares. The
Company's payables will be released by the Vendor upon the earlier of the date
the Registration is declared effective, the date the Vendor sells all the Shares
or the Vendor receives an opinion of counsel that the Vendor Shares may be sold
under rule 144(k). The Company has issued the Vendor Shares.
b.) The Company recorded a non-operating gain of $198,000 for the three months
ended July 31, 1996, in connection with the sale of its 50% ownership interest
in a joint venture with Urethane Technologies, Inc. ("UTI"). The joint venture
was originally established to exploit technology relating to the production of
footwear soles. The Company received 175,000 shares of UTI restricted common
stock. The value of the shares received approximated 50% of the equity interest
in the joint venture. UTI is a publicly traded company whose securities are
quoted on NASDAQ.
15
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended July 31, 1996 Compared to July 31, 1995
Net revenues increased by $1,203,296 (8.69%) for the three months ended July 31,
1996 compared with the three months ended July 31, 1995. The increase was
primarily due to the Company's sales and marketing efforts, including the
Company's decision to emphasize sales of casual and fashion footwear while
de-emphasizing sales of outdoor footwear products. Additionally, strong sales
increases occurred in products bearing the BONGO trademark. The increase in
BONGO sales continues to reflect the continued acceptance of these products in
the marketplace.
Gross margins were 16.97% in 1996 compared with 26.10% in 1995. The decrease was
attributable to higher levels of closeout sales and promotional activity, such
as increased allowances and advertising.
Selling expenses were $1,262,242 in 1996 compared to $1,166,349 in 1995, an
increase of 8.22% primarily due to higher advertising and marketing costs.
General and administrative expenses were $842,635 in 1996 compared with $956,584
in 1995, a decrease of 11.91%. Operating expenses decreased principally due to
management's efforts to reduce overhead costs through, among others, a decrease
in compensation costs due to a reduction in commissions paid and certain staff
reductions.
Interest expense of $206,651 was down in 1996 from the $211,456 reported in the
1995 period. The reduction resulted from reduced average borrowings during the
year and more favorable interest rates.
As a result of the foregoing, the Company's net income for the three months
ended July 31, 1996 decreased to $439,539 from $1,105,645 for the corresponding
period ended July 31, 1995.
Six Months Ended July 31, 1996 Compared to July 31, 1995
Net revenues increased by $1,709,066 (8.72%) for the six months ended July 31,
1996 compared with the six months ended July 31, 1995. The increase was
primarily due to the Company's sales and marketing efforts, including the
Company's decision to emphasize sales of casual and fashion footwear while
de-emphasizing sales of outdoor footwear products. Additionally, strong sales
increases occurred in products bearing the BONGO trademark. The increase in
BONGO sales continues to reflect the continued acceptance of these products in
the marketplace.
Gross margins were 19.64% in 1996 compared with 26.15% in 1995. The decrease was
attributable to a higher level of closeout sales and promotional activity, such
as increased allowances and advertising.
Selling expenses were $2,404,570 in 1996 compared to $2,329,552 in 1995, an
increase of 3.22% primarily due to higher advertising and marketing expenses.
General and administrative expenses were $1,614,426 in 1996 compared with
$1,759,100 in 1995, a decrease of 8.22%. Operating expenses decreased
principally due to management's efforts to reduce overhead costs through, among
others, a decrease in compensation costs due to a reduction in commissions paid
and certain staff reductions.
Interest expense of $346,544 was down in 1996 from the $385,903 reported in the
1995 period. The reduction resulted from reduced average borrowings during the
year and more favorable interest rates.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
As a result of the foregoing, the Company's net income for the six months ended
July 31, 1996 decreased to $16,201 from $475,926 for the corresponding period
ended July 31, 1995.
Liquidity and Capital Resources
The Company relies primarily upon cash flow from operations and borrowings under
its credit facility with its factor to finance its operations. For the six
months ended July 31, 1996, net cash provided by operating activities was
$39,457 as compared with net cash used in operating activities of $237,004
during the same period in the prior year.
At July 31, 1996, the Company had a working capital deficiency of $111,510
versus a working capital deficiency of $68,360 at January 31, 1996.
In May 1996 the Company entered into a lease for retail store space located in
the Galleria Mall in White Plains, New York, where the Company intends to open
the first retail store by the end of September. The Company anticipates that the
cost to open the store will aggregate approximately $250,000.
Management anticipates it will be able to satisfy its ongoing cash requirements
for the foreseeable future, including the cost required to open the Company's
first retail store, primarily with cash flow from operations, borrowings under
its credit facility and if necessary, funds generated from the sale of
securities.
Seasonality
Demand for the Company's footwear has historically peaked during the
fall/back-to-school season. As a result, shipment of the Company's products have
been heavily concentrated in the second and third fiscal quarters. Therefore,
the Company's results of operations can fluctuate from quarter to quarter. The
Company has sought to reduce fluctuations in its quarterly operating results by
marketing additional footwear categories during other selling seasons. However,
there can be no assurance that the Company will be able to achieve consistent
quarterly operating results in the future by implementing this strategy. The
success of this strategy depends upon market acceptance of the additional
products offered during selling seasons other than the peak season, of which
there can be no assurance. Accordingly, operating results may continue to
fluctuate in the future.
Inflation
The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on the Company's revenues or
profitability.
17
<PAGE>
PART II. Other Information Page
Item 1. Legal Proceedings
None
Items 2-5 Other
None
Item 6. Exhibits and Reports
Exhibit 11 Computations of Earnings Per Share 20
Exhibit 27 Financial Data Schedule 21
18
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CANDIE'S, INC.
By: /s/ Neil Cole
----------------------------
Neil Cole, President,
(Principal Executive
and Accounting Officer)
Dated: September 18, 1996
19
EXHIBIT 11
CANDIE'S, INC. AND SUBSIDIARIES
COMPUTATIONS OF EARNINGS PER SHARE
For the Three Months
Ended July 31,
1996 1995
---------- ----------
TOTAL EPS INCOME $ 439,539 $1,105,645
========== ==========
Weighted average number of
shares outstanding 8,767,939 9,456,112
========== ==========
NET INCOME PER SHARE $ .05 $0.12
===== =====
No additional income (earnings from investing the excess proceeds upon the
exercise of common stock equivalents) nor common stock equivalents were
included in the calculation of net loss per common share. The results would
have been antidilutive.
For the Six Months
Ended July 31,
1996 1995
---------- ----------
TOTAL EPS INCOME $ 16,201 $ 475,926
========== ==========
Weighted average number of
shares outstanding 8,759,059 9,370,562
========== ==========
NET INCOME PER SHARE $.00 $0.05
===== =====
No additional income (earnings from investing the excess proceeds upon the
exercise of common stock equivalents) nor common stock equivalents were
included in the calculation of net loss per common share. The results would
have been antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-QSB AT JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FINANCIAL STATEMENTS INCLUDED IN SUCH FORM 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<CASH> 118,125
<SECURITIES> 0
<RECEIVABLES> 4,261,772
<ALLOWANCES> 180,000
<INVENTORY> 3,851,672
<CURRENT-ASSETS> 9,149,641
<PP&E> 954,953
<DEPRECIATION> 743,356
<TOTAL-ASSETS> 15,035,657
<CURRENT-LIABILITIES> 9,261,151
<BONDS> 0
0
0
<COMMON> 8,768
<OTHER-SE> 5,643,738
<TOTAL-LIABILITY-AND-EQUITY> 15,035,657
<SALES> 21,300,199
<TOTAL-REVENUES> 21,300,199
<CGS> 17,116,458
<TOTAL-COSTS> 17,116,458
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 346,544
<INCOME-PRETAX> 16,201
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,201
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,201
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
