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 close of business on June 30, 2003: $690,311.

          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 27, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

None.

          The Company was incorporated on April 17, 1936. The Company is engaged in the importation, sale and distribution of men's accessories under the names "Kenneth Cole", "Geoffrey Beene", "Pierre Cardin", "Claiborne", "Tommy Hilfiger", "Guess", "Swank", and "Colours by Alexander Julian", among others. Prior to July 23, 2001, the Company was also engaged in the sale and distribution of women's costume jewelry.

          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 in to 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 men's jewelry, principally cuff links, tie klips, chains and tacs, bracelets, neck chains, vest chains, collar pins, key rings and money clips, as well as suspenders, are distributed under the names "Geoffrey Beene", "Claiborne", "Kenneth Cole", "Tommy Hilfiger", "Guess?", "Swank", "Field & Stream" and "Colours by Alexander Julian". The Company also distributes men's leather accessories under the name "Pierre Cardin" and for customers' private labels.

          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 typically 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 (July through December) in order to meet customer imposed delivery 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. Net sales in fiscal 2003 to the Company's four largest customers, Federated Department Stores ("Federated), Inc., TJX Companies, Inc. ("TJX"), May Department Stores Company ("May") and Target Corporation ("Target") accounted for approximately 13%, 11%, 10% and 10%, respectively, of consolidated net sales. Sales to Federated, Target and May were approximately 15%, 14%, and 11% respectively, of consolidated net sales in fiscal 2002 and approximately 16%, 15% and 12%, respectively, in fiscal 2001. Sales to TJX 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 2003, 2002 or 2001. Exports to foreign countries accounted for less than 4% of consolidated net sales in fiscal year 2003 and less than 5% of consolidated net sales in each of the Com pany's fiscal years ended December 31, 2002 and 2001, respectively.

          At March 10, 2004, the Company had unfilled orders of approximately $8,910,000 compared with approximately $7,844,000 at March 10, 2003. The increase in backlog of unfilled orders is primarily attributable to orders for initial merchandise shipments to certain new customers and increased orders from existing customers. The Company also believes that a better than expected retail sell-through during the 2003 holiday period combined with generally lower retail inventories entering the holiday season resulted in an increased demand for its products during the first quarter of 2004. However, in the ordinary course of business, the dollar amount of unfilled orders at a particular point in time is affected by a number of factors, including manufacturing schedules, timely shipment of goods, which, in turn, may be dependent on the requirements of customers, and the timing of placement by our customers of orders from year-to-year. Accordingly, a comparison of backlog from period to period is not necessarily meaningful and may not be indicative of future sales patterns or shipments.

          Approximately 44 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, at December 31, 2003 the Company sold certain of its products through 11 company-owned factory outlet stores in 8 states. Subsequent to December 31, 2003, the Company closed two of those locations and now operates 9 stores located in 7 states.

          Items manufactured by the Company, consisting of belts and suspenders, accounted for approximately 22% of consolidated net sales in fiscal 2003. However, during the fourth quarter of the last fiscal year, the Company determined to cease manufacturing operations at its belt and suspender manufacturing facility, located in Norwalk, Connecticut, and source its entire belt and suspender merchandise requirements from third-party vendors. As part of this transition, the Company has reorganized its sourcing and production organizations to better reflect the Company's new supply chain model. Historically, the Company had manufactured and/or assembled its men's and women's costume jewelry products at the Company's plant in Attleboro, Massachusetts and at the facility of the Company's former 65% owned subsidiary, Joyas y Cueros de Costa Rica, S.A. ("Joyas y Cueros") located in Cartago, Costa Rica. The Company discontinued its manufacturi ng operations at Joyas y Cueros and Massachusetts in 2001 and 2000, respectively, in each case, transferring its production requirements to third party vendors. As of the date of this Form 10-K, the Company no longer manufactures the products it sells. Reference is made to Footnote I of the Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information concerning the cessation of the Norwalk manufacturing operations.

          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 has identified alternative sources for small leather goods, which could be utilized by the Company within several months. The Company also purchases its finished belts and other accessories 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.

          Substantial expenditures on advertising and promotion are an integral part of the Company's business. Approximately 3.2% of net sales was expended on advertising and promotion in 2003, of which approximately 2.1% 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 and, in some instances, in certain other jurisdictions, for the distribution and sale of men's leather accessories and costume jewelry under the names "Geoffrey Beene", "Claiborne", "Kenneth Cole", "Tommy Hilfiger", "Guess?", "Field & Stream" and "Colours by Alexander Julian." The Company also holds exclusive licenses to distribute men's leather accessories under the name "Pierre Cardin." The Company's "Geoffrey Beene", "Pierre Cardin", "Claiborne", "Kenneth Cole", "Tommy Hilfiger", "Field & Stream" and "Guess?" licenses collectively may be considered material to the Company's business. The "Pierre Cardin", "Geoffrey Beene", "Claiborne" and "Tommy Hilfiger" agreements also license the Company to distribute and sell suspenders. The Company does not believe that its business is materially dependent on any one license agreement. The Company's "Pierre Cardin", "Field & Stream" and "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 provide for percentage royalty payments not exceeding 8% of net sales. The license agreements to which the Company is a party generally specify minimum royalties and minimum advertising and promotion expenditures. The Company's "Pierre Cardin" and "Field & Stream" licenses expire December 31, 2006. The Company's "Kenneth Cole", "Claiborne", "Guess?" and "Tommy Hilfiger" licenses expire December 31, 2004. The Company's "Geoffrey Beene" license expires June 30, 2005. The Company regularly assesses the status of its license agreements and anticipates renewing those contracts scheduled to expire in 2004, subject to the negotiation of terms and conditions satisfactor y to the Company.

          The Company has approximately 293 employees, of whom approximately 160 are warehouse and production employees. None of the Company's employees are represented by labor unions and management believes its relationship with its employees to be satisfactory.

