-----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, RqOmTfNaIkCphH4l82NQasluCl32n5VKUSS+Hh2LOMqwQNSKU/d6UlcKcVXfc1wf jbqCCG39/GPG/ZSM0utWFw== 0000891554-97-001185.txt : 19971216 0000891554-97-001185.hdr.sgml : 19971216 ACCESSION NUMBER: 0000891554-97-001185 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19971215 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANDIES INC CENTRAL INDEX KEY: 0000857737 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 112481930 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10593 FILM NUMBER: 97738598 BUSINESS ADDRESS: STREET 1: 2975 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9146948600 MAIL ADDRESS: STREET 1: 2975 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: MILLFELD TRADING CO INC DATE OF NAME CHANGE: 19920703 10-Q 1 QUARTERLY REPORT U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended October 31, 1997 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 0-10593 CANDIE'S, INC. (Exact name of registrant 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)(Zip code) (914)694-8600 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check 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 _____ APPLICABLE ONLY TO CORPORATE ISSUERS: As of December 15, 1997, 12,366,709 shares of Common Stock, par value $.001 per share were outstanding. CANDIE'S, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q FOR THE PERIOD ENDED OCTOBER 31, 1997 PAGE PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets at October 31, 1997 3-4 (unaudited)and January 31, 1997 Condensed Consolidated Statements of Income for the 5 Three Months Ended October 31, 1997 and 1996 (unaudited) Condensed Consolidated Statements of Income for the Nine Months Ended October 31, 1997 and 1996 (unaudited) 6 Condensed Consolidated Statement of Stockholders' Equity 7 for the Nine Months Ended October 31, 1997 (unaudited) Condensed Consolidated Statements of Cash Flows for 8-9 the Nine Months Ended October 31, 1997 and 1996 (unaudited) Notes to Condensed Consolidated Financial Statements(unaudited) 10-11 ITEM 2. Management's Discussion and Analysis of Financial 12-13 Condition and Results of Operations PART II. OTHER INFORMATION 14 SIGNATURES 15 2 Candie's, Inc. and Subsidiaries Condensed Consolidated Balance Sheets PART I. ITEM 1. October 31, January 31, 1997 1997 --------------------------- Assets (unaudited) Current assets: Cash and cash equivalents $ 800,886 $ 389,517 Accounts receivable, net 2,362,747 1,328,814 Inventories 10,850,133 5,251,091 Deferred taxes 603,645 1,300,000 Due from factor 1,841,941 -- Prepaids - advertising and marketing 2,107,473 459,120 Prepaids - other 467,710 310,661 --------------------------- Total current assets 19,034,535 9,039,203 --------------------------- Property and equipment-net of accumulated depreciation 504,282 377,145 --------------------------- Other assets: Noncompetition agreements 304,872 334,698 Trademark 4,336,538 4,548,650 Other 364,329 409,649 --------------------------- Total other assets 5,005,739 5,292,997 --------------------------- Total assets $24,544,556 $14,709,345 =========================== See accompanying notes to condensed consolidated financial statements. 3 Candie's, Inc. and Subsidiaries Condensed Consolidated Balance Sheets
October 31, January 31, 1997 1997 --------------------------- (unaudited) Liabilities and Stockholders' equity Current liabilities: Accounts payable and accrued expenses $ 2,580,705 $ 5,412,919 Due to factor -- 580,515 --------------------------- Total current liabilities 2,580,705 5,993,434 Long-term liabilities 100,000 108,000 --------------------------- Total liabilities 2,680,705 6,101,434 --------------------------- 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; 12,361,657 and 9,633,786 12,363 9,634 Additional paid-in capital 21,345,085 11,918,655 Retained earnings (deficit), since February 28, 1993, (deficit eliminated $27,696,007) 506,403 (3,320,378) --------------------------- Total stockholders' equity 21,863,851 8,607,911 --------------------------- Total liabilities and stockholders' equity $ 24,544,556 $ 14,709,345 ===========================
See accompanying notes to condensed consolidated financial statements. 4 Candie's, Inc. and Subsidiaries Condensed Consolidated Statements of Income (unaudited) Three Months Ended October 31, October 31, 1997 1996 ----------------------------- Net revenues $ 23,780,002 $ 10,962,347 Cost of goods sold 17,672,630 8,677,849 ----------------------------- Gross profit 6,107,372 2,284,498 ----------------------------- Operating expenses: Selling expenses 3,115,763 1,416,141 General and administrative expenses 1,372,860 665,293 ----------------------------- 4,488,623 2,081,434 ----------------------------- Operating income 1,618,749 203,064 Other expenses: Other -- (148,000) Interest expense (305,245) (222,992) ----------------------------- (305,245) (370,992) Income (loss) before provision for income taxes 1,313,504 (167,928) Provision for income taxes 505,000 -- ----------------------------- Net income (loss) $ 808,504 $ (167,928) ============================= Net income (loss) per share $ .06 $ (.02) ============================= Weighted average number of common shares and equivalents outstanding (1) 16,225,255 9,117,938 ============================= (1) Weighted average number of common shares and equivalents outstanding for 1997 used in calculating net income per share is based on the modified treasury stock method. See accompanying notes to condensed consolidated financial statements. 