<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended AUGUST 31, 1998....................
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from................to..................
Commission File Number 1-10860....................................
THE NAHDREE GROUP, LTD.
...................................................
(Exact name of registrant as specified in its charter)
DELAWARE 13-3615898
............................... ............................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
530 SEVENTH AVENUE NEW YORK, NEW YORK
10018
....................................................
(Address of principal executive offices)
(Zip Code)
(212)947-9000
....................................................
(Registrant's telephone number, including area code)
....................................................
(Former name, former address and former fiscal year,
if changed since last report)
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
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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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes......... No.........
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of registrant's Common Stock, outstanding
as of October 15, 1998, is 11,995,238 shares.
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The Nahdree Group, Ltd. and Subsidiaries
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
August 31, 1998 and May 31, 1998..... 4
Condensed Statement of Operations
Three Months Ended August 31, 1998
and 1997............................. 5
Condensed Statements of Cash Flows
Three Months Ended August 31, 1998
and 1997............................. 6
Notes to Condensed Consolidated
Financial Statements................. 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 9
PART II - OTHER INFORMATION............................. 13
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE NAHDREE GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
August 31, May 31,
1998 1998
---- ----
(UNAUDITED)
ASSETS
Current Assets:
<S> <C> <C>
Cash.......................................... $ 0 $ 93
------- -------
Accounts receivable:
Trade....................................... 1,049 497
Suppliers and other......................... 2,183 1,649
------- -------
3,232 2,146
Inventory..................................... 15,656 13,781
Other current assets.......................... 170 200
------- -------
Total current assets..................... 19,058 16,220
------- -------
Fixed assets - at cost, net of accumulated
depreciation and amortization................. 1,102 1,173
Intangibles..................................... 10,647 10,933
Other assets.................................... 1,047 1,053
------- -------
$31,854 $29,379
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Cash Overdraft................................ $ 852 $ 614
Due to factor................................. 8,134 6,883
Accounts payable.............................. 7,243 5,857
Current portion of capital lease obligation 20 20
Accrued expenses and other current
liabilities................................. 1,518 1,209
Due to affiliate.............................. 2,151 2,151
------- -------
Total current liabilities................ 19,918 16,734
------- -------
Long-term debt--stockholder--Subordinated 9,691 9,691
Long-Term portion of capital lease obligation 40 45
------- -------
9,731 9,736
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000
authorized shares; no shares outstanding -- --
Common stock, $.01 par value; 25,000,000
authorized shares; issued and outstanding
11,995,238 shares........................ 120 120
Additional paid-in capital.................. 2,867 2,867
Accumulated deficit......................... (782) (78)
-------- --------
Total stockholders' equity.................. 2,205 2,909
------- -------
Total liabilities and stockholders' equity $31,854 $29,379
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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THE NAHDREE GROUP, LTD. AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
Consolidated
August 31, August 31,
1998 1997
---- ----
(Condensed from
unaudited finan-
cial statements
of Nah Nah
Collection, Inc.)(Note 1)
<S> <C> <C>
Net Sales.............. $11,193 $ 5,139
Cost of sales.......... 6,694 3,748
------- -------
Gross profit........... 4,499 1,391
Selling, general and
administrative expenses 4,238 1,018
Amortization of goodwill 285 --
------- -------
Operating (loss)/income (24) 373
Interest Expense....... 680 104
------- -------
(Loss) Income before
income taxes........... (704) 269
Provision for income
taxes.................. -- --
------- -------
Net (loss) income...... (704) 269
======= =======
Basic and diluted (loss)
income per share...... $(0.06) $ 0.05
======= =======
Weighted average shares
outstanding............ 11,995 5,278
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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THE NAHDREE GROUP, LTD. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Consolidated
Three Months Ended Three Months Ended
------------------ ------------------
August 31, 1998 August 31, 1997
--------------- ---------------
(Condensed from
unaudited fin-
ancial statement
of Nah Nah
Collection, Inc.)(Note 1)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) income ................................ $ (704) $ 269
------- -------
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating
activities:
Depreciation and amortization .................. 389 37
(Increase) decrease in assets:
Trade receivables ................................ (552) (2)
Other receivables ................................ (534) 729
Inventories ...................................... (1,875) (759)
Other current assets ............................. 30 (48)
Increase (decrease) in liabilities:
Accounts payable ................................. 1,386 789
Accrued expenses and other current liabilities ... 309 (11)
------- -------
Total adjustments ................................ (847) 735
------- -------
Net cash (used in) provided by
operating activities .............................. (1,551) 1004
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets ...................... (32) (64)
Increase in other assets ......................... 6 0
------- -------
Net cash used in investing activities .............. (26) (64)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances (Repayment) of cash overdraft ........... 238 (23)
Increase (decrease) in bank loans ................ 1,251 (914)
Repayment of equipment lease ..................... (5) (3)
------- -------
Net cash provided by (used in)
financing activities ........................... 1,484 (940)
NET (DECREASE) INCREASE IN CASH .................... (93) 0
------- -------
CASH, beginning of period .......................... 93 0
------- -------
CASH, end of period ................................ $ 0 $ 0
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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THE NAHDREE GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1998
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
The Nahdree Group, Ltd. and its subsidiaries (hereinafter collectively
referred to as the "Company" unless the context clearly otherwise
requires). The consolidated financial statements are presented in
accordance with the requirements of the quarterly report on Form 10-Q and
consequently do not include all of the disclosures normally made in an
annual report on Form 10-K filing. Accordingly, the consolidated financial
statements included herein should be reviewed in conjunction with the
consolidated financial statements and the notes included therein with the
Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1998.
The financial information as of and for the three months ended August
31, 1998 and 1997 has been prepared in accordance with the Company's
customary accounting practices and has not been audited. In the opinion of
management, the information presented reflects all adjustments necessary for
a fair presentation of interim results. All such adjustments are of a normal
and recurring nature. The foregoing interim results are not necessarily
indicative of the results of operations for the full year ending May 31,
1999.
2. ACQUISITION
On December 24, 1997, the Company purchased all of the outstanding
capital stock of Nah Nah Collection, Inc. ("Nah Nah"). The transaction has
been accounted for as a reverse acquisition. Accordingly, the accompanying
financial statements present the unaudited consolidated historical results
of operations of The Nahdree Group, Ltd. (which includes Nah Nah) for the
three months ended August 31, 1998, and the results of operations of Nah
Nah only, for the three months ended August 31, 1997.
3. USE OF ESTIMATES
Generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent gains and losses at the date of the
financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
4. NEW ACCOUNTING PROUNCEMENTS
In 1998, the AICPA issued Statement of Position 98-5 (SOP 98-5)
"Reporting on the Costs of Start-up Activities". Pursuant to the provision
of SOP 98-5, all costs associated with the start-up activites, including
organization costs, should be expensed as incurred. Companies that
previously capitalized such costs are required to write-off the
unamortized portion of such costs as the cumulative effect of a change of
accounting principle. The adoption of SOP 98-5 will not have a
significant impact on the Company's financial statements.
5. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share excludes dilution and is computed by
dividing earnings (loss) available to common shareholders by the weighted
average number of common shares outstanding for the period.
Diluted earnings (loss) per share is computed by dividing earnings
(loss) available to common shareholders by the weighted average number of
common shares outstanding for the period, adjusted to reflect potentially
dilutive securities. Options and warrants were not included in the
computation of diluted earnings (loss) per share because the exercise price
was greater than the market price of the stock.
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6. INVENTORY
Inventory is stated at the lower of cost (first-in, first-out) or market,
and at August 31, 1998, a majority of the inventory was calculated using the
gross profit method.
<TABLE>
<CAPTION>
(In Thousands)
---------------------------------
August 31, May 31,
1998 1998
---- ----
(Unaudited)
<S> <C> <C>
Finished goods............... $12,492 $11,470
Raw materials and work in process 3,164 2,311
------- -------
$15,656 $13,781
======= =======
</TABLE>
7. SUPPLEMENTAL CASH FLOW INFORMATION
Payments of income taxes were $8,000 and $0 for the three months ended
August 31, 1998 and 1997, respectively. Payments of interest during the
corresponding periods were $445,500 and $117,000 respectively.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
GENERAL
The following discussion provides information and analysis of
the results of operations for the three-month period ended August 31, 1998, of
The Nahdree Group, Ltd. and its subsidiaries (collectively, the "Company"). The
following discussion and analysis should be read in conjunction with the
financial statements and notes thereto included elsewhere herein.
On December 24, 1997, The He-Ro Group, Ltd. ("He-Ro") acquired
all the outstanding capital stock of Nah Nah Collection, Inc. ("Nah Nah"), in an
acquisition (the "Acquisition") accounted for as a "reverse acquisition" and a
purchase, thereby forming the Company. As a result, the operating results of
the accounting acquiror (Nah Nah), rather than those of He-Ro, are the
operating results which are reported herein for the three-month period ended
August 31, 1997.
The Company's principal selling seasons are the Spring and
Fall seasons. The Company's Spring season begins in December and ends in May,
and the Fall season begins in June and ends in November. Products sold under the
Company's NiteLine and Black Tie labels have historically achieved higher sales
in the Fall season while products under the Company's Nah Nah Collection, Victor
Costa by Nahdree and Constance Saunders by Nahdree labels have achieved higher
sales in the Spring.
LIQUIDITY AND CAPITAL RESOURCES
On December 24, 1997, the Company entered into a Factoring and
Revolving Inventory Loan and Security Agreement (as amended as of May 31, 1998,
the "Heller Agreement") with Heller Financial, Inc. ("Heller"), replacing the
credit agreement with the Company's prior senior lender, Foothill Capital Corp.
("Foothill"). All obligations of the Company to Foothill were paid in full at
the time of the Acquisition.
The Heller Agreement provides that Heller will (i) purchase
eligible receivables and advance to specified operating affiliates of the
Company up to 85% of the amount thereof, (ii) in its discretion make revolving
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loans, secured by a lien on assets upon request, in amounts up to approximately
60% of eligible finished goods inventory located in the United States, plus
certain supplemental amounts (overadvances), and (iii) arrange for the issuance
of letters of credit secured by funds available to the Company, provided that
the amount of the loans and letters of credit outstanding at any time may not
exceed $20,000,000 in the aggregate.
The Heller Agreement contains certain financial covenants,
including (i) that the Company's tangible net worth shall not be less than $2.3
million during the fiscal year-ending May 31, 1999, (ii) working capital shall
not be less than negative $515,000, disregarding liabilities to affiliates
($2.15 million) at August 31, 1998, (iii) its current ratio shall not be less
than 1.30 to 1.00, and (iv) capital expenditures shall not exceed $450,000 in a
fiscal year. Taking into account the definitions in the Heller Agreement, the
Company was in compliance with such covenants at August 31, 1998.
CHANGES IN FINANCIAL CONDITIONS
A comparison of the balance sheet of the Company as at August
31, 1998, with its balance sheet as at May 31, 1998, indicates that (i) total
assets were $31.8 million at August 31, 1998, compared to $29.4 million at May
31, 1998, and (ii) working capital was a negative $0.85 million at August 31,
1998, as compared with negative $0.51 million at May 31, 1998. The increase in
current assets is primarily due to higher inventory in August 1998 than May
1998, because August is the beginning of the Company's Fall shipping season.
RESULTS OF OPERATIONS
EXPLANATORY NOTE: The results of operations for the three-
month period ended August 31, 1997, are presented as if the
Acquisition had taken place on June 1, 1997, and include the
combination of (i) the operating results of Nah Nah for the
three-month period ended August 31, 1997, as reported in the
unaudited condensed financial statements and notes thereto
included elsewhere herein, plus (ii) the operating results
of He-Ro as previously reported in He-Ro's Form 10-Q for the
fiscal quarter ended August 31, 1997. Such figures are
denoted by an (*)
THREE MONTHS ENDED AUGUST 31, 1998, COMPARED TO THREE MONTHS
ENDED AUGUST 31, 1997.
The Company's net loss was $0.70 million for the three-month
period ended August 31, 1998, compared to $0.82* million for the three-month
period ended August 31, 1997. Such decrease in net loss is a result of the
factors discussed below.
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The net sales for the three-month period ended August 31,
1998, were $11.2 million compared to $15.0* million for the three-month period
ended August 31, 1997. The decline in net sales is attributable to (i)
generally unstable market conditions, which led to reductions and/or delays by
customers in placing orders, and (ii) the closing of six out of 25 of the
Company's retail stores and the reduction in size of several other of its
stores during the fiscal-year ended May 31, 1998.
The cost of sales from operations for the three-month period
ended August 31, 1998, was $6.7 million (59.8% of net sales) compared to $10.1*
million (67.3%) for the three-month period ended August 31, 1997. The decrease
in cost of sales, as a percentage of net sales, is principally attributable to
the Company's success in reducing the number of deep-discount close-out sales
compared with the year-earlier period. As a result, gross profit for the
three-month period ended August 31, 1998, was $4.5 million, compared with
$4.9* million for the three-month period ended August 31, 1997.
Selling, general and administrative expenses for the
three-month period ended August 31, 1998, were $4.2 million (37.5%) compared to
$5.1* million (34.0%) for the three-month period ended August 31, 1997. Such
decrease in selling, general and administrative expenses is attributable to (i)
the planned elimination of overlapping functions of Nah Nah and He-Ro, including
the closing of one of the Company's showrooms, (ii) costs eliminated due to the
closing and reduction in size of retail stores referred to above, (iii) a
reduction in the Company's leased space in Hong Kong, and (iv) the
consolidation of the Company's warehouse space in the United States.
- ---------------------
* See Explanatory Note at Top of Section
YEAR 2000 PROBLEM.
The Company has retained a consulting firm to review the
impact of Year 2000 on its management information computer systems, which the
Company uses to coordinate and monitor the components of its business and
provide its management with information it needs to make informed decisions.
Such systems were designed to provide the Company with, among other things,
comprehensive order processing, predicitions, accounting and management
information for the marketing, manufacturing, importing and distribution
functions of the Company's business.
The consultant retained by the Company has recommended steps
to be taken to upgrade the Company's software and hardware regarding necessary
modifications to the Company's computer systems to deal with the Year 2000
problem. The Company is reviewing such recommendations to determine what steps
should be taken regarding the Year 2000, but has not yet reached a conclusion.
However, it currently appears that the Company will have to spend approximately
$150,000 to complete the necessary modifications of its computer systems. The
Company believes that such modifications will be able to be completed by the
end of August 1999, which will enable a change-over to be fully-effective by
December 31, 1999.
However, there can be no assurance that the project will
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accomplish its objectives or that such costs may not increase as the project
continues. The Company will expense all such costs as they are incurred. In
order to assess and remedy the Year 2000 problem, the Company has foregone
certain planned information system projects, including a hardware upgrade, a
custom code upgrade, the installation of a test system, and a system and
integration test.
The failure to correct a Year 2000 problem could result in an
interruption in certain normal business activities or operations. Such
interruption could have an adverse affect on the Company's results of
operations, liquidity, and financial condition. There is general uncertainty
inherent in the Year 2000 problem, particularly with regards to the effects the
failure of computer systems operated by the Company's suppliers and vendors
might have on the Company's operations. The Company believes that with the
completion of the Year 2000 project, the possibility of significant
interruptions of its normal operations should be greatly reduced, although there
is no assurance that such belief will not prove to be overly optimistic.
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PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
In December 1997, Mr. Hong J. Han acquired from Mrs. Della
Rounick, subordinated indebtedness of the Company to the Estate of Herbert
Rounick (of which Mrs. Rounick is executrix) in the amount of $5,482,117 (Mrs.
Rounick retained $1,209,064 of such indebtedness). Such debt (i) bears interest
at 9.278% per annum payable on the first of each month commencing January 1,
1998, or otherwise on demand, and (ii) is subordinated to Heller (see "Liquidity
and Capital Resources" above) pursuant to the Subordination Agreement (the
"Subordination Agreement") dated December 24, 1997. The Company has defaulted on
the payment of interest to Mr. Han and Mrs. Rounick on such indebtedness, and at
October 15, 1998, is in arrears in the amount of $504,835 on the payment of such
interest.
In December 1997, Mr. Han also acquired all of the obligations
due and owing by the Company to its former bank group ("Bank Group"), and all
the collateral therefor, under the fourth amended and restated revolving credit
agreement dated May 15, 1995, between the Company and the Bank Group, in the
aggregate principal amount of $2,750,000. These obligations are evidenced by
term notes bearing interest at 2% above the prime rate. Pursuant to the terms of
the Subordination and Intercreditor Agreement dated December 24, 1997, between
Heller and Mr. Han, such indebtedness is subordinated to Heller (see "Liquidity
and Capital Resources" above). The Company has defaulted on the payment of
interest to Mr. Han on such indebtedness, and at October 15, 1998, is in arrears
in the amount of $158,525 on the payment of such interest.
ITEM 6. EXHIBITS AND OTHER REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation of Registrant.
Incorporated by reference to Exhibit 3.1 of
Registrant's Annual Report on Form 10-K for the
fiscal year ended May 31, 1995 ("Registrant's 1995
10-K").
3.2 Certificate of Amendment to Articles of Incorporation
of Registrant changing the name of Registrant to The
Nahdree Group, Ltd., effective May 31, 1998.
Incorporated by reference to Exhibit 3.2 of Regist-
rant's Annual Report on Form 8-K for the fiscal year
ended May 31, 1998 ("Registrant's 1998 10-K").
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3.3 By-Laws of Registrant, as amended. Incorporated by
reference to Exhibit 3.2 of Registrant's 1995 10-K.
4.1 Specimen Certificate of Common Stock of Registrant.
Incorporated by reference to Exhibit 4.1 of Regist-
rant's 1998 10-K.
10.1 Stock Purchase Agreement dated October 16, 1997,
among Registrant, Vasiliki Della Pasvantidou Rouni-
ck ("Della Rounick"), Nah Nah Collection, Inc.("Nah
Nah"), and Hong J. Han. Incorporated by reference to
Exhibit 2.1 of Registrant's Current Report on Form
8-K dated December 31, 1997.
10.2 Debt Purchase and Intercreditor Agreement dated
December 24, 1997, among Hong J. Han, Della Rounick
and The He-Ro Group, Inc. Incorporated by reference
to Exhibit C of Form 13-D of Hong J. Han filed
January 13, 1998.
10.3 Guaranty by Registrant and its subsidiaries in favor
of Hong J. Han and Della Rounick as Executrix of the
Estate of Herbert Rounick dated December 24, 1997.
Incorporated by reference to Exhibit 10.3 of
Registrant's Form 10-Q for the quarter ended Febru-
ary 28, 1998.
10.4 Registration Rights Agreement dated December 24,
1997, between Registrant and Hong J. Han.
Incorporated by reference to Exhibit 10.4 of
Registrant's Form 10-Q for the quarter ended February
28, 1998.
10.5 Amended and Restated Employment Agreement dated
November 1, 1997, between The He-Ro Group, Inc. and
Katherine Wong. Incorporated by reference to Exhibit
10.5 of Registrant's Form 10-Q for the quarter ended
February 28, 1998.
10.6 Amended and Restated Employment Agreement dated
November 1, 1997, between The He-Ro Group, Inc. and
David Minka. Incorporated by reference to Exhibit
10.6 of Registrant's Form 10-Q for the quarter ended
February 28, 1998.
10.7 Agreement dated July 30, 1997, among Nah Nah,
C.A.S. Designs, Inc. and Constance Saunders.
Incorporated by reference to Exhibit 10.7 of Regis-
trant's Form 10-Q for the quarter ended February
28, 1998.
10.8 Employment Agreement dated January 1, 1997, between
Nah Nah, and Victor Costa. Incorporated by refer-
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ence to Exhibit 10.8 of Registrant's Form 10-Q for
the quarter ended February 28, 1998.
10.9 Sublease dated March 6, 1997, between The He-Ro
Group, Inc. (as sublessor) and Harve Benard (as
sublessee) relating to premises located at One
American Way, Secaucus, New Jersey. Incorporated by
reference to Exhibit 10.2 of Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31,
1997.
10.10.1 License Agreement dated June 1, 1990, between The
He-Ro Group, Inc., and Oleg Cassini, Inc. ("Cassini
License"). Incorporated by reference to Exhibit 10.8
of Registrant's 1995 10-K.
10.10.2 Letter Agreement dated December 15, 1995, from Oleg
Cassini, Inc. to The He-Ro Group, Inc., amending the
Cassini License. Incorporated by reference to Exhibit
10.8.1 of Registrant's Annual Report on Form 10-K for
the fiscal year ended May 31, 1996 ("Registrant's
1996 10-K").
10.10.3 Agreement dated December 30, 1997, between The He-Ro
Group, Inc., and Oleg Cassini, Inc., amending the
Cassini License. Incorporated by reference to Exhibit
10.4 of Registrant's Form 10-Q for the quarter ended
February 28, 1998.
10.11 1991 Stock Option Plan. Incorporated by reference
to Exhibit 10.12 of Registrant's 1995 10-K.
10.12 1992 Outside Director Stock Option Plan. Incorpo-
rated by reference to Exhibit 10.13 of Registrant's
1995 10-K.
10.13 1993 Outside Director Stock Option Plan. Incorpo-
rated by reference to Exhibit 10.14 of Registrant's
1995 10-K.
10.14 Amended and Restated 1994 Outside Director Stock
Option Plan. Incorporated by reference to Exhibit
10.15 of Registrant's 1996 10-K.
10.15 License Agreement between N.N.C.S., Inc. and The
Nahdree Group, Ltd. dated as of June 1, 1998.
Incorporated by reference to Exhibit 10.15 of
Registrant's 1998 10-K.
*27 Financial Data Schedule
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99.1 Irrevocable Proxy granted by Della Rounick in favor
of Hong J. Han. Incorporated by reference to
Exhibit B of Form 13-D of Hong J. Han filed January
13, 1998.
99.2 Factoring Agreement dated December 24, 1997, among
The He-Ro Group, Inc., HRNL, Inc., Nah Nah, Regist-
rant, certain other subsidiaries and Heller Finan-
cial, Inc. Incorporated by reference to Exhibit 99.1
of Registrant's Current Report on Form 8-K dated
December 31, 1997.
99.3 Subordination Agreement dated December 24, 1997,
among Hong J. Han, Nah Nah, and Heller Financial
Inc. subordinating indebtedness owed by Nah Nah to
Hong J. Han. Incorporated by reference to Exhibit
99.3 of Registrant's Form 10-Q for the quarter
ended February 28, 1998.
99.4 Subordination Agreement dated December 24, 1997,
among Della Rounick, Hong J. Han, The He-Ro Group,
Inc., and Heller Financial Inc. subordinating
indebtedness owed by The He-Ro Group, Inc. to Della
Rounick and Hong J. Han. Incorporated by reference to
Exhibit 99.4 of Registrant's Form 10-Q for the
quarter ended February 28, 1998.
99.5 Letter agreement dated August 27, 1998, between The
Nahdree Group, Inc. f/k/a The He-Ro Group, Inc., Nah
Nah, HRNL, Inc., Registrant, certain other
subsidiaries and Heller Financial, Inc., amending as
of May 31, 1998, the Factoring and Revolving
Inventory Loan and Security Agreement dated Decem-
ber 24, 1997, between The He-Ro Group, Inc., Nah Nah,
HRNL, Inc., Registrant, certain other subsidiaries
and Heller Financial, Inc. Incorporated by reference
to Exhibit 99.5 of Registrant's 1998 10-K.
- -------------------
* Exhibit filed herewith
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the three-month
period ended August 31, 1998.
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<PAGE> 17
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.
THE NAHDREE GROUP, LTD.
Date: October 15, 1998 By: /s/ Hong J. Han
------------------------------
Hong J. Han
President
Date: October 15, 1998 /s/ Chris Han
-----------------------------
Chris Han
Chief Financial Officer
- 17 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 1998, AND CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,532,000
<ALLOWANCES> 300,000
<INVENTORY> 15,656,000
<CURRENT-ASSETS> 19,058,000
<PP&E> 7,762,000
<DEPRECIATION> 6,660,000
<TOTAL-ASSETS> 31,854,000
<CURRENT-LIABILITIES> 19,918,000
<BONDS> 0
0
0
<COMMON> 120,000
<OTHER-SE> 2,085,000
<TOTAL-LIABILITY-AND-EQUITY> 31,854,000
<SALES> 11,193,000
<TOTAL-REVENUES> 11,193,000
<CGS> 6,694,000
<TOTAL-COSTS> 6,694,000
<OTHER-EXPENSES> 4,523,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 680,000
<INCOME-PRETAX> (704,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (704,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (704,000)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