          As previously announced, as of September 30, 2003, the Company was not in compliance with the EBITDA covenant in the 2003 Loan Agreement. Since that date, and from that date through the date of this Form 10-K, the Company has not been in compliance with the covenant, which is measured, on a cumulative basis, as at the end of each month. As a result, extensions of credit under the 2003 Loan Agreement were at the discretion of Congress at an interest rate 200 basis points higher than the customary rate. In February 2004, the Company and Congress entered into an agreement, which has since been extended, under which Congress has agreed not to take any action with respect to the Company's non-compliance with this covenant, and to continue to make loans to the Company on terms set forth in that agreement and in the 2003 Loan Agreement. The Company has had discussions recently with several prospective lenders, as well as with Congress, with regard to proposed new credit arrangements that would provide the Company with adequate financing to fund its operations through 2004 and beyond. The Company is in the process of negotiating the terms and conditions of a new financing agreement with one of those lenders and anticipates finalizing a new credit agreement within the next 60 to 90 days. At December 31, 2003, $521,000 was included in other assets on the Company's Consolidated Balance Sheet in connection with unamortized deferred financing fees associated with the 2003 Loan Agreement.

          In the first quarter of 2004, the Company and the landlord of its South Norwalk, Connecticut facility entered into an agreement under which the lease for that facility has been terminated effective April 1, 2004. The Company paid $250,000 to the landlord upon signing of the termination agreement, which also provides for payments to the landlord of an additional $1,250,000, in installments, during the period from April 2004 through March 2006. The Company anticipates recording the costs associated with terminating the lease during the first quarter of 2004. The Company estimates its remaining liabilities under the lease, had it not been terminated, would have been approximately $2,586,000. Reference is made to Footnote I of the Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information concerning the termination of this lease.

         On April 1, 2004, Marshall Tulin, Chairman of the Board of the Company, (the "Investor"), loaned $350,000 to the Company pursuant to the terms of a convertible subordinated promissory note (the "Note") issued by the Company to the Investor. The Note is expressly subordinate in right of payment to the Company's senior secured debt, has a maturity of three years, and pays interest at an annual rate of 7 percent, payable quarterly. See discussion of Liquidity and Capital Resources included under "Management's Discussion and Analysis" below.

          The Company's main administrative office is presently 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 executive offices and its 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. The warehouse facility in Taunton is equipped with modern machinery and equipment, substantially all of which is owned by the Company, with the remainder leased.

          Through fiscal 2003, men's belts and suspenders were 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. As mentioned above in Item 1 of this Form 10-K, the Company no longer conducts manufacturing operations in Norwalk and the lease for these premises has been terminated.

          The Company presently operates eight 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 14,000 square feet in the aggregate.

          In management's opinion, the Company's properties and machinery and equipment are adequate for the conduct of the Company's businesses.

Item 3.          Legal Proceedings.

          (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, has 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 Spring of 2004.  EPA is expected to announce its Record of Decision during the summer of 2004.  The Massachusetts Superfund site is adjacent to a municipal landfill that is in the process of being closed under Massachusetts law.  It is unlikely that this matter will have a material adverse effect on the Company's operating results, financial condition or cash flows because once the FS is approved by the EPA, the Company's obligation under its Consent Order will cease. The PRP Group's accountant's records reflect group expenses since December 31, 1990, independent of legal fees, in the amount of $3,785,739 as of December 31, 2003. 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 two PRP's, however, the Company expects that the r espective shares of these costs in the future will be reallocated among the remaining members of the PRP Group. The Company believes that it has adequately reserved for the potential costs associated with this site.

          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. The Company believes that it has adequately reserved for the potential costs associated with this site.

          (b)  No material pending legal proceedings were terminated during the three month period ended December 31, 2003.

Not applicable.

The executive officers of the Company are as follows:

          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.

          The Company's Common Stock is traded in the over-the-counter market under the symbol SNKI. The following table sets forth for each quarterly period during the last two fiscal years the high and low bid prices for the Company's Common Stock, as reported by thestreet.com (which prices reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions).

            Number of Record Holders at February 27, 2004  -  1,249

           The 2003 Loan Agreement 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 during the last two fiscal 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.

          During the three-months ended December 31, 2003, the Company did not repurchase any shares of its Common Stock.

Item 6.          Selected Financial Data.

       The Company is currently engaged in the importation, 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 a wide variety of specialty stores and mass merchandisers. The Company also operates a number of factory outlet stores primarily to distribute excess and out of line merchandise.

       Net sales in 2003 decreased 5.2% to $94,845,000 compared to $100,011,000 in 2002. The decrease in net sales was mainly due to lower shipments of certain belt and personal leather goods programs associated with new product and packaging concepts in 2002 that were not sold to the same extent in 2003. Gross profit decreased 6.4% to $26,362,000 from $28,154,000 in 2002. The decrease in gross profit resulted primarily from the decrease in net sales and certain non-recurring expenses associated with the closure of the Company's belt and suspender manufacturing facility located in South Norwalk, Connecticut ("Norwalk"). The decrease in gross profit however, was offset by a 10.1% decrease in selling and administrative expenses reducing the Company's operating loss before interest and tax by $1,006,000 or 40.8% compared to 2002.

          During 2003, the Company determined that it would be advantageous to discontinue its manufacturing operations at Norwalk and source its entire belt and suspender merchandise requirements from third-party vendors. The Company began transitioning its requirements to these vendors primarily during the second half of 2003 and, during the fourth quarter of 2003, ceased its manufacturing operations at Norwalk. As part of this transition, the Company has reorganized its sourcing and production organizations to better reflect the Company's new supply chain model. The Company recorded $1,640,000 of non-recurring expenses during the fourth quarter of 2003 in connection with the closure, including $1,360,000 in inventory-related costs that were charged to cost of goods sold.

       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.

       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 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.

       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, and the likelihood that the Company's deferred tax assets will be recovered.

       Net sales for the year ended December 31, 2003 decreased by $5,166,000 or 5.2% compared to 2002. Shipments of the Company's personal leather goods and belt merchandise decreased 8.8% and 5.7%, respectively both as compared to the prior year. The decrease in personal leather goods shipments was primarily due to rollouts of new small leather goods merchandise shipped during the first and second quarters of 2002 and certain holiday gift programs that were not shipped to the same extent in 2003. During 2002's spring season, the Company made unusually heavy shipments in connection with new product and packaging concepts associated with the Company's "Geoffrey Beene" and "Tommy Hilfiger" branded collections as well as in connection with certain private label programs. The decrease in men's belt shipments in 2003 was primarily due to lower sales of non-branded merchandise offset in part by higher sales associated with the launch of certain new branded be lt programs including "Axcess by Claiborne" and "Kenneth Cole Reaction".

          Net sales in 2003 were further affected by decisions made by the Company's retail customers during the year to reduce their on-hand inventories to accelerate inventory turn. Retailers generally reduced their purchases from the Company during 2003 to achieve the targeted reductions. In addition, shipments of private label merchandise for all categories fell 12.1% in 2003, due in part to the Company's decision to reduce its exposure to low-margin businesses. Retailers have generally been revising their pricing strategies with regard to private label product requiring vendors to become more aggressive in providing lower cost merchandise. The Company determined in 2003 that it would reduce its participation in certain of these programs if the Company could not achieve appropriate margin goals, and instead concentrate its working capital and product development resources on potentially more profitable businesses.

          The decrease in belt and small leather goods shipments was offset in part by a reduction in sales dilution associated with reduced customer returns, markdowns and allowances. The decrease in sales dilution during 2003 was mainly due to higher returns received during the spring 2002 season associated with the launches of the new packaging concepts, and increased markdown activity during the fourth quarter of 2002 in connection with certain holiday boxed merchandise shipped to retailers during the fall 2002 season. During 2002, a disappointing holiday season and generally sluggish retail climate also contributed to a more promotional retail environment compared to 2003. 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 2003 and 2002 were also favorably affected by the annual returns adjustment made in the second quarter. 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 $2,069,000 and $505,000 for the twelve month periods ended December 31, 2003 and 2002, respectively. The increase in this adjustment in 2003 compared to 2002 was primarily due to a significant reduction in customer returns during the spring 2003 season beyond that which had been projected. As described above, during the spring 2002 season the Company made unusually heavy shipments in connection with certain new "Geoffrey Beene" and "Tommy Hilfiger" branded merchandise but also experienced an increase in returns as retailers adjusted their inventories accordingly. In establishing its reserve at December 31, 2002, the company anticipated a reduction in returns during the spring 2003 season but its actual experience was more favorable than planned.

       Gross profit for the year ended December 31, 2003 decreased by $1,792,000 or 6.4% compared to the prior year's gross profit of $28,154,000. Gross profit expressed as a percentage of net sales for 2003 was 27.8% compared to 28.1% for 2002.

       The decrease in gross profit both in dollars and as a percentage of net sales during 2003 was primarily due to increases in certain inventory-related costs, non-recurring expenses associated with the Norwalk closure and lower net sales, all offset in part by reduced sales dilution and royalty charges and improved manufacturing efficiencies. The increase in inventory-related charges in 2003 was primarily due to costs incurred by the Company associated with sales of discontinued and excess belt inventories. As a consequence of transitioning its belt requirements to third-party vendors, the Company discontinued a variety of manufactured styles and purchased additional merchandise to ensure adequate supplies for the fall season. As discussed above, the Company's retail customers also adjusted their purchases during 2003 to reduce their on-hand inventories. These factors contributed to a higher than usual inventory of excess product primarily during the fall season and resulted in additional markdown expense associated with the subsequent sale of these goods. The closure of the Norwalk facility resulted in non-recurring inventory-related charges of $1,360,000 recorded in cost of sales during the fourth quarter associated with excess and obsolete raw materials and supplies formerly used in belt and suspender manufacturing. Sales dilution decreased in 2003 compared to 2002 due to customer returns received during last year's spring season associated with the launches of the new packaging concepts shipped during the first quarter of 2002 and increased markdown accruals recorded during the fourth quarter of 2002 in connection with certain holiday boxed merchandise shipped to retailers during the fall 2002 season. The Company made fewer shipments of boxed merchandise during the 2003 holiday season.

       The Company's initial markup in 2003 on its men's personal leather goods and belt merchandise decreased slightly compared to the prior year principally due to a higher proportion of sales to off-price and labels-for-less retailers. During the past year, the Company has also introduced several new styling and packaging concepts for certain of its leather goods programs to address the needs of more value-conscious consumers that contributed to an increase in merchandise cost. The Company has developed several initiatives designed to reduce these costs by more effectively sourcing its leather goods merchandise and developing new sources for its packaging requirements.

       The improvement in manufacturing efficiencies is mainly attributable to the increase in belt merchandise sourced from third-party vendors and the consequent decrease in production activity at Norwalk. During 2002, the Company recorded substantial labor and overhead manufacturing variances at Norwalk in an attempt to adjust production levels with anticipated demand. The Company began significantly decreasing its production levels at Norwalk during the third quarter of 2003 and ceased manufacturing operations during the fourth quarter. Royalty charges decreased in 2003 due to lower net sales of certain branded merchandise, reductions in contractual minimum royalty obligations and the expiration of the Company's John Henry license.

       Selling and administrative expenses for the year ended December 31, 2003 decreased $3,078,000 or 10.1% compared to the prior year. Selling and administrative expense expressed as a percentage of net sales decreased to 29.0% from 30.7% in 2002. Selling expenses decreased by $2,185,000 or 10.1% while administrative expenses decreased by $893,000 or 10.0%, both as compared to the prior year. Expressed as a percentage of net sales, selling expenses totaled 20.5% and 21.7% for 2003 and 2002, respectively, and administrative expenses totaled 8.5% and 9.0% for 2003 and 2002, respectively.

       The decrease in selling expenses was primarily due to lower variable selling costs, including sales commissions, travel and entertainment and distribution-related costs, and reduced management and administrative compensation and benefits expense. During 2003, the Company determined that it would reduce its overall cost structure and streamline its operations by reorganizing its sales and merchandising functions to reflect its new sourcing strategy.

       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. Advertising and promotional expenses in support of the Company's men's accessories business, exclusive of cooperative advertising and display expenditures, totaled 2.1% of net sales for the year ended December 31, 2003 compared to 2.2% in 2002.

       The reduction in administrative expenses in 2003 was mainly due to a decrease in management compensation and related expenses, professional fees, and bad debt expense. The reduction in bad debt expense was due mainly to a reserve established during the fourth quarter of 2002 associated with a specific event concerning one of the Company's customers.

       During 2002, the Company recorded an adjustment to an accrual that 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 fourth quarter of 2003, the Company ceased manufacturing operations at its belt and suspender manufacturing facility in Norwalk and began sourcing its entire belt and suspender merchandise requirements from third-party vendors. As part of this transition, beginning early in the third quarter the Company gradually began to reduce production levels at Norwalk and subsequently reorganized its sourcing and production organizations to better reflect the Company's new supply chain model. In connection with the plant closure, the Company recorded and included in cost of goods sold during the fourth quarter $1,360,000 in non-recurring charges associated with obsolete raw materials and supplies. In addition, the Company also recorded during the fourth quarter a $280,000 restructuring charge associated with severances and other expenses incurred in connection with the plant closure. The restructuring charge is stated separately in the accompanying Consolidated Statements of Operations for the year ending December 31, 2003. At December 31, 2003, $181,000 had been paid representing all of the severance liability payable to the affected employees. An additional $99,000 was recorded as a reduction in the cost basis of the machinery and equipment formerly used in the Company's belt and suspender manufacturing operations, to reflect their estimated fair market values. No restructuring expenses were recorded in 2002.

        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. The restructuring charges are stated separately in the accompanying Consolidated Statements of Operations for the year ending December 31, 2001. 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 interest expense for the year ended December 31, 2003 increased $18,000 or 1.2% compared to 2002. The increase was primarily due to higher average outstanding revolving credit balances during 2003 compared to 2002 offset in part by a reduction of approximately 26 basis points in the Company's average borrowing costs compared to the prior year (see "Interest Charges" and "Liquidity and Capital Resources").

       Net sales for the year ended December 31, 2002 increased by $12,199,000 or 13.9% 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 25.7% and 37.9% 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 increased sales to mass-merchandising retailers by expanding its merchandise offerings and developing dedicated lines for these customers. Shipments to mass-merchandise retailers increased 19.2% 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 8.4% 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.

       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 $357,000 and $481,000 for the years ended December 31, 2002 and 2001 respectively.

       Selling and administrative expenses for the year ended December 31, 2002 increased $221,000 or .7% compared to the prior year. Selling expenses increased by $645,000 or 3.1% and totaled 21.7% of net sales in 2002 compared to 23.9% in 2001. Administrative expenses in 2002 decreased by $424,000 or 4.5% 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 interest expense for the year ended December 31, 2002 decreased $278,000 or 19.5% compared to 2001. The decrease was primarily due to a reduction of approximately 190 basis points in the Company's average borrowing costs 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 did not record a current income tax provision or benefit for fiscal year 2003. The Company had a deferred income tax benefit of $680,000 in 2003 that was fully reserved by an increase in the deferred tax asset valuation allowance of $680,000. 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. The effective tax rates for 2003, 2002 and 2001 were impacted by the recording of valuation allowances on the Company's net deferred tax assets of $10,245,000, $9,565,000 and $9,964,000, respectively (see Note E). The effective tax rates were also affected by differences associated with nontaxable life insurance benefits, the operating losses incurred by Joyas y Cueros and other items. In fiscal year 2000, the Company began recording a valuation reserve against all of its deferred tax assets. Accordingly, the only benefit that the Company has recorded i n 2002 and 2001 relates to the utilization of tax loss carrybacks for which the Company has received cash refunds. The amount of the deferred tax asset considered 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. Promotional expenditures included in selling and administrative expenses decreased by $17,000 in 2003 and increased by $672,000 in 2002 both as compared to the prior year. The Company also makes expenditures in support of cooperative advertising arrangements with its retail customers. These expenses which are included in net sales decreased $235,000 in 2003 and increased $155,000 in 2002, both as compared to the corresponding prior year periods. Expenditures for merchandise displays which the Company includes in cost of sales decreased $161,000 in 2003 and increased $284,000 in 2002 (see Overview and Footnote J).

       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 during each of the three years ended December 31, 2003, 2002, and 2001, which the Company was able to fund from the 1998 Revolving Credit Agreement and the 2003 Loan Agreement, both discussed below. 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 credit facilities to finance working capital requirements during 2004; achieving planned sales revenue; implementing the cost control initiatives identified in 2003 and early 2004; and ultimately, returning to profitability.

       Over the past several years, the Company has taken certain steps intended to improve its results from operations and cash flows including the closing of its Attleboro, Massachusetts and Cartago, Costa Rica and Norwalk, Connecticut manufacturing facilities in 2000, 2001 and 2003, respectively. In 2001, the Company entered into a sale-leaseback transaction with respect to its Connecticut facility and sold certain assets and discontinued the remaining operations associated with its women's costume jewelry division. Since 2001, the Company has also instituted a number of process improvements designed to eliminate waste and improve operating efficiencies. The net proceeds of the sale-leaseback transaction and the sale of the women's jewelry assets of $6,100,000 and $4,600,000, respectively, were used to reduce the Company's outstanding revolving credit balance in 2001. The Company also received federal income tax refunds of $1,648,000 in 2003 offset b y Internal Revenue Service audit adjustments of $632,000 in connection with fiscal years 1996 through 2001, and $4,247,000 during 2002.