5 Candie's, Inc. and Subsidiaries Condensed Consolidated Statements of Income (unaudited) Nine Months Ended October 31, October 31, 1997 1996 ----------------------------- Net revenues $ 70,367,254 $ 32,262,546 Cost of goods sold 52,534,710 25,794,309 ----------------------------- Gross profit 17,832,544 6,468,237 ----------------------------- Operating expenses: Selling expenses 8,353,097 3,820,711 General and administrative expenses 3,816,389 2,279,719 ----------------------------- 12,169,486 6,100,430 Operating income 5,663,058 367,807 Other (expenses) income: Other (98,000) 50,000 Interest expense (833,277) (569,534) ----------------------------- (931,277) (519,534) Income (loss) before provision for income taxes 4,731,781 (151,727) Provision for income taxes 905,000 -- ----------------------------- Net income (loss) $ 3,826,781 $ (151,727) ============================= Net income (loss) per share $ .26 $ (.02) ============================= Weighted average number of common shares and equivalents outstanding (1) 16,100,213 8,877,444 ============================= (1) Weighted average number of common shares and equivalents outstanding for 1997 used in calculating net income per share is based on the modified treasury stock method. See accompanying notes to condensed consolidated financial statements. 6 Candie's, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders' Equity October 31, 1997 (unaudited)
Additional Common Stock Paid-In Shares Amount Capital Deficit Total ------------------------------------------------------------------- Balance at January 31, 1997 9,633,786 $ 9,634 $11,918,655 $(3,320,378) $ 8,607,911 Issuance of common stock through exercise of options and warrants 2,717,093 2,718 9,267,529 -- 9,270,247 Issuance of common stock in connection with retirement plan 10,778 11 55,901 -- 55,912 Tax effect of utilization of pre-quasi reorganization operating loss carryforwards -- 103,000 -- 103,000 Net income for the nine months ended October 31, 1997 -- -- -- 3,826,781 3,826,781 ------------------------------------------------------------------- Balance at October 31, 1997 12,361,657 $ 12,363 $21,345,085 $ 506,403 $21,863,851 ===================================================================
See accompanying notes to condensed consolidated financial statements. 7 Candie's, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended October 31, October 31, 1997 1996 -------------------------- Cash flows from operating activities: Net income (loss) $ 3,826,781 $ (151,727) Items in net income not effecting cash: Depreciation and amortization 406,492 333,156 Provision for allowances and bad debts expense 66,623 47,431 Sale of joint venture interest -- (50,000) Tax effect of utilization of pre-quasi reorganization net operating losses 103,000 -- Changes in operating assets and liabilities: Accounts receivable (1,100,556) 277,762 Inventories (5,599,042) 647,265 Deferred taxes 696,355 -- Prepaid expenses (1,805,402) (79,827) Other assets 10,106 (81,616) Due from factor (2,422,456) (1,834,365) Accounts payable and accrued expenses (2,773,584) 1,438,140 Long term liabilities (8,000) (2,436) -------------------------- Net cash (used in) provided by operating activities (8,599,683) 543,783 --------------------------
See accompanying notes to condensed consolidated financial statements. 8 Candie's, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (continued) (unaudited) Nine Months Ended October 31, October 31, 1997 1996 ------------------------- Cash flows used in investing activities: Capital expenditures $ (256,477) $ (307,650) ------------------------- Net cash used in investing activities (256,477) (307,650) ------------------------- Cash flows provided by financing activities: Proceeds from sale of stock options and warrants 9,267,529 Stock issuance expenses -- (116,000) ------------------------- Net cash provided by (used in) financing activities 9,267,529 (116,000) ------------------------- Net increase in cash and cash equivalents 411,369 120,133 Cash and cash equivalents, beginning of period 389,517 204,996 ------------------------- Cash and cash equivalents, end of period $ 800,886 $ 325,129 ========================= Supplemental disclosures of non-cash activities: The Company issued 10,778 shares of common stock for the nine months ended October 31, 1997 as a matching contribution in connection with the Company's retirement plan. See accompanying notes to condensed consolidated financial statements. 9 Candie's, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary have been included. Operating results for the nine month period ended October 31, 1997 are not necessarily indicative of the results that may be expected for the year ending January 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended January 31, 1997. The condensed consolidated financial statements include the accounts of Candie's, Inc. and its wholly owned subsidiaries, Bright Star Footwear, Inc. ("Bright Star"), Ponca, Ltd., Yulong Co., Ltd., Candies Galleria, Inc. and the Company's 60% owned subsidiary Intercontinental Trading Group, Inc., (collectively, the "Company"). All significant 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, casual and fashion footwear for women and girls under the trademarks CANDIE'S(R), BONGO(R), ASPEN(R) and certain others. The Company's product line also includes a wide variety of men's and boys' work boots, hiking shoes and leisure shoes designed, marketed and distributed by Bright Star. The Company sells to retailers throughout the United States and several foreign countries. 2. Inventory 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. 3. Capital Stock Transactions-Warrants During the nine months ended October 31, 1997, Class B warrants to purchase an aggregate of 1,431,100 shares of Common Stock were exercised and $5,724,400 in gross proceeds received. The Company used the net proceeds of such exercises to repay short-term borrowings and finance capital expenditures and other working capital requirements. 10 Candie's, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) (Continued) 4. Recently Issued Accounting Standards In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which is effective for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted. The Company accordingly plans to adopt SFAS No. 128 in its January 31, 1998 annual financial statements. The Company does not anticipate that SFAS No. 128 would have had a material effect on the earnings per share presented, if it had been adopted for the nine months ended October 31, 1997. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net revenues increased $12,817,655 or 117% up to $23,780,002 for the three months ended October 31, 1997 compared with revenues of $10,962,347 for the three months ended October 31 , 1996. For the first nine months of 1997 total net revenues of $70,367,254 were up $38,104,708 or 118%, compared with revenues of $32,262,546 reported in the comparable 1996 period. The increase was primarily due to the Company's sales and marketing efforts, including the Company's decision to emphasize sales of contemporary and casual footwear. In addition to the growth achieved by the Candie's (R) brand in its core market, the Company's shipments of its children's footwear line sold well on a national level. Moreover, strong sales increases continued in the BONGO (R) product line. The Company is a licensee of the BONGO trademark. Gross margins were 25.68% for the three months ended October 31, 1997 compared with 20.83% in 1996. For the first nine months of 1997 gross margins were 25.34% compared with 20.04% for 1996. The increase in gross margin was attributable to lower levels of closeout sales and promotional activity, such as markdowns and advertising allowances. In addition gross margin was higher in 1997 due to more favorable prices negotiated with suppliers and increased selling prices. Selling expenses were $3,115,763 for the three months ended October 31, 1997 compared with $1,416,141 in 1996. For the first nine months of 1997 selling expenses were $8,353,097 compared with $3,820,711 for 1996. Higher selling expenses are primarily due to increases in the amount of salesmen's commissions on increased footwear sales, increases in customer service salaries from personnel additions and increases in advertising and marketing costs. General and administrative expenses were $1,372,860 for the three months ended October 31, 1997 compared with $665,293 in 1996. For the first nine months of 1997 general and administrative expenses were $3,816,389 compared with $2,279,719 for the comparable 1996 period. Higher general and administrative expenses are primarily due to an increase in general and administrative salaries from hiring new employees and increases in general expenses directly attributable to the increase in sales during the 1997 period. Interest expense of $305,245 increased for the three months ended October 31, 1997 compared with $222,992 reported in the 1996 period. For the first nine months of 1997 interest expense was $833,277 compared with $569,534 for 1996. The increase is due to increased average borrowings. Net income for the three months ended October 31, 1997 was $808,504 or $.06 per share, compared to a net loss of $167,928 or $.02 per share, for the same period in 1996. Net income for the nine months ended October 31, 1997 was $3,826,781 or $.26 per share, compared with a net loss of $151,727 or $.02 per share, for the same period in 1996. Net income for the nine months ended October 31, 1997, includes a $900,000 tax benefit as a result of a reduction in the valuation allowance of the Company's net deferred tax assets recorded during the second quarter of 1997. 12 (continued) Results of Operations Liquidity and Capital Resources The Company has relied primarily upon cash flow from operations, borrowings under its credit facility and the sale of securities to finance its operations. For the nine months ended October 31, 1997, net cash used in operating activities was $8,599,683 as compared with $543,783 net cash provided by operating activities during the same period in the prior year. At October 31, 1997, the Company had working capital of $16,453,830 as compared to working capital of $3,045,769 at January 31, 1997. The increase is primarily due to cash generated from increased earnings and from the issuance of common stock in connection with the conversion of options and warrants. During the nine months ended October 31, 1997, the Company received gross proceeds totalling $5,724,400, in connection with the redemption of its redeemable Class B warrants as discussed in footnote 3 of the Notes to the Condensed Consolidated Financial Statements. Management anticipates it will be able to satisfy its ongoing cash requirements for the foreseeable future, primarily with anticipated cash flow from operations, borrowings under its existing credit facility and if necessary, funds generated from the sale of securities. There can be no assurance that additional funds, if required, will be available. 13 PART II. Other Information Item 2. Changes in Securities During the fiscal quarter ended October 31, 1997, the Company issued five-year options to its employees and certain vendors to purchase an aggregate of 153,300 shares of its common stock at exercise prices ranging between $4.50 and $7.37. The foregoing options were acquired by the holders for investment in private transactions exempt from registration by sections 2(3) or 4(2) of the Securities Act of 1933. Item 4. Submission of Matters to a Vote of Security-Holders. On September 4, 1997 the Company held an Annual Meeting of Stockholders at which the holders of the Company's common stock voted on: (i) the election of directors and (ii) a proposal to approve the adoption of the Company's 1997 Stock Option Plan which provides for the grant of options to purchase up to 3,500,000 shares of the Company's common stock. The results of the vote were as follows: Messrs. Neil Cole, Lawrence O'Shaughnessy, Barry Emanuel and Mark Tucker were elected to serve as members of the Company's Board of Directors for the ensuing year and until the election and qualification of their successors. The votes cast by stockholders with respect to the election of Directors were follows: Votes Cast Director "For" Withheld - -------- ----- -------- Neil Cole 9,428,673 27,905 Lawrence O'Shaughnessy 9,428,673 27,905 Barry Emanuel 9,434,773 21,805 Mark Tucker 9,428,773 27,805 The Company's 1997 Stock Option Plan was approved by the stockholders. The votes cast by stockholders with respect to the 1997 Stock Option Plan were as follows: Votes Cast "For" Votes Cast "Against" Votes "Abstaining" - ---------------- -------------------- ------------------ 7,462,272 410,730 35,076 Item 6. Exhibits and Reports on Form 8-K A. Exhibits Exhibit 10.1 1997 Stock Option Plan Exhibit 11 Computations of Earnings Per Share Exhibit 27 Financial Data Schedule (SEC use only) B. Reports on Form 8-K None 14 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. CANDIE'S, INC. By: /s/ Neil Cole ---------------------------- Neil Cole, Chief Executive Officer, (Principal Executive Officer) By: /s/ Gary Klein ---------------------------- Gary Klein, Vice President of Finance (Principal Accounting and Financial Officer) Dated: December 15, 1997 15 EX-10.1 2 1997 STOCK OPTION PLAN 1997 STOCK OPTION PLAN OF Candie's, Inc. 1. Purpose Candie's, Inc. (the "Company") desires to attract and retain the best available talent and encourage the highest level of performance in order to continue to serve the best interests of the Company, and its stockholder(s). By affording key personnel, as well as other individuals and entities who provide services to the Company and its Subsidiaries, the opportunity to acquire proprietary interests in the Company and by providing them incentives to put forth maximum efforts for the success of the business, the 1997 Stock Option Plan of Candie's, Inc. (the "1997 Plan") is expected to contribute to the attainment of those objectives. The word "Subsidiary" or "Subsidiaries" as used herein, shall mean any corporation, fifty percent or more of the voting stock of which is owned by the Company. 2. Scope and Duration Options under the 1997 Plan may be granted in the form of incentive stock options ("Incentive Options") as provided in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or in the form of nonqualified stock options ("Non-Qualified Options"). (Unless otherwise indicated, references in the 1997 Plan to "options" include Incentive Options and Non-Qualified Options.) The maximum aggregate number of shares as to which options may be granted from time to time under the 1997 Plan is 3,500,000 shares of the Common Stock of the Company ("Common Stock"), which shares may be, in whole or in part, authorized but unissued shares or shares reacquired by the Company. The maximum number of shares with respect to which options may be granted to any employee during the term of the 1997 Plan is 2,500,000. If an option shall expire, terminate or be surrendered for cancellation for any reason without having been exercised in full, the shares represented by the option or portion thereof not so exercised shall (unless the 1997 Plan shall have been terminated) become available for subsequent option grants under the 1997 Plan. As provided in paragraph 13, the 1997 Plan shall become effective on May 13, 1997, and unless terminated sooner pursuant to paragraph 14, the 1997 Plan shall terminate on May 12, 2007, and no option shall be granted hereunder after that date. 3. Administration The 1997 Plan shall be administered by the Board of Directors of the Company, or, at their discretion, by a committee which is appointed by the Board of Directors to perform such function (the "Committee"). The Committee, if appointed, shall consist of not less than two members of the Board of Directors, each of whom shall serve at the pleasure of the Board of Directors and shall be a "Non-Employee Director" as defined in Rule l6b-3 pursuant to the Securities Exchange Act of 1934 (the "Act"). Vacancies occurring in the membership of the Committee shall be filled by appointment by the Board of Directors. The Board of Directors or the Committee, as the case may be, shall have plenary authority in its discretion, subject to and not inconsistent with the express provisions of the 1997 Plan, to grant options, to determine the purchase price of the Common Stock covered by each option, the term of each option, the persons to whom, and the time or times at which, options shall be granted and the number of shares to be covered by each option; to designate options as Incentive Options or Non-Qualified Options; to interpret the 1997 Plan; to prescribe, amend and rescind rules and regulations relating to the 1997 Plan; to determine the terms and provisions of the option agreements (which need not be identical) entered into in connection with options under the 1997 Plan; and to make all other determinations deemed necessary or advisable for the administration of the 1997 Plan. The Board of Directors or the Committee, as the case may be, may delegate to one or more of its members or to one or more agents such administrative duties as it may deem advisable, and the Board of Directors or the Committee, as the case may be, or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Board of Directors or the Committee, as the case may be, or such person may have under the 1997 Plan. 4. Eligibility; Factors to be Considered in Granting Options Incentive Options shall be limited to persons who are employees of the Company or its present and future Subsidiaries and at the date of grant of any option are in the employ of the Company or its present and future Subsidiaries. In determining the employees to whom Incentive Options shall be granted and the number of shares to be covered by each Incentive Option, the Board of Directors or the Committee, as the case may be, shall take into account the nature of employees' duties, their present and potential contributions to the success of the Company and such other factors as it shall deem relevant in connection with accomplishing the purposes of the 1997 Plan. An employee who has -2- been granted an option or options under the 1997 Plan may be granted an additional option or options, subject, in the case of Incentive Options, to such limitations as may be imposed by the Code on such options. Except as provided below, a Non-Qualified Option may be granted to any person or entity, including, but not limited to, employees, independent agents, consultants and attorneys, who the Board of Directors or the Committee, as the case may be, believes has contributed, or will contribute, to the success of the Company. 5. Option Price The purchase price of the Common Stock covered by each option granted under the 1997 Plan shall be determined by the Board of Directors or the Committee, as the case may be, and, in the case of Incentive Options, shall not be less than 100% of the Fair Market Value (as defined in paragraph 15 below) of a share of the Common Stock on the date on which the option is granted. The purchase price of Non-Qualified Options granted under the 1997 Plan shall not be less than the par value of the Common Stock on the date of grant of the options. Such purchase prices shall be subject to adjustment as provided in paragraph 12 below. The Board of Directors or the Committee, as the case may be, shall determine the date on which an option is granted; in the absence of such a determination, the date on which the Board of Directors or the Committee, as the case may be, adopts a resolution granting an option shall be considered the date on which such option is granted. 6. Term of Options The term of each option shall be not more then 10 years from the date of grant, as the Board of Directors or the Committee, as the case may be, shall determine, subject to earlier termination as provided in paragraphs 10 and 11 below. 7. Exercise of Options (a) Subject to the provisions of the 1997 Plan and unless otherwise provided in the option agreement, options granted under the 1997 Plan shall become exercisable as determined by the Board of Directors or Committee. In its discretion, the Board of Directors or the Committee, as the case may be, may, in any case or cases, prescribe that options granted under the 1997 Plan become exercisable in installments or provide that an option may be exercisable in full immediately upon the date of its grant. The Board of Directors or the Committee, as the case may be, may, in its sole discretion, also provide that an option granted pursuant to the 1997 Plan shall immediately become exercisable in full upon the happening of any of the following events; (i) the first -3- purchase of shares of Common Stock pursuant to a tender offer or exchange offer (other than an offer by the Company) for all, or any part of, the Common Stock, (ii) the approval by the shareholder(s) of the Company of an agreement for a merger in which the Company will not survive as an independent, publicly owned corporation, a consolidation, or a sale, exchange or other disposition of all or substantially all of the Company's assets, (iii) with respect to an employee, on his 65th birthday, or (iv) with respect to an employee, on the employee's involuntary termination from employment, except as provided in Section 10 herein. In the event of a question or controversy as to whether or not any of the events hereinabove described has taken place, a determination by the Board of Directors or the Committee, as the case may be, that such event has or has not occurred shall be conclusive and binding upon the Company and participants in the 1997 Plan. (b) Any option at any time granted under the 1997 Plan may contain a provision to the effect that the optionee (or any persons entitled to act under Paragraph 11 hereof) may, at any time at which Fair Market Value is in excess of the exercise price and prior to exercising the option, in whole or in part, request that the Company purchase all or any portion of the option as shall then be exercisable at a price equal to the difference between (i) an amount equal to the option price multiplied by the number of shares subject to that portion of the option in respect of which such request shall be made and (ii) an amount equal to such number of shares multiplied by the fair market value of the Company's Common Stock (within the meaning of Section 422 of the Code and the treasury regulations promulgated thereunder) on the date of purchase. The Company shall have no obligation to make any purchase pursuant to such request, but if it elects to do so, such portion of the option as to which the request is made shall be surrendered to the Company. The purchase price for the portion of the option to be so surrendered shall be paid by the Company, less any applicable withholding tax obligations imposed upon the Company by reason of the purchase, at the election of the Board of Directors or the Committee, as the case may be, either in cash or in shares of Common Stock (valued as of the date and in the manner provided in clause (ii) above), or in any combination of cash and Common Stock, which may consist, in whole or in part, of shares of authorized but unissued Common Stock or shares of Common Stock held in the Company's treasury. No fractional share of Common Stock shall be issued or transferred and any fractional share shall be disregarded. Shares covered by that portion of any option purchased by the Company pursuant hereto and surrendered to the Company shall not be available for the granting of further options under the 1997 Plan. All determinations to be made by the Company hereunder shall be made by the Board of Directors or the Committee, as the case may be. -4- An option at any time granted under the 1997 Plan may also contain a provision to the effect that the payment of the exercise price may be made by delivery to the Company by the optionee of an executed exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the shares sold or margined and deliver the sale or margin loan proceeds directly to the Company to pay for the exercise price. (c) An option may be exercised, at any time or from time to time (subject, in the case of Incentive Options, to such restrictions as may be imposed by the Code), as to any or all full shares as to which the option has become exercisable until the expiration of the period set forth in Paragraph 6 hereof, by the delivery to the Company, at its principal place of business, of (i) written notice of exercise in the form specified by the Board of Directors or the Committee, as the case may be, specifying the number of shares of Common Stock with respect to which the option is being exercised and signed by the person exercising the option as provided herein, (ii) payment of the purchase price; and (iii) in the case of Non-Qualified Options, payment in cash of all withholding tax obligations imposed on the Company by reason of the exercise of the option. Upon acceptance of such notice, receipt of payment in full, and receipt of payment of all withholding tax obligations, the Company shall cause to be issued a certificate representing the shares of Common Stock purchased. In the event the person exercising the option delivers the items specified in (i) and (ii) of this Subsection (c), but not the item specified in (iii) hereof, if applicable, the option shall still be considered exercised upon acceptance by the Company for the full number of shares of Common Stock specified in the notice of exercise but the actual number of shares issued shall be reduced by the smallest number of whole shares of Common Stock which, when multiplied by the Fair Market Value of the Common Stock as of the date the option is exercised, is sufficient to satisfy the required amount of withholding tax. (d) The purchase price of the shares as to which an option is exercised shall be paid in full at the time of exercise. Payment shall be made in cash, which may be paid by check or other instrument acceptable to the Company; in addition, subject to compliance with applicable laws and regulations and such conditions as the Board of Directors or the Committee, as the case may be, may impose, the Board of Directors or the Committee, as the case may be, in its sole discretion, may on a case-by-case basis elect to accept payment in shares of Common Stock of the Company which are already owned by the option holder, valued at the Fair Market Value thereof (as defined in paragraph 15 below) on the date of exercise; provided, however, that with respect to Incentive Options, no such -5- discretion may be exercised unless the option agreement permits the payment of the purchase price in that manner. (e) Except as provided in paragraphs 10 and 11 below, no option granted to an employee may be exercised at any time by such employee unless such employee is then an employee of the Company or a Subsidiary. 8. Incentive Options (a) With respect to Incentive Options granted, the aggregate Fair Market Value (determined in accordance with the provisions of paragraph 15 at the time the Incentive Option is granted) of the Common Stock or any other stock of the Company or its current or future Subsidiaries with respect to which incentive stock options, as defined in Section 422 of the Code, are exercisable for the first time by any employee during any calendar year (under all incentive stock option plans of the Company and its parent and subsidiary corporation's, as those terms are defined in Section 424 of the Code) shall not exceed $100,000. (b) No Incentive Option may be awarded to any employee who immediately prior to the date of the granting of such Incentive Option owns more than 10% of the combined voting power of all classes of stock of the Company or any of its Subsidiaries unless the exercise price under the Incentive Option is at least 110% of the Fair Market Value and the option expires within 5 years from the date of grant. (c) In the event of amendments to the Code or applicable regulations relating to Incentive Options subsequent to the date hereof, the Company may amend the provisions of the 1997 Plan, and the Company and the employees holding options may agree to amend outstanding option agreements, to conform to such amendments. 9. Non-Transferability of Incentive Options Incentive Options granted under the 1997 Plan shall not be transferable otherwise than by will or the laws of descent and distribution, and options may be exercised during the lifetime of the optionee only by the optionee. No transfer of an Incentive Option by the optionee by will or by the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of the will and such other evidence as the Company may deem necessary to establish the validity of the transfer and the acceptance by the transferor or transferees of the terms and conditions of such option. -6- 10. Termination of Employment In the event that the employment of an employee to whom an option has been granted under the 1997 Plan shall be terminated (except as set forth in paragraph 11 below), such option may be, subject to the provisions of the 1997 Plan, exercised (to the extent that the employee was entitled to do so at the termination of his employment) at any time within three (3) months after such termination, but not later than the date on which the option terminates; provided, however, that any option which is held by an employee whose employment is terminated for cause or voluntarily without the consent of the Company shall, to the extent not theretofore exercised, automatically terminate as of the date of termination of employment. As used herein, "cause" shall mean conduct amounting to fraud, dishonesty, negligence, or engaging in competition or solicitations in competition with the Company and breaches of any applicable employment agreement between the Company and the optionee. Options granted to employees under the 1997 Plan shall not be affected by any change of duties or position so long as the holder continues to be a regular employee of the Company or any of its current or future Subsidiaries. Any option agreement or any rules and regulations relating to the 1997 Plan may contain such provisions as the Board of Directors or the Committee, as the case may be, shall approve with reference to the determination of the date employment terminates and the effect of leaves of absence. Nothing in the 1997 Plan or in any option granted pursuant to the 1997 Plan shall confer upon any employee any right to continue in the employ of the Company or any of its Subsidiaries or parent or affiliated companies or interfere in any way with the right of the Company or any such Subsidiary or parent or affiliated companies to terminate such employment at any time. 11. Death or Disability of Employee If an employee to whom an option has been granted under the 1997 Plan shall die while employed by the Company or a Subsidiary or within three (3) months after the termination of such employment (other than termination for cause or voluntary termination without the consent of the Company), such option may be exercised, to the extent exercisable by the employee on the date of death, by a legatee or legatees of the employee under the employee's last will, or by the employee's personal representative or distributees, at any time within one year after the date of the employee's death, but not later than the date on which the option terminates. In the event that the employment of an employee to whom an option has been granted under the 1997 Plan shall be terminated as the result of a disability, such option may be exercised, to the extent exercisable by the employee on the date of such termination, at any time within one year after the date of -7- such termination, but not later than the date on which the option terminates. 12. Adjustments Upon Changes in Capitalization, Etc. Notwithstanding any other provision of the 1997 Plan, the Board of Directors or the Committee, as the case may be, may, at any time, make or provide for such adjustments to the 1997 Plan, to the number and class of shares issuable thereunder or to any outstanding options as it shall deem appropriate to prevent dilution or enlargement of rights, including adjustments in the event of changes in the outstanding Common Stock by reason of stock dividends, split-ups, recapitalizations, mergers, consolidations, combinations or exchanges of shares, separations, reorganizations, liquidations and the like. In the event of any offer to holders of Common Stock generally relating to the acquisition of their shares, the Board of Directors or the Committee, as the case may be, may make such adjustment as it deems equitable in respect of outstanding options and rights, including in its discretion revision of outstanding options and rights so that they may be exercisable for the consideration payable in the acquisition transaction. Any such determination by the Board of Directors or the Committee, as the case may be, shall be conclusive. Any fractional shares resulting from such adjustments shall be eliminated. 13. Effective Date The 1997 Plan shall become effective on May 13, 1997, the date of adoption by the Board of Directors of the Company, subject to approval by the stockholders of the Company on or before May 12, 1998. 14. Termination and Amendment The Board of Directors of the Company may suspend, terminate, modify or amend the 1997 Plan, provided that any amendment that would increase the aggregate number of shares which may be issued under the 1997 Plan, materially increase the benefits accruing to participants under the 1997 Plan, or materially modify the requirements as to eligibility for participation in the 1997 Plan, shall be subject to the approval of the Company's stockholder(s), except that any such increase or modification that may result from adjustments authorized by paragraph 12 does not require such approval. No suspension, termination, modification or amendment of the 1997 Plan may, without the consent of the employee to whom an option shall theretofore have been granted, effect the rights of such employee under such option. -8- 15. Miscellaneous As said term is used in the 1997 Plan, the "Fair Market Value" of a share of Common Stock on any day means: (a) if the principal market for the Common Stock is a national securities exchange or the National Association of Securities Dealers Automated Quotations System ("NASDAQ), the closing sales price of the Common Stock on such day as reported by such exchange or market system, or on a consolidated tape reflecting transactions on such exchange or market system, or (b) if the principal market for the Common Stock is not a national securities exchange and the Common Stock is not quoted on NASDAQ, the mean between the highest bid and lowest asked prices for the Common Stock on such day as reported by the National Quotation Bureau, Inc.; provided that if clauses (a) and (b) of this paragraph are both inapplicable, or if no trades have been made or no quotes are available for such day, the Fair Market Value of the Common Stock shall be determined by the Board of Directors or the Committee, as the case may be, which determination shall be conclusive as to the Fair Market Value of the Common Stock. The Board of Directors or the Committee, as the case may be, may require, as a condition to the exercise of any options granted under the 1997 Plan, that to the extent required at the time of exercise, (i) the shares of Common Stock reserved for purposes of the 1997 Plan shall be duly listed, upon official notice of issuance, upon stock exchange(s) on which the Common Stock is listed, (ii) a Registration Statement under the Securities Act of 1933, as amended, with respect to such shares shall be effective, and/or (iii) the person exercising such option deliver to the Company such documents, agreements and investment and other representations as the Board of Directors or the Committee, as the case may be, shall determine to be in the best interests of the Company. During the term of the 1997 Plan, the Board of Directors or the Committee, as the case may be, in its discretion, may offer one or more option holders the opportunity to surrender any or all unexpired options for cancellation or replacement. If any options are so surrendered, the Board of Directors or the Committee, as the case may be, may then grant new Non-Qualified or Incentive Options to such holders for the same or different numbers of shares at higher or lower exercise prices than the surrendered options. Such new options may have a different term and shall be subject to the provisions of the 1997 Plan the same as any other option. Anything herein to the contrary notwithstanding, the Board of Directors or the Committee, as the case may be, may, in their sole discretion, impose more restrictive conditions on the exercise of an option granted pursuant to the 1997 Plan; however, -9- any and all such conditions shall be specified in the option agreement limiting and defining such option. 16. Compliance with SEC Regulations. It is the Company's intent that the 1997 Plan comply in all respects with Rule 16b-3 of the Act and any regulations promulgated thereunder. If any provision of the 1997 Plan is later found not to be in compliance with said Rule, the provisions shall be deemed null and void. -10- EX-11 3 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 CANDIE'S, INC. AND SUBSIDIARIES COMPUTATIONS OF EARNINGS PER SHARE (MODIFIED TREASURY STOCK METHOD)
Three Months Ended Nine Months Ended October 31, October 31, ------------------------- ------------------------- (1) (1) 1997 1996 1997 1996 ----------- ----------- ----------- ----------- AVERAGE SHARES OUTSTANDING 11,956,882 9,117,938 11,025,498 8,877,444 NET EFFECT OF DILUTIVE STOCK OPTIONS-BASED ON THE MODIFIED TREASURY STOCK METHOD USING AVERAGE MARKET PRICE WHICH IS GREATER THAN QUARTER- END MARKET PRICE 4,268,373 -- 5,074,715 -- ----------- ----------- ----------- ----------- TOTAL COMMON STOCK AND EQUIVALENT SHARES 16,225,255 9,117,938 16,100,213 8,877,444 =========== =========== =========== =========== NET INCOME (LOSS) $ 808,504 $ (167,928) $ 3,826,781 $ (151,727) ADD: INCOME EARNED, NET OF FEDERAL INCOME TAX EFFECT 85,707 -- 420,220 -- ----------- ----------- ----------- ----------- TOTAL EPS INCOME (LOSS) $ 894,211 $ (167,928) $ 4,247,001 $ (151,727) =========== =========== =========== =========== PER SHARE AMOUNT (PRIMARY AND FULLY DILUTED) $ .06 $ (.02) $ .26 $ (.02) =========== =========== =========== ===========
(1) 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 SHARE FOR 1996 BECAUSE THE RESULTS WOULD HAVE BEEN ANTIDILUTIVE. 16 EX-27 4 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AT OCTOBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FINANCIAL STATEMENTS INCLUDED IN SUCH FORM 10-Q. 9-MOS JAN-31-1998 OCT-31-1997 800,886 0 2,362,747 0 10,850,133 19,034,535 504,282 0 24,544,556 2,580,705 0 0 0 12,363 21,851,488 24,544,556 70,367,254 70,367,254 52,534,710 52,534,710 0 0 833,277 4,731,781 905,000 3,826,781 0 0 0 3,826,781 .26 .26
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