UNITED STATES 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 quarter ended March 31, 2003 ---------------------------------------------------------- or [ ] 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: 0-24176 --------------------------------------------------------- Marisa Christina, Incorporated - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 11-3216809 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 8101 Tonnelle Avenue, North Bergen, New Jersey 07047-4601 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (201)-758-9800 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 whether the registrant is an actuated filer (as defined in Exchange Act Rule 12b-2). Yes No X The number of shares outstanding of the Company's Common Stock on May 12, 2003 was 7,295,065. MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES INDEX PAGE PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets -- March 31, 2003 (Unaudited) and December 31, 2002 2 Consolidated Statements of Operations -- Three months ended March 31, 2003 and 2002 (Unaudited) 3 Consolidated Statements of Cash Flows -- Three months ended March 31, 2003 and 2002 (Unaudited) 4 Notes to Consolidated Financial Statements (Unaudited) 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk 12 Item 4. Controls and Procedures 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURE 14 CERTIFICATIONS PART I: FINANCIAL INFORMATION ITEM I: CONSOLIDATED FINANCIAL STATEMENTS MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES Consolidated Balance Sheets March 31, 2003 and December 31, 2002 ASSETS 2003 2002(1) ------------ ------------ (Unaudited) Current assets: Cash and cash equivalents $ 2,949,176 4,721,614 Trade accounts receivable, less allowance for doubtful accounts of $389,627 in 2003 and $348,860 in 2002 4,946,291 3,562,927 Inventories 1,348,925 1,843,190 Deferred taxes 739,000 739,000 Prepaid expenses and other current assets 511,576 322,912 ------------ ------------ Total current assets 10,494,968 11,189,643 Property and equipment, net 299,656 320,061 Noncurrent deferred taxes 5,551,000 5,551,000 Other assets 77,325 106,004 ------------ ------------ Total assets $ 16,422,949 17,166,708 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 1,017,999 1,506,579 Accrued expenses and other current liabilities 491,371 459,499 ------------ ------------ Total current liabilities 1,509,370 1,966,078 ------------ ------------ Stockholders' equity: Preferred stock, $0.01 par value. Authorized 1,000,000 shares; none issued -- -- Common stock, $0.01 par value. Authorized 15,000,000 shares; issued 8,586,769 shares in 2003 and 2002 85,868 85,868 Additional paid-in capital 31,664,680 31,664,680 Accumulated other comprehensive loss (58,182) (58,182) Accumulated deficit (12,674,511) (12,387,460) Treasury stock, 1,291,704 common shares at cost (4,104,276) (4,104,276) ------------ ------------ Total stockholders' equity 14,913,579 15,200,630 Commitments and contingencies ------------ ------------ Total liabilities and stockholders' equity $ 16,422,949 17,166,708 ============ ============ (1) Accounts were derived from the audited consolidated balance sheet as of December 31, 2002. See accompanying notes to consolidated financial statements. 2 MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES Consolidated Statements of Operations Three months ended March 31, 2003 and 2002 (Unaudited) 2003 2002 ----------- ----------- Net sales $ 5,306,645 6,264,156 Cost of goods sold 3,530,059 3,981,602 ----------- ----------- Gross profit 1,776,586 2,282,554 Selling, general, and administrative expenses 2,120,821 2,069,754 ----------- ----------- Operating income (loss) (344,235) 212,800 Other income, net 13,226 20,572 Interest income, net 11,916 18,285 ----------- ----------- Income (loss) before income tax expense (benefit) (319,093) 251,657 Income tax expense (benefit) (32,042) 2,984 ----------- ----------- Net income (loss) $ (287,051) 248,673 =========== =========== Basic and diluted net income (loss) per common share $ (0.04) 0.03 =========== =========== See accompanying notes to consolidated financial statements. 3 MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES Consolidated Statements of Cash Flows Three months ended March 31, 2003 and 2002 (Unaudited) 2003 2002 ----------- ----------- Cash flows from operating activities: Net income (loss) $ (287,051) 248,673 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 36,375 36,328 Write-off of property and equipment -- 410 Bad debt expense 48,000 62,499 Changes in assets and liabilities: Trade accounts receivable (1,431,364) (1,495,269) Inventories 494,265 306,245 Prepaid expenses and other assets (159,985) (63,836) Trade accounts payable (488,580) 167,529 Accrued expenses and other current liabilities 31,872 (119,909) ----------- ----------- Net cash used in operating activities (1,756,468) (857,330) Cash flows used by investing activities-- acquisitions of property and equipment (15,970) (20,921) ----------- ----------- Net decrease in cash and cash equivalents (1,772,438) (878,251) Cash and cash equivalents at beginning of period 4,721,614 3,330,602 ----------- ----------- Cash and cash equivalents at end of period $ 2,949,176 2,452,351 =========== =========== See accompanying notes to consolidated financial statements. 4 MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2003 (Unaudited) (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements include the accounts of Marisa Christina, Incorporated and its wholly owned subsidiaries (the Company). Significant intercompany accounts and transactions are eliminated in consolidation. The unaudited consolidated financial statements do not include all information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. For further information, such as the significant accounting policies followed by the Company, refer to the notes to the Company's audited consolidated financial statements, included in its annual report on Form 10-K for the year ended December 31, 2002. In the opinion of management, the unaudited consolidated financial statements include all necessary adjustments (consisting of normal, recurring accruals) for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three months ended March 31, 2003 and 2002 are not necessarily indicative of the operating results to be expected for a full year. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) REVENUE AND RECEIVABLES Revenue is recognized when title and risk of ownership transfers to the customer, which is when the product is shipped to the customer. Allowances are provided for estimated uncollectible receivables based on review of specific accounts and historical experience. Allowances and credits, which are given to customers in connection with sales incentives and promotional activities, are recognized as reductions of sales when the related sales revenue is earned and recognized. As of March 31, 2003 and December 31, 2002, the Company's reserves for sales allowances were $1,420,000 and $1,163,000, respectively. Such amounts are recorded as reductions to accounts receivable. (b) STOCK OPTION PLAN The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB Opinion No. 25, issued in March 2000, to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based Compensation, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 123. 5 The following table illustrates the effect on net income (loss) if the fair-value-based method had been applied to all outstanding and unvested awards for the three months ended March 31, 2003 and 2002: 2003 2002 --------- ------- Net income (loss), as reported $(287,051) 248,673 Deduct total stock-based employee compensation expense determined under fair-value-based method for all rewards, net of tax (36,000) (22,000) --------- ------- Pro forma net income (loss) $(323,051) 226,673 ========= ======= Diluted net income (loss) per weighted average common share: As reported $ (0.04) 0.03 Pro forma $ (0.04) 0.03 ========= ======= (c) COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) was equal to net income (loss) for the three months ended March 31, 2003 and 2002. (3) INVENTORIES Inventories at March 31, 2003 and December 31, 2002 consist of the following: 2003 2002 ---------- --------- Piece goods $ 19,775 68,900 Finished goods 1,329,150 1,774,290 ---------- --------- $1,348,925 1,843,190 ========== ========= (4) CREDIT FACILITY The Company has a $17.5 million line of credit facility with a finance company, which may be utilized for commercial letters of credit, banker's acceptances, commercial loans and letters of indemnity. Borrowings under the facility are secured by certain of the Company's assets, primarily trade accounts receivable and inventory, and bear interest at the prime rate plus 0.75%. The Company is required to pay an annual commitment fee of $50,000. The credit facility contains various covenants that require minimum levels of working capital and net tangible worth. As of March 31, 2003, there were no borrowings outstanding and approximately $186,000 of commercial letters of credit were outstanding under the credit facility. Available borrowings at March 31, 2003 were approximately $5.7 million. The arrangement expires on June 14, 2004 and is cancelable by either party with 90 days' written notice. The Company expects to have sufficient financing to meet its working capital needs throughout 2003. 6 MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2003 (Unaudited) (5) NET INCOME (LOSS) PER COMMON SHARE Basic and diluted net income (loss) per common share is based on the weighted average number of common shares outstanding, which was 7,295,065 for the three months ended March 31, 2003 and 2002. The effect of stock options outstanding during the three months ended March 31, 2003 and 2002 was not included in the computation of diluted net income per common share because the effect would have been antidilutive. (6) LEGAL PROCEEDINGS The Company is a party to a lawsuit entitled Martha Wahlert V. Marisa Christina, Inc. and Nordstrom Inc., alleging copyright infringement and other related claims, has been commenced in the United States District Court for the Eastern District of Texas. The lawsuit claims unspecified damages resulting from Marisa Christina's sale to Nordstrom of 695 sweaters bearing a design which allegedly infringes the Plaintiff's copyrighted design. Marisa Christina, pursuant to an agreement, is indemnifying Nordstrom. Marisa Christina is vigorously defending the lawsuit and believes that any possible adverse determination would not be material. 7 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with Marisa Christina's consolidated financial statements. FORWARD-LOOKING STATEMENTS This Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The statements regarding Marisa Christina in this document that are not historical in nature, particularly those that utilize terminology such as "may," "will," "should," "likely," "expects," "anticipates," "estimates," "believes" or "plans," or comparable terminology, are forward-looking statements based on current expectations about future events, which Marisa Christina has derived from information currently available. These forward-looking statements involve known and unknown risks and uncertainties that may cause our results to be materially different from results implied in such forward-looking statements. Those risks include, among others, risks associated with the apparel industry, the dependence on senior management, maintaining sufficient working capital financing, price pressures and other competitive factors and a softening of retailer or consumer acceptance of the Company's products leading to a decrease in anticipated revenues and gross profit margins. CRITICAL ACCOUNTING POLICIES Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management's most difficult, complex or subjective judgments. The Company's most critical accounting policies relate to estimates related to allowances for uncollectible receivables, customer sales allowances, valuation of inventories and valuation of deferred tax assets. RECEIVABLES Allowances are provided for estimated uncollectible receivables based on review of specific accounts and historical experience. Allowances and credits, which are given to customers in connection with sales incentives and promotional activities, are recognized as reductions of sales when the related sales revenue is earned and recognized. Events or changes in market conditions that adversely impact our customers or the Company's ability to generate sales, could impact management's estimates of uncollectible receivables or require the Company to offer greater sales incentives, which could negatively impact sales or profits in the future. As of March 31, 2003, the Company has allowances for bad debts of approximately $390,000 and reserves for sales allowances of approximately $1,420,000. INVENTORIES Inventories are stated at the lower of cost, by the first-in, first-out method, or market. In assessing the market value of its inventories, particularly those with slower turnover, the Company considers the estimated sales value less costs to dispose and a reasonable profit margin and assesses the likelihood of realizing the recorded amounts of inventory. Changes in market conditions could impact the Company's ability to achieve sales at the estimated selling prices and could negatively impact the carrying value of the Company's inventory. 8 VALUATIONS OF DEFERRED TAX ASSETS Deferred income taxes arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. Management makes an assessment of the realizability of the Company's deferred tax assets. In making this assessment, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income of the Company in making this assessment. A valuation allowance is recorded to reduce the total deferred income tax assets to its net realizable value. At March 31, 2003 and December 31, 2002, the Company's deferred tax assets related primarily to a U.S. net operating loss carryforward of $29.5 million which can be utilized over the next seventeen years. Based on the Company's recent operating results and projections of future profitability, management believes it is more likely than not that the Company will generate sufficient taxable income to recover $6.3 million of its deferred tax assets. The recovery of the remaining net deferred tax assets is significantly less certain and, accordingly, the Company has established a valuation allowance for the balance of its deferred tax assets of $4.9 million. If future taxable income is less than management's estimates, the amount of the net deferred tax assets on the Company's consolidated balance sheet will require an additional valuation allowance. Additionally, if the Company is able to realize higher taxable income the valuation allowance could be reduced. OVERVIEW In order to reverse the trend of continuing losses, the Company undertook a number of initiatives over the past four years to reduce overhead, replace certain sales and marketing personnel and exit unprofitable product lines. The Company returned to profitability in 2001 and 2002 primarily as a result of these initiatives and focusing on its core business. While there can be no assurance, management believes that the Company's prospects for profitability will continue in 2003. The following table sets forth information with respect to the percentage relationship to net sales of certain items in the consolidated statements of operations of the Company for the three months ended March 31, 2003 and 2002. 2003 2002 --------------------------- --------------------------- Net sales $ 5,306,645 100.0% $ 6,264,156 100.0% ----------- ----- ----------- ----- Gross profit 1,776,586 33.5% 2,282,554 36.4% Selling, general, and administrative expenses 2,120,821 40.0% 2,069,754 33.0% ----------- ----- ----------- ----- Operating income (loss) (344,235) (6.5%) 212,800 3.4% Other income, net 13,226 0.3% 20,572 0.3% Interest income, net 11,916 0.2% 18,285 0.3% Income tax expense (benefit) (32,042) (0.6%) 2,984 -- ----------- ----- ----------- ----- Net income (loss) $ (287,051) (6.6%) $ 248,673 4.0% =========== ===== =========== ===== 9 THREE MONTHS ENDED MARCH 31, 2003 (2003) COMPARED WITH THREE MONTHS ENDED MARCH 31, 2002 (2002) Net sales. Net sales decreased 15.3% from $6.3 million in 2002, to $5.3 million in 2003, primarily as a result of lower sales to department stores, which were impacted by a weaker economy. Gross profit. Gross profit decreased 22.2% from $2.3 million in 2002, to $1.8 million in 2003. As a percentage of net sales, gross profit decreased from 36.4% in 2002 to 33.5% in 2003. Gross profit as a percentage of net sales was adversely impacted by price compression to the major department stores without a corresponding decrease in the cost of goods sold. Selling, general, and administrative expenses. Selling, general and administrative expenses (SG&A) increased 2.5%. As a percentage of net sales, SG&A increased from 33.0% in 2002 to 40.0% in 2003 as a result of a lower base of sales in 2003. Interest income, net. Interest income, net decreased from $18,285 in 2002 to $11,916 in 2003 as a result of lower interest rates and lower invested balances. Income tax expense (benefit). Income tax changed from expense of $2,984 in 2002 to a benefit of $32,042 in 2003. As of December 31, 2002, the Company had net operating loss carryforwards of approximately $29.5 million, which can be used to offset future taxable income. The net operating loss carryforwards expire in varying amounts during 2018, 2019 and 2020. Over the past several years, the Company has implemented a number of initiatives which have returned the Company to profitability. Based on the Company's recent operating results and projection of future profitability, management believes it is more likely than not that the Company will be able to recover $6.3 million of its net deferred tax assets and has reduced its valuation allowance to $4.9 million at December 31, 2002. Net income (loss). Net income (loss) changed from income of $248,673 in 2002 to a loss of ($287,051) in 2003, principally as a result of lower net sales and gross profit. SEASONALITY The Company's business is seasonal, with a substantial portion of its revenues and earnings occurring during the second half of the year as a result of the Fall and Holiday selling seasons. This is due to both a larger volume of unit sales in these seasons and traditionally higher prices for Fall and Holiday season garments, which generally require more costly materials than the Spring/Summer and Resort seasons. Merchandise from the Fall collection, the Company's largest selling season and Holiday, the Company's next largest season, is shipped in the last two fiscal quarters. Merchandise for Resort, Spring/Summer and Early Fall, the Company's lower volume seasons, is shipped primarily in the first two quarters. In addition, prices of products in the Resorts, Spring/Summer and Early Fall collections average 5% to 10% lower than in other selling seasons. LIQUIDITY AND CAPITAL RESOURCES The Company has a $17.5 million line of credit facility with a finance company, which may be utilized for commercial letters of credit, banker's acceptances, commercial loans and letters of indemnity. Available borrowings at March 31, 2003 were approximately $5.7 million. Borrowings under the facility are secured by certain of the Company's assets, primarily inventory and trade accounts receivable, and bear interest at the prime rate plus 0.75%. The Company is required to pay an annual commitment fee of $50,000. The credit facility contains various covenants that require minimum levels of working capital and net tangible worth. The Company expects to have sufficient financing to meet its working capital needs through 2003. 10 The Company used cash flows in operating activities of $1.8 million and $0.9 million during the three months ended March 31, 2003 and 2002, respectively, principally related to the increases in accounts receivable which were related to the sale of spring-season goods. During the first quarter of 2003, the Company had capital expenditures of approximately $16,000, primarily for upgrading computer systems. Capital expenditures for the remainder of 2003 are expected to be approximately $109,000. These capital expenditures will be funded by internally generated funds and, if necessary, borrowings under the Company's credit facility. The Company's contractual cash obligations related to operating leases as of March 31, 2003 include $447,000 for the remainder of 2003; $590,000 in 2004; $449,000 in 2005, $50,000 in 2006, and $37,000 in 2007. EXCHANGE RATES Although it is Company policy to contract for the purchase of imported merchandise in United States dollars, reductions in the value of the dollar could result in the Company paying higher prices for its products. During the last three fiscal years, however, currency fluctuations have not had an impact on the Company's cost of merchandise. The Company does not engage in hedging activities with respect to such exchange rate risk. IMPACT OF INFLATION The Company has historically been able to adjust prices, and, therefore, inflation has not had, nor is it expected to have, a significant effect on the operations of the Company. 11 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's major market risk exposure is to changing interest rates. However, interest expense has not been and is not expected to be a material expense of the Company. The Company has implemented management monitoring processes designed to minimize the impact of sudden and sustained changes in interest rates. The Company's floating rate debt is based on the prime rate; however, there were no borrowings outstanding at March 31, 2003. Currently, the Company does not use foreign currency forward contracts or commodity contracts and does not have any material foreign currency exposure. All purchases from foreign contractors are made in United States dollars and the Company's investment in its foreign subsidiary was $140,000 at March 31, 2003. ITEM 4: CONTROLS AND PROCEDURES Within 90 days prior to the date of this report, the Company carried out, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. Based on that evaluation, the Company's Chief Executive Offer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information which is required to be included in the periodic reports that the Company must file with the Securities and Exchange Commission. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation. 12 PART II OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS The Company is a party to a lawsuit entitled Martha Wahlert V. Marisa Christina, Inc. and Nordstrom Inc., alleging copyright infringement and other related claims, has been commenced in the United States District Court for the Eastern District of Texas. The lawsuit claims unspecified damages resulting from Marisa Christina's sale to Nordstrom of 695 sweaters bearing a design which allegedly infringes the Plaintiff's copyrighted design. Marisa Christina, pursuant to an agreement, is indemnifying Nordstrom. Marisa Christina is vigorously defending the lawsuit and believes that any possible adverse determination would not be material. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K Reports on Form 8-K -- no reports on Form 8-K were filed by the Company during the quarter ended March 31, 2003. 13 SIGNATURE 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. Date: May 14, 2003 /s/ S. E. Melvin Hecht ---------------------------------------------------- S. E. Melvin Hecht Vice Chairman, Chief Financial Officer and Treasurer 14 MARISA CHRISTINA, INCORPORATED SECTION 302(A) CERTIFICATION CERTIFICATIONS I, S.E. Melvin Hecht, certify that: 1. I have reviewed this quarterly report of Form 10-Q of Marisa Christina, Incorporated (Marisa Christina or the Company); 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 Marisa Christina as of, and for, the periods presented in this quarterly report; 4. Michael H. Lerner and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Marisa Christina and we 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 Marisa Christina's disclosure controls and procedures as of a date within 90 days prior to 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; 5. Michael H. Lerner and I have disclosed, based on our most recent evaluation, to our auditors and the audit committee of Marisa Christina's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize, and report financial data and have identified for the Company'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 Company's internal controls; and 6. Michael H. Lerner and I have indicated in this quarterly report whether or not 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. May 14, 2003 /s/ S.E. Melvin Hecht - ------------------------------------- Vice Chairman of the Board of Directors, Chief Financial Officer, and Treasurer MARISA CHRISTINA, INCORPORATED SECTION 302(A) CERTIFICATION CERTIFICATIONS I, Michael H. Lerner, certify that: 1. I have reviewed this quarterly report of Form 10-Q of Marisa Christina, Incorporated (Marisa Christina or the Company); 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 Marisa Christina as of, and for, the periods presented in this quarterly report; 4. S.E. Melvin Hecht and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Marisa Christina and we 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 Marisa Christina's disclosure controls and procedures as of a date within 90 days prior to 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; 5. S.E. Melvin Hecht and I have disclosed, based on our most recent evaluation, to our auditors and the audit committee of Marisa Christina's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize, and report financial data and have identified for the Company'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 Company's internal controls; and 6. S.E. Melvin Hecht and I have indicated in this quarterly report whether or not 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. May 14, 2003 /s/ Michael H. Lerner - ------------------------------- Chairman of the Board of Directors, Chief Executive Officer, and President