SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Under Section 13 or 15(d) of the
--- Securities Exchange Act of 1934
For the quarter ended September 30, 2002
Transition Report Pursuant to Section 13 or 15(d) of the
--- Securities Exchange Act of 1934
For the transition period from to
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Commission File Number 1-5893
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MOVIE STAR, INC.
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(Exact name of Registrant as specified in its charter)
New York 13-5651322
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1115 Broadway, New York, N.Y. 10010
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(Address of principal executive offices) (Zip Code)
(212) 684-3400
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(Registrant's telephone number, including area code)
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(Former name, former address, and former fiscal
year, if changed since last report.)
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
----- ----
The number of common shares outstanding on October 31, 2002 was 15,084,975.
MOVIE STAR, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
September 30, 2002 (Unaudited), June 30, 2002 (Audited)
and September 30, 2001(Unaudited) 3
Consolidated Condensed Statements of Income (Unaudited)
for the Three Months Ended September 30, 2002 and 2001 4
Consolidated Condensed Statements of Cash Flows (Unaudited)
for the Three Months Ended September 30, 2002 and 2001 5-6
Notes to Consolidated Condensed Unaudited Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-13
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
Item 4. Controls and Procedures 14
Part II. Other Information 16
Signatures 16
2
Part I. Financial Information
Item 1. Financial Statements
MOVIE STAR, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands, Except Number of Shares)
September 30, June 30, September 30,
2002 2002* 2001
------------ --------- ------------
(Unaudited) (Unaudited)
Assets
Current Assets
Cash $ 194 $ 215 $ 401
Receivables, net 11,964 7,001 12,726
Inventory 9,020 8,797 11,870
Prepaid expenses and other current assets 1,763 2,044 2,284
--------- ---------- ----------
Total current assets 22,941 18,057 27,281
Property, plant and equipment, net 1,335 1,350 1,431
Other assets 3,032 2,999 2,969
--------- ---------- ----------
Total assets $ 27,308 $ 22,406 $ 31,681
========= ========== ==========
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable $ 8,681 $ 4,129 $ 14,948
Current maturity of long-term liabilities 41 40 63
Accounts payable and accrued expenses 4,026 4,359 3,096
--------- ---------- ----------
Total current liabilities 12,748 8,528 18,107
--------- ---------- ----------
Long-term liabilities 266 254 196
--------- ---------- ----------
Commitments and Contingencies - - -
Shareholders' equity
Common stock, $.01 par value - authorized 30,000,000 shares;
issued 17,102,000 shares in September 2002, June 2002 and
September 2001 171 171 171
Additional paid-in capital 4,147 4,147 4,147
Retained earnings 13,594 12,924 12,678
--------- ---------- ----------
17,912 17,242 16,996
Less: Treasury stock, at cost - 2,017,000 shares 3,618 3,618 3,618
--------- ---------- ----------
Total shareholders' equity 14,294 13,624 13,378
--------- ---------- ----------
Total liabilities and shareholders' equity $ 27,308 $ 22,406 $ 31,681
========= ========== ==========
* Derived from audited financial statements.
See notes to consolidated condensed unaudited financial statements.
3
MOVIE STAR, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Amounts)
Three Months Ended
September 30,
-------------------
2002 2001
---- ----
Net sales $15,780 $14,911
Cost of sales 11,094 10,761
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Gross profit 4,686 4,150
Selling, general and administrative expenses 3,469 3,450
------- -------
Operating income from continuing operations 1,217 700
Interest income (1) (1)
Interest expense 102 273
------- -------
Income from continuing operations before income taxes 1,116 428
Income taxes 446 170
------- -------
Income from continuing operations 670 258
Income from discontinued operations, net of income taxes - 43
------- -------
Net income $ 670 $ 301
======= =======
BASIC NET INCOME PER SHARE
From continuing operations $.04 $.02
From discontinued operations - -
------- -------
Net income per share $.04 $.02
======= =======
DILUTED NET INCOME PER SHARE
From continuing operations $.04 $.02
From discontinued operations - -
------- -------
Net income per share $.04 $.02
======= =======
Basic weighted average number of shares outstanding 15,085 15,085
======= =======
Diluted weighted average number of shares outstanding 15,085 15,137
======= =======
See notes to consolidated condensed unaudited financial statements.
