Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / __ /

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)

          State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant's most recently completed second fiscal quarter: $657,176.

          The number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 5,522,490 shares of Common Stock as of the close of business on February 28, 2003.

          On July 23, 2001, the Company sold certain assets associated with its women's costume jewelry division pursuant to an Agreement dated July 10, 2001 (the "Agreement") between the Company and K&M Associates, LP ("K&M"), a subsidiary of American Biltrite, Inc. 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, subject to adjustment. 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. In connection with the sale to K&M, the Company and K&M entered int o 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"). As provided by the Transition Agreement, the Company was reimbursed by K&M in 2001 for its direct costs associated with performing the transition services.

          Men's leather accessories, principally belts, wallets and other small leather goods including billfolds, key cases, card holders and other items, and suspenders are distributed under the names "Geoffrey Beene", "Pierre Cardin", "Claiborne", "Kenneth Cole", "Tommy Hilfiger", "Guess?", "Swank" and "Colours by Alexander Julian". The Company also manufactures and distributes men's leather accessories for customers' private labels. Men's jewelry consists principally of cuff links, tie klips, chains and tacs, bracelets, neck chains, vest chains, collar pins, key rings and money clips which are distributed under the names "Geoffrey Beene", "Pierre Cardin", "Claiborne", "Kenneth Cole", "Tommy Hilfiger", "Guess?", "Swank" and "Colours by Alexander Julian".

          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. The Company's bank borrowings are at a peak during the months of August, September, October and November to enable the Company to carry significant amounts of inventory and accounts receivable.

          In addition to product, pricing and terms of payment, the Company's customers generally consider one or more factors, such as the availability of electronic order processing and the timeliness and completeness of shipments, as important in maintaining ongoing relationships. In addition, the Company generally will allow customers to return merchandise in order to achieve proper stock balances. These factors, among others, result in the Company increasing its inventory levels during the Fall selling season in order to meet customer imposed requirements. The Company believes that these practices are substantially consistent throughout the fashion accessories industry.

          The Company's customers are primarily major retailers within the United States. Sales to the Company's three largest customers, Federated Department Stores, Inc., Target Corporation, and the May Department Stores Company accounted for approximately 15%, 14%, and 11% respectively, of consolidated net sales in 2002; approximately 16%, 15%, and 12% respectively, in 2001; and approximately 17%, 15%, and 13% respectively, in 2000. In addition, sales to the TJX Companies, Inc. accounted for approximately 10% of consolidated net sales in 2001. No other customer accounted for more than 10% of consolidated net sales during fiscal years 2002, 2001 or 2000. Exports to foreign countries accounted for less than 5% of consolidated net sales in each of the Company's fiscal years ended December 31, 2002, 2001 and 2000, respectively.

          Approximately 42 salespeople and district managers are engaged in the sale of products of the Company, working out of sales offices located in three major cities in the United States. In addition, the Company sells certain of its products through 14 company-owned factory outlet stores located in 9 states. The Company has licensed or sub-licensed the production and sale of certain of its lines in certain foreign countries under royalty arrangements.

          Items manufactured by the Company accounted for approximately 36% of consolidated net sales in fiscal 2002. The Company manufactures belts and suspenders at the Company's leased premises located in South Norwalk, Connecticut. Historically, the Company has manufactured and/or assembled its men's and women's costume jewelry products at the Company's plant in Attleboro, Massachusetts and at the Company's 65% owned subsidiary, Joyas y Cueros de Costa Rica, S.A. ("Joyas y Cueros") located in Cartago, Costa Rica. The Company discontinued its manufacturing operations at Joyas y Cueros and Massachusetts in 2001 and 2000, respectively, in each case, transferring its production requirements to third party vendors.

          Substantial expenditures on advertising and promotion are an integral part of the Company's business. Approximately 3.5% of net sales was expended on advertising and promotion in 2002, of which approximately 2.0% was for advertising media, principally in national consumer magazines, trade publications, newspapers, radio and television. The remaining expenditures were for cooperative advertising, fixtures, displays and point-of-sale materials.

          The businesses in which the Company is engaged are highly competitive. The Company competes with, among others, Trafalgar, Cipriani, Salant, Randa/Humphrey's, Fossil, Tandy Brands Accessories, Inc., and private label programs in men's belts; Tandy Brands Accessories, Inc., Cipriani, Fossil, Mundi-Westport, Randa/Humphrey's and retail private label programs in small leather goods; and David Donahue in men's jewelry. The ability of the Company to continue to compete will depend largely upon its ability to create new designs and products, to meet the increasing service and technology requirements of its customers and to offer consumers high quality merchandise at popular prices.

Patents, Trademarks and Licenses

          The Company owns the rights to various patents, trademarks, trade names and copyrights and has exclusive licenses in the United States for, among other things, (i) men's leather accessories under the name "Pierre Cardin", (ii) men's leather accessories and costume jewelry under the names "Geoffrey Beene", "Claiborne", "Kenneth Cole", and "Tommy Hilfiger" and (iii) men's leather accessories and costume jewelry under the name "Guess?". The Company also distributes men's jewelry under the name "Pierre Cardin" and men's jewelry and leather accessories under the name "Colours by Alexander Julian." The Company's "Geoffrey Beene", "Pierre Cardin", "Claiborne", "Kenneth Cole", "Tommy Hilfiger", and "Guess?" licenses collectively may be considered material to the Company's business. The Company does not believe that its business is materially dependent on any one license agreement. The "Pierre Cardin" leather accessories licenses and the " Claiborne" licenses provide for percentage royalty payments not exceeding 6% of net sales. The "Guess?", "Geoffrey Beene" and "Tommy Hilfiger" licenses provide for percentage royalty payments not exceeding 7% of net sales. The "Kenneth Cole" licenses and the "Pierre Cardin" costume jewelry license arrangement provide for percentage royalty payments not exceeding 8% and 9% of net sales, respectively. The license agreements to which the Company is a party generally specify minimum royalties and minimum advertising and promotion expenditures. The Company's license to distribute "Pierre Cardin" leather accessories and its "Kenneth Cole" and "Claiborne" licenses expire December 31, 2003. The Company's license to distribute its "Guess?" and "Tommy Hilfiger" licenses expire December 31, 2004. The Company's "Geoffrey Beene" license expires June 30, 2005.

          The Company has approximately 490 employees, of whom approximately 130 are production employees. None of the Company's employees are represented by labor unions and management believes its relationship with its employees to be satisfactory.

On April 17, 2003, the Company signed a new $30,000,000 Loan and Security Agreement (the "2003 Loan Agreement") with Congress Financial Corporation (New England). The new financing replaced the Company's Revolving Credit and Security Agreement dated July 27, 1998 between the Company and PNC Bank, National Association and is collateralized by substantially all of the Company's assets including domestic accounts receivable, inventory, and machinery and equipment. In addition, the 2003 Loan Agreement prohibits the Company from paying dividends, imposes limits on additional indebtedness for borrowed money, and contains minimum earnings before interest, taxes, depreciation, and amortization (EBITDA) requirements. The terms of the 2003 Loan Agreement permit the Company to borrow against a percentage of eligible accounts receivable and eligible inventory at a maximum interest rate equal to Wachovia Bank, National Association's ("Wachovia") prime lending rate plus 1.25%, or at Wachovia's Eurodollar rate plus 3.25%. The Company is required to pay an unused line fee monthly of .5% on the amount by which $25,000,000 exceeds the average daily balance of loans and letters of credit outstanding.

          The Company's main administrative office is located in a three-story building, containing approximately 193,000 square feet, on a seven-acre site owned by the Company in Attleboro, Massachusetts. Until 2000, this facility had also been used to manufacture and/or assemble costume jewelry products for both the women's accessories and men's accessories segments.

          The Company's national, international, and regional sales offices are located in leased premises at 90 Park Avenue, New York City, New York. On July 23, 2001 the Company entered into a sublease agreement with K&M Associates, L.P. for approximately 43% of its space under lease at 90 Park Avenue. The lease and sublease of such premises both expire in 2010. A regional sales office is also located in leased premises in Chicago, Illinois and a branch office is leased in Scottsdale, Arizona. The leases for the Chicago and Scottsdale offices expire in 2004 and 2006, respectively. Collectively, these three offices contain approximately 22,000 square feet.

          The Company also leases a warehouse containing approximately 242,000 square feet in Taunton, Massachusetts, which is used in the distribution of all of the Company's products. In addition, one of the Company's factory stores is located within the Taunton location. The lease for these premises expires in 2006.

          Men's belts and suspenders are manufactured in leased premises located in South Norwalk, Connecticut consisting of a manufacturing plant and office space in a 126,500 square foot building, located on approximately seven and one-half acres. The lease for these premises expires in 2011.

          The Company's manufacturing and distribution facilities are equipped with modern machinery and equipment, substantially all of which are owned by the Company, with the remainder leased. In management's opinion, the Company's properties and machinery and equipment are adequate for the conduct of the respective businesses to which they relate.

          The Company presently operates 13 factory outlet store locations in addition to the outlet store in Taunton, Massachusetts as described above. These stores have leases with terms not in excess of three years and contain approximately 30,000 square feet in the aggregate.

          (a) On June 7, 1990, the Company received notice from the United States Environmental Protection Agency ("EPA") that it, along with fifteen others, had been identified as a Potentially Responsible Party ("PRP") in connection with the release of hazardous substances at a Superfund site located in Massachusetts. This notice does not constitute the commencement of a proceeding against the Company nor necessarily indicate that a proceeding against the Company is contemplated. The Company, along with six other PRP's, have entered into an Administrative Order by Consent pursuant to which, inter alia, they have undertaken to conduct a remedial investigation/feasibility study (the "RI/FS") with respect to the alleged contamination at the site.

       The remedial investigation of the site is ongoing, although it is anticipated that the RI/FS will be completed by the end of 2003. The Massachusetts Superfund site is adjacent to a municipal landfill that is in the process of being closed under Massachusetts law. The Company believes that the issues regarding the site are under discussion among state and federal agencies due to the proximity of the site to the landfill and the composition of waste at the site. Therefore, it is premature to make a determination whether this matter may have a material adverse effect on the Company's operating results, financial condition or cash flows. The PRP Group's accountant's records reflect group expenses since December 31, 1990, independent of legal fees, in the amount of $3,052,199 as of December 31, 2002. The Company's share of costs for the RI/FS is being allocated on an interim basis at 12.52%. Due to the withdrawal of a PRP, however, the Company expects that the respective shares of these costs in the future will be reallocated among the remaining members of the PRP Group.

       In September 1991, the Company signed a judicial consent decree relating to the Western Sand and Gravel site located in Burrillville and North Smithfield, Rhode Island. The consent decree was entered on August 28, 1992 by the United States District Court for the District of Rhode Island. The most likely scenario for remediation of the ground water at this site is through natural attenuation, which will be monitored for a period of up to 24 years. Estimates of the costs of remediation range from approximately $2.8 million for natural attenuation to approximately $7.8 million for other remediation. Based on current participation, the Company's share is 8.66% of approximately 75% of the costs. Management believes that this site will not result in any material adverse effect on the Company's operating results, financial condition or cash flows based on the results of periodic tests conducted at the site.

       In 1988, the Company received notice from the Department of Pollution Control and Ecology of the State of Arkansas that the Company, together with numerous other companies, had been identified as a PRP in connection with the release or threatened release of hazardous substances from the Diaz Refinery, Incorporated site in Diaz, Arkansas. The Company has advised the State of Arkansas that it intends to participate in negotiations with the Department of Pollution Control and Ecology through the committees formed by the PRPs. The Company has not received further communications regarding the Diaz site. Therefore, it is premature to make a determination whether this matter may have a material adverse effect on the Company's operating results, financial condition or cash flows.

(b) No material pending legal proceedings were terminated during the three month period ended December 31, 2002.

          There are no family relationships among any of the persons listed above or among such persons and the directors of the Company except that John A. Tulin and James E. Tulin are the sons of Marshall Tulin.

          Marshall Tulin has served as Chairman of the Board since October 1995. He joined the Company in 1940, was elected a Vice President in 1954 and President in 1957. Mr. Tulin has served as a director of the Company since 1956.

          John A. Tulin has served as President and Chief Executive Officer of the Company since October 1995. Mr. Tulin joined the Company in 1971, was elected a Vice President in 1974, Senior Vice President in 1979 and Executive Vice President in 1982. He has served as a director since 1975.

          James E. Tulin has been Senior Vice President-Merchandising since October 1995. For more than five years prior to October 1995, Mr. Tulin served as a Senior Vice President of the Company. Mr. Tulin has been a director of the Company since 1985.

          Paul Duckett has been Senior Vice President-Distribution and Retail Store Operations since October 1995. For more than five years prior to October 1995, Mr. Duckett served as a Senior Vice President of the Company.

          Melvin Goldfeder has been Senior Vice President-Special Markets Division since October 1995. For more than five years prior to October 1995, Mr. Goldfeder served as a Senior Vice President of the Company.

          Jerold R. Kassner has been Senior Vice President, Chief Financial Officer, Treasurer and Secretary of the Company since July 1999. Mr. Kassner joined the Company in November 1988 and was elected Vice President and Controller in September 1997.

          Eric P. Luft has been Senior Vice President-Men's Division since October 1995. Mr. Luft served as a Divisional Vice President of the Men's Products Division from June 1989 until January 1993, when he was elected a Senior Vice President of the Company. Mr. Luft became a director of the Company in December 2000.

          Each officer of the Company serves, at the pleasure of the Board of Directors, for a term of one year and until his successor is elected and qualified.

       During the second quarter of 2001, the Company announced that it had received notice from Nasdaq indicating that it was not in compliance with Nasdaq's $1 minimum bid price requirement for continued listing of its shares of Common Stock on the Nasdaq SmallCap Market. The Company also announced that it received notice from Nasdaq that it was not in compliance with Nasdaq's requirement for continued listing due to a delinquency in the filing of its Annual Report on Form 10-K. On May 25, 2001, the Company was advised by Nasdaq that the shares of its Common Stock would no longer be listed on the Nasdaq SmallCap Market. The Company's shares are now traded in the over-the-counter market. The Company historically has not relied on the public equity markets for external funding and does not anticipate any adverse financial consequences resulting from Nasdaq's action.