       On April 17, 2003, the Company signed a new $30,000,000 Loan and Security Agreement (as amended to date, the "2003 Loan Agreement") with Congress Financial Corporation (New England) ("Congress"). The new financing replaced the Company's Revolving Credit and Security Agreement dated July 27, 1998 between the Company and PNC Bank, National Association (as amended, the "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 earnings before interest, taxes, depreciation, and amortization (EBITDA) requirements. The original terms of the 2003 Loan Agreement permit the Company to borrow against a percentage of eligible accounts receivable and eligible inventory at a m aximum 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.

       As previously announced, as of September 30, 2003, the Company was not in compliance with the EBITDA covenant in the 2003 Loan Agreement. Since that date, and from that date through the date of this Form 10-K, the Company has not been in compliance with the covenant, which is measured, on a cumulative basis, as at the end of each month. As a result, extensions of credit under the 2003 Loan Agreement were at the discretion of Congress at an interest rate 200 basis points higher than the stated maximum rate. In February 2004, the Company and Congress entered into an agreement, which has since been extended, under which Congress has agreed not to take any action with respect to the Company's non-compliance with this covenant, and to continue to make loans to the Company on terms set forth in that agreement and in the 2003 Loan Agreement. The Company has had discussions recently with several prospective lenders, as well as with Congress, with regard to proposed new credit arrangements that would provide the Company with adequate financing to fund its operations through 2004 and beyond. The Company is in the process of negotiating the terms and conditions of a new financing agreement with one of those lenders and anticipates finalizing a new credit agreement within the next 60 to 90 days. Congress has agreed to extend loans to the Company under the 2003 Loan Agreement until the new credit agreement closes. At December 31, 2003, $521,000 was included in other assets on the Company's Consolidated Balance Sheet in connection with unamortized deferred financing fees associated with the 2003 Loan Agreement.

       On April 1, 2004, Marshall Tulin, Chairman of the Board of the Company, (the "Investor"), loaned $350,000 to the Company pursuant to the terms of a convertible subordinated promissory note (the "Note") issued by the Company to the Investor. The Note is expressly subordinate in right of payment to the Company's senior secured debt, has a maturity of three years, and pays interest at an annual rate of 7 percent, payable quarterly. The Investor has the option at maturity to convert the principal amount of his Note into shares of the Company's common stock pursuant to a formula based on the greater of the aggregate market value of the Company, or its going concern value as determined by an investment banking firm or nationally recognized accounting firm, on the conversion date. The number of shares of the Company's common stock that may be issued under the Note may not exceed 10% of the then issued and outstanding shares of the Company's common stock on the conversion date. The Company, at its option, may prepay the Note at any time without premium or penalty.

       Although no assurances can be given, the Company believes that obtaining adequate credit facilities, achieving its revenue plan for 2004 and continuing the current program of cost control initiatives 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 the ordinary course of business, the Company is contingently liable for performance under letters of credit of approximately $767,000 at December 31, 2003. The Company is required to pay a fee quarterly equal to 4.25% per annum on outstanding letters of credit.

       The following chart summarizes the Company's contractual obligations as of December 31, 2003 (in thousands):

       As discussed above, during the first quarter of 2004 the Company and the landlord of its South Norwalk, Connecticut facility entered into an agreement under which the lease for that facility has been terminated effective April 1, 2004. The Company paid $250,000 to the landlord upon signing of the termination agreement, which also provides for payments to the landlord of an additional $1,250,000, in installments, during the period from April 2004 through March 2006. The Company estimates its remaining liabilities under the lease, had it not been terminated, would have been approximately $2,586,000. Reference is made to Footnote I of the Notes to Consolidated Financial Statements for additional information concerning the termination of this lease.

       On April 1, 2004, Marshall Tulin, Chairman of the Board of the Company, (the "Investor"), loaned $350,000 to the Company pursuant to the terms of a convertible subordinated promissory note (the "Note") issued by the Company to the Investor. The Note is expressly subordinate in right of payment to the Company's senior secured debt, has a maturity of three years, and pays interest at an annual rate of 7 percent, payable quarterly. The Investor has the option at maturity to convert the principal amount of his Note into shares of the Company's common stock pursuant to a formula based on the greater of the aggregate market value of the Company, or its going concern value as determined by an investment banking firm or nationally recognized accounting firm, on the conversion date. The number of shares of the Company's common stock that may be issued under the Note may not exceed 10% of the then issued and outstanding shares of the Company's common stock on the conversion date. The Company, at its option, may prepay the Note at any time without premium or penalty.

The Company is also a party to employment agreements with certain of its executive officers that provide for the payment of compensation and other benefits during the term of each executives' employment and, under certain circumstances, for a period of time following their termination.

       Cash used in operations totaled $2,729,000 in 2003 compared to cash used in operations of $2,972,000 in 2002. Cash used in operations in 2003 was due principally to the operating loss, increases in accounts receivable and certain prepaid and other current assets, and decreases in accounts payable, accrued and other long term obligations, offset in part by decreases in inventory and income taxes recoverable. In 2002 cash used in operations was due principally to the operating loss, increases in accounts receivable and certain prepaid and other current assets, and decreases in accounts payable, accrued and other long term obligations, and deferred credits. Cash was provided by decreases in inventory and recoverable income taxes. In 2001, cash used in operations was due primarily to the net loss and decreases in accounts receivable reserves and certain other accrued and other long-term liabilities. Working capital decreased by $3,065,000 in 2003 main ly due to decreases in inventory and income taxes recoverable and increases in notes payable to banks and accounts payable, partially offset by an increase in accounts receivable and decreases in accrued royalties payable and other liabilities.