4
MOVIE STAR, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended
September 30,
-------------------
2002 2001
---- ----
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Net income $ 670 $ 301
Adjustments to reconcile net income to net cash used in
continuing operating activities:
Depreciation and amortization 102 104
Provision for allowance for doubtful accounts and sales discount 545 348
Deferred income taxes 379 29
Deferred lease liability 27 28
Gain on discontinued operations - (43)
(Increase) decrease in operating assets:
Receivables (5,508) (5,215)
Inventory (223) 77
Prepaid expenses and other current assets (97) 260
Other assets (38) (34)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (336) (1,120)
------- -------
Net cash used in continuing operating activities (4,479) (5,265)
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CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:
Purchases of equipment (82) (47)
Proceeds from sale of property - 729
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Net cash (used in) provided by continuing investing activities (82) 682
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CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:
Repayments of long-term debt and capital lease obligations (12) (6,487)
Proceeds from (repayment of) revolving line of credit, net 4,552 11,214
------- -------
Net cash used in continuing financing activities 4,540 4,727
------- -------
Cash used by discontinued operations - (4)
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NET (DECREASE) INCREASE IN CASH (21) 140
CASH, beginning of period 215 261
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CASH, end of period $ 194 $ 401
======= =======
(Cont'd)
5
MOVIE STAR, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended
September 30,
-------------------
2002 2001
---- ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Interest $ 102 $ 475
======= =======
Income taxes (net of refunds received) $ 5 $ -
======= =======
SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING ACTIVITIES:
Conversion of long-term debt for common stock $ - $ (56)
Issuance of common stock - 56
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$ - $ -
======= =======
(Concluded)
See notes to consolidated condensed unaudited financial statements.
6
MOVIE STAR, INC.
NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying consolidated condensed
unaudited financial statements contain all adjustments (consisting of
normal recurring accruals) necessary to present fairly the financial
position as of September 30, 2002 and the results of operations for the
interim periods presented and cash flows for the three months ended
September 30, 2002 and 2001, respectively.
The consolidated condensed financial statements and notes are presented as
required by Form 10-Q and do not contain certain information included in
the Company's year-end consolidated financial statements. The year-end
consolidated condensed balance sheet was derived from the Company's audited
financial statements. The results of operations for the three months ended
September 30, 2002 are not necessarily indicative of the results to be
expected for the full year. This Form 10-Q should be read in conjunction
with the Company's consolidated financial statements and notes included in
the 2002 Annual Report on Form 10-K.
2. The inventory consists of the following (in thousands):
September 30, June 30, September 30,
2002 2002 2001
------------ ------------- --------------
Raw materials $ 2,541 $ 1,499 $ 1,444
Work-in process 517 640 484
Finished goods 5,962 6,658 9,942
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$ 9,020 $ 8,797 $11,870
======= ======= =======
3. Effective June 30, 2001, the Company renegotiated its revolving credit
facility to provide borrowings of up to $30,000,000 until its maturity
date, July 1, 2004. Interest on outstanding borrowings is payable at the
prime rate, but not less than 5.75% per annum. As of September 30, 2002,
the Company had borrowings of $8,681,000 outstanding under the credit
facility and also had approximately $5,363,000 of outstanding letters of
credit. Availability under the line of credit is subject to the Company's
compliance with certain agreed upon financial formulas. Under the terms of
this financing, the Company has agreed to pledge substantially all of its
assets, except the Company's real property.
4. On September 4, 2001, the Company paid its 8% Senior Notes of $2,284,000 at
maturity and its 12.875% Subordinated Debentures of $4,180,000 one-month
early utilizing its three-year credit facility. Additionally, in July 2001,
holders of $55,500 in principal amount of the 8% Convertible Senior Notes
converted their Notes into approximately 148,000 shares of the Company's
common stock.
7
5. Net Income Per Share - The Company's calculation of Basic and Diluted Net
Income Per Share are as follows (in thousands, except per share amounts):
Three Months Ended
September 30,
-------------------
2002 2001
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BASIC:
Income from continuing operations $ 670 $ 258
Income from discontinued operations - 43
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Net income $ 670 $ 301
======= =======
Basic weighted average number of shares outstanding 15,085 15,085
======= =======
Basic net income (loss) per share:
From continuing operations $.04 $.02
From discontinued operations - -
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Basic net income per share $.04 $.02
======= =======
DILUTED:
Income from continuing operations $ 670 $ 258
Income from discontinued operations - 43
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Adjusted net income $ 670 $ 301
======= =======
Weighted average number of shares outstanding 15,085 15,085
Shares Issuable Upon Conversion of Stock Options - 36
Shares Issuable Upon Conversion of Warrants - 16
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Total average number of equivalent shares outstanding 15,087 15,137
======= =======
Diluted net income per share:
From continuing operations $.04 $.02
From discontinued operations - -
------- -------
Diluted net income per share $.04 $.02
======= =======
Options and warrants to purchase 2,570,000 shares of common stock at prices
ranging from $.4375 to $1.125 per share and options to purchase 620,000
shares of common stock at prices ranging from $.6875 to $1.125 per share
were outstanding as of September 30, 2002 and 2001, respectively, but were
not included in the computation of diluted net income per share since they
would be considered antidilutive.
6. During fiscal 2001, the Company closed its remaining distribution facility
located in Lebanon, Virginia. In September 2001, the Company sold its two
non-operating facilities for $729,000. No gain or loss was recognized
during the period. As of September 30, 2001, the remaining accruals
relating to severance and other employee benefits and exit costs aggregated
$8,000.
7. In December 2000, management decided to discontinue the retail segment of
it business and finalized all operations in March 2001. The retail segment
had no activity for the three months ended September 30, 2002 and recorded
income of $43,000, net of income taxes of $29,000 for the three months
ended September 30, 2001.
8
Operating results of discontinued operations are as follows (in thousands):
Three Months Ended
September 30,
--------------------
2002 2001
----- -----
Net sales $ - $ -
Costs and expenses, net of other income - (72)
Income taxes - 29
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Net income from discontinued operations $ - $ 43
===== =====
The net assets and liabilities of discontinued operations included in the
accompanying consolidated balance sheets are as follows (in thousands):
September 30, June 30, September 30,
2002 2002 2001
------------ --------- ------------
Cash $ - $ - $ 1
Property, plant and equipment, net - - -
Other assets 160 160 189
------ ------ ------
Total assets of discontinued operations $ 160 $ 160 $ 190
====== ====== ======
Accounts payable and accrued expenses $ - $ 6 $ 74
------ ------ ------
Total liabilities of discontinued operations $ - $ 6 $ 74
====== ====== ======
As of September 30, 2002, the Company has a deferred tax asset of $160,000
primarily due to net operating loss carryforwards.
9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion contains certain forward-looking statements with
respect to anticipated results, which are subject to a number of risks and
uncertainties. Among the factors that could cause actual results to differ
materially are: business conditions and growth in the Company's industry;
general economic conditions; the addition or loss of significant customers; the
loss of key personnel; product development; competition; foreign government
regulations; fluctuations in foreign currency exchange rates; rising costs of
raw materials and the unavailability of sources of supply; the timing of orders
placed by the Company's customers; and the risk factors listed from time to time
in the Company's SEC reports.
Critical Accounting Policies and Estimates
- ------------------------------------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the appropriate
application of certain accounting policies, many of which require estimates and
assumptions about future events and their impact on amounts reported in the
financial statements and related notes. Since future events and their impact
cannot be determined with certainty, the actual results will inevitably differ
from our estimates. Such differences could be material to the consolidated
financial statements.
Management believes the application of accounting policies, and the estimates
inherently required by the policies, are reasonable. These accounting policies
and estimates are constantly re-evaluated, and adjustments are made when facts
and circumstances dictate a change. Historically, management has found the
application of its accounting policies to be appropriate, and actual results
generally have not materially differed from those determined using the necessary
estimates.
Our accounting policies are more fully described in Note 1 to the consolidated
financial statements, located in the 2002 Annual Report on Form 10-K filed with
the Securities and Exchange Commission. Management has identified certain
critical accounting policies that are described below.
Inventory - Inventory is carried at the lower of cost or market on a first-in,
first-out basis. Management writes down inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.
Allowance for doubtful accounts/Sales discounts - The Company maintains
allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. If the financial condition
of our customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required. The Company
also estimates expenses for customer discounts, programs and incentive
offerings. If market conditions were to decline, the Company may take actions to
increase customer incentive offerings possibly resulting in an incremental
expense at the time the incentive is offered.
Long-lived assets - In the evaluation of the fair value and future benefits of
long-lived assets, management performs an analysis of the anticipated
undiscounted future net cash flows of the related long-lived assets. If the
carrying value of the related asset exceeds the undiscounted cash flows, the
carrying value is reduced to its fair value. Various factors including future
sales growth and profit margins are included in this analysis. To the extent
these future projections or our strategies change, the conclusion regarding
impairment may differ from the current estimates.
10
Deferred tax valuation allowance - In assessing the need for a deferred tax
valuation allowance, we consider future taxable income and ongoing prudent and
feasible tax planning strategies. Since we were able to determine that we would
be able to realize our deferred tax assets in the future, in excess of its
recorded amount, an adjustment to the deferred tax asset was not deemed
necessary. Likewise, should we determine that we would not be able to realize
all or part of our net deferred tax asset in the future, an adjustment to the
deferred tax asset would be charged to income in the period such determination
was made.
Results of Continuing Operations
- --------------------------------
Net sales for the three months ended September 30, 2002 increased $869,000 to
$15,780,000 from $14,911,000 in the comparable period in 2001. The increase in
sales was due primarily to an increase in programs with certain customers
partially offset by a decrease with other customers.
The gross profit percentage increased to 29.7% for the three months ended
September 30, 2002 from 27.8% in the similar period in 2001. The higher margins
resulted primarily from a better product mix.
As a result of the West Coast dock strike, the Company will incur additional
expenses related to the air shipment of goods that would normally have been
carried via water at a significantly lower cost basis. These goods are being
shipped by air to meet customer deliveries for the upcoming holiday season. If
the Company is not successful in delivering the goods on time, additional
expenses for allowances may be incurred or customers may cancel orders due to
late delivery of goods. At the current time, the Company cannot determine the
full impact of the strike.
Selling, general and administrative expenses were $3,469,000, or 22.0% of net
sales for the three months ended September 30, 2002, as compared to $3,450,000,
or 23.1% of net sales for the similar period in 2001. This increase of $19,000
resulted from an increase in general selling related expenses. The reduction in
percentage is primarily due to an increase in sales for the period.
Income from continuing operations increased to $1,217,000 for the three months
ended September 30, 2002, from $700,000 for the similar period in 2001. This
increase was due to higher sales and margins partially offset by higher selling,
general and administrative expenses.
Interest expense for the three months ended September 30, 2002 decreased by
$171,000 to $102,000 from $273,000 in the comparable period in 2001, due to
overall lower borrowing levels and lower interest rates.
The Company provided for income taxes of $446,000 for the three months ended
September 30, 2002, as compared to a $170,000 income tax provision for the same
period in 2001. The Company utilized an estimated income tax rate of 40% in both
periods.
Results of Discontinued Operations
- ----------------------------------
In December 2000, the Company decided to dispose of the majority of the assets
of its retail division. Accordingly, the operating results of this division were
reclassified as discontinued operations.
The retail division had no activity for the three months ended September 30,
2002 and had income from discontinued operations of $43,000 for the three months
ended September 30, 2001. The income in the September 30, 2001 period relates to
the sale of certain assets that were fully depreciated.
11
Net Income
- ----------
The Company had net income of $670,000 and $301,000 for the three months ended
September 30, 2002 and 2001, respectively. The increase in net income was due to
higher sales and gross margins and lower interest costs partially offset by a
higher income tax provision in the current year and an increase in selling,
general and administrative expenses.
Contractual Obligations and Commercial Commitments
- --------------------------------------------------
To facilitate an understanding of our contractual obligations and commercial
commitments, the following data is provided (in thousands):
Payments Due by Period
----------------------------------------------------
Within After 5
Total 1 Year 2-3 Years 4-5 Years Years
-------- --------- ----------- ----------- ----------
Contractual Obligations
-----------------------
Credit Facility $ 8,681 $ 8,681 $ - $ - $ -
Capital Leases 58 41 17 - -
Operating Leases 9,710 1,136 2,360 2,312 3,902
Consulting Agreement 350 200 150 - -
Employment Contract 856 481 375 - -
------- ------- ------ ------ ------
Total Contractual Obligations $19,655 $10,539 $2,902 $2,312 $3,902
======= ======= ====== ====== ======
Amount of Commitment Expiration Per Period
------------------------------------------
Total Amounts Within After 5
Committed 1 Year 2-3 Years 4-5 Years Years
-------- --------- ----------- ----------- ----------
Other Commercial Commitments
----------------------------
Letters of Credit $ 5,363 $5,363 $ - $ - $ -
------- ------- ------ ------ ------
Total Commercial Commitments $ 5,363 $5,363 $ - $ - $ -
======= ======= ====== ====== ======
Liquidity and Capital Resources
- -------------------------------
For the three months ended September 30, 2002, the Company's working capital
increased by $664,000 to $10,193,000, primarily from profitable operations.
During the three months ended September 30, 2002, cash decreased by $21,000. The
Company used cash of $4,479,000 in its operations, $82,000 for the purchase of
fixed assets and $12,000 for the payment of capital lease obligations. The net
proceeds from short-term borrowings of $4,552,000 funded these activities.
Receivables at September 30, 2002 increased by $4,963,000 to $11,964,000 from
$7,001,000 at June 30, 2002. This increase is due to normal seasonal shipping
fluctuations within the period.
Inventory at September 30, 2002 increased by $223,000 to $9,020,000 from
$8,797,000 at June 30, 2002.
The Company has a secured revolving line of credit of up to $30,000,000. The
revolving line of credit expires July 1, 2004 and is sufficient for the
Company's projected needs for operating capital and letters of credit to fund
12
the purchase of imported goods through July 1, 2004. Direct borrowings under
this line bear interest at the prime rate of Chase Manhattan Bank but not less
than 5.75% per annum. Availability under the line of credit is subject to the
Company's compliance with certain agreed upon financial formulas. Under the
terms of this financing, the Company has agreed to pledge substantially all of
its assets, except the Company's real property. At November 8, 2002, the
Company had $9,182,000 in borrowings outstanding.
Management believes the available borrowing under its secured revolving line of
credit, along with anticipated internally generated funds, will be sufficient to
cover its working capital requirements through July 1, 2004.
The Company anticipates that capital expenditures for fiscal 2003 will be less
than $300,000.
Effect of New Accounting Standards
- ----------------------------------
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. The provisions of SFAS No. 143 are effective for fiscal years
beginning after June 15, 2002. The Company has determined that the adoption of
this Statement does not have a material impact on our results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The primary objectives of SFAS No. 144 were to develop one
accounting model based on the framework established in SFAS No. 121, and to
address significant implementation issues. The provisions of SFAS No. 144 are
effective for fiscal years beginning after December 15, 2001. The Company has
determined that the adoption of FAS No. 144 does not have a material impact on
our results of operations.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinds the provisions of SFAS No. 4 that requires companies to
classify certain gains and losses from debt extinguishments as extraordinary
items, eliminates the provisions of SFAS No. 44 regarding the Motor Carrier Act
of 1980 and amends the provisions of SFAS No. 13 to require that certain lease
modifications be treated as sale leaseback transactions. The provisions of SFAS
No. 145 related to the classification of debt extinguishment is effective for
fiscal years beginning after May 15, 2002. The adoption of SFAS No. 145 does not
have an impact on the Company's financial position.
Accounting Standards Not Yet Adopted
- ------------------------------------
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. This statement also
established that fair value is the objective for initial measurement of the
liability. The provisions of SFAS No. 146 are effective for exit or disposal
activities that are initiated after December 31, 2002. The Company is currently
evaluating the impact of SFAS No. 146 on its consolidated financial statements.
13
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company is subject to changes in the prime rate based on the Federal Reserve
actions and general market interest fluctuations. The Company believes that
moderate interest rate increases will not have a material adverse impact on its
results of operations, or financial position, in the foreseeable future. For the
fiscal year ended June 30, 2002, borrowings peaked during the year at
$15,783,000 and the average amount of borrowings was $7,806,000.
Imports
The Company's transactions with its foreign manufacturers and suppliers are
subject to the risks of doing business abroad. The Company's import and offshore
operations are subject to constraints imposed by agreements between the United
States and a number of foreign countries in which the Company does business.
These agreements impose quotas on the amount and type of goods that can be
imported into the United States from these countries. Such agreements also allow
the United States to impose, at any time, restraints on the importation of
categories of merchandise that, under the terms of the agreements, are not
subject to specified limits. The Company's imported products are also subject to
United States customs duties and, in the ordinary course of business, the
Company is from time to time subject to claims by the United States Customs
Service for duties and other charges. The United States and other countries in
which the Company's products are manufactured may, from time to time, impose new
quotas, duties, tariffs or other restrictions, or adversely adjust presently
prevailing quotas, duty or tariff levels, which could adversely affect the
Company's operations and its ability to continue to import products at current
or increased levels. The Company cannot predict the likelihood or frequency of
any such events occurring.
Item 4.
Controls and Procedures
- -----------------------
Within the 90-day period prior to the filing of this report, an evaluation of
the effectiveness of the Company's disclosure controls and procedures was made
under the supervision and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial Officer. Based on that
evaluation, the CEO and CFO concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
Subsequent to the date of their evaluation, there were no significant changes in
the Company's internal controls or in other factors that could significantly
affect these controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.
14
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES
LITIGATION REFORM ACT OF 1995
Except for historical information contained herein, this Report on Form 10-Q
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, which involve certain risks and uncertainties.
The Company's actual results or outcomes may differ materially from those
anticipated. Important factors that the Company believes might cause differences
are discussed in the cautionary statement under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
this Form 10-Q. In assessing forward-looking statements contained herein,
readers are urged to carefully read those statements.
15
PART II. Other Information
-----------------
Item 1 - Legal proceedings - Not Applicable
Item 2 - Changes in Securities - Not Applicable
Item 3 - Defaults Upon Senior Securities - Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders - None
Item 5 - Other Information - None
Item 6 - (a) Exhibits - None
(b) Form 8-K Report - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MOVIE STAR, INC.
By: /s/ Melvyn Knigin
---------------------------
MELVYN KNIGIN
President; Chief Executive Officer
By: /s/ Thomas Rende
---------------------------
THOMAS RENDE
Chief Financial Officer
November 13, 2002
16
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Movie Star, Inc.(the "Company") on
Form 10-Q for the period ended September 30, 2002 as filed with the Securities
and Exchange Commission (the "Report"), each of the undersigned, in the
capacities and on the dates indicated below, hereby certifies pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
1. the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
Dated: November 13, 2002 /s/ Melvyn Knigin
--------------------------------
Name: Melvyn Knigin
Title: Chief Executive Officer
Dated: November 13, 2002 /s/ Thomas Rende
--------------------------------
Name: Thomas Rende
Title: Chief Financial Officer (Principal
Financial and Accounting Officer)
17
FORM OF SECTION 302 CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
CERTIFICATION
I, Melvyn Knigin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Movie Star, Inc.;
2. based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. the registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
18
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and to the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. the registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002 /s/ Melvyn Knigin
--------------------------------
Name: Melvyn Knigin
Title: Chief Executive Officer
19
FORM OF SECTION 302 CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
CERTIFICATION
I, Thomas Rende, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Movie Star, Inc.;
2. based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. the registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
20
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and to the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. the registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002 /s/ Thomas Rende
--------------------------------
Name: Thomas Rende
Title: Chief Financial Officer (Principal
Financial and Accounting Officer)
21