       The Company's financing agreement with its lender prohibits the payment of cash dividends on the Company's Common Stock (see "Management's Discussion and Analysis of Financial Condition and Results of Operations"). The Company has not paid any cash dividends on its Common Stock in the last ten years and has no current expectation that cash dividends will be paid in the foreseeable future.

       The Company did not issue any unregistered securities during the past year.

       Net sales increased 14% to $100,011,000 in 2002 compared to $87,812,000 in 2001 while gross profit increased 8% to $28,154,000 from $25,981,000. Despite a generally sluggish retail environment that prevailed during most of 2002, the Company was able to increase net sales primarily through higher shipments of certain branded merchandise programs, particularly the Company's Tommy Hilfiger collection of men's accessories, and by controlling returns and other customer allowances. The improvement in gross profit was mainly due to the increase in net sales, offset partially by higher product costs associated with new styling and packaging concepts introduced during the year.

       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 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.

       Contemporaneously with the sale of the women's jewelry assets to K&M, the Company discontinued its remaining women's jewelry operations. 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 separated results from continuing operations and results from discontinued operations for all prior periods presented. During 2002, the Company and K&M resolved all remaining purchase price and transition-related issues associated with the Agreement and 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. During 2001, the Company recorded a loss on disposal of $5,957,000 net of inco me 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 reserve 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 associated to the disposition including legal and broker's fees.

      During 2002, the Company adopted Emerging Issues Task Force Issue No. 01-9, "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products" ("EITF 01-9"). As a result of adopting EITF 01-9, the Company has reclassified certain cooperative advertising costs against net revenue and in-store fixturing and display expenditures to cost of goods sold. Both items had previously been classified as promotional expenditures within selling and administrative expense. The Company's adoption of EITF 01-9 reduced net sales for the year ended December 31, 2002 by $911,000; increased cost of sales by $539,000; and reduced selling and administrative expense by $1,450,000. For the year ended December 31, 2001, the adoption of EITF 01-9 reduced net sales by $756,000; increased cost of sales by $255,000; and reduced selling and administrative expense by $1,011,000. For the year ended December 31, 2000, the adoption of EITF 01-9 reduc ed net sales by $897,000; increased cost of sales by $373,000; and reduced selling and administrative expense by $1,270,000. 

       Management believes that the accounting policies discussed below are important to an understanding of the Company's financial statements because they require management to exercise judgment and estimate the effects of uncertain matters in the preparation and reporting of financial results. Accordingly, management cautions that these policies and the judgments and estimates they involve are subject to revision and adjustment in the future. While they involve judgment, management believes the other accounting policies discussed in footnote B to the consolidated financial statements are also important in understanding the statements.

       The Company records revenues net of sales allowances, including cash discounts, in-store customer allowances, cooperative advertising, and customer returns. Sales allowances are estimated using a number of factors including historical experience, current trends in the retail industry, and individual customer and product experience.

     The Company determines allowances for doubtful accounts using a number of factors including historical collection experience, general economic conditions, and the amount of time an account receivable is past its payment due date. In certain circumstances where it is believed a customer is unable to meet its financial obligations, a specific allowance for doubtful accounts is recorded to reduce the account receivable to the amount believed to be collectable.

       The Company determines the valuation allowance for deferred tax assets based upon projections of future taxable income or loss for future tax years in which the temporary differences that created the deferred tax asset were anticipated to reverse.

       Net sales for the year ended December 31, 2002 increased by $12,199,000 or 14% compared to 2001. The increase in net sales was primarily due to higher shipments of certain branded and private label men's personal leather goods programs and increased sales of men's costume jewelry. During 2002, shipments of the Company's personal leather goods and costume jewelry merchandise increased 26% and 38% respectively, both as compared to the prior year. The increase in personal leather goods volume was mainly due to higher shipments of the Company's Tommy Hilfiger and Geoffrey Beene branded collections of men's accessories to the Company's core department store customers. During 2002, the Company introduced new styling and packaging concepts for certain personal leather goods and jewelry collections which resulted in additional sales volume to both new and existing customers, particularly during the fall and holiday selling seasons. The Company also increa sed sales to mass-merchandising retailers by expanding its merchandise offerings and developing dedicated lines for these customers. Shipments to mass-merchandise retailers increased 19% in 2002 compared to 2001.

       Net sales for the year ended December 31, 2002 were positively affected by a reduction in accruals associated with customer returns and promotional allowances. During 2001, the Company experienced a substantial increase in these costs as a generally weak economy, volatile stock market, and sluggish retail climate all contributed to the Company agreeing to participate more in deeper discounting at the retail level relative to prior years. The Company regularly participates in promotional events designed to stimulate sales of its merchandise or expand its market share within certain retail channels.

       Net sales in 2002 and 2001 were also favorably affected by the returns adjustment made in the second quarter. As described in Note B to the accompanying consolidated financial statements, the Company reduces net sales and cost of sales by the estimated effect of future returns of current period shipments. Each spring upon the completion of processing returns from the preceding fall season, the Company records adjustments to net sales in the second quarter to reflect the difference between customer returns of prior year shipments actually received in the current year and the estimate used to establish the allowance for customer returns at the end of the preceding fiscal year. These adjustments increased net sales by $505,000 and $479,000 for the twelve month periods ended December 31, 2002 and 2001, respectively.

       Gross profit for the year ended December 31, 2002 increased by $2,173,000 or 8% compared to gross profit for the prior year of $25,981,000. Gross profit expressed as a percentage of net sales for 2002 was 28.1% compared to 29.6% for 2001.

       The increase in gross profit dollars for 2002 was primarily due to the increase in gross shipments, decrease in returns and other dilutive customer allowances, and a reduction in inventory control costs, offset in part by lower initial markups (IMU) on belts and personal leather goods, increases in royalty costs and increases in unfavorable production variances associated with the Company's belt manufacturing operations in Norwalk, Connecticut. The decrease in average IMU for the Company's belt merchandise was due mainly to lower average wholesale prices with regard to certain private label merchandise programs compared to 2001. The Company has also been actively working with retailers to develop new merchandise lines designed to satisfy increasingly value-conscious consumers. While these collections have generally been well-received, they have led to some wholesale price erosion, dampening belt margins in 2002. In response to these margin pressur es, the Company reduced belt production levels at its Norwalk, Connecticut facility and began sourcing more of its belt merchandise from third-party contractors located primarily in Asia and South America. The decrease in manufacturing activity, particularly during the second half of 2002 led to additional unfavorable overhead variances in Norwalk.

       The decrease in gross profit as a percentage of net sales in 2002 was principally due to a change in sales mix that favored higher shipments of lower-margin merchandise. The Company introduced several new styling and packaging concepts during the year for certain of its jewelry and personal leather goods merchandise programs that contributed to the increase in net sales but also increased the Company's merchandise costs. Inventory-related costs including markdowns and obsolescence were lower in 2002, as the Company decreased inventory levels significantly during the year despite the increase in net sales. The increase in royalty expense was mainly due to higher shipments of certain branded merchandise in 2002, particularly Tommy Hilfiger and Geoffrey Beene belts and personal leather goods.

