June 30, 2002

December 31, 2001

ASSETS

Current:

  Cash and cash equivalents

$111

$   974

  Accounts receivable, less allowances

    of $4,901 and $7,182

10,755

9,067

   Inventories:

          Raw materials

3,189

3,334

          Work in process

2,067

2,176

          Finished goods

14,018

19,274

14,938

20,448

  Income taxes recoverable

1,215

3,032

  Prepaid and other

1,415

938

          Total current assets

32,770

34,459

Property, plant and equipment, at cost

17,941

17,876

    less accumulated depreciation and amortization

15,643

2,298

15,295

2,581

Other assets

3,813

6,171

  Total assets

$38,881

$43,211

LIABILITIES

Current:

  Notes payable to banks

$16,952

$12,105

  Current portion of long-term debt

8

16

  Accounts payable

2,328

3,700

  Accrued employee compensation

2,190

1,891

  Other current liabilities

3,753

7,111

          Total current liabilities

25,231

24,823

Long-term obligations

10,324

12,747

STOCKHOLDERS' EQUITY

Preferred stock, par value $1.00

  Authorized 1,000,000 shares

Common stock, par value $.10

  Authorized 43,000,000 shares:

    Issued 5,633,712 and 5,633,712 shares

563

563

Capital in excess of par value

1,440

1,440

Retained earnings

1,644

3,959

Accumulated other comprehensive income

(85)

(85)

3,562

5,877

Treasury stock, at cost, 111,222 shares and 111,222 shares

(236)

(236)

         Total stockholders' equity

3,326

5,641

Total liabilities and stockholders' equity

$38,881

$43,211

2002

2001

Net sales

$22,895

$20,277

Cost of goods sold

15,791

13,804

Gross profit

7,104

6,473

Selling and administrative expenses

7,761

8,054

Restructuring expenses

-

7

(Loss) from continuing operations

(657)

(1,588)

Interest expense, net

288

305

(Loss) from continuing operations before income taxes

(945)

(1,893)

(Benefit) for income taxes

-

-

(Loss) from continuing operations

(945)

$(1,893)

Discontinued operations:

(Loss) from discontinued operations, net of income taxes of $0

-

(2,654)

Income/(Loss) on disposal of discontinued operations, net of income taxes       of $0 and $0

300

(5,209)

Net (loss)

$(645)

$(9,756)

Share and per share information:

Basic income/(loss) per share:

Continuing operations

$(.17)

$(.34)

Discontinued operations

.05

(1.43)

Net (loss)

$(,12)

$(1,77)

Diluted income/(loss) per share:

Continuing operations

$(.17)

$(.34)

Discontinued operations

.05

(1.43)

Net (loss)

$(.12)

$(1.77)

Weighted average common shares outstanding

5,522,490

5,522,490

Weighted average common shares outstanding assuming dilution

5,522,490

5,522,490

(1)

The unaudited information furnished herein reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary to present a fair statement of the results for the periods ended June 30, 2002 and 2001. The financial information contained herein represents condensed financial data and, therefore, does not include all footnote disclosures required to be included in financial statements prepared in conformity with generally accepted accounting principles. Footnote information was included in the financial statements included in the Company's 2001 Annual Report on Form 10-K. The condensed financial data included herein should be read in conjunction with the information in the Annual Report.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company experienced operating losses and negative cash flows from operating activities for the quarter and six months ended June 30, 2002 which the Company was able to fund from bank financing currently in place. These factors raise substantial doubt about the ability of the Company to continue to operate as a going concern. Although no assurances can be given, the Company believes that attaining adequate sales revenue, continuing the current program of cost control initiatives, and maintaining cash requirements within the amended revolving credit agreement terms will enable the Company to continue as a going concern. Accordingly, the consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or l iabilities or any other adjustments that would be necessary should the Company be unable to operate as a going concern in its present form.

At December 31, 2001, the Company was not in compliance with the Minimum Tangible Net Worth ratio as required by its 1998 Revolving Credit Agreement, as amended. The Company's bank lender waived that requirement as of and for the quarter ended December 31, 2001 through a Bank Waiver dated March 19, 2002. The Company also was not in compliance with the Minimum Tangible Net Worth ratio for the quarter ended March 31, 2002 as required by the 1998 Revolving Credit Agreement. On May 7, 2002, the Company entered into an Eighth Amendment of the 1998 Revolving Credit Agreement (the "Eighth Amendment"). The Eighth Amendment modified the 1998 Revolving Credit Agreement by, among other things, extending the termination date of the 1998 Revolving Credit Agreement to June 25, 2003; reducing the maximum amount of revolving advances to $23,000,000 from $25,000,000; and revising the minimum Tangible Net Worth covenants for the quarters ending March 31, 2002, June 30, 2002, September 30, 2002, and December 31, 2002. The Eighth Amendment also provides for a seasonal overadvance of $1,500,000 for the period July 1, 2002 through October 15, 2002 (the "Seasonal Overadvance") and requires that John Tulin, President and a director of the Company, and Marshall Tulin, Chairman and a director of the Company, furnish to the Bank a guaranty, in an amount not to exceed $750,000, to secure the repayment of the Seasonal Overadvance.

During the past two years, the Company has embarked on a number of initiatives designed to reduce costs and increase its competitiveness. These actions have, among others, included closing the Company's costume jewelry manufacturing facilities in both the United States and Costa Rica in 2000 and 2001, respectively; selling and leasing back the Company's Norwalk, Connecticut belt manufacturing facility during the second quarter of 2001; and selling certain assets associated with and discontinuing the remainder of the Company's women's costume jewelry business during the third quarter of 2001 (see Note 6). In addition, the Company received refunds of $3,024,000 and $2,251,000 in April 2002 and April 2001, respectively, from the Internal Revenue Service for federal income taxes paid in prior years. The Company recorded a tax benefit of $1,215,000 during the quarter ended March 31, 2002 to reflect additional income taxes recoverable from the Internal Revenue Service for federal income taxes pai d in prior years as a result of a tax law change which was effective in March 2002. The Company received this refund on July 30, 2002.

SWANK, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited, Continued)

(2)

During the quarter ended June 30, 2002, the Company has not incurred any material changes in commitments and contingencies set forth in Footnote J of the 2001 Annual Report to Stockholders.

(3)

The following table sets forth the computation of the net loss per share for the quarters ended June 30, 2002 and June 30, 2001 (in thousands, except for share and per share data):

Quarter

Six Months

Ended June 30,

Ended June 30,

2002

2001

2002

2001

Numerator:

Net (loss)

$(645)

$(9,756)

$(2,314)

$(13,518)

Denominators:

Shares used in computing net (loss) per common share

5,522,490

5,522,490

5,522,490

5,522,490

Effect of dilutive options

-

        -

-

         -

Shares used in computing net (loss) per common share assuming dilution

5,522,490

5,522,490

5,522,490

5,522,490

Basic income/(loss) per share:

Continuing operations

$(.17)

$(.34)

$(.47)

$(.74)

Discontinued operations

.05

(1.43)

.05

(1.71)

Net (loss)

$(.12)

$(1.77)

$(.42)

$(2.45)

Diluted income/(loss) per share:

Continuing operations

$(.17)

$(.34)

$(.47)

$(.74)

Discontinued operations

.05

(1.43)

.05

(1.71)

Net (loss)

$(.12)

$(1.77)

$(.42)

$(2.45)

(4)

Segment Information. As further described in Note 6 below, during the third quarter of 2001, the Company completed the sale of certain assets pertaining to its women's costume jewelry division and discontinued its remaining women's jewelry businesses. Accordingly, the Company now has only one reportable segment.

(5)

Bank financing. At December 31, 2001, the Company was not in compliance with the Minimum Tangible Net Worth ratio as required by its 1998 Revolving Credit Agreement, as amended. The Company's bank lender waived that requirement as of and for the quarter ended December 31, 2001 through a Bank Waiver dated March 19, 2002.

SWANK, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited, Continued)

(6)

Discontinued Operations. On July 23, 2001, the Company disposed of certain of its women's costume jewelry division's assets pursuant to an Agreement dated July 10, 2001 (the "Agreement") between the Company and K&M Associates L.P. ("K&M"). Pursuant to the Agreement, the Company sold to K&M inventory, accounts receivable and miscellaneous other assets relating to the Company's Anne Klein, Anne Klein II, Guess?, and certain private label women's costume jewelry businesses. The purchase price paid by K&M to the Company at the closing of the transactions contemplated by the Agreement was approximately $4,600,000. K&M also assumed the Company's interest in its respective license agreements with Anne Klein, a division of Kasper A.S.L., Ltd., and Guess? Licensing Inc. and certain specified liabilities. The cash portion of the purchase price was subject to adjustment. In connection with the sale to K&M, the Company and K&M entered into an agreement whereby the Company provided certain operational and administrative services to and on behalf of K&M for a period of time extending from the closing date through December 31, 2001 (the "Transition Agreement"). Under the terms of the Transition Agreement, the Company was reimbursed by K&M for its direct costs associated with performing the transition services. During the quarter and six months ended June 30, 2001, the Company recorded a loss from discontinued operations of $2,654,000 and $4,222,000 respectively, net of income taxes of $0 for both periods. In connection with the disposal of its women's costume jewelry business, the Company recorded a non-recurring charge of $5,957,000 net of income tax benefit of $810,000 for the year ended December 31, 2001, of which $5,209,000 net of income taxes of $0 was recorded during the quarter ending June 30, 2001. The components of the charge for the 12 months ended December 31, 2001 are set forth in the following table:

During the second quarter, the Company resolved certain purchase price and transition-related issues that arose through April 30, 2002 in connection with the sale of its women's jewelry division to K&M in fiscal 2001. As a result of this agreement, the Company during the quarter recorded as an adjustment to the loss on disposal a reduction of $300,000 to the reserve it had established at December 31, 2001 to provide for potential claims.

Item 2  Management's Discussion and Analysis of the Financial Condition and Results of Operations

Overview

As part of its strategy to focus on its core strength in the men's accessories business, the Company disposed of certain of its women's costume jewelry assets on July 23, 2001 pursuant to the Agreement between the Company and K&M. Pursuant to the Agreement, the Company sold to K&M inventory, accounts receivable and miscellaneous other assets relating to the Company's Anne Klein, Anne Klein II, Guess?, and certain private label women's costume jewelry businesses. The purchase price paid by K&M to the Company at the closing of the transactions contemplated by the Agreement was approximately $4,600,000. K&M also assumed the Company's interest in its respective license agreements with Anne Klein, a division of Kasper A.S.L., Ltd., and Guess? Licensing Inc. and certain specified liabilities. The cash portion of the purchase price is subject to adjustment under certain circumstances. In connection with the sale to K&M, the Company and K&M entered into the Transition Agre ement whereby the Company provided certain operational and administrative services to and on behalf of K&M for a period of time extending from the closing date through December 31, 2001. Under the terms of the Transition Agreement, the Company was reimbursed by K&M for its direct costs associated with performing the transition services.

APB Opinion No. 30 requires that the results of continuing operations be reported separately from those of discontinued operations for all periods presented and that any loss on disposal of a segment of a business be reported in conjunction with the related results of discontinued operations. Accordingly, the Company has restated its results from operations for all prior periods presented. The Company recorded a loss from discontinued operations of $2,654,000 net of income taxes of $0 for the quarter ended June 30, 2001. During the year ended December 31, 2001, the Company also recorded a non-recurring charge of $5,957,000 net of income tax benefit of $810,000, to reflect the difference between the net book value and the cash proceeds received for the assets sold to K&M; a valuation adjustment associated with certain inventory not sold to K&M; a provision for the remaining obligations under certain license agreements not assigned to K&M; and accruals for other expenses directly as sociated to the disposition including legal and broker's fees (see Note 6).

The Company is currently engaged in the manufacture, sale and distribution of men's belts, leather accessories, suspenders, and men's jewelry. These products are sold both domestically and internationally, principally through department stores, and also through specialty stores and mass merchandisers. The Company operates a number of factory outlet stores primarily to distribute excess and out of line merchandise.

Results of Operations

As is customary in the fashion accessories industry, the Company makes modifications to its lines coinciding with the Spring (approximately January -- June) and Fall (approximately July -- December) seasons. The Company believes that results of operations are more meaningful on a seasonal basis than on a quarterly basis. The timing of shipments can be affected by the availability of materials, retail sales, and fashion trends. These factors may shift volume between quarters within a season differently in one year than in another. Due to seasonality and other factors, the results of the quarter are not necessarily indicative of the results to be expected for the full year.

Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations (continued)

Net Sales

Included in gross profit for the quarter and six months ended June 30, 2002, are annual second quarter adjustments to record the variance between customer returns of prior year shipments actually received in the current year and the allowance for customer returns which was established at the end of the preceding fiscal year. The adjustment to net sales recorded in the second quarter described above resulted in a favorable adjustment to gross profit of $357,000 and $481,000 for the quarter and six month periods ended June 30, 2002 and June 30, 2001, respectively.

Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations (continued)

Selling and Administrative Expenses

Selling and administrative expenses decreased $293,000 or 3.7% for the quarter ended June 30, 2002 and increased $73,000 or 0.5% for the six months ended June 30, 2002, compared to the quarter and six months ended June 30, 2001, respectively.

Selling expenses increased $590,000 or 12.1% and $1,065,000 or 10.8% for the quarter and six months ended June 30, 2002, respectively, compared to the corresponding periods in 2001. Selling expenses expressed as a percentage of net sales were 23.9% and 24.9% for the quarter and six months ended June 30, 2002, respectively, compared to 24.1% and 24.6% for the quarter and six months ended June 30, 2001, respectively. The increase in selling expenses was mainly due to increases in advertising and promotion expenses and other variable selling and distribution costs. Certain of the Company's fixed occupancy expenses had been absorbed by the women's jewelry division prior to its sale in 2001.

Administrative expenses decreased $884,000 or 27.9% and $992,000 or 17.8% for the quarter and six months ended June 30, 2002, respectively, compared to the quarter and six months ended June 30, 2001. Administrative expenses expressed as a percentage of net sales were 10.0% and 10.4% for the quarter and six months ended June 30, 2002, respectively, compared to 15.6% and 13.9% for the quarter and six months ended June 30, 2001, respectively. The decrease in selling and administrative expenses was mainly due to a reduction in professional fees and management compensation.

Interest Expense

Net interest expense decreased by $17,000 or 5.6% and $147,000 or 21.3% for the quarter and six months ended June 30, 2002 compared to the same periods last year. The decrease was primarily due to lower average borrowings and a reduction in the Company's average borrowing costs compared to 2001. The Company reduced outstanding borrowings in 2001 with the proceeds of the sale of its Norwalk manufacturing facility during the second quarter of 2001 and, as further discussed in Footnote 6, from the sale of its women's costume jewelry business.

Provision for Income Taxes

The Company has received refunds from the Internal Revenue Service aggregating $4,415,000 relating to federal income taxes paid in prior years, including $3,200,000 during the first quarter and $1,215,000 during the second quarter. The Company recorded an income tax benefit of $1,215,000 on the consolidated pre-tax loss during the six months ended June 30, 2002 as a result of a change in tax law that permits the Company to carryback operating losses to additional years. The Company recorded no income tax benefit on the consolidated pretax loss for the quarter or six months ended June 30, 2001. At December 31, 2001, the Company recorded a valuation allowance on its deferred tax asset of $9,964,000 to reduce the asset to its estimated net realizable value. Based upon the projections for future taxable income over the periods in which the temporary differences that created the deferred tax asset are anticipated to reverse, management believes it is more likely than not that the Company will rea lize the benefit of these deductible temporary differences, net of the valuation allowance. The amount of the deferred tax asset considered realizable could be adjusted in the future if estimates of taxable income are revised based on actual results.

Discontinued Operations

The following table summarizes the income/(loss) from discontinued operations, net of tax, for the quarter ended June 30, 2002 and 2001 (in thousands):

Three Months ended June 30

Six Months ended June 30

2002

2001

2002

2001

(Loss) from discontinued women's costume jewelry business

$-

$(2,654)

$-

$(4,222)

Income/(Loss) on disposition of women's costume jewelry business

300

(5,209)

300

(5,209)

Income tax benefit for discontinued operations

-

-

-

-

$300

$(7,863)

$300

$(9,431)

Revenues and expenses directly associated with the women's costume jewelry business have been presented as discontinued operations. Certain general administrative costs and shared fixed costs including rents, depreciation, professional fees, utilities, and other occupancy costs that the Company has historically allocated to its operating divisions based on revenue or space utilization have not been allocated to discontinued operations unless the expenses were assumed to be reduced in the future as a result of the disposition.

Interest expense was eliminated under the assumption that the cash proceeds from the sale of certain of the women's costume jewelry division's assets were used to eliminate outstanding borrowings under the existing credit facility related to the women's costume jewelry division assets sold.

The net loss from discontinued operations for the quarter and six months ended June 30, 2001 was $7,863,000 and $9,431,000, respectively. As discussed in Note 6, the Company recorded a loss in 2001 on the disposition of its women's jewelry division of $5,957,000 of which $5,209,000 was recorded in the second quarter. The loss on disposition consists of the difference between the net book value of the assets sold and the cash proceeds received from K&M; a provision for additional reserves on the remaining women's jewelry assets not sold to K&M; accruals for remaining payments on license and lease agreements not assigned or transferred to K&M; and other fees and expenses directly attributable to the disposition including legal and broker's expenses.

During the second quarter, the Company resolved certain purchase price and transition-related issues that arose through April 30, 2002 in connection with the sale of its women's jewelry division to K&M in fiscal 2001. As a result of this agreement, the Company during the quarter recorded as an adjustment to the loss on disposal a reduction of $300,000 to the reserve it had established at December 31, 2001 to provide for potential claims.

Liquidity and Capital Resources

As is customary in the fashion accessories industry, substantial percentages of the Company's sales and earnings occur in the months of September, October and November, during which the Company makes significant shipments of its products to retailers for sale during the holiday season. As a result, accounts receivable peak in the fourth quarter. The Company builds its inventory during the year to meet the demand for the holiday season. The required cash is provided by a revolving credit facility.

Item 2 Management's discussion and Analysis of the Financial Condition and Results of Operations (continued)

At December 31, 2001, the Company was not in compliance with the Minimum Tangible Net Worth ratio as required by its 1998 Revolving Credit Agreement. The Company's bank lender subsequently waived those requirements as of and for the quarter ended December 31, 2001. The Company also was not in compliance with the Minimum Tangible Net Worth ratio for the quarter ended March 31, 2002 as required by the 1998 Revolving Credit Agreement. On May 7, 2002, the Company entered into the Eighth Amendment of its 1998 Revolving Credit Agreement which, among other things, extended the termination date of the 1998 Revolving Credit Agreement to June 25, 2003; reduced the maximum amount of revolving advances to $23,000,000 from $25,000,000; and revised the minimum Tangible Net Worth covenants for the quarters ending March 31, 2002, June 30, 2002, September 30, 2002, and December 31, 2002. The Eighth Amendment also provides for a seasonal overadvance of $1,500,000 for the period July 1, 2002 through October 15 , 2002. John Tulin, President and a director of the Company, and Marshall Tulin, Chairman and a director of the Company have furnished to the Bank a guaranty, in an amount not to exceed $750,000, to secure the repayment of the Seasonal Overadvance (see Note 5).

Although no assurances can be given, the Company believes that attaining adequate sales revenue, continuing the current program of cost control initiatives, and maintaining cash requirements within the amended revolving credit agreement terms will enable the Company to continue as a going concern. Accordingly, the consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or liabilities or any other adjustments that would be necessary should the Company be unable to operate as a going concern in its present form.

The Company's working capital decreased by $2,097,000 during the six months ended June 30, 2002 compared to a decrease of $7,347,000 for the six months ended June 30, 2001.

Cash used in operations for the six months ended June 30, 2002 totaled $7,954,000 compared to cash used of $1,134,000 for the six months ended June 30, 2001. Cash used in operations in 2002 consisted primarily of the consolidated net loss and seasonal reductions in accounts receivable reserves, accounts payable, and other accrued liabilities, offset in part by decreases in accounts receivable, inventory and income taxes recoverable. Accounts receivable reserves decreased due to actual charges processed year-to-date for cash discounts, in-store markdowns, cooperative advertising, and customer returns primarily relating to commitments made during 2001. Cash used in operations for the same period last year was principally due to the consolidated net loss for the period, after giving effect to the loss on disposition of the Company's women's jewelry business, and reductions in accounts receivable, inventory and income taxes recoverable, offset by decreases in accounts payable and other current l iabilities.

Cash provided by investing activities of $2,252,000 resulted mainly from the surrender of life insurance policies the proceeds of which were used to fund withdrawals from the Company's 1993 Deferred Compensation Plan (the "1993 Plan"), and the sale of a common stock investment. On July 22, 2002, the Company determined that it would terminate the 1993 Plan, surrender the remaining life insurance policies, and distribute vested benefits to participants. The Company anticipates that the final termination of the 1993 Plan and distribution of benefits will be completed no later than August 22, 2002.

"Forward Looking Statements"

Certain of the preceding paragraphs contain "forward looking statements" under the securities laws of the United States. Actual results may vary from anticipated results as a result of various risks and uncertainties, including sales patterns, overall economic conditions, competition, pricing, consumer buying trends and other factors.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the quarter ended June 30, 2002, there were no material changes in the information called for by this item from the information contained in Item 7A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)

Exhibit Number

Description

99.1

Certification 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

No reports on Form 8-K were filed during the quarter ended June 30, 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SWANK, INC.

Registrant

/s/ Jerold R. Kassner

Jerold R. Kassner

Senior Vice President

Chief Financial Officer

And Treasurer

Date:   August 14, 2002