       Cash used in investing activities in 2003 of $303,000 was for capital expenditures and premiums on life insurance policies. Cash provided by investing activities of $2,830,000 in 2002 was primarily associated with the proceeds from the surrender of certain life insurance policies owned by the Company in connection 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 $62,000, $187,000 and $660,000 in 2003, 2002 and 2001, respectively.

       The Company expects that cash from operations and availability under a new financing agreement currently under negotiation and expected to close within 60 to 90 days 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. Reference is also made to the information set forth under the caption "Forward Looking Statements" which appears before Part I of this Form 10-K, which is incorporated by reference herein.

Recent Accounting Pronouncements

       In November 2002, the Emerging Issues Task Force, or EITF, reached consensus on Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. Revenue arrangements with multiple deliverables include arrangements which provide for the delivery or performance of multiple products, services and/or rights to use assets where performance may occur at different points in time or over different periods of time. EITF Issue No. 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of the guidance under this consensus did not have an impact on our financial position, results of operations or cash flows.

       In April 2003, the Financial Accounting Standards Board, or FASB, issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. In particular, SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative discussed in SFAS No. 133, clarifies when a derivative contains a financing component, amends the definition of an underlying (as initially defined in SFAS No. 133) to conform it to language used in FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, and amends certain other existing pronouncements. SFAS No. 149 is effective for all contracts entered into or modified after June 30, 2003, subject to certain exceptions. The adoption of this statement did not have an impact on our financial position, results of operations, or cash flows.

       In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances), while many of such instruments were previously classified as equity or "mezzanine" equity. The statement also requires that income statement treatment be consistent with the balance sheet classification. That is, if the instrument is classified as a liability, payments to the holders are interest expense, not dividends, and changes in value are recorded in earnings. The statement relates to three specific categories of instruments: mandatorily redeemable shares, freestanding written put options and forward con tracts that obligate an entity to purchase its own shares, and freestanding contracts that obligate an entity to pay with its own shares in amounts that are either unrelated, or inversely related, to the price of the shares. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective in the first interim period beginning after June 15, 2003. The adoption of this statement did not have an impact on our financial position, results of operations, or cash flows.

       In December 2003, the FASB issued a revision to FASB Interpretation, or FIN, No. 46, Consolidation of Variable Interest Entities. The revised FIN No. 46, which replaces the original FIN No. 46 issued in January 2003, clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. While this interpretation exempts certain entities from its requirements, it also expands the definition of a variable interest entity, or VIE, to a broader group of entities than those previously considered special-purpose entities, or SPE's, and specifies the criteria under which it is appropriate for an investor to consolidate VIE's. Application of the revis ed FIN No. 46 is required in financial statements of public entities that have interest in structures that are commonly referred to as SPE's for periods ending after December 15, 2003. For all other types of VIE's, application of the revised FIN No. 46 by public entities is required for periods ending after March 15, 2004. The application of this interpretation with respect to structures commonly referred to as SPE's did not have an impact on our financial position, results of operations, or cash flows. We currently do not expect the application of this interpretation with respect to other types of VIE's to have an impact on our financial position, results of operations, or cash flows.

       In December 2003, the Securities and Exchange Commission, or SEC, published Staff Accounting Bulletin, or SAB, No. 104, Revenue Recognition. SAB No. 104 was effective upon issuance and supersedes SAB No. 101, Revenue Recognition in Financial Statements, and rescinds the accounting guidance contained in SAB No. 101 related to multiple-element revenue arrangements that was superseded by EITF Issue No. 00-21. Accordingly, SAB No. 104 rescinds portions of the interpretive guidance included in Topic 13 of the codification of staff accounting bulletins. While the wording of SAB No. 104 has changed to reflect the guidance of EITF 00-21, the revenue recognition principles of SAB No. 101 have remained largely unchanged. The adoption of SAB No. 104 did not have an effect on our financial position, results of operations, or cash flows.

       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 revolving credit facility is presently the prime rate plus 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 purchases substantially all of its men's personal leather items and belts from third-party suppliers. 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.

     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 sheets of Swank, Inc. as of December 31, 2003 and 2002 and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years 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 audits 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 2003, and the results of their operations and their cash flows for the two years 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, negative cash flows from operating activities and is not in compliance with the covenant under its financing agreement. These matters 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 13, 2004 (except with respect to certain matters

discussed in Notes I and M as to which the date is April 1, 2004)
Boston, Massachusetts

To Board of Directors and Shareholders

of Swank, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under item 15(a)(1) on page 51 through 52, present fairly, in all material respects, the results of their operations and their cash flows for the year 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 schedule listed in the index appearing under item 15(a)(1) on page 51 through 52 for the year ended December 31, 2001, present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted i n 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 audit provides 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 LLP

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 currently engaged in the importation, 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 a wide variety of specialty stores and mass merchandisers. The Company also 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 during each of the three years ended December 31, 2003, 2002, and 2001 which the Company was able to fund from the 1998 Revolving Credit Agreement and the 2003 Loan Agreement, both discussed below. 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 credit facilities to finance working capital requirements during 2004; achieving planned sales revenue; implementing the cost control initiatives identified in 2003 and early 2004; and ultimately, returning to profitability.

       Over the past several years, the Company has taken certain steps intended to improve its results from operations and cash flows including the closing of its Attleboro, Massachusetts and Cartago, Costa Rica and Norwalk, Connecticut manufacturing facilities in 2000, 2001 and 2003, respectively. In 2001, the Company entered into a sale-leaseback transaction with respect to its Connecticut facility and sold certain assets and discontinued the remaining operations associated with its women's costume jewelry division. Since 2001, the Company has also instituted a number of process improvements designed to eliminate waste and improve operating efficiencies. The net proceeds of the sale-leaseback transaction and the sale of the women's jewelry assets of $6,100,000 and $4,600,000, respectively, were used to reduce the Company's outstanding revolving credit balance in 2001. The Company also received federal income tax refunds of $1,648,000 in 2003, offset b y Internal Revenue Service audit adjustments of $632,000 in connection with fiscal years 1996 through 2001, and $4,247,000 during 2002.

       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.

       As previously announced, as of September 30, 2003, the Company was not in compliance with the EBITDA covenant in the 2003 Loan Agreement. Since that date, and from that date through the date of this Form 10-K, the Company has not been in compliance with the covenant, which is measured, on a cumulative basis, as at the end of each month. As a result, extensions of credit under the 2003 Loan Agreement were at the discretion of Congress at an interest rate 200 basis points higher than the customary rate. In February 2004, the Company and Congress entered into an agreement, which has since been extended, under which Congress has agreed not to take any action with respect to the Company's non-compliance with this covenant, and to continue to make loans to the Company on terms set forth in that agreement and in the 2003 Loan Agreement. The Company has had discussions recently with several prospective lenders, as well as with Congress, with regard to pro posed new credit arrangements that would provide the Company with adequate financing to fund its operations through 2004 and beyond. The Company is in the process of negotiating the terms and conditions of a new financing agreement with one of those lenders and anticipates finalizing a new credit agreement within the next 60 to 90 days. At December 31, 2003, $521,000 was included in other assets on the Company's Consolidated Balance Sheet in connection with unamortized deferred financing fees associated with the 2003 Loan Agreement.

       Although no assurances can be given, the Company believes that obtaining adequate credit facilities, achieving its revenue plan for 2004 and continuing the current program of cost control initiatives 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 consolidated financial statements include the accounts of Swank, Inc., its former majority-owned Costa Rican subsidiary, and a former wholly-owned foreign sales corporation. The Company closed the Costa Rican subsidiary in 2001 (see Note A above). All intercompany amounts have been eliminated. Amounts are in thousands except for per share data.

       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.

       Sales to the Company's three largest customers accounted for approximately 13%, 11%, and 10% of consolidated net sales in 2003; approximately 15%, 14%, and 11% respectively, in 2002; and approximately 16%, 15%, and 12% respectively, in 2001. In addition, sales to a fourth customer accounted for approximately 10% of consolidated net sales in 2003 and 2001. No other customer accounted for more than 10% of consolidated net sales during fiscal years 2003, 2002 or 2001. Exports to foreign countries accounted for less than 4% of consolidated net sales in fiscal year 2003 and less than 5% of consolidated net sales in each of the Company's fiscal years ended December 31, 2002 and 2001, respectively.

       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. Included on the balance sheet in prepaid and other current assets are securities available for sale of approximately $48,000 and $37,000 at December 31, 2004 and 2003, respectively.

       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 charges 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 2003, 2002 and 2001 were $(194,000), $448,000 and $(226,000), respectively.

       The Company sells products primarily to major retailers within the United States. The Company's three largest customers accounted for approximately 10%, 8% and 12%, respectively, of consolidated trade receivables (gross of allowances) at December 31, 2003 and approximately 10%, 20% and 13%, respectively, at December 31, 2002.

       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 Loan Agreement is presently the prime 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 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 substantially all of its finished belts and other accessories 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.

       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.

       Property, plant and equipment are stated at cost. The Company provides for depreciation of plant and equipment by charges against income which are sufficient to write off the cost of the assets over estimated useful lives of 10-45 years for buildings and improvements and 3-12 years for machinery, equipment and software. Improvements to leased premises are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease.

       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. As of December 31, 2004, the capital lease assets were fully depreciated and the capital lease obligations have been fully satisfied.

       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.

       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.

       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. During the fourth quarter of 2003, the Company wrote-down the carrying value of certain machinery and equipment at its Norwalk, CT facility, to its estimated fair market value, and recognized an expense of $99,000, which was included in restructuring expenses for the year ending December 31, 2003.

       The carrying value of notes payable to banks approximates their fair value due to their variable interest rates.

       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, 2003 by $676,000; increased cost of sales by $378,000; and reduced selling and administrative expense by $1,054,000. For the year ended December 31, 2002, the adoption of EITF 01-9 reduced net sales by $911,000; increased cost of sales by $539,000; and reduced selling and administrative expense by $1,450,000. For the year e nded 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.

       In accordance with AICPA Statement of Position 96-1, Environmental Remediation Liabilities, 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.

       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:

       Net income (loss) per common share or basic earnings per share amounts are adjusted to include, where appropriate, shares held by the Company's employee stock ownership plan and deemed to be allocated to participants. Net income (loss) per share assuming full dilution includes the effects of options. For the years ended December 31, 2003, 2002 and 2001, basic net loss per share is equal to fully diluted net loss per share as the effect of all options is anti-dilutive.

       Reporting comprehensive income requires that certain items recognized under generally accepted accounting standards as separate components of stockholders' equity be reported as comprehensive income in an annual financial statement that is displayed with the same prominence as the other annual financial statements. This statement also requires that an entity classify items of other comprehensive income by their nature in an annual financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional capital in excess of par value in the equity section of the balance sheet. Reportable other comprehensive income (loss) was $25,000 and ($32,000) in 2003 and 2002, respectively. Income in 2003 resulted primarily from adjustments associated with unrecognized actuarial gains and losses relating to the Company's defined benefit plan and from unrealized gains on securi ties available for sale. The loss of $(32,000) in 2002 was principally due to adjustments of actuarial gains and losses relating to the Company's defined benefit plan.

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

       In November 2002, the Emerging Issues Task Force, or EITF, reached consensus on Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. Revenue arrangements with multiple deliverables include arrangements which provide for the delivery or performance of multiple products, services and/or rights to use assets where performance may occur at different points in time or over different periods of time. EITF Issue No. 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of the guidance under this consensus did not have an impact on our financial position, results of operations or cash flows.

       In April 2003, the Financial Accounting Standards Board, or FASB, issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. In particular, SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative discussed in SFAS No. 133, clarifies when a derivative contains a financing component, amends the definition of an "underlying" as initially defined in SFAS No. 133) to conform it to language used in FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, and amends certain other existing pronouncements. SFAS No. 149 is effective for all contracts entered into or modified after June 30, 2003, subject to certain exceptions. The adoption of this statement did not have an impact on our financial position, results of operations, or cash flows.

       In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances), while many of such instruments were previously classified as equity or "mezzanine" equity. The statement also requires that income statement treatment be consistent with the balance sheet classification. That is, if the instrument is classified as a liability, payments to the holders are interest expense, not dividends, and changes in value are recorded in earnings. The statement relates to three specific categories of instruments: mandatorily redeemable shares, freestanding written put options and forward con tracts that obligate an entity to purchase its own shares, and freestanding contracts that obligate an entity to pay with its own shares in amounts that are either unrelated, or inversely related, to the price of the shares. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective in the first interim period beginning after June 15, 2003. The adoption of this statement did not have an impact on our financial position, results of operations, or cash flows.

       In December 2003, the FASB issued a revision to FASB Interpretation, or FIN, No. 46, Consolidation of Variable Interest Entities. The revised FIN No. 46, which replaces the original FIN No. 46 issued in January 2003, clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. While this interpretation exempts certain entities from its requirements, it also expands the definition of a variable interest entity, or VIE, to a broader group of entities than those previously considered special-purpose entities, or SPE's, and specifies the criteria under which it is appropriate for an investor to consolidate VIE's. Application of the revis ed FIN No. 46 is required in financial statements of public entities that have interest in structures that are commonly referred to as SPE's for periods ending after December 15, 2003. For all other types of VIE's, application of the revised FIN No. 46 by public entities is required for periods ending after March 15, 2004. The application of this interpretation with respect to structures commonly referred to as SPE's did not have an impact on our financial position, results of operations, or cash flows. We currently do not expect the application of this interpretation with respect to other types of VIE's to have an impact on our financial position, results of operations, or cash flows.

       In December 2003, the Securities and Exchange Commission, or SEC, published Staff Accounting Bulletin, or SAB, No. 104, Revenue Recognition. SAB No. 104 was effective upon issuance and supersedes SAB No. 101, Revenue Recognition in Financial Statements, and rescinds the accounting guidance contained in SAB No. 101 related to multiple-element revenue arrangements that was superseded by EITF Issue No. 00-21. Accordingly, SAB No. 104 rescinds portions of the interpretive guidance included in Topic 13 of the codification of staff accounting bulletins. While the wording of SAB No. 104 has changed to reflect the guidance of EITF 00-21, the revenue recognition principles of SAB No. 101 have remained largely unchanged. The adoption of SAB No. 104 did not have an effect on our financial position, results of operations, or cash flows.

       During the fourth quarter of 2003, the Company ceased manufacturing operations at its belt and suspender manufacturing facility in Norwalk, Connecticut and began sourcing its entire belt and suspender merchandise requirements from third-party vendors. As part of this transition, beginning early in the third quarter the Company gradually began to reduce production levels at Norwalk and subsequently reorganized its sourcing and production organizations to better reflect the Company's new supply chain model. In connection with the plant closure, the Company recorded and included in cost of goods sold during the fourth quarter $1,360,000 in non-recurring charges associated with obsolete raw materials and supplies. In addition, the Company also recorded during the fourth quarter a $280,000 restructuring charge associated with severances and other expenses incurred in connection with the plant closure. The Company was also evaluating its ability to suble ase the Norwalk facility at a rate sufficient to cover its costs and accordingly, no loss on the lease was recorded. The restructuring charge is stated separately in the accompanying Consolidated Statements of Operations for the year ending December 31, 2003. During 2003, $181,000 was paid representing all of the severance liability payable to the affected employees. The $99,000 balance of 2003's restructuring charge represents a reduction in the cost basis of the machinery and equipment formerly used in the Company's belt and suspender manufacturing operations. No restructuring expenses were recorded in 2002.

       Early in 2001, management determined that the Company would 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. 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 April 17, 2003, the Company signed a new $30,000,000 Loan and Security Agreement (as amended to date, the "2003 Loan Agreement") with Congress Financial Corporation (New England) ("Congress"). The new financing replaced the Company's Revolving Credit and Security Agreement dated July 27, 1998 between the Company and PNC Bank, National Association (as amended, the "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 earnings before interest, taxes, depreciation, and amortization (EBITDA) requirements. The original terms of the 2003 Loan Agreement permit the Company to borrow against a percentage of eligible accounts receivable and eligi ble 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.

       As previously announced, as of September 30, 2003, the Company was not in compliance with the EBITDA covenant in the 2003 Loan Agreement. Since that date, and from that date through the date of this Form 10-K, the Company has not been in compliance with the covenant, which is measured, on a cumulative basis, as at the end of each month. As a result, extensions of credit under the 2003 Loan Agreement were at the discretion of Congress at an interest rate 200 basis points higher than the stated maximum rate. In February 2004, the Company and Congress entered into an agreement, which has since been extended, under which Congress has agreed not to take any action with respect to the Company's non-compliance with this covenant, and to continue to make loans to the Company on terms set forth in that agreement and in the 2003 Loan Agreement. The Company has had discussions recently with several prospective lenders, as well as with Congress, with regard t o proposed new credit arrangements that would provide the Company with adequate financing to fund its operations through 2004 and beyond. The Company is in the process of negotiating the terms and conditions of a new financing agreement with one of those lenders and anticipates finalizing a new credit agreement within the next 60 to 90 days. At December 31, 2003, $521,000 was included in other assets on the Company's Consolidated Balance Sheet in connection with unamortized deferred financing fees associated with the 2003 Loan Agreement.

At December 31, 2002 and 2001, the Company was not in compliance with certain covenants as required by the 1998 Revolving Credit Agreement as amended, between the Company and PNC Bank, National Association.  PNC Bank, NA subsequently waived those requirements as of and for the quarters ended December 31, 2002 and 2001.

The components of income taxes are as follows: