U.S. Securities and Exchange Commission
Washington, D.C. 20549

------------------------------------

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the Quarterly Period Ended October 31, 1999

[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the Transition Period From ________ to ________

Commission file number 0-10593

CANDIE'S, INC.
(Exact name of registrant as specified in its charter)

Delaware 11-2481903
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2975 Westchester Avenue
Purchase, NY 10577
(Address of principal executive offices) (Zip Code)

(914) 694-8600
(Registrant's telephone number, including area code)

Not Applicable
(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 periods 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 the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.

Common Stock, $.001 Par Value -- 17,897,166 shares as of December 14, 1999

INDEX

FORM 10-Q

CANDIE'S, INC. and SUBSIDIARIES

Page No.
-----------

Part I. Financial Information

Item 1. Financial Statements - (Unaudited)

Condensed Consolidated Balance Sheets - October 31, 1999 and January 31, 1999...................... 3

Condensed Consolidated Statements of Operations - Three and Nine Months
Ended October 31, 1999 and 1998.................................................................... 4

Condensed Consolidated Statement of Stockholders' Equity - Nine Months Ended
October 31, 1999................................................................................... 5

Condensed Consolidated Statements of Cash Flows - Nine Months Ended October 31,
1999 and 1998...................................................................................... 6

Notes to Condensed Consolidated Financial Statements............................................... 7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ................................................................................... 10

Item 3. Quantitative and Qualitative Disclosures about Market Risk..................................... 14

Part II. Other Information

Item 1. Legal Proceedings............................................................................... 14
Item 6. Exhibits and Reports on Form 8-K................................................................ 14

Signatures ........................................................................................... 15

Index to Exhibits....................................................................................... 16

Part I. Financial Information

Candie's, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

October 31, January 31,
1999 1999
-------- --------
(Unaudited)
(000's omitted)

Assets

Current Assets
Cash ...................................................... $ 468 $ 598
Accounts receivable, net .................................. 3,689 2,774
Due from affiliate ........................................ 696 796
Due from factors and trade receivables, net ............... 10,186 15,138
Inventories, net .......................................... 13,786 19,031
Refundable and prepaid income taxes ....................... 600 2,623
Deferred income taxes ..................................... 2,589 2,598
Prepaid advertising and other ............................. 1,016 1,182
Other current assets ...................................... 397 476
-------- --------
Total Current Assets ............................................ 33,427 45,216

Property and equipment, at cost:
Furniture, fixtures and equipment ......................... 5,666 3,860
Less: Accumulated depreciation and amortization ........... (1,851) (1,258)
-------- --------
3,815 2,602
Other assets:
Intangibles, net .......................................... 24,723 26,179
Deferred income taxes ..................................... 979 --
Investment and equity in joint venture - net .............. 97 51
Other ..................................................... 405 552
-------- --------
26,204 26,782
-------- --------
Total Assets .................................................... $ 63,446 $ 74,600
======== ========

Liabilities and Stockholders' Equity

Current Liabilities:
Revolving notes payable ................................... $ 11,602 $ 16,874
Accounts payable and accrued expenses ..................... 4,681 4,416
Accounts payable - Redwood Shoe ........................... 1,876 943
Current portion of long-term liabilities
and capital lease obligations .......................... 912 97
-------- --------
Total Current Liabilities ....................................... 19,071 22,330

Long-term liabilities and deferred taxes ........................ 2,300 421

Stockholders' Equity
Preferred stock, $.01 par value
-- authorized 5,000 shares; none issued and outstanding
Common stock, $.001 par value
-- authorized 30,000 shares; issued 19,209 shares at
October 31, 1999 and 18,525 shares issued
at January 31, 1999 ................................. 19 18
Additional paid-in capital ................................ 59,059 58,819
Retained earnings (deficit) ............................... (10,570) (556)
Treasury stock - at cost - 1,313 shares .................. (6,433) (6,432)
-------- --------
Total Stockholders' Equity ...................................... 42,075 51,849
-------- --------

Total Liabilities and Stockholders' Equity ...................... $ 63,446 $ 74,600
======== ========

See notes to condensed consolidated financial statements.

Candie's, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations
(Unaudited)

Three Months Ended Nine Months Ended
October 31, October 31,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
(000's omitted, except per share data)

Net revenues ........................................ $ 22,175 $ 28,919 $ 76,483 $ 90,627
Cost of goods sold .................................. 18,877 23,330 61,516 69,042
-------- -------- -------- --------
Gross profit ........................................ 3,298 5,589 14,967 21,585
Licensing income .................................... 1,151 100 2,009 100
-------- -------- -------- --------
4,449 5,689 16,976 21,685

Operating expenses:
Special charges ..................................... 1,144 -- 2,310 --
Selling, general and administrative expenses ........ 8,281 6,208 24,359 18,728
-------- -------- -------- --------
9,425 6,208 26,669 18,728

Operating (loss) income ............................. (4,976) (519) (9,693) 2,957

Other expenses:
Interest expense - net .............................. 307 289 958 786
Equity loss in joint venture ........................ 116 -- 453 --
-------- -------- -------- --------
423 289 1,411 786
-------- -------- -------- --------

(Loss) income before income taxes ................... (5,399) (808) (11,104) 2,171
(Benefit) provision for income taxes ................ 346 (306) (1,090) 862
-------- -------- -------- --------

Net (loss) income ................................... $ (5,745) $ (502) $(10,014) $ 1,309
======== ======== ======== ========

(Loss) earnings per common share:
Basic ............................. $ (.32) $ (0.03) $ (.56) $ 0.09
======== ======== ======== ========
Diluted ........................... $ (.32) $ (0.03) $ (.56) $ 0.08
======== ======== ======== ========

Weighted average number of common shares outstanding:
Basic ............................. 17,896 15,841 17,742 14,577
======== ======== ======== ========
Diluted ........................... 17,896 15,841 17,742 16,723
======== ======== ======== ========

See notes to condensed consolidated financial statements.

Candie's, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders' Equity
(Unaudited)

Nine Months Ended October 31, 1999
(000's omitted)

Additional Retained
Common Stock Paid-In Earnings Treasury
Shares Amount Capital (Deficit) Stock Total
-------- -------- -------- -------- -------- --------

Balances at January 31, 1999 ................................. 18,525 $ 18 $ 58,819 $ (556) $ (6,432) $ 51,849
-------- -------- -------- -------- -------- --------

Exercise of stock options ................................ 99 -- 98 -- -- 98

Issuance of common stock to retirement plan .............. 37 -- 129 -- -- 129

Additional contingent shares issued for the
Acquisition of Michael Caruso & Co., Inc. .......... 548 1 (1) -- -- 0

Tax benefit from exercise of stock options ............... -- -- 14 -- -- 14

Other .................................................... -- -- -- -- (1) (1)

Net (loss) ............................................... -- -- -- (10,014) -- (10,014)
-------- -------- -------- -------- -------- --------
Balances at October 31, 1999 ................................. 19,209 $ 19 $ 59,059 $(10,570) $ (6,433) $ 42,075
======== ======== ======== ======== ======== ========

See notes to condensed consolidated financial statements.

Candie's, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows
(Unaudited)

Nine Months Ended
---------------------------
October 31, October 31,
1999 1998
---------------------------
(000's omitted)

OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities ................................. $ 3,965 $(18,496)
---------------------------

INVESTING ACTIVITIES:
Purchases of property and equipment ............................................ (1,819) (521)
Investment in joint venture .................................................... -- (500)
---------------------------
Net cash used in investing activities ............................................... (1,819) (1,021)
---------------------------

FINANCING ACTIVITIES:
Proceeds from exercise of stock options and warrants ........................... 98 8,382
Capital lease and unsecured loan ............................................... 3,471 --
Capital lease reduction ........................................................ (574) --
Bankers acceptance - net ....................................................... -- 4,959
Revolving notes payable ..................................................... (5,271) 6,287
Purchase of common stock for treasury .......................................... -- (371)
---------------------------
Net cash (used in) provided by financing activities ................................. (2,276) 19,257
---------------------------

DECREASE IN CASH .................................................................... (130) (260)
Cash at beginning of period ......................................................... 598 367
---------------------------
Cash at end of period ............................................................... $ 468 $ 107
===========================

Supplemental disclosures of non-cash investing and financing activities:

Merger and acquisition of businesses ........................................... -- $ 15,250
===========================

Common stock issued for merger & acquisition - net of treasury stock acquired .. -- $ 5,255
===========================

See notes to condensed consolidated financial statements.

Candie's, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements
(Unaudited)
(dollars are in thousands)

October 31, 1999

NOTE A -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended October 31,
1999 are not necessarily indicative of the results that may be expected for a
full fiscal year.

For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended January 31, 1999.

NOTE B -- FINANCING AGREEMENTS

In May 1999, the Company entered into a $3.5 million master lease agreement with
a financial organization. The agreement requires the Company to collateralize
property and equipment of $2.4 million, of which $1.4 million had been
collateralized as of October 31, 1999, with the remaining agreement balance
considered to be an unsecured loan. The agreement's term is for a period of four
years.

At October 31, 1999 and January 31, 1999, the Company had $118 and $1.2 million,
respectively, of outstanding letters of credit. The Company's letters of credit
availability are formula based which takes into account borrowings under the
Facility and Line of Credit, as described below.

On May 27, 1998, the Company entered into a three year $35 million revolving
credit facility (the "Facility"). On August 4, 1998, BankBoston, N.A. entered
into a co-lending arrangement and became a participant in the Facility with Bank
of America Commercial Corporation.

Prior to January 31, 1999, borrowings under the Facility, which totaled $16,874
at January 31, 1999, bore interest at 1.50% below the prime rate (7.75% at
January 31, 1999). Effective January 31, 1999 the Facility was amended and
borrowings under the Facility bore interest at .25% below the prime rate. The
Company also paid a commitment fee of 1/4% on the unused portion of the
Facility. Borrowings under the Facility were formula based and available up to
the maximum amount of the Facility. During the period ended October 31, 1999,
the Company was not in compliance of certain financial covenants contained in
the Facility. Prior to the termination of the Facility, the lenders issued
periodic forbearance agreements to the Company.

On October 28, 1999, the Company entered into a new two year $35 million
revolving line of credit (the "Line of Credit") with Rosenthal & Rosenthal, Inc.
and terminated the former Facility. On November 23, 1999, First Union National
Bank entered into a co-lending arrangement and became a participant in the Line
of Credit.

Borrowings under the Line of Credit are formula based and available up to the
maximum amount of the Line of Credit. Borrowings under the Line of Credit will
bear interest at .50% above the prime rate. Borrowings in excess of certain
availability formula will bear interest at 2.5% above the prime rate. The
Company will also pay an annual facility fee of .25% of the maximum Line of
Credit.

NOTE B -- FINANCING AGREEMENTS (Continued)

The Line of Credit also contains two financial covenants including minimum
tangible net worth and working capital. The Company has granted the lenders a
security interest in substantially all of its assets.

NOTE C -- EARNINGS PER SHARE

Basic earnings per share includes no dilution and is computed by dividing net
(loss) income available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflect, in
periods in which they have a dilutive effect, the effect of common shares
issuable upon exercise of stock options and warrants.

The following is a reconciliation of the shares used in calculating basic and
diluted earnings per share:

Three Months Ended Nine Months Ended
October 31, October 31,
------------------------- -------------------------
1999 1998 1999 1998
------------------------- -------------------------
(000's omitted)

Basic share.............................. 17,896 15,841 17,742 14,577
Effect of assumed conversion
of employee stock options............ -- -- -- 2,146
------------------------- -------------------------
Diluted share............................ 17,896 15,841 17,742 16,723
========================= =========================

NOTE D -- COMMITMENTS AND CONTINGENCIES

On May 17, 1999, a stockholder class action complaint was filed in the United
States District Court for the Southern District of New York, against the Company
and certain of its current and former officers and directors, which together
with certain other complaints subsequently filed in the same court alleging
similar violations, were consolidated in one lawsuit, Willow Creek Capital
Partners L.P., v. Candie's, Inc. A consolidated complaint was served on the
Company on or about August 24, 1999. The consolidated complaint includes claims
under section 11, 12 and 15 of the Securities Act of 1933 and sections 10(b) and
20(a)of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder. The consolidated complaint is brought on behalf of all persons who
acquired securities of the Company between May 28, 1997 and May 12, 1999, and
alleges that the plaintiffs were damaged by reason of the Company's having
issued materially false and misleading financial statements for fiscal 1998 and
the first three quarters of fiscal 1999, which caused the Company's securities
to trade at artificially inflated prices. An unfavorable resolution of this
action could have a material adverse effect on the business, results of
operations, financial condition or cash flows of the Company. There can be no
assurance that the Company will successfully defend these lawsuits. The Company
is continuing to negotiate a possible settlement with plantiffs.

On August 4, 1999, the staff of the Securities and Exchange Commission advised
the Company that it had commenced a formal investigation into the actions of the
Company and others in connection with, among other things, certain accounting
issues and transactions.

The Company is also a party to certain litigation incurred in the normal course
of business. While any litigation has an element of uncertainty, the Company
believes that the final outcome of any of these routine matters will not have a
material effect on the Company's financial position or future liquidity.

NOTE E -- SPECIAL CHARGES

As referred to in Notes B and D, the Company has incurred substantial additional
costs in evaluating various new potential borrowing arrangements, the
restatement of its fiscal 1998 and the first three quarters of fiscal 1999
financial statements, the investigation conducted by the Special Committee of
the Board and the costs of defending the class action lawsuit and the SEC
investigation. During the period ended October 31, 1999, the Company has
incurred approximately $2.3 million in special charges for professional fees and
payments to financial institutions for the above matters. The Company
anticipates additional charges for future quarters.

NOTE F -- INCOME TAXES

The Company has a net deferred tax asset of $6.0 million, before a valuation
allowance of $2.4 million, at October 31, 1999, consisting of future tax
benefits of net operating loss carryforwards and various other temporary
differences. The Company has forecasted profitable operations for at least the
next few years and, therefore, has recorded a net deferred tax asset of
approximately $3.6 million. The benefits of these net operating loss
carryforwards and other temporary differences that are estimated to take more
than a few years to realize cannot be reasonably determined at this time.
Accordingly, a valuation allowance totaling $2.4 million was recorded in the
October 31, 1999 period to provide for this uncertainty.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995. The statements which are not historical facts contained in this Quarterly
Report on Form 10-Q are forward looking statements that involve a number of
known and unknown risks, uncertainties and other factors, all of which are
difficult or impossible to predict and many of which are beyond the control of
the Company, which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward looking statements.

Such factors include, but are not limited to, uncertainty regarding
continued market acceptance of current products and the ability to successfully
develop and market new products particularly in light of rapidly changing
fashion trends, the impact of supply and manufacturing constraints or
difficulties relating to the Company's dependence on foreign manufacturers,
uncertainties relating to customer plans and commitments, competition,
uncertainties relating to economic conditions in the markets in which the
Company operates, the ability to hire and retain key personnel, the ability to
obtain capital if required, the risk of litigation, the risks of uncertainty of
trademark protection, year 2000 compliance, the uncertainty of marketing and
licensing the trademarks acquired during fiscal 1999 and other risks detailed
below and in the Company's Securities and Exchange Commission filings.

The words "believe", "expect", "anticipate", and "seek" and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date the statement was made.

Results of Operations

Revenues. Net revenues decreased by $ 6.7 million or 23.3% to $ 22.2
million in the three months ended October 31, 1999, from $ 28.9 million in the
comparable restated period of the prior year. Net revenues decreased by $ 14.1
million or 15.6% to $ 76.5 million in the nine months ended October 31, 1999,
from $ 90.6 million in the comparable period of the prior year. The decreases
were due to lower wholesale sales of women's footwear and private label
business.

Gross Profit. Gross profit margins decreased to 14.8% in the three months
ended October 31, 1999 from 19.3% in the comparable period of the prior year.
Gross profit margins decreased to 19.6% in the nine months ended October 31,
1999 from 23.8% in the comparable period of the prior year. The decreases were
primarily attributable to lower wholesale sales of women's footwear and
increased markdowns taken to reduce excess inventory.

Operating Expenses. Selling, general and administrative expenses increased
by $ 2.1 million to $ 8.3 million in the three months ended October 31, 1999
from $ 6.2 million in the comparable period of the prior year. As a percentage
of net revenues, selling, general and administrative expenses increased 15.8% to
37.3% for the three months ended October 31, 1999 from 21.5% for the comparable
period of the prior year. Selling, general and administrative expenses increased
by $ 5.6 million to $ 24.3 million in the nine months ended October 31, 1999
from $ 18.7 million in the comparable period of the prior year. As a percentage
of net revenues, selling, general and administrative expenses increased 11.1% to
31.8% for the nine months ended October 31, 1999 from 20.7% for the comparable
period of the prior year. These increases reflect costs which are directly
associated with implementation of the Company's strategic plan to strengthen its
management team and infrastructure, the expansion outside of its core footwear
products to include, handbags, international distribution channels and the
growth of licensing as well as increased advertising expenditures and intangible
amortization relating to the Company's fiscal 1999 acquisitions. The Company has
incurred $1.1 million and $2.3 million in special charges, for the three and
nine months ended October 31, 1999, relating to professional fees and payments
to financial institutions in connection with the restatement of its financial
statements, evaluating various potential borrowing arrangements, the
investigation by the Special Committee, the SEC investigation and the class
action lawsuit.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Continued

Results of Operations - Continued

Interest Expense. Interest expense for the three months ended October 31,
1999 was $ 307,000, compared to $ 289,000 for the comparable period in the
previous year. Interest expense for the nine months ended October 31, 1999 was
$958,000, compared to $ 786,000 for the comparable period in the previous year.
The increase was caused by higher interest rates charged for the periods
compared to the prior year.

Income Taxes. The Company has a net deferred tax asset of $6.0 million, before a
valuation allowance of $2.4 million, at October 31, 1999, consisting of future
tax benefits of net operating loss carryforwards and various other temporary
differences. The Company has forecasted profitable operations for at least the
next few years and, therefore, has recorded a net deferred tax asset of
approximately $3.6 million. The benefits of these net operating loss
carryforwards and other temporary differences that are estimated to take more
than a few years to realize cannot be reasonably determined at this time.
Accordingly, a valuation allowance of $2.4 million was recorded in the October
31, 1999 period to provide for this uncertainty. The valuation allowance will
continue to be evaluated in future periods.

Net (loss) Income. As a result of the foregoing, the Company sustained a
net loss of $ 5.7 million in the three months ended October 31, 1999, compared
to a net loss of $.5 million in the corresponding period a year ago. The net
loss increased to $ 10.0 million for the nine months ended October 31, 1999
compared to a net income of $1.3 million for the same period in fiscal 1999.

(Loss) Earnings Per Share. The loss per share in the three months ended
October 31, 1999 was $(.32) on a basic and diluted basis, which reflects
additional 2 million weighted shares outstanding, compared to a net loss of
$(.03) per basic and diluted share in the comparable quarter of the prior year.
The loss per share for the nine months ended October 31, 1999 was $(.56) on a
basic and diluted basis, which also reflects additional 3.2 million weighted
shares outstanding, compared to net income of $.08 per diluted share in the same
period in fiscal 1999. The increase in the weighted average shares outstanding
for the three and nine month periods ended October 31, 1999 is primarily the
result of the shares issued in connection with the Company's Fiscal 1999
acquisitions.

Liquidity and Capital Resources

Working capital decreased $ 8.5 million to approximately $ 14.4 million at
October 31, 1999 from approximately $22.9 million at January 31, 1999. This
decrease was due primarily to the loss incurred during the period ended October
31, 1999. At October 31, 1999, the current ratio was 1.8 to 1.

The Company has relied in the past primarily upon revenues generated from
operations, borrowings from its factor and sales of securities to finance its
liquidity and capital needs. Net cash provided from operating activities totaled
$ 4.0 million for the nine months ended October 31, 1999, compared to cash used
of $ 18.5 million for the nine months ended October 31, 1998. The change in
operating activities primarily reflects last year's change in the Company's
agreements with its factor. This resulted in the grossing up of advances from
the factor and amounts borrowed under the factoring and financing agreements
causing a higher use of operating activities for the period ending October 31,
1998. In addition, current year receivables have declined reflecting the lower
sales.

Capital expenditures were $ 1.8 million for the nine months ended October
31, 1999, compared to $521,000 for the nine months ended October 31, 1998. This
increase primarily reflects amounts expended on the development of the JBA ERP
Software Solution and the remedial software implementation of Millennium
Solutions, the expansion of new Retail stores and the construction of a new
showroom. The Company expects minimal capital expenditures for the remainder of
the fiscal year.

Liquidity and Capital Resources - Continued

During the nine month period ended October 31, 1998, substantially all of
the Company's outstanding Class C warrants ("Warrants") were exercised and the
Company received aggregate proceeds of approximately $7.16 million from the
exercise of such Warrants. The proceeds were used to repay short-term
borrowings. In addition, the Company received proceeds of approximately $1.12
million in connection with the issuance of common stock relating to the exercise
of outstanding stock options and certain underwriters' warrants.

In October 1999, the Company made a non-cash $500,000 capital contribution
to Unzipped Apparel LLC ("Unzipped") by foregoing affiliate receivables to
satisfy its obligation. Unzipped, the Company's joint venture with Sweet
Sportswear LLC, markets and distributes jeanswear and apparel under the Candie's
and BONGO label.

On May 27, 1998, the Company entered into a three year $35 million
revolving credit facility (the "Facility"). On August 4, 1998, BankBoston, N.A.
entered into a co-lending arrangement and became a participant in the Facility
with Bank of America Commercial Corporation.

Prior to January 31, 1999, borrowings under the Facility, which totaled
$16,874 at January 31, 1999, bore interest at 1.50% below the prime rate (7.75%
at January 31, 1999). Effective January 31, 1999 the Facility was amended and
borrowings under the Facility bore interest at .25% below the prime rate. The
Company also paid a commitment fee of 1/4% on the unused portion of the
Facility. Borrowings under the Facility were formula based and available up to
the maximum amount of the Facility. During the period ended October 31, 1999,
the Company was not in compliance of certain financial covenants contained in
the Facility. Prior to the termination of the Facility, the lenders issued
periodic forbearance agreements to the Company.

On October 28, 1999, the Company entered into a new two-year $35 million
revolving line of credit (the "Line of Credit") with Rosenthal & Rosenthal, Inc.
and terminated the former Facility. On November 23, 1999, First Union National
Bank entered into a co-lending arrangement and became a participant in the Line
of Credit. On October 31, 1999, borrowings under the Line of Credit were $11.6
million.

Borrowings under the Line of Credit are formula based and available up to
the maximum amount of the Line of Credit. Borrowings under the Line of Credit
will bear interest at .50% above the prime rate. Borrowings in excess of certain
availability formula will bear interest at 2.5% above the prime rate. The
Company will also pay an annual facility fee of .25% of the maximum Line of
Credit.

In May 1999, the Company entered into a $3.5 million master lease agreement
with a financial organization. The agreement requires the Company to
collateralize property and equipment of $2.4 million, of which $ 1.4 million had
been collateralized as of October 1999, with the remaining agreement balance
considered to be an unsecured loan. The agreement's term is for a period of four
years.

Cash requirements fluctuate from time to time due to seasonal requirements,
including the timing of receipt of merchandise and various other factors. The
Company believes that it will be able to satisfy its ongoing cash requirements
for the foreseeable future, including requirements for any expansion, primarily
with cash flow from operations, supplemented by borrowings under the new
financing agreement.

Year 2000

In preparation for the Year 2000, the Company has completed an inventory
and assessment of its information systems, including its computer software and
hardware. The Company determined over a year ago that its existing systems would
be adversely affected by the Year 2000 and that its operational needs would be

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Continued

Year 2000 - Continued

best served by upgrading its entire system. Accordingly, the Company is
currently in the process of implementing throughout all operating areas of the
Company, JBA's ERP Software Solution (the "JBA Solution"), which has been
certified "Year 2000 Compliant" by the ITAA (Information Technology Association
of America).

Since the implementation of the JBA Solution will not be complete prior to
December 31, 1999, the Company has contracted with Millennium Solutions 400 Ltd.
to license software and to implement a remedial system, MS4, that will permit
the Company to bring its current system into compliance. The MS4 system uses an
encapsulation process that will make the Company's existing system Year 2000
compliant. The algorithm that will be used by this system is expected to insure
that the Company's existing system is Year 2000 compliant and will work until
the year 2027.

Additionally, the Company has inventoried and analyzed substantially all of
its embedded information systems throughout its operations, including,
telephones, voice mail, alarms and personal computers. The results of this
analysis did not indicate that embedded systems would not present a material
Year 2000 risk to the Company. The Company will continue to test selected
embedded systems and remediate and certify systems that exhibit Year 2000
issues. The Company intends to complete the testing and remediation of these
systems by the fourth quarter of Fiscal 2000.

The Company's Year 2000 strategy addresses its relationships with critical
third parties, including suppliers, customers and service providers. The
Company's evaluation of these business partners includes written inquiry of such
third parties' Year 2000 readiness and evaluation of responses. The Company has
or intends to follow up with those third parties that indicate material problems
with continued operation as the Company's products are sourced through third
parties abroad into the Year 2000. The Company will continue to work jointly
with customers, strategic vendors and business partners to identify and resolve
any Year 2000 issues that may impact the Company through the end of December
1999. An assessment of the capability of electronic data interface trading
partners to operate with respect to Year 2000 has been completed.

The Company expects its total costs to address the Year 2000 issue to be
approximately $1 million in connection with the implementation of the JBA
Solution and $100,000 for the purchase of the MS4 remedial system. Approximately
$862,000 of these costs have been incurred through October 31, 1999, and the
Company expects to incur the balance of such costs to complete the compliance
plan in fiscal 2000. The balance of such costs is expected to be funded through
operating cash flows. The Company's cost estimates do not include costs
associated with addressing and resolving issues as a result of the failure of
third parties to become Year 2000 compliant.

The Company does not expect the Year 2000 issue to pose significant
operational or financial problems for the Company. The Company bases this
expectation on the progress it has made in upgrading and remediating its
internal information systems and the assurances it has received so far from its
suppliers. Nevertheless, the Year 2000 issue could have a material impact on the
Company's operations and financial condition in the future in the event that the
Company or its key suppliers, such as off-shore manufacturers of shoes for the
Company or the shipping companies that carry those shoes to the Company, are
unable to resolve Year 2000 issues on a timely manner or if the Company becomes
the subject of litigation or other proceedings regarding any Year 2000-related
events. The amount of potential loss cannot be reasonably estimated at this
time.

In the event of a worst case scenario in which the MS4 System misfunctions,
it could delay or prevent business operations, including entering orders,
shipping or invoicing products. No contingency plans are being developed for the
availability of key public services and utilities in the United States or abroad
or to deal with a failure by any of the Company's key suppliers. A failure to
develop a contingency plan with respect to these parties could have a material
adverse effect on the Company.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

PART II. Other Information

Item 1. Legal Proceedings

On May 17, 1999, a stockholder class action complaint was filed in the
United States District Court for the Southern District of New York
against the Company and certain of its current and former officers and
directors, which together with certain other complaints subsequently
filed in the same court alleging similar violations, were consolidated
in one lawsuit, Willow Creek Capital Partners L.P., v. Candie's, Inc.
A consolidated complaint was served on the Company on or about August
24, 1999. The consolidated complaint includes claims under section 11,
12 and 15 of the Securities Act of 1933 and sections 10(b) and 20(a)
of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder. The consolidated complaint is brought on behalf of all
persons who acquired securities of the Company between May 28, 1997
and May 12, 1999, and alleges that the plaintiffs were damaged by
reason of the Company's having issued materially false and misleading
financial statements for fiscal 1998 and the first three quarters of
fiscal 1999, which caused the Company's securities to trade at
artificially inflated prices. An unfavorable resolution of this action
could have a material adverse effect on the business, results of
operations, financial condition or cash flows of the Company. There
can be no assurance that the Company will successfully defend these
lawsuits. The Company is continuing to negotiate a possible settlement
with plantiffs.

On August 4, 1999, the staff of the Securities and Exchange Commission
advised the Company that it had commenced a formal investigation into
the actions of the Company and others in connection with, among other
things, certain accounting issues and transactions.

The Company is also a party to certain litigation incurred in the
normal course of business. While any litigation has an element of
uncertainty, the Company believes that the final outcome of any of
these routine matters will not have a material effect on the Company's
financial position or future liquidity.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit 10.1 - Rosenthal & Rosenthal, Inc. Factoring Agreement -
Candie's, Inc.

Exhibit 10.2 - Rosenthal & Rosenthal, Inc. Inventory Security
Agreement - Candie's, Inc.

Exhibit 10.3 - Rosenthal & Rosenthal, Inc. Factoring Agreement -
Bright Star Footwear, Inc.

Exhibit 10.4 - Rosenthal & Rosenthal, Inc. Inventory Security
Agreement - Bright Star Footwear, Inc.

Exhibit 27 - Financial Data Schedules

(b) Reports on Form 8-K

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, thereunto duly authorized.

CANDIE'S, INC.
----------------------------
(Registrant)

Date December 15, 1999 /s/ Neil Cole
--------------------------- ----------------------------
Neil Cole
Chief Executive Officer
(on Behalf of the Registrant)

Date December 15, 1999 /s/ Frank Marcinowski
--------------------------- ----------------------------
Frank Marcinowski
Vice President and
Chief Financial Officer

Index to Exhibits

Exhibit
Numbers Description
- ------- -----------

10.1 Rosenthal & Rosenthal, Inc. Factoring Agreements - Candie's, Inc.
10.2 Rosenthal & Rosenthal, Inc. Inventory Security Agreement -
Candie's, Inc.
10.3 Rosenthal & Rosenthal, Inc. Factoring Agreement -
Bright Star Footwear, Inc.
10.4 Rosenthal & Rosenthal, Inc. Inventory Security Agreement -
Bright Star Footwear, Inc.
27 Financial Data Schedule