-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UC90CwIR6kYinBLg+dlG+sfM5LRjlCzz+iQesYBJ/+/ik7YtrIhN6Z50xD56wz5/ fPxizMYszy087tt+wD9uYQ== 0000950117-03-005277.txt : 20031215 0000950117-03-005277.hdr.sgml : 20031215 20031215171204 ACCESSION NUMBER: 0000950117-03-005277 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20031101 FILED AS OF DATE: 20031215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: G&G RETAIL INC CENTRAL INDEX KEY: 0001088811 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] STATE OF INCORPORATION: DE FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-81307 FILM NUMBER: 031055255 BUSINESS ADDRESS: STREET 1: 520 EIGHTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2122794961 10-Q 1 a36665.txt G&G RETAIL, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended November 1, 2003 ------------------------------------------------ Commission file number 333-81307 G+G Retail, Inc. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 22-3596083 - ------------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 520 Eighth Avenue, New York, New York 10018 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (212) 279-4961 --------------------------- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report. Indicate by check [X] 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 by check mark [X] whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class B Outstanding at December 15, 2003 - ------------------------------------- -------------------------------- Common Stock par value $.01 per share 10 shares CONTENTS
Page No. -------- Part I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - November 1, 2003 and 3 February 1, 2003 Condensed Consolidated Statements of Operations - Three and Nine Months Ended November 1, 2003 and November 2, 2002 4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended November 1, 2003 and November 2, 2002 5 Notes to Unaudited Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of 7-12 Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk 12 Item 4. Controls and Procedures 12 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 13 Signature Page 14
2 Part I. Financial Information Item 1. Financial Statements G+G Retail, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except par value and share data)
November February 1, 2003 1, 2003 --------------------------------- Assets Current assets: Cash and short-term investments $ 755 $ 21,526 Accounts receivable 964 1,782 Merchandise inventories 25,451 15,575 Prepaid taxes and other expenses 2,120 1,791 Deferred tax assets 2,436 2,436 --------------------------------- Total current assets 31,726 43,110 Property and equipment, net 51,325 52,983 Deferred financing cost, net 2,287 2,971 Goodwill 57,720 57,720 Trademarks 45,900 45,900 Other assets 178 184 --------------------------------- Total assets $189,136 $202,868 ================================= Liabilities and stockholder's equity Current liabilities: Accounts payable $ 21,592 $ 16,756 Accrued expenses 18,904 20,609 Accrued interest 5,460 2,517 Short-term borrowings 7,738 - Current portion of capital lease 1,376 1,719 --------------------------------- Total current liabilities 55,070 41,601 Deferred tax liability 2,203 3,220 Capital lease - 944 Long-term debt 103,430 102,563 --------------------------------- Total liabilities 160,703 148,328 Commitments and contingencies Stockholder's equity: Class B common stock, par value $.01 per share, 1,000 shares authorized, 10 shares issued and outstanding - - Additional paid-in capital 50,298 50,298 (Accumulated deficit) retained earnings (21,865) 4,242 --------------------------------- Total stockholder's equity 28,433 54,540 --------------------------------- Total liabilities and stockholder's equity $189,136 $202,868 =================================
See accompanying notes. 3 G+G Retail, Inc. Condensed Consolidated Statements of Operations (Unaudited) (In thousands)
Three months Three months Nine months Nine months ended November ended November ended November ended November 1, 2003 2, 2002 1, 2003 2, 2002 ------------------------------------------------------------------ Net sales $90,218 $97,364 $268,829 $291,151 Cost of sales (including occupancy costs) 60,357 61,540 179,840 184,324 Selling, general, administrative and buying expenses 33,105 32,383 96,931 95,066 Depreciation and amortization 2,650 2,686 8,475 8,304 ------------------------------------------------------------------ Operating (loss) income (5,894) 755 (16,417) 3,457 Interest expense 3,594 3,596 10,761 10,777 Interest income 4 33 54 106 ------------------------------------------------------------------ Loss before benefit from income taxes (9,484) (2,808) (27,124) (7,214) Benefit from income taxes (10) (1,194) (1,017) (3,065) ------------------------------------------------------------------ Net loss $(9,474) $(1,614) $(26,107) $ (4,149) ==================================================================
See accompanying notes. 4 G+G Retail, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months Nine months ended ended November 1, 2003 November 2, 2002 -------------------------------------- Operating activities Net loss $(26,107) $(4,149) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 8,475 8,304 Amortization of debt issue costs 1,656 1,539 Write-off of closed store fixed assets 206 216 Deferred taxes (1,017) (3,065) Changes in assets and liabilities: Accounts receivable, prepaid expenses and other assets 495 (1,070) Merchandise inventories (9,876) (13,552) Accounts payable, accrued expenses and accrued interest 6,074 15,260 --------- -------- Net cash (used in) provided by operating activities (20,094) 3,483 Investing activities Capital expenditures (7,023) (10,590) --------- -------- Net cash used in investing activities (7,023) (10,590) Financing activities Proceeds from short-term borrowings 11,187 - Payment of short-term borrowings (3,449) - Payment of debt issuance costs (105) - Payment of capital lease obligations (1,287) (1,127) --------- -------- Net cash provided by (used in) financing activities 6,346 (1,127) --------- -------- Net decrease in cash and short-term investments (20,771) (8,234) Cash and short-term investments, beginning of period 21,526 15,328 --------- -------- Cash and short-term investments, end of period $ 755 $ 7,094 ========= ======== Supplemental cash flow disclosures Cash paid for: Interest $ 6,118 $ 6,312 ========= ======== Income taxes, net of cash refunds of $25 and $31, respectively $ 119 $ 286 ========= ========
See accompanying notes 5 G+G Retail, Inc. Notes to Unaudited Condensed Consolidated Financial Statements 1. Principles of Consolidation and Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company's management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly: (1) its financial position as of November 1, 2003, (2) the results of its operations for the three and nine months ended November 1, 2003 and November 2, 2002 and (3) its cash flows for the three and nine months ended November 1, 2003 and November 2, 2002. The balance sheet at February 1, 2003 has been derived from the consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the fiscal year ended February 1, 2003 filed on April 30, 2003. The interim operating results are not necessarily indicative of the results that may be expected for an entire year. 2. Short-Term Borrowings The Company is party to a Loan and Security Agreement that expires on May 1, 2006 or alternatively, on May 1, 2007 if either of the following events occur before May 1, 2006: (a) the maturity date of all of the Company's senior notes due May 15, 2006 (the "Senior Notes") have been extended until after May 1, 2007; or (b) all of the Senior Notes have been redeemed, retired, purchased or otherwise acquired with proceeds of equity securities sold by the Company or with the proceeds of indebtedness incurred by the Company with a maturity date after May 1, 2007. The Loan and Security Agreement provides for a revolving credit facility (the "Facility"), subject to eligible inventory and credit card receivables, not to exceed $30.0 million, of which $10.0 million can be used for letters of credit. The outstanding borrowings under the Facility at November 1, 2003 totaled $7,738,000. Outstanding letters of credit under the Facility totaled $974,852 at November 1, 2003. Interest on outstanding borrowings can range either from Prime to Prime plus .25% or from 1.50% over the Eurodollar Rate to a maximum 2.25% over the Eurodollar Rate, based on the profitability and amount of indebtedness of the Company. On September 25, 2003, the Company amended its credit facility, eliminating its minimum net worth covenant and replaced it with a minimum maintained excess availability requirement of $3.75 million (as defined by the agreement). The $3.75 million excess availability requirement is in effect until February 1, 2004, at which time it will be re-established but it shall not exceed $7.5 million. 3. Goodwill and Other Indefinite Lived Intangible Assets The Company adheres to Statement of Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under SFAS 142, goodwill and other intangible assets that have indefinite useful lives are no longer amortized, but are subject to at least an annual assessment of impairment by applying a fair value based test, as specifically provided in the Statement. The net loss for the nine-month period may be an impairment indicator of goodwill. The Company believes that goodwill impairment is probable but not estimable at this time. An impairment test will be performed in the fourth quarter of fiscal 2004 at which time an impairment charge, if any, will be recorded. The Company believes that there will be no impairment to its trademarks. The accumulated amortization of goodwill and trademarks as of November 1, 2003 and February 1, 2003 was $13.3 million. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview A decline of 13.8% in same store sales during the first nine months of fiscal 2004 (compared to the same period in fiscal 2003) resulted in a net loss of $26.1 million (including interest expense of $10.8 million) during this period. We are discussing with our Senior Note holders the restructuring of our Senior Note obligations to reduce our debt service. We are also in discussions regarding the investment of additional capital. If these efforts are unsuccessful, we may be unable to meet our fiscal 2005 cash requirements. The discussions concerning restructuring of our Senior Note obligations and investment of additional capital are progressing; however, there can be no assurance these efforts will be successful. We are a leading national mall-based retailer of popular price female junior and pre-teen apparel. For over 30 years, we and our predecessors have built a reputation for providing fashion apparel and accessories distinctly targeted at teenaged women. Our core customers are young women principally between the ages of 13 to 19 years old. We sell substantially all of our merchandise under private label names including Rave, Rave Up, Rave Girl, R4R, and Shut Eye, which provide our customers with fashionable, high quality apparel and accessories at lower prices than brand name merchandise. Our emphasis on sourcing merchandise domestically and our efficient distribution system allow for short inventory lead times, which facilitates quick response to the latest fashion trends. As of November 1, 2003, we had 599 operating stores principally located in major enclosed regional shopping malls throughout the United States, Puerto Rico, and the U.S. Virgin Islands under the G+G, Rave and Rave Girl names. Our G+G/Rave stores average approximately 2,400 gross square feet with approximately 25 feet of mall frontage and are designed to create a lively and exciting shopping experience for teenaged customers. In July 1999, we started our Rave Girl chain of stores, which sells fashion apparel and accessories targeted at girls aged 7 to 12 years old. As of November 1, 2003, there were 108 Rave Girl stores in operation throughout the United States and Puerto Rico. Our Rave Girl stores are approximately 2,000 gross square feet and are designed with bright colors, unique lighting and exciting graphics. Results of Operations Comparison of The Third Quarter of Fiscal 2004 and The Third Quarter of Fiscal 2003 Net sales decreased to $90.2 million in the third quarter of fiscal 2004 from $97.4 million in the third quarter of fiscal 2003. The $7.2 million or 7.4% decrease in net sales was due to a $13.1 million or 13.9% decrease in same store sales compared to the third quarter of fiscal 2003. This decrease was offset by the opening of new stores, which contributed $5.9 million to net sales in the third quarter of fiscal 2004. Average sales per gross square foot decreased 12.5% to $63 in the third quarter of fiscal 2004 from $72 in the third quarter of fiscal 2003. We operated 599 stores at the end of the third quarter of fiscal 2004 as compared to 574 stores at the end of the third quarter of fiscal 2003, as a result of opening 44 stores and closing 19 stores. Cost of sales, including occupancy costs, decreased 1.8% to $60.4 million in the third quarter of fiscal 2004 from $61.5 million in the third quarter of fiscal 2003. As a percentage of net sales, cost of sales including occupancy costs, increased 3.9% from 63.1% in the third quarter of fiscal 2003 to 67.0% in the third quarter of fiscal 2004. This 3.9% increase resulted from a 1.4% increase in the cost of sales and a 2.5% increase in occupancy costs as a percent of sales compared to the third quarter of fiscal 2003. The increase in the cost of sales as a percentage of net sales was due to an increase in markdowns in the third quarter of fiscal 2004 compared to the third quarter of fiscal 2003 offset by an increase in the initial mark-on. The 7 occupancy cost increase as a percent of sales resulted from increases in occupancy costs coupled with the decrease in same store sales. In the third quarter of fiscal 2004, selling, general, administrative and buying expenses totaled $33.1 million compared to $32.4 million in the third quarter of fiscal 2003. As a percent of sales, these expenses increased from 33.3% in the third quarter of fiscal 2003 to 36.7% in the third quarter of fiscal 2004. The increase in selling, general, administrative and buying expenses is the result of additional costs related to the new store openings. The increase as a percent of sales is primarily due to the decrease in same store sales. Depreciation and amortization expense for the third quarter of fiscal 2004 and the third quarter of fiscal 2003 was $2.7 million. Interest expense in the third quarter of fiscal 2004 was $3.6 million or 4.0% of net sales as compared to $3.6 million or 3.7% of net sales for the third quarter of fiscal 2003. Net interest expense reflects interest on our senior notes, short-term borrowings, amortization of the $7.3 million original issue discount on our senior notes, the $470,000 value assigned to the warrants issued by G&G Retail Holdings, Inc., our parent company, the deferred financing costs associated with the senior notes and interest on our capital leases. The income tax benefit for the third quarter of fiscal 2004 was $10,000 as compared to a $1.2 million or a 42.5% income tax benefit in the third quarter of fiscal 2003. The $10,000 benefit recorded in the third quarter of fiscal 2004 was the result of determining the estimated realization of the deferred tax asset as of November 1, 2003. The net loss increased from $1.6 million in the third quarter of fiscal 2003 to a net loss of $9.5 million in the third quarter of fiscal 2004 due to the factors discussed above. Comparison of The First Nine Months of Fiscal 2004 and The First Nine Months of Fiscal 2003 Net sales decreased $22.4 million or 7.7% to $268.8 million in the first nine months of fiscal 2004 as compared to $291.2 million in the first nine months of fiscal 2003. The decrease in net sales was due to a $38.9 million or 13.8% decrease in same store sales compared to the first nine months of fiscal 2003. This decrease was offset by the opening of new stores, which contributed $16.5 million to net sales in the first nine months of fiscal 2004. Average sales per gross square foot decreased 11.9% to $193 in the first nine months of fiscal 2004 from $219 in the first nine months of fiscal 2003. Cost of sales, including occupancy costs, decreased 2.4% to $179.8 million in the first nine months of fiscal 2004 from $184.3 million in the first nine months of fiscal 2003. As a percentage of net sales, cost of sales including occupancy costs increased 3.6% from 63.3% in the first nine months of fiscal 2003 to 66.9% in the first nine months of fiscal 2004. This 3.6% increase resulted from a 1.4% increase in the cost of merchandise and a 2.2% increase in occupancy costs as a percent of sales. The increase in the cost of merchandise as a percentage of net sales was due to an increase in markdowns in the first nine months of fiscal 2004 compared to the first nine months of fiscal 2003. This increase in markdowns was offset by an increase in the initial mark-on. The occupancy cost increase as a percent of sales resulted mainly from the decrease in same store sales, coupled with increases in occupancy costs. In the first nine months of fiscal 2004, selling, general, administrative and buying expenses totaled $96.9 million compared to $95.1 million in the first nine months of fiscal 2003. As a percent of sales, these expenses increased from 32.7% in the first nine months of fiscal 2003 to 36.0% in the first nine months of fiscal 2004. The $1.8 million increase resulted from additional selling costs related to new store openings, 8 and an increase in administrative costs. The increase as a percent of sales resulted from the decrease in same store sales. Depreciation and amortization expense for the first nine months of fiscal 2004 was $8.5 million as compared to $8.3 million for the first nine months of fiscal 2003. Interest expense in the first nine months of fiscal 2004 was $10.7 million or 4.0% of net sales as compared to $10.8 million or 3.7% of net sales for the first nine months of fiscal 2003. Net interest expense reflects interest on our senior notes, short-term borrowings, amortization of the $7.3 million original issue discount on our senior notes, the $470,000 value assigned to the warrants issued by G&G Retail Holdings, Inc., our parent company, the deferred financing costs associated with the senior notes and interest on our capital leases. The income tax benefit for the first nine months of fiscal 2004 was $1.0 million as compared to $3.1 million, or an income tax benefit rate of 42.5% for the first nine months of fiscal 2003. The income tax benefit rate of 3.7% for the nine months of fiscal 2004 is predicated on the estimated realization of the deferred tax asset. The net loss increased from $4.1 million in the first nine months of fiscal 2003 to a loss of $26.1 million in the first nine months of fiscal 2004 due to the factors discussed above. Liquidity and Capital Resources Our primary sources of liquidity are cash flow from operating activities and borrowings under our revolving credit facility. Our primary cash requirements are for: (i) seasonal working capital; (ii) the construction of new stores; (iii) the remodeling or upgrading of existing stores; (iv) upgrading and maintaining our computer system; and (v) interest on our senior notes. Our revolving credit facility provides for a line of credit in an amount of up to $30.0 million (including a sub limit of $10.0 million for letters of credit). We may use the revolving credit facility for general operating, working capital and other corporate purposes. Amounts available under the revolving credit facility are subject to the value of our eligible inventory and credit card receivables, subject to certain conditions. The borrowing base provides for seasonal fluctuations in inventory with peak borrowing availability during the months of July through November. Interest on outstanding borrowings can range either from Prime to Prime plus .25% or from 1.50% over the Eurodollar Rate to a maximum 2.25% over the Eurodollar Rate, based on the profitability and amount of indebtedness of the Company. The facility also contains other customary restrictive covenants including limitations on changes of ownership, transactions with affiliates, dividends, additional indebtedness, creation of liens, asset sales, acquisitions, conduct of business and capital expenditures. Our obligations under the revolving credit facility are secured by a lien on all or substantially all of our assets, excluding our leasehold interests. As of November 1, 2003, we had borrowings outstanding under the revolving credit facility totaling $7,738,000 and $974,852 of letters of credit outstanding. Our revolving credit facility expires on May 1, 2006 or alternatively on May 1, 2007 if either of the following events occur before May 1, 2006: (a) the maturity date of all of the Senior Notes have been extended until after May 1, 2007 or (b) all of the Senior Notes have been redeemed, retired, purchased or otherwise acquired with proceeds of equity securities sold by us or with the proceeds of indebtedness incurred by us with a maturity date after May 1, 2007. On September 25, 2003 the Company amended its credit facility, by replacing its minimum net worth covenant with a minimum maintained excess availability requirement of $3.75 million (as defined by the agreement). The $3.75 million excess availability requirement is in effect until February 1, 2004 at which time it will be re-established but it shall not exceed $7.5 million. As of November 1, 2003, the availability under the revolving credit facility was $14.3 million before the $3.75 million excess availability requirement. 9 Net cash used in operating activities in the first nine months of fiscal 2004 was $20.1 million as compared to net cash provided by operating activities of $3.5 million in the first nine months of fiscal 2003. The increase in net cash used in operating activities in the first nine months of fiscal 2004, as compared to the first nine months of fiscal 2003, was principally due to an increase of $22.0 million in our net loss. Capital expenditures for the first nine months of fiscal 2004 and the first nine months of fiscal 2003 were $7.0 million and $10.6 million, respectively. Management continues to monitor its capital expenditures and estimates that capital expenditures for the remaining three months of fiscal 2004 will be approximately $1.0 million. We review the operating performance of our stores on an ongoing basis to determine which stores, if any, to expand or close. We closed seventeen stores in fiscal 2003, ten stores in the first nine months of fiscal 2004 and anticipate closing an additional eight stores during the remaining three months of fiscal 2004. Eight stores were closed in the first nine months of fiscal 2003. As of November 1, 2003, our capital lease obligation for the purchase of the point of sale equipment and software was $1.4 million. The lease term is five years from the date the initial equipment was financed with variable interest rates, based on the purchase date. Principal and interest payments are $1.9 million and $961,000 for the fiscal years ending 2004 and 2005 respectively. As of November 1, 2003, we had $755,000 in cash. We historically have maintained negligible accounts receivable balances since our customers primarily pay for their purchases with cash, checks and third-party credit cards, which are promptly converted to cash. As of November 1, 2003, our indebtedness under our senior notes totaled $103.4 million, which reflects the aggregate face amount of the notes of $107.0 million, net of $3.4 million of unamortized original issue discount, and approximately $171,000 of unamortized value assigned to the warrants issued by G&G Retail Holdings, Inc., our parent company, in connection with our senior note issuance. The senior notes are due May 15, 2006 and bear interest at 11% per annum, which is payable semi-annually on May 15 and November 15. We have minimum lease commitments (excluding percentage rents and early termination provisions) under noncancelable operating leases as follows:
Fiscal year ending in: (In Thousands) 2004 $ 31,356 2005 28,035 2006 24,862 2007 19,367 2008 15,327 Thereafter 41,235 -------- $160,182 ========
We believe that our cash flow from operating activities, cash on hand and borrowings available under our revolving credit facility will be sufficient to meet our operating, capital expenditure and debt service requirements through the end of fiscal 2004. See the first paragraph in the Overview discussion above concerning fiscal 2005 cash requirements. The sufficiency of our cash flow is affected by numerous factors affecting our operations, including factors beyond our control. See the "Statement Regarding Forward Looking Disclosures" below. 10 If a "change of control" (as defined in the indenture agreement for our senior notes) occurs, we will be required under the indenture to offer to repurchase all the notes. However, we may not have sufficient funds at the time of the change of control to make the required repurchases, or restrictions in our revolving credit facility may prohibit the repurchases. We may not be able to raise enough money to finance the change of control offer required by the indenture related to the senior notes. If there is a change of control, we could be in default under the indenture. In addition, upon a change of control our parent company may not have sufficient funds to redeem its preferred stock as required in such event under our parent company's certificate of incorporation unless we pay a dividend of such amount to it. Critical Accounting Policies The preparation of the foregoing unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates and assumptions are based on management's judgment and available information and, consequently, actual results could be different from these estimates. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2003 for a description of our critical accounting policies involving significant judgment by our management. Seasonality and Quarterly Operating Results Our fourth fiscal quarter historically accounts for the largest percentage of our annual net sales. Our first fiscal quarter historically accounts for the smallest percentage of annual net sales. In fiscal 2003, our first quarter and fourth quarter accounted for approximately 23.2% and 29.2% of annual net sales, respectively. Our quarterly results of operations may also fluctuate significantly as a result of a variety of factors, including the timing of store openings, the amount of revenue contributed by new stores, changes in the mix of products sold, the timing and level of markdowns, the timing of store closings and expansions, competitive factors, weather fluctuations and general economic conditions. Inflation We do not believe that inflation has had a material effect on the results of operations during the past three fiscal years. However, our business may be affected by inflation in the future. Statement Regarding Forward Looking Disclosures Certain sections of this Report, including the preceding "Management's Discussion and Analysis of Financial Condition and Results of Operations," contain various forward looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, which represent our expectations or beliefs concerning future events. We caution that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward looking statements, including, without limitation, our ability to expand and to increase comparable store sales, the sufficiency of our working capital and cash flows from operating activities, a decline in the demand for our merchandise, our ability to locate and obtain acceptable store sites and lease terms or renew existing leases, our ability to gauge the fashion tastes of our customers and provide merchandise that satisfies customer demand, our management's ability to manage expansion, the effect of economic conditions, changes in customer shopping habits, including the effect that the September 11, 11 2001 terrorist attacks had on the United States and events following the attacks may have on mall shopping, the effect of severe weather or natural disasters and the effect of competitive pressures from other retailers. For a discussion of these and other factors that could cause results to differ from the expectations and projections expressed in this report, see Item 1. Business - Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended February 1, 2003, filed with the Securities and Exchange Commission on April 30, 2003. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable. Item 4. Controls and Procedures As of the end of the period covered by this report, our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") have evaluated our disclosure controls and procedures. Our CEO and CFO have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports we file and submit and the Exchange Act of 1934 is recorded, processed, summarized and reported to our management, CEO and CFO to allow timely decisions regarding required disclosure within the time periods specified in the Securities and Exchange Commission's rules and forms. 12 Part II. Other Information Item 6 - Exhibits and Reports on Form 8-K: --------------------------------- (a) Exhibits 3.01 Certificate of Incorporation of G+G Retail, Inc., incorporated by reference to the registrant's Registration Statement on Form S-4, declared effective by the SEC on October 4, 1999 (File No. 333-81307) (the "S-4"). 3.02 Amended and Restated By-Laws of G+G Retail, Inc., incorporated by reference to the S-4. 4.01 Indenture, dated as of May 17, 1999, by and between G+G Retail, Inc., as issuer, and U.S. Bank Trust National Association, as trustee, incorporated by reference to the S-4. 4.02 Form of 11% Senior Note due 2006 of G+G Retail, Inc., incorporated by reference to the S-4. 4.03 A/B Exchange Registration Rights Agreement, dated as of May 17, 1999, by and between G+G Retail, Inc. and U.S. Bancorp Libra, incorporated by reference to the S-4. *10.1 Second Amendment, dated as of September 25, 2003, to Loan and Security Agreement, dated as of May 2, 2001, between The CIT Group/Business Credit, Inc. and G+G Retail, Inc. *31.1 Certification of Jay Galin required by Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *31.2 Certification of Michael Kaplan required by Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *32.1 Certification of Jay Galin pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *32.2 Certification of Michael Kaplan pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K None
- ----------- * Filed herewith. 13 Signature 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. G+G RETAIL, INC. Date: December 15, 2003 By: /s/ Michael Kaplan ----------------------------------------- Michael Kaplan, Chief Financial Officer (signing on behalf of the registrant and as principal financial officer) 14 EXHIBIT INDEX
Exhibit Description ------- ----------- 3.01 Certificate of Incorporation of G+G Retail, Inc., incorporated by reference to the registrant's Registration Statement on Form S-4, declared effective by the SEC on October 4, 1999 (File No. 333-81307) (the "S-4"). 3.02 Amended and Restated By-Laws of G+G Retail, Inc., incorporated by reference to the S-4. 4.01 Indenture, dated as of May 17, 1999, by and between G+G Retail, Inc., as issuer, and U.S. Bank Trust National Association, as trustee, incorporated by reference to the S-4. 4.02 Form of 11% Senior Note due 2006 of G+G Retail, Inc., incorporated by reference to the S-4. 4.03 A/B Exchange Registration Rights Agreement, dated as of May 17, 1999, by and between G+G Retail, Inc. and U.S. Bancorp Libra, incorporated by reference to the S-4. *10.1 Second Amendment, dated as of September 25, 2003, to Loan and Security Agreement, dated as of May 2, 2001, between The CIT Group/Business Credit, Inc. and G+G Retail, Inc. *31.1 Certification of Jay Galin required by Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *31.2 Certification of Michael Kaplan required by Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *32.1 Certification of Jay Galin pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *32.2 Certification of Michael Kaplan pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
- ------------- * Filed herewith. 15 EX-10 3 ex10-1.txt EXHIBIT 10.1 EXHIBIT 10.1 SECOND AMENDMENT dated as of September 25, 2003 (the "Amendment") to LOAN AND SECURITY AGREEMENT dated as of May 2, 2001 (as amended, modified, supplemented or restated from time to time, the "Loan Agreement") between THE CIT GROUP/BUSINESS CREDIT, INC. (the "Lender") and G+G Retail, Inc. (the "Borrower"). Terms which are capitalized in this Amendment and not otherwise defined shall have the meanings ascribed to such terms in the Loan Agreement. WHEREAS, Borrower has requested that Lender consent to the modification of certain terms and provisions contained in the Loan Agreement; and WHEREAS, Lender has agreed to the foregoing request, on the terms and conditions contained in this Amendment; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section One. Amendments. Upon the satisfaction of the conditions set forth in Section Two hereof, the Loan Agreement shall be and is hereby amended as follows: (a) Section 1. Definitions. Section 1 is amended by (i) adding thereto the defined term "Minimum Availability", and the following definition thereof, (ii) adding thereto the defined term "2005 Covenants", and the following definition thereof, and (iii) adding thereto the defined term "2005 Plan", and the following definition thereof: "'Minimum Availability' shall mean the amount, as determined by Lender, calculated at any time, equal to the difference between (a) the amount of the Loans available to Borrowers as of such time based on the applicable lending formulas multiplied by the Cost of Eligible Inventory and the amount of Eligible Accounts, respectively, as determined by Lender, and subject to the sublimits and Availability Reserves from time to time established by Lender hereunder and (b) the sum of (i) the amount of all then outstanding and unpaid Obligations, plus (ii) (A) the aggregate amount of all trade payables of Borrowers which are more than forty-five (45) days past due as of such time minus (B) the lesser of (x) the amount of all trade payables which are more than forty-five (45) days past due which Borrowers are in good faith contesting, to the extent each such payable is so contested and (y) $500,000. '2005 Covenants' shall mean those modifications, if any, as to which the Lender and the Borrowers may mutually agree, based on the terms of the 2005 Plan, with respect to the provisions contained in Sections 9.10(e)(i)(C) and (D), 9.11(a)(3) and (4) and 9.14. '2005 Plan' shall mean the forecasted budget and financial projections of each Borrower's performance, results and operations for the Fiscal Year ending January 31, 2005, prepared on a month by month basis by or under the direction of G+G's chief financial officer, based on assumptions that were reasonable at the time made." (b) Section 7.3. Inventory Covenants. Section 7.3 is amended by deleting the word "twice" as it appears in each of clauses (d) and (e) thereof, and, in each case, by substituting the words "four times" in lieu thereof. (c) Section 9.10. Loans, Investments, Guarantees, Etc. Section 9.10 is amended by deleting clause (e) thereof in its entirety, and by substituting the following in lieu thereof: "(e) upon the implementation of the 2005 Covenants, G+G shall be permitted to (i) make loans and advances to Parent, the proceeds of which are used concurrently upon its receipt thereof by Parent to fund the cost of redeeming or repurchasing Capital Stock of Parent (including without limitation the Senior Note Warrants) and (ii) purchase or otherwise acquire Capital Stock of Parent (including without limitation the Senior Note Warrants), provided that, in each case, (A) no Event of Default has occurred and is continuing on the date (the "transaction date") on which G+G proposes to make such loan, advance, purchase or acquisition (each a "transaction"), (B) Lender shall have received, at least ten (10) days prior to the transaction date, written notice from Borrowers of such proposed transaction, (C) Borrowers' Excess Availability on the transaction date, after giving effect to the proposed transaction, is at least $5,000,000 and (D) Borrowers' Net Worth on the transaction date, after giving effect to the proposed transaction, is not less than $40,000,000, provided further that, solely for the purpose of determining Borrowers' compliance with this clause (D), the calculation of Net Worth shall exclude any amounts due to G+G from Parent as a result of loans and advances made by G+G to Parent pursuant to clause (i) of this Section 9.10(e);" (d) Section 9.11. Dividends and Redemptions. Section 9.11 is amended by deleting clause (a) in its entirety and by substituting the following in lieu thereof: "(a) upon the implementation of the 2005 Covenants, G+G may declare and pay cash dividends upon its Capital Stock, provided that (1) no Event of Default has occurred and is continuing on the date (the "dividend payment date") on which G+G proposes to pay such dividend, (2) Lender shall have received, at least ten (10) days prior to the dividend payment date, written notice from Borrowers of such proposed dividend, (3) Borrowers' Excess Availability on the dividend payment date, after giving effect to - 2 - such Dividend, is at least $5,000,000 and (4) Borrowers' Net Worth on the dividend payment date, after giving effect to such dividend, is not less than $40,000,000," (e) Section 9.14. Net Worth. Section 9.14 is deleted in its entirety and a new Section 9.14, captioned "Minimum Availability", is substituted in lieu thereof, as follows: "9.14 Minimum Availability. Minimum Availability at the end of each day shall not be less than $3,750,000 until February 1, 2004. On February 1, 2004, and at the end of each day thereafter, until such time, if any, as the Lender shall have received and reviewed to its satisfaction the 2005 Plan and the 2005 Covenants shall have been implemented, Minimum Availability at the end of each day shall not be less than $7,500,000." (f) Section 10.1. Events of Default. Section 10.1 is amended by deleting clause (a)(ii)(C) thereof in its entirety, and by substituting the following in lieu thereof: "(C) the failure to observe or perform any of the covenants or provisions contained in Section 9.2(ii), 9.6(a), 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13, 9.14, 9.15, 9.16 or 9.18 of this Agreement or any covenants or agreements covering substantially the same matter as such sections in any of the other Financing Agreements;" Section Two. Conditions Precedent. This Amendment shall become effective on the date when all of the following conditions, the satisfaction of each of which is a condition precedent to the effectiveness of this Amendment, shall have occurred or shall have been waived in writing by Lender. (a) Lender shall have received for its own account payment in cash of a non-refundable fee in the amount of $30,000. The Lender acknowledges and agrees that the Borrowers shall not be obligated to pay any additional amendment fee or similar charge on account of or in connection with the execution and delivery of an amendment to the Loan Agreement, a primary purpose of which is to implement the 2005 Covenants. (b) Lender shall have received and reviewed to its reasonable satisfaction fully executed counterparts or originals of each of this Amendment and a Certificate of the Secretary or Assistant Secretary of Borrower (A) relating to the adoption of resolutions by Borrower's Board of Directors and the Class B Common Stockholders of the Parent (the "Class B Stockholders") approving this Amendment, (B) certifying that no amendments have been made to Borrower's Certificate of Incorporation as amended, and Borrower's by-laws, as amended, since May 2, 2001, and (C) further certifying the names and incumbency of officers of Borrower authorized to sign this Amendment and the names and validity of signatures of such officers. (c) All representations and warranties set forth in the Loan Agreement (except for such inducing representations and warranties that were only required to be true and correct as of a prior date) shall be true and correct in all material respects on and as of the effective date hereof, and no Event of Default shall have occurred and be continuing. - 3 - (d) No event or development shall have occurred since the date of the financial statements of Borrower for the year-to-date period ended in, and for the month of, July, 2003, which event or development has had or is reasonably likely to have a Material Adverse Effect. (e) Lender shall have received a certificate from Borrower, executed by its president and chief operating officer as to the truth and accuracy of paragraphs (c), (d) and (g) of this Section Two. (f) All corporate and legal proceedings and all documents and instruments executed or delivered in connection with this Amendment shall be satisfactory in form and substance to Lender and its counsel, and Lender and its counsel shall have received all information and copies of all documents which Lender and its counsel may have reasonably requested in connection herewith and the matters contemplated hereunder, such documents, when requested by them, to be certified by appropriate corporate authorities. (g) There shall be no action, suit or proceeding pending or to Borrower's knowledge overtly threatened against Borrower before any court (including any bankruptcy court), arbitrator or governmental or administrative body or agency which challenges or relates to the consummation of this Amendment or the other transactions contemplated herein. (h) Lender shall have received such further agreements, consents, instruments and documents as may be necessary or proper in the reasonable opinion of Lender and its counsel to carry out the provisions and purposes of this Amendment. Section Three. Representations and Warranties. Borrower hereby represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to Lender that: (a) Borrower has the corporate or other power, authority and legal right to execute, deliver and perform this Amendment and the transactions contemplated hereby, and has taken all actions necessary to authorize the execution, delivery and performance of this Amendment and the transactions contemplated hereby; (b) No consent of any Person (including, without limitation, stockholders or creditors of Borrower, as the case may be) other than Lender and the Class B Stockholders (whose consent has been given), and no consent, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority, is required in connection with the execution, delivery and performance by Borrower, or the validity or enforceability against Borrower, of this Amendment and the transactions contemplated hereby; (c) This Amendment has been duly executed and delivered on behalf of Borrower by its duly authorized officer, and constitutes the legal, valid and binding obligation of Borrower, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights of creditors generally or equitable remedies (whether arising in a proceeding at law or in equity); - 4 - (d) Borrower is not in material default under any indenture, mortgage, deed of trust, agreement or other instrument to which it is a party or by which it may be bound. Neither the execution and delivery of each of this Amendment, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof will (i) violate any law or regulation, or (ii) result in or cause a violation by Borrower of any order or decree of any court or government instrumentality, or (iii) conflict with, or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, material agreement or other material instrument to which Borrower is a party or by which it may be bound, or (iv) result in the creation or imposition of any lien, charge, or encumbrance upon any of the property of Borrower, except in favor of Lender, to secure the Liabilities, or (v) violate any provision of the Certificate of Incorporation, By-Laws or any capital stock or similar equity instrument of Borrower; (e) After giving effect to this Amendment, no Event of Default has occurred and is continuing; and (f) Since the date of Borrower's financial statements for the year-to-date period ended in, and for the month of, July, 2003, no change or event has occurred which has had or is reasonably likely to have a Material Adverse Effect. Section Four. General Provisions. (a) Except as herein expressly amended, the Loan Agreement and all other amendments, agreements, documents, instruments and certificates executed in connection therewith, are ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. (b) All references in the Other Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby and as hereafter amended, supplemented or modified from time to time. From and after the date hereof, all references in the Loan Agreement to "this Agreement," "hereof," "herein," or similar terms, shall mean and refer to the Loan Agreement as amended by this Amendment. (c) This Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all which shall constitute one and the same agreement. (d) This Amendment shall be governed and controlled by the internal laws of the State of New York. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 5 - IN WITNESS WHEREOF, Lender and Borrower have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. THE CIT GROUP/BUSINESS CREDIT, INC. By: /s/ Deborah Rogut ------------------------------ Name: Deborah Rogut Title: Vice President G+ G RETAIL, INC. By: /s/ Michael Kaplan ------------------------------ Name: Michael Kaplan Title: Chief Financial Officer - 6 - EX-31 4 ex31-1.txt EXHIBIT 31.1 EXHIBIT 31.1 CERTIFICATION I, Jay Galin, Chief Executive Officer of G + G Retail, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of G+G Retail, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Dated: December 15, 2003 /s/ Jay Galin ----------------------------- Jay Galin Chief Executive Officer EX-31 5 ex31-2.txt EXHIBIT 31.2 EXHIBIT 31.2 CERTIFICATION I, Michael Kaplan, Chief Financial Officer of G + G Retail, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of G+G Retail, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Dated: December 15, 2003 /s/ Michael Kaplan ------------------------------- Michael Kaplan Chief Financial Officer EX-32 6 ex32-1.txt EXHIBIT 32.1 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of G+G Retail, Inc. (the "Company") on Form 10-Q for the period ending November 1, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jay Galin, Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Jay Galin - ------------------------------- Jay Galin Chief Executive Officer December 15, 2003 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. EX-32 7 ex32-2.txt EXHIBIT 32.2 EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of G+G Retail, Inc. (the "Company") on Form 10-Q for the period ending November 1, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael Kaplan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Michael Kaplan - ------------------------------ Michael Kaplan Chief Financial Officer December 15, 2003 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----