       Selling and administrative expenses for the year ended December 31, 2002 decreased $221,000 or 1% compared to the prior year. Selling expenses increased by $645,000 or 3% and totaled 21.7% of net sales in 2002 compared to 23.9% in 2001. Administrative expenses in 2002 decreased by $424,000 or 5% compared to the prior year. Administrative expenses expressed as a percentage of net sales were 9.0% and 10.7% for 2002 and 2001, respectively.

       The increase in selling expenses was primarily due to higher advertising and promotional costs associated with the Company's branded merchandise programs and increased variable sales compensation, merchandising, and distribution-related expenses. The Company routinely makes advertising and promotional expenditures to enhance its business and to support the advertising and promotion activity of its licensors. The license agreements to which the Company is a party also generally include minimum advertising and promotional spending requirements. The increase in variable distribution and sales compensation costs are due to higher net sales. Freight costs also increased in 2002 due to certain freight arrangements with customers and higher net sales. Advertising and promotional expenses in support of the Company's men's accessories business, exclusive of cooperative advertising and display expenditures, totaled 2.2% of net sales for the year ended Decem ber 31, 2002 compared to 1.7% in 2001.

       The reduction in administrative expenses in 2002 was mainly due to a decrease in compensation and related expenses, and decreases in professional fees, offset in part by an increase in bad debt expense. The decrease in professional fees expense compared to the prior year was primarily due to the additional costs that were incurred during 2001 associated with the transactions described in Notes A and C to the consolidated financial statements.

       During 2002, the Company recorded an adjustment to an accrual which originally had been established in connection with certain variable expenses associated with net sales made prior to 2001. The Company determined its actual liability for this expense in 2002 and accordingly, recorded other income of $640,000 for the period ending December 31, 2002 to adjust the accrual to its expected amount.

       During the first quarter of 2001, management determined that the Company should intensify its efforts to reduce costs throughout the organization to streamline operations and reduce net cash requirements. As a consequence of this strategy, the Company recorded a restructuring charge of $845,000 in the first quarter of 2001 for employee severance and related payroll costs associated with staff reductions primarily within certain sales and administrative departments affecting approximately 93 employees. Of the $845,000 charge recorded in 2001, $372,000 was included within discontinued operations and $473,000 was included in the results of continuing operations. No restructuring charges were recorded in 2002. The restructuring charges are stated separately in the accompanying Consolidated Statements of Operations. During 2002, the Company paid the remaining liability of $8,000, which was included in Other Liabilities on the Company's Consolidated Balance Sheet at December 31, 2001.

       Net sales for the year ended December 31, 2001 decreased by $12,938,000 or 12.8% compared to 2000. The decrease in net sales was primarily due to lower shipments of certain branded and private label men's accessories programs, offset in part by shipments of the Company's new Tommy Hilfiger merchandise collections which were first shipped during the second quarter. The reduction in shipments of existing merchandise programs was mainly due to a relatively weak retail climate and an economy characterized by poor corporate earnings and extreme volatility in the financial markets, which led to a decline in consumer confidence that prevailed for most of the year. This environment was exacerbated by the tragic events of September 11 and the subsequent disruption in economic activity. As the economy softened further during the fall months, the department store sector suffered disproportionately as consumers generally shifted their focus to other retail c hannels of distribution. Year to year sales comparisons, especially during the Company's spring selling season, were also adversely affected by substantial shipments of men's belts and personal leather goods made during the first quarter of 2000 that accompanied new product introductions at several major accounts.

       Net sales for the year ended December 31, 2001 were also adversely impacted by an increase in customer returns and in-store markdown allowances associated with the weak economy generally, and a heavily promotional holiday season marked by deeper and more frequent price discounting by retailers relative to prior years, offset partially by the launch of the Company's new Tommy Hilfiger merchandise collection. The Company regularly participates in promotional events designed to stimulate sales of its merchandise or expand its market share within certain retail channels.

       Net sales in 2001 were favorably affected by the returns adjustment made in the second quarter. As described in Note B to the accompanying consolidated financial statements, the Company reduces net sales and cost of sales by the estimated effect of future returns of current period shipments. Each spring upon the completion of processing returns from the preceding fall season, the Company records adjustments to net sales in the second quarter to reflect the difference between customer returns of prior year shipments actually received in the current year and the estimate used to establish the allowance for customer returns at the end of the preceding fiscal year. These adjustments increased net sales by $479,000 and $1,740,000 for the twelve month periods ended December 31, 2001 and 2000, respectively.

       Gross profit for the years ended December 31, 2001 and 2000 was $25,981,000 and $31,124,000 respectively, reflecting a decrease of $5,143,000 or 16.5% compared to last year. Gross profit expressed as a percentage of net sales for the year ended December 31, 2001 was 29.6%, compared to 30.9% last year.

       The decrease in gross profit both in dollars and expressed as a percentage of net sales for the year ended December 31, 2001 was primarily due to lower net sales; a reduction in gross margin resulting from an unfavorable sales mix; higher in-store markdown allowances and other allowances recorded during the year to support certain new and existing merchandise programs; and a higher level of customer returns. Gross margin was favorably impacted by lower inventory-related costs as the Company generally was able to reduce inventory levels during the year in response to lower net sales. As discussed above, the retail environment during the important 2001 holiday season saw an unprecedented level of promotional activity as retailers in general and department stores in particular struggled with the affects of recession and reduced consumer spending in the aftermath of the September 11 attacks.

       Included in gross profit 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 $481,000 and $985,000 for the years ended December 31, 2001 and 2000 respectively.

       Selling and administrative expenses for the year ended December 31, 2001 fell $4,640,000 or 13.2% compared to the prior year. Selling expenses decreased by $2,770,000 or 11.6% and totaled 23.9% of net sales for the year ended December 31, 2001 compared to 23.6% last year. The decrease in selling expenses was primarily due to lower compensation costs including salaries, wages, and fringe benefits resulting from the Company's restructuring program; reduced controllable expenses including travel, entertainment, and other discretionary spending; and decreased variable selling costs associated with lower net sales. Advertising and promotional expenses in support of the Company's men's accessories business, exclusive of cooperative advertising and displays, totaled 1.6% of net sales for the year ended December 31, 2001 compared to 1.2% in 2000.

       Administrative expenses for the year ended December 31, 2001 decreased by $1,870,000 or 16.6%. Expressed as a percentage of net sales, administrative expenses fell to 10.7% compared to 11.2% last year. Administrative expenses in 2001 were favorably affected by a reduction in salary and other compensation related costs, lower travel and entertainment expenses, and a reduction in bad debt expense, all partially offset by increased professional fees incurred primarily in connection with the transactions described in Notes A and C to the consolidated financial statements. Administrative expenses for the year ended December 31, 2000 included a non-recurring gain of $476,000 recorded during the first quarter of 2000 resulting from the receipt of common shares associated with the conversion of a mutual life insurance company to a stock corporation (commonly known as a demutualization).

       During the first quarter of 2001, management determined that the Company should intensify its efforts to reduce costs throughout the organization to streamline operations and reduce net cash requirements. As a consequence of this strategy, the Company recorded a restructuring charge of $845,000 in the first quarter of 2001 for employee severance and related payroll costs associated with staff reductions primarily within certain sales and administrative departments affecting approximately 93 employees. Of the $845,000 charge, $372,000 has been presented within to discontinued operations and $473,000 is included in the results of continuing operations.

       The restructuring charges have been stated separately in the Consolidated Statements of Operations. As of December 31, 2001, approximately $837,000 had been paid and $8,000 is included in Other Liabilities in the Consolidated Balance Sheet. The remaining liability was paid during fiscal 2002.

       On April 6, 2001, the Company ceased production operations at Joyas y Cueros de Costa Rica, S.A. ("Joyas y Cueros"), its costume jewelry manufacturing facility located in Cartago, Costa Rica. In connection with the plant closure, Joyas y Cueros recorded charges of approximately $1,218,000 during the fourth quarter of 2000 to reflect a write-down in the value of its manufacturing machinery and equipment and raw materials inventory. Joyas y Cueros also recorded a charge for severance and associated costs of approximately $264,000 in 2001 in connection with the termination of its manufacturing operations. Approximately 150 employees were terminated in connection with the restructuring and plant closure. Restructuring charges associated with Joyas y Cueros were included in Cost of Sales on the Consolidated Statements of Operations for the years ending December 31, 2001 and 2000. The Company completed the sale and liquidation of Joyas y Cueros' remain ing assets in 2001.

       On March 16, 2000, the Company announced a plan to cease production operations at its jewelry manufacturing facility located in Attleboro, Massachusetts and transfer its remaining domestic jewelry production requirements to other vendors. Manufacturing operations at Attleboro ceased in May of 2000 following the orderly transition of merchandise requirements to other resources. Management concluded early in 2000, that its Attleboro manufacturing facility could no longer be competitive in light of the increasing pressure to sustain gross margins at both the wholesale and retail level and that maintaining a domestic large-scale jewelry manufacturing operation was not economically viable. In connection with the closure, the Company recorded a restructuring charge of $2,041,000, of which, approximately $545,000 was allocated to loss from discontinued operations, against income from operations for the year ended December 31, 2000, to cover employee sever ance and other payroll related costs. Additional integration costs of $1,849,000 were incurred during the fourth quarter of 2000 in connection with obsolescence charges for certain jewelry raw material and work in process inventories. During 2001, the Company paid the remaining $308,000 of outstanding restructuring obligations relating to the plant closure which had been included in Other Current liabilities at December 31, 2000. The restructuring charges recorded in 2000 were based upon the Company's estimates of the cost of the employee terminations including outplacement fees, severance, and curtailment losses related to certain post-retirement benefits.

       Net interest expense decreased $447,000 or 23.9% for the year ended December 31, 2001 compared to 2000. The decrease was primarily due to a reduction of approximately 150 basis points in the Company's average borrowing costs in 2001 compared to the prior year (see "Interest Charges" and "Liquidity and Capital Resources"). The Company also reduced its average outstanding revolving credit balance in 2002 by approximately $1,000,000 compared to 2001.

       The Company recorded an income tax benefit at a combined federal and state effective tax rate of 87.4% and 9.2% for 2002 and 2001, respectively, and an income tax provision at a combined federal and state effective tax rate of 34.4% for 2000. The effective tax rates for 2002, 2001 and 2000 were impacted by the recording of valuation allowances on the Company's net deferred tax assets of $9,565,000, $9,964,000 and $5,208,000, respectively (see Note E). The effective tax rates were also effected by differences associated with nontaxable life insurance benefits, the operating losses incurred by Joyas y Cueros and other items. Beginning in 2001, the Company began recording a valuation reserve against all of its deferred tax assets. Accordingly, the only benefit that the Company has recorded in 2001 and 2002 relates to the utilization of tax loss carrybacks for which the Company intends to receive cash refunds. The amount of the deferred tax asset c onsidered realizable could be adjusted in the future if estimates of taxable income or loss for future years are revised based on actual results.

        The Company routinely makes advertising and promotional expenditures to enhance its business and to support the advertising and promotion activity of its licensors. These expenses increased by $138,000 in 2002 due to additional national and other advertising costs associated with branded merchandise programs. Advertising and promotional expenditures increased $138,000 in 2001 compared to 2000 due to additional cooperative and national advertising costs associated with branded merchandise programs.

       The accompanying 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 three years ended December 31, 2002, which the Company was able to fund from the 1998 Revolving Credit Agreement, discussed below, which had an expiry date of June 2003. These factors raise substantial doubt about the ability of the Company to continue to operate as a going concern. The Company's success going forward will be dependent on, among other things, attaining adequate sales revenue; continuing the current program of cost control initiatives; maintaining its cash requirements within its new revolving credit agreement; and ultimately, returning to profitability.

       At December 31, 2001 and 2002, the Company was not in compliance with certain covenants as required by the Revolving Credit and Security Agreement dated July 27, 1998 (the "1998 Revolving Credit Agreement") between the Company and PNC Bank, National Association (the "Bank"), as amended from time to time.

        On April 17, 2003, the Company signed a new $30,000,000 Loan and Security Agreement (the "2003 Loan Agreement") with Congress Financial Corporation (New England). The new financing replaced the Company's 1998 Revolving Credit Agreement and is collateralized by substantially all of the Company's assets including domestic accounts receivable, inventory, and machinery and equipment. In addition, the 2003 Loan Agreement prohibits the Company from paying dividends, imposes limits on additional indebtedness for borrowed money, and contains minimum monthly earnings before interest, taxes, depreciation, and amortization (EBITDA) requirements. The terms of the 2003 Loan Agreement permit the Company to borrow against a percentage of eligible accounts receivable and eligible inventory at a maximum interest rate equal to Wachovia Bank, National Association's ("Wachovia") prime lending rate plus 1.25%, or at Wachovia's Eurodollar rate plus 3.25%. The Co mpany is required to pay an unused line fee monthly of .5% on the amount by which $25,000,000 exceeds the average daily balance of loans and letters of credit outstanding.

       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 terms of the 2003 LoanAgreement 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.

       In the ordinary course of business, the Company is contingently liable for performance under letters of credit of approximately $1,442,000 at December 31, 2002. The Company is required to pay a fee quarterly equal to 2.25% per annum on outstanding letters of credit.

       The following chart summarizes the Company's contractual obligations as of December 31, 2002 (in thousands):

       Cash from investing activities in 2002 was $2,830,000 and was provided primarily by the cash surrender value of certain life insurance policies owned by the Company associated with its 1993 Deferred Compensation plan (the "1993 Plan"). During the third quarter of 2002, the Company completed the termination its 1993 Plan, surrendered the underlying insurance policies, and used the proceeds to distribute all vested benefits to participants. In 2001, the sale of certain assets associated with the women's costume jewelry division and of the Company's South Norwalk, Connecticut manufacturing facility provided $10,362,000 in net cash from investing activities. Capital expenditures were $187,000 and $660,000 in 2002 and 2001, respectively.

       The Company expects that cash from operations and availability under the 2003 Loan Agreement will be sufficient to fund its ongoing program of replacing aging machinery and equipment to maintain or enhance operating efficiencies.

       Certain of the preceding paragraphs contain "forward looking statements" which are based upon current expectations and involve certain risks and uncertainties. Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, readers should note that these statements may be impacted by, and the Company's actual performance may vary as a result of, a number of factors including general economic and business conditions, continuing sales patterns, pricing, competition, consumer preferences, and other factors.

       In April 2002, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No. 145, "Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections, " (SFAS No. 145), which updates, clarifies, and simplifies certain existing accounting pronouncements covering a variety of issues. Certain of the provisions of SFAS No. 145 are effective for fiscal years beginning after May 15, 2002 or for transactions occurring after May 15, 2002. Other provisions of SFAS No. 145 are effective for financial statements issued after May 15, 2002, with earlier application encouraged. The Company believes that the adoption of SFAS No. 145 will have no material effect on the financial statements.

In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS No. 146"), which addresses financial accounting and reporting for costs associated with exit or disposal activities and supersedes Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002, with earlier application encouraged. The Company believes that the adoption of SFAS No. 146 will have no material effect on the financial statements.

       On December 31, 2002, the FASB issued FAS 148, Accounting for Stock-Based Compensation -- Transition and Disclosure (FAS 148). FAS 148 amends FAS 123, Accounting for Stock-Based Compensation (FAS 123), to provide alternative methods of transition to FAS 123's fair value method of accounting for stock-based employee compensation in the event companies adopt FAS 123 and account for stock options under the fair value method. FAS 148 also amends the disclosure provisions of FAS 123 and APB Opinion No. 28, Interim Financial Reporting (APB 28), to require disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While the Statement does not amend FAS 123 to require companies to account for employe e stock options using the fair value method, the disclosure provisions of FAS 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of FAS 123 or the intrinsic value method of APB Opinion No. 25 Accounting for Stock Issued to Employees (APB 25). As of December 31, 2002, we have adopted the disclosure requirements of FAS 148 as disclosed in the Notes to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

       In November 2002, the FASB issued Interpretation No. (FIN) 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. Among other things, the Interpretation requires guarantors to recognize, at fair value, their obligations to stand ready to perform under certain guarantees. FIN 45 is effective for guarantees issued or modified on or after January 1, 2003. We believe the adoption of FIN 45 will not have an effect on our financial position and future results of operations.

        In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities. FIN 46's consolidation criteria are based on analysis of risks and rewards, not control, and represent a significant and complex modification of previous accounting principles. FIN 46 represents an accounting change, not a change in the underlying economics of asset sales. FIN 46 is effective for consolidated financial statements issued after June 30, 2003. We believe the adoption of FIN 45 will not have an effect on our financial position and future results of operations.

       The Company, in the normal course of business, is theoretically exposed to interest rate change market risk with respect to borrowings under its revolving credit line. The seasonal nature of the Company's business typically requires it to build inventories during the course of the year in anticipation of heavy shipments to retailers for the upcoming holiday season. The Company's revolving credit borrowings generally peak during the third and fourth quarters. Therefore, a sudden increase in interest rates (which under the Company's amended revolving credit facility is the prime rate plus 1.25%) may, especially during peak borrowing periods, have a negative impact on short-term results. The Company is also theoretically exposed to market risk with respect to changes in the global price level of certain commodities used in the production of the Company's products. The Company routinely makes substantial purchases of leather hides during the year for u se in the manufacture of men's belts. The Company also purchases men's personal leather items from a third-party supplier. An unanticipated material increase in the market price of leather could increase the cost of these products to the Company and therefore have a negative effect on the Company's results. To minimize this risk, the Company has developed certain manufacturing techniques and processes designed to maximize leather yields and incorporate lesser cost materials.

     All other schedules have been omitted because they are not applicable or not required as the required information is included in the Consolidated Financial Statements of the Company or the Notes thereto.

Independent Auditors' Report
Board of Directors
Swank, Inc.
Attleboro, Massachusetts

We have audited the accompanying consolidated balance sheet of Swank, Inc. as of December 31, 2002 and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Swank, Inc. at December 31, 2002, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the schedule, listed in the index appearing under Item 15(a)(2) on page 56, presents fairly, in all material respects, the information set forth therein.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note A. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ BDO Seidman, LLP

BDO Seidman, LLP

February 20, 2003 (except with respect to the matters

discussed in Note M as to which the date is April 17, 2003)
Boston, Massachusetts

In our opinion, the consolidated balance sheet as of December 31, 2001 and the related consolidated statements of operations, changes in stockholders' equity and of cash flows for each of the two years in the period ended December 31, 2001 (appearing on pages 21 through 39 of Swank, Inc.'s 2002 Annual Report to Shareholders which has been incorporated by reference in this Form 10-K) present fairly, in all material respects, the financial position, results of operations and cash flows of Swank Inc. and its subsidiaries at December 31, 2001 and for each of the two years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules appearing on page 56 of the Swank, Inc.'s 2002 Annual Report to Shareholders which has been incorporated by reference in this Form 10-K as of and for the years ended December 31, 2001 and 2000 present fairly, in all material respects, the informatio n set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern. As discussed in Note A to the financial statements, the Company has experienced operating losses and negative cash flows from operating activities for the year ended December 31, 2001 that raise substantial doubt about its ability to continue to operate as a going concern. Management's plans in regard to these matters are also described in Note A. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ PricewaterhouseCoopers LLLP

PricewaterhouseCoopers LLP
Boston, Massachusetts

March 13, 2002, except for
the third paragraph of Note D for
which the date is May 7, 2002

       The Company is engaged in the manufacture, sale and distribution of men's belts, leather accessories, suspenders and jewelry. Its 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. See Note K to the consolidated financial statements.

       The accompanying 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 year ended December 31, 2002, which the Company was able to fund from the 1998 Credit Agreement, discussed below, which had an expiry date of June 2003. These factors raise substantial doubt about the ability of the Company to continue to operate as a going concern. The Company's success going forward will be dependent on, among other things, attaining adequate sales revenue; continuing the current program of cost control initiatives; maintaining its cash requirements within its amended revolving credit agreement; and ultimately, returning to profitability.

       Over the past several years, the Company has taken certain steps and has instituted several initiatives intended to improve its results from operations and cash flows, including closing its Attleboro, Massachusetts and Cartago, Costa Rica jewelry manufacturing facilities in 2000 and 2001, respectively. In 2001, the Company entered into a sale-leaseback transaction with respect to its South Norwalk, Connecticut manufacturing facility and completed the sale of certain assets and contemporaneously discontinued the remaining operations associated with its women's costume jewelry division in 2001. The net proceeds of the sale-leaseback transaction and the sale of the women's jewelry assets of approximately $6,100,000 and $4,600,000, respectively, were used to reduce the Company's outstanding revolving credit balance. The Company has also received from the Internal Revenue Service refunds of federal income taxes paid in prior years of approximately $2,2 51,000 and $4,239,000 in 2001 and 2002, respectively.

       At December 31, 2001 and 2002, the Company was not in compliance with certain covenants as required by the Revolving Credit and Security Agreement dated July 27, 1998 (the "1998 Revolving Credit Agreement") between the Company and PNC Bank, National Association (the "Bank"), as amended from time to time.

       On April 17, 2003, the Company signed a new $30,000,000 Loan and Security Agreement (the "2003 Loan Agreement") with Congress Financial Corporation (New England). The new financing replaced the Company's 1998 Revolving Credit Agreement and is collateralized by substantially all of the Company's assets including domestic accounts receivable, inventory, and machinery and equipment. In addition, the 2003 Loan Agreement prohibits the Company from paying dividends, imposes limits on additional indebtedness for borrowed money, and contains minimum monthly earnings before interest, taxes, depreciation, and amortization (EBITDA) requirements. The terms of the 2003 Loan Agreement permit the Company to borrow against a percentage of eligible accounts receivable and eligible inventory at a maximum interest rate equal to Wachovia Bank, National Association's ("Wachovia") prime lending rate plus 1.25%, or at Wachovia's Eurodollar rate plus 3.25%. The Company is required to pay an unused line fee monthly of .5% on the amount by which $25,000,000 exceeds the average daily balance of loans and letters of credit outstanding.

       Although no assurances can be given, the Company believes that attaining adequate sales revenue, continuing the current program of cost control initiatives, and managing working capital requirements within the terms of the 2003 Agreement will enable it 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 preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

       Net sales are generally recorded upon shipment, provided there exists persuasive evidence of an arrangement, the fee is fixed or determinable and collectability of the related receivable is reasonably assured. Allowances, including cash discounts, in-store customer allowances, cooperative advertising allowances, and customer returns, are provided for at the time the revenue is recognized based upon historical experience, current trends in the retail industry and individual customer and product experience.

       For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with original maturities of three months or less to be cash equivalents.

       The Company's allowances for receivables are comprised of cash discounts, doubtful accounts, in-store markdowns, cooperative advertising and customer returns. Provisions for doubtful accounts and cooperative advertising are reflected in selling and administrative expenses. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential bad debt losses. The Company does not typically require collateral from its customers. The allowance for customer returns results from the reversal of sales for estimated returns and associated costs. Allowances for in-store markdowns and cooperative advertising reflect the estimated costs of the Company's share of certain promotions by its retail customers. Allowances for accounts receivable are generally at their seasonal highs on December 31. Reductions of allowances occur principally in the first and second quarters when the balances are adjusted to reflect actual char ges as processed. Allowances for accounts receivable are estimates made by management based on historical experience, adjusted for current conditions, and may differ from actual results. The provisions (recoveries) for bad debts in 2002, 2001 and 2000 were $448,000, $(226,000), and $(60,000), respectively.

       The Company sells products primarily to major retailers within the United States. The Company's three largest customers accounted for approximately 43% of consolidated trade receivables (gross of allowances) at December 31, 2002 and 37% at December 31, 2001.

       The Company, in the normal course of business, is theoretically exposed to interest rate change market risk with respect to borrowings under its revolving credit line. The seasonal nature of the Company's business typically requires it to build inventories during the course of the year in anticipation of heavy shipments to retailers for the upcoming holiday season. The Company's revolving credit borrowings generally peak during the third and fourth quarters. Therefore, a sudden increase in interest rates (which under the Company's 2003 Agreement is the prime rate plus a maximum margin of 1.25% or the Eurodollar rate plus a maximum margin of 3.25%) may, especially during peak borrowing periods, have a negative impact on short-term results. The Company is also theoretically exposed to market risk with respect to changes in the global price level of certain commodities used in the production of the Company's products. The Company routinely makes subst antial purchases of leather hides during the year for use in the manufacture of men's belts. The Company also purchases men's personal leather items from a third-party supplier. An unanticipated material increase in the market price of leather could increase the cost of these products to the Company and therefore have a negative effect on the Company's results. To minimize this risk, the Company has developed certain manufacturing techniques and processes designed to maximize leather yields and incorporate lesser cost materials.

          The Company purchases substantially all of its small leather goods, principally wallets, from a single supplier in India. Unexpected disruption of this source of supply could have an adverse effect on the Company's small leather goods business in the short-term depending upon the Company's inventory position and on the seasonal shipping requirements at that time. However, the Company believes that alternative sources for small leather goods are available and could be utilized by the Company within several months. The Company also purchases finished belts and other accessories as well as certain belt components, including buckles, from a number of suppliers in the United States and abroad. The Company believes that alternative suppliers are readily available for substantially all such purchased items. Raw materials are purchased in the open market from a number of domestic and foreign suppliers and are readily available.

       Inventories are stated at the lower of cost (principally average cost which approximates FIFO) or market. The Company's inventory is somewhat fashion oriented and, as a result, is subject to risk of rapid obsolescence. Management believes that inventory has been adequately adjusted, where appropriate, and that the Company has adequate channels to dispose of excess and obsolete inventory.

       The Company's capital lease obligations for certain equipment are recorded at the lesser of the present value of the minimum lease payments or the fair market value of the leased property at the inception of the lease. The cost of the leased assets is amortized on a straight-line basis over the lesser of the term of the lease obligation or the life of the asset, generally 3 to 5 years.

       Expenditures for maintenance and repairs and minor renewals are charged to expense; betterments and major renewals are capitalized. Upon disposition, cost and related accumulated depreciation are removed from the accounts with any related gain or loss reflected in results of operations.

       Prior to 2002, management periodically assessed, based on undiscounted cash flows, if there had been a permanent impairment in the carrying value of its long-lived assets and, if so, the amount of any such impairment, by comparing anticipated discounted future operating income resulting from intangible assets with the carrying value of the related asset. In performing this analysis, management considered such factors as current results, trends and prospects, in addition to other economic factors. As a result of such cash flow analysis, the Company wrote-down the value of certain machinery and equipment at its Costa Rica facility and recognized an expense of $502,000, which was included in selling and administrative expenses for the year ending December 31, 2000.

       In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of, but retains FAS 121's fundamental provisions for (a) recognition and measurement of impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. FAS 144 also supersedes the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations -- Reporting the Effects of a Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (APB 30), for segments of a business to be disposed of but retains the requirement to report discontinued operations separately from continuing operations. The Company adopted SFAS 144, effective January 1, 2002, which did not have a material impact on its financial position or results of operations.

       The Company reviews the carrying value of its long-lived assets whenever events and circumstances indicate that the assets might be impaired and the carrying value may not be recoverable. Recoverability of these assets is measured by comparison of the carrying value of the assets to the undiscounted cash flows estimated to be generated by those assets over their remaining economic life. If such assets are considered impaired, the impairment loss is measured by comparing the fair value of the assets to their carrying values. Fair value is determined by either a quoted market price or a value determined by a discounted cash flow technique, whichever is more appropriate under the circumstances involved. The Company believes that no improvements exist at December 31, 2002.

       The Company charges advertising costs to expense as they are incurred. During 2002, the Company adopted Emerging Issues Task Force Issue No. 01-9, "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products" ("EITF 01-9"). As a result of adopting EITF 01-9, the Company has reclassified cooperative advertising costs to net revenue and in-store fixturing and display expenditures to cost of goods sold. Both had previously been classified within selling and administrative expense. The Company's adoption of EITF 01-9 reduced net sales for the year ended December 31, 2002 by $911,000; increased cost of sales by $539,000; and reduced selling and administrative expense by $1,450,000. For the year ended December 31, 2001, the adoption of EITF 01-9 reduced net sales by $756,000; increased cost of sales by $255,000; and reduced selling and administrative expense by $1,011,000. For the year ended De cember 31, 2000, the adoption of EITF 01-9 reduced net sales by $897,000; increased cost of sales by $373,000; and reduced selling and administrative expense by $1,270,000.

       Environmental expenditures that relate to current operations are expensed or capitalized, as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Generally, adjustments to these accruals coincide with the completion of a feasibility study or the Company's commitment to a formal plan of action or other appropriate benchmark.

       The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Net deferred tax assets are recorded when it is more likely than not that such tax benefits will be realized. A valuation allowance is recorded to reflect the estimated realization of the deferred tax asset.

       The Company measures the cost of stock-based compensation associated with the stock option plans described in Note H using the "intrinsic value" method. Under this method, the increment of fair value, if any, at the date of grant over the exercise price is charged to expense over the period that the employee provides the associated services. The Company discloses the information required by SAFS No. 123 "Accounting for Stock Based Compensation", which includes information with respect to stock-based compensation determined under the "fair value" method. The Company uses the Black-Scholes formula to determine the fair value of options on the grant date for purposes of this disclosure.

       The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant, and accounts for stock-based compensation for employees in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and follows the disclosure-only alternative under FAS 123, Accounting for Stock Based Compensation (FAS 123) (see Note H).

      Had compensation expense for the Company's Stock Plans been determined consistent with FAS 123, the pro forma net (loss) per share would have been as follows:

       Certain prior year amounts have been reclassified to be consistent with the current year's presentation.

       In April 2002, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No. 145, "Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections, " (SFAS No. 145), which updates, clarifies, and simplifies certain existing accounting pronouncements covering a variety of issues. Certain of the provisions of SFAS No. 145 are effective for fiscal years beginning after May 15, 2002 or for transactions occurring after May 15, 2002. Other provisions of SFAS No. 145 are effective for financial statements issued after May 15, 2002, with earlier application encouraged. The Company believes that the adoption of SFAS No. 145 will have no material effect on the financial statements.

In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS No. 146"), which addresses financial accounting and reporting for costs associated with exit or disposal activities and supersedes Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002, with earlier application encouraged. The Company believes that the adoption of SFAS No. 146 will have no material effect on the financial statements.

       On December 31, 2002, the FASB issued FAS 148, Accounting for Stock-Based Compensation -- Transition and Disclosure (FAS 148). FAS 148 amends FAS 123, Accounting for Stock-Based Compensation (FAS 123), to provide alternative methods of transition to FAS 123's fair value method of accounting for stock-based employee compensation in the event companies adopt FAS 123 and account for stock options under the fair value method. FAS 148 also amends the disclosure provisions of FAS 123 and APB Opinion No. 28, Interim Financial Reporting (APB 28), to require disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While the Statement does not amend FAS 123 to require companies to account for employe e stock options using the fair value method, the disclosure provisions of FAS 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of FAS 123 or the intrinsic value method of APB Opinion No. 25 Accounting for Stock Issued to Employees (APB 25). As of December 31, 2002, we have adopted the disclosure requirements of FAS 148 as disclosed in the Notes to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

       In November 2002, the FASB issued Interpretation No. (FIN) 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. Among other things, the Interpretation requires guarantors to recognize, at fair value, their obligations to stand ready to perform under certain guarantees. FIN 45 is effective for guarantees issued or modified on or after January 1, 2003. We believe the adoption of FIN 45 will not have an effect on our financial position and future results of operations.

        In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities. FIN 46's consolidation criteria are based on analysis of risks and rewards, not control, and represent a significant and complex modification of previous accounting principles. FIN 46 represents an accounting change, not a change in the underlying economics of asset sales. FIN 46 is effective for consolidated financial statements issued after June 30, 2003. We believe the adoption of FIN 45 will not have an effect on our financial position and future results of operations.

       Early in 2001, management determined that the Company should intensify its efforts to reduce costs throughout the organization to streamline operations and reduce net cash requirements. As a consequence of this strategy, the Company recorded a restructuring charge of $845,000 in the first quarter of 2001 for employee severance and related payroll costs associated with staff reductions primarily within certain sales and administrative departments affecting approximately 93 employees. Of the $845,000 charge recorded in 2001, $372,000 was included within discontinued operations and $473,000 was included in the results of continuing operations. No restructuring charges were recorded in 2002. The restructuring charges are stated separately in the Consolidated Statements of Operations. During 2002, the Company paid the remaining liability of $8,000, which was included in Other Liabilities on the Company's Consolidated Balance Sheet at December 31, 2001.

       The average amounts outstanding and weighted average interest rates during each year are based on average monthly balances outstanding under the Company's revolving credit facility for seasonal working capital needs.

       On July 16, 2001, the Company entered into a Seventh Amendment of the 1998 Credit Agreement (the "Seventh Amendment") in connection with the sale of certain of its women's jewelry assets to K&M. The Seventh Amendment, among other things, reduced the maximum amount of revolving advances from $30,000,000 to $25,000,000 at all times subsequent to the sale of the women's jewelry assets and removed the applicable women's jewelry accounts receivable and inventory from the collateral base. The Seventh Amendment also provided for the bank's consent to the sale.

       At December 31, 2001and 2002, the Company was not in compliance with certain covenants as required by the 1998 Revolving Credit Agreement, as amended. The Bank subsequently waived those requirements as of and for the quarter ended December 31, 2001. 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 provided for a seasonal overadvance of $1,500,000 for the period July 1, 2002 through October 15, 2002 (the "Seasonal Overadvan ce") and required that John and Marshall Tulin furnish to the Bank a guaranty (the "Tulin Guaranty"), in an amount not to exceed $750,000, to secure the repayment of the Seasonal Overadvance.

The Seasonal Overadvance, which expired on October 15, 2002, has been repaid and the Tulin Guaranty has been terminated. At December 31, 2002, the Company was in compliance with the minimum Tangible Net Worth covenant required by the Eighth Amendment.

       On April 17, 2003, the Company signed a new $30,000,000 Loan and Security Agreement (the "2003 Loan Agreement") with Congress Financial Corporation (New England). The new financing replaced the Company's 1998 Revolving Credit Agreement and is collateralized by substantially all of the Company's assets including domestic accounts receivable, inventory, and machinery and equipment. In addition, the 2003 Loan Agreement prohibits the Company from paying dividends, imposes limits on additional indebtedness for borrowed money, and contains minimum monthly earnings before interest, taxes, depreciation, and amortization (EBITDA) requirements. The terms of the 2003 Loan Agreement permit the Company to borrow against a percentage of eligible accounts receivable and eligible inventory at a maximum interest rate equal to Wachovia Bank, National Association's ("Wachovia") prime lending rate plus 1.25%, or at Wachovia's Eurodollar rate plus 3 .25%. The Company is required to pay an unused line fee monthly of .5% on the amount by which $25,000,000 exceeds the average daily balance of loans and letters of credit outstanding.

The components of income taxes are as follows: