**UNITED STATES**

**SECURITIES AND EXCHANGE        COMMISSION        WASHINGTON, D.C. 20549        Form 10-Q**-----------------------

| **(Mark                    One)** |
|-----------------------------------|
| **x**                             |   | **Quarterly                    report pursuant to Section 13 or 15(d) of the Securities Exchange Act of                    1934** |
|                              |   |
|                              | **For the                    quarterly period ended September 30, 2007** |
|                              |   |
|                              | **OR** |
|                              |   |   |
| **o**                             |   | **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 1-5354**

**Swank,        Inc.***(Exact name of registrant as specified in its        charter)*

|                                                                                                                               |   |                                                                    |
|------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|
| **Delaware***(State or                    other jurisdiction of incorporation or organization)*                                    |   | **04-1886990***(IRS Employer                    Identification Number)* |
|                                                                                                                               |   |                                                                    |
| **90 Park                    Avenue                    New York, NY***(Address of                    principal executive offices)* |   | **10016***(Zip                    code)*                                |

**(212)        867-2600***(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, 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 a large accelerated filer, an accelerated filer, or a        non-accelerated filer. See definition of “accelerated filer and large accelerated        filer” in Rule 12b-2 of the Exchange Act. (Check one):         

| Large Accelerated                    filer ____ | Accelerated filer                    ______ | Non-Accelerated                    filer                    X  |
|-------------------------------------------------|---------------------------------------------|---------------------------------------------------------------------|

         

Indicate by check mark        whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange        Act).

| Yes X  |   | No___ |
|------------------|--------|-------|

         APPLICABLE ONLY TO        CORPORATE ISSUERS:            Indicate the number of shares outstanding of each of the issuer's        classes of common stock as of the latest practicable date:

         

| Title of                    Class      | Shares                    Outstanding on October 31, 2007 |
|-----------------------------------------------------------------|-----------------------------------------------------------|
| Common stock,                    $.10 par value                 | 6,079,699                                                 |

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SWANK, INC.

INDEX

|                                                 | Page No.                                                                                                 |
|------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
| **Part I. Financial                    Information** |                                                                                                     |
|                                                 |                                                                                                     |   |
| Item 1.                                              | Condensed Financial Statements and                    Related Notes                                      | 3 – 9 |
|                                                 |                                                                                                     |   |
| Item 2.                                              | Management's Discussion and Analysis                    of Financial Condition and Results of Operations | 10 – 15 |
|                                                 |                                                                                                     |   |
| Item 3.                                              | Quantitative and Qualitative                    Disclosures about Market Risk                            | 15 |
|                                                 |                                                                                                     |   |
| Item 4.                                              | Controls and Procedures                                                                                  | 15 |
|                                                 |                                                                                                     |   |
|                                                 |                                                                                                     |   |
| **Part II. Other                    Information**    |                                                                                                     |
|                                                 |                                                                                                     |   |
| Item 1A.                                             | Risk Factors                                                                                             | 16 |
|                                                 |                                                                                                     |   |
| Item 2.                                              | Unregistered Sales of Equity                    Securities and Use of Proceeds                           | 16 |
|                                                 |                                                                                                     |   |
| Item 4.                                              | Submission of Matters to a Vote of                    Security Holders                                   | 16 |
|                                                 |                                                                                                     |   |
| Item 6.                                              | Exhibits                                                                                                 | 17 |
|                                                 |                                                                                                     |   |
| Signatures                                           | 18                                                                                                       |
|                                                 |                                                                                                     |   |
| Exhibit Index                                        | 19                                                                                                       |

 

 

2

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**Part I. Financial        Information**

**Item 1. Financial        Statements**

**SWANK, INC.****CONDENSED        BALANCE SHEETS****(Dollars in        thousands except share data)**

|                                                                                                      | **(Unaudited)                    September 30, 2007** | **December 31,                    2006** |
|-----------------------------------------------------------------------------------------------------------|-------------------------------------------------------|------------------------------------------|
| ****ASSETS****                                                                                            |                                                  |                                     |   |   |
| Current:                                                                                                  |                                                  |                                     |   |   |
|   Cash                    and cash equivalents                                                  |                                                  | $ 107                                    |   | $ 899 |
|   Accounts                    receivable, less allowances                                       |                                                  |                                     |   |   |
|     of                    $6,161 and $6,196, respectively                             |                                                  | 17,946                                   |   | 14,820 |
|    Inventories,                    net:                                                    |                                                  |                                     |   |   |
|           Work                    in process            | 1,338                                                 |                                     | 1,213 |   |
|           Finished                    goods             | 27,418                                                |                                     | 17,917 |   |
|                                                                                                      |                                                  | 28,756                                   |   | 19,130 |
|   Deferred                    taxes, current                                                    |                                                  | 2,459                                    |   | 2,459 |
|   Prepaid                    and other current assets                                           |                                                  | 1,221                                    |   | 761 |
|                                                                                                      |                                                  |                                     |   |   |
|           Total                    current assets       |                                                  | 50,489                                   |   | 38,069 |
|                                                                                                      |                                                  |                                     |   |   |
| Property, plant                    and equipment, net of                                                  |                                                  |                                     |   |   |
|     accumulated                    depreciation                                       |                                                  | 1,144                                    |   | 397 |
| Deferred taxes,                    noncurrent                                                             |                                                  | 3,161                                    |   | 3,161 |
| Other                    assets                                                                           |                                                  | 3,471                                    |   | 3,502 |
|                                                                                                      |                                                  |                                     |   |   |
| Total                    assets                                                                           |                                                  | **$                    58,265**          |   | **$                    45,129** |
|                                                                                                      |                                                  |                                     |   |   |
| ****LIABILITIES****                                                                                       |                                                  |                                     |   |   |
| Current:                                                                                                  |                                                  |                                     |   |   |
|   Note                    payable to bank                                                       |                                                  | $                    21,451              |   | $                    7,405 |
|   Current                    portion of long-term obligations                                   |                                                  | 652                                      |   | 665 |
|   Accounts                    payable                                                           |                                                  | 3,559                                    |   | 4,016 |
|   Accrued                    employee compensation                                              |                                                  | 977                                      |   | 1,550 |
|   Other                    current liabilities                                                  |                                                  | 1,909                                    |   | 3,595 |
|                                                                                                      |                                                  |                                     |   |   |
|           Total                    current liabilities  |                                                  | 28,548                                   |   | 17,231 |
|                                                                                                      |                                                  |                                     |   |   |
| Long-term                    obligations                                                                  |                                                  | 6,653                                    |   | 6,332 |
|                                                                                                      |                                                  |                                     |   |   |
| Total                    liabilities                                                                      |                                                  | 35,201                                   |   | 23,563 |
|                                                                                                      |                                                  |                                     |   |   |
| **STOCKHOLDERS'                    EQUITY**                                                               |                                                  |                                     |   |   |
| Preferred stock,                    par value $1.00:                                                      |                                                  |                                     |   |   |   |
|   Authorized                    - 1,000,000 shares                                              |                                                  | -                                        |   | - |
| Common stock, par                    value $.10:                                                          |                                                  |                                     |   |   |
|   Authorized                    - 43,000,000 shares:                                            |                                                  |                                     |   |   |
|     Issued                    -- 6,385,379 shares                                     |                                                  | 639                                      |   | 638 |
| Capital in excess                    of par value                                                         |                                                  | 1,826                                    |   | 1,823 |
| Retained                    earnings                                                                      |                                                  | 21,933                                   |   | 20,439 |
| Accumulated other                    comprehensive (loss), net of tax                                     |                                                  | (730)                                    |   | (730) |
| Treasury stock,                    at cost, 305,680 shares                                                |                                                  | (604)                                    |   | (604) |
|                                                                                                      |                                                  |                                     |   |   |
|           Total                    stockholders' equity |                                                  | 23,064                                   |   | 21,566 |
|                                                                                                      |                                                  |                                     |   |   |
| Total liabilities                    and stockholders' equity                                             |                                                  | **$                    58,265**          |   | **$                    45,129** |
|                                                                                                      |                                                  |                                     |   |   |
|                                                                                                      |                                                  |                                     |   |   |

*The accompanying notes        are an integral part of the condensed financial statements.         *

        3

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**SWANK, INC.        CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)        FOR THE QUARTERS ENDED SEPTEMBER 30, 2007 AND 2006        (Dollars in thousands except share and per share data)        ---------------------------------**

|                                                                                |   | **2007**      |   | **2006**      |
|-------------------------------------------------------------------------------------|--------|---------------|--------|---------------|
|                                                                                |   |          |   |          |
| Net                    sales                                                        |   | $ 31,277 |   | $ 33,172 |
|                                                                                |   |          |   |          |
| Cost of goods                    sold                                               |   | 21,414        |   | 21,560        |
|                                                                                |   |          |   |          |
| Gross                    profit                                                     |   | 9,863         |   | 11,612        |
|                                                                                |   |          |   |          |
| Selling and                    administrative expenses                              |   | 7,948         |   | 8,003         |
|                                                                                |   |          |   |          |
| Income from                    operations                                           |   | 1,915         |   | 3,609         |
|                                                                                |   |          |   |          |
| Interest                    expense                                                 |   | 387           |   | 455           |
|                                                                                |   |          |   |          |
| Income before                    income taxes                                       |   | 1,528         |   | 3,154         |
|                                                                                |   |          |   |          |
| Income                    taxes                                                     |   |  698     |   |  59      |
|                                                                                |   |          |   |          |
| **Net income**                                                                      |   | $ 830    |   | $ 3,095  |
|                                                                                |   |          |   |          |
| Share and per                    share information:                                 |   |          |   |          |
| Basic net income                    per weighted average common share outstanding   |   | $ .14    |   | $ .52    |
| Basic weighted                    average common shares outstanding                 |   | 6,076,366     |   | 5,943,907     |
| Diluted net                    income per weighted average common share outstanding |   | $ .14         |   | $ .51         |
| Diluted weighted                    average common shares outstanding               |   | 6,079,306     |   | 6,020,953     |

*The accompanying notes are        an integral part of the condensed financial statements.*

 

4

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**SWANK, INC.        CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)        FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006        (Dollars in thousands except share and per share data)        ---------------------------------**

|                                                                                |   | **2007**           |   | **2006**           |
|-------------------------------------------------------------------------------------|--------|--------------------|--------|--------------------|
|                                                                                |   |               |   |               |
| Net                    sales                                                        |   | $ 85,521      |   | $ 81,786      |
|                                                                                |   |               |   |               |
| Cost of goods                    sold                                               |   | 58,316             |   | 54,055             |
|                                                                                |   |               |   |               |
| Gross                    profit                                                     |   | 27,205             |   | 27,731             |
|                                                                                |   |               |   |               |
| Selling and                    administrative expenses                              |   | 23,326             |   | 22,367             |
|                                                                                |   |               |   |               |
| Income from                    operations                                           |   | 3,879              |   | 5,364              |
|                                                                                |   |               |   |               |
| Interest                    expense                                                 |   | 1,177              |   | 1,185              |
|                                                                                |   |               |   |               |
| Income before                    income taxes                                       |   | 2,702              |   | 4,179              |
|                                                                                |   |               |   |               |
| Income                    taxes                                                     |   |  1,208        |   |  84           |
|                                                                                |   |               |   |               |
| **Net income**                                                                      |   | $ 1,494  |   | $ 4,095  |
|                                                                                |   |               |   |               |
| Share and per                    share information:                                 |   |               |   |               |
| Basic net income                    per weighted average common share outstanding   |   | $ .25         |   | $ .70         |
| Basic weighted                    average common shares outstanding                 |   | 6,075,255          |   | 5,819,392          |
| Diluted net                    income per weighted average common share outstanding |   | $ .25              |   | $ .69              |
| Diluted weighted                    average common shares outstanding               |   | 6,078,285          |   | 5,960,258          |

*The accompanying notes are        an integral part of the condensed financial statements.*

         

5

         

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**SWANK, INC.****CONDENSED STATEMENTS OF CASH FLOWS        (UNAUDITED)        FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006        (Dollars in thousands)        --------------**

|                                                                                     | **2007   **                                                       | **2006   ** |
|------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|----------------------------|
| Cash flows from                    operating activities:                                 |                                                                             |                       |
|                                                                                     |                                                                             |                       |
| Net                    income                                                            | $ 1,494                                                                     | $ 4,095               |
| Adjustments to                    reconcile net income to net cash (used in) operations: |                                                                             |                       |
|                                                                                     | Depreciation and                    amortization                                 | 153                        | 157 |
|                                                                                     | Bad debt                    expense                                              | 286                        | 227 |
|                                                                                     |                                                                             |                       |
| Changes in assets                    and liabilities                                     |                                                                             |                       |
|                                                                                     | (Increase) in                    accounts receivable                             | (3,412)                    | (10,372) |
|                                                                                     | (Increase) in                    inventory                                       | (9,626)                    | (6,007) |
|                                                                                     | (Increase) in                    prepaid and other assets                        | (367)                      | (160) |
|                                                                                     | (Decrease) in                    accounts payable, accrued and other liabilities | (2,729)                    | (390) |
|                                                                                     | Increase in other                    long-term obligations and deferred credits  | 321                        | 365 |
|                                                                                     | **Net cash (used                    in) operations**                             | **(13,880)**               | **(12,085)** |
|                                                                                     |                                                                             |                       |
| Cash flows from                    investing activities:                                 |                                                                             |                       |
|                                                                                     | Capital                    expenditures                                          | (833)                      | (34) |
|                                                                                     | Premiums on life                    insurance                                    | (129)                      | (122) |
|                                                                                     | **Net cash (used                    in) investing activities**                   | **(962)**                  | **(156)** |
|                                                                                     |                                                                             |                       |
| Cash flows from                    financing activities:                                 |                                                                             |                       |
|                                                                                     | Borrowing under                    revolving credit agreements                   | 53,873                     | 42,326 |
|                                                                                     | Payments of                    revolving credit obligations                      | (39,827)                   | (30,037) |
|                                                                                     | Proceeds from                    stock option exercises                          | 4                          | 48 |
|                                                                                     | Treasury stock                    purchased                                      | -                          | (264) |
|                                                                                     | **Net cash                    provided by financing activities**                 | **14,050**                 | **12,073** |
|                                                                                     |                                                                             |                       |
|                                                                                     | **Net (decrease)                    in cash and cash equivalents**               | **(792)**                  | **(168)** |
|                                                                                     |                                                                             |                       |   |
|                                                                                     | Cash and cash                    equivalents at beginning of period              | 899                        | 505 |
|                                                                                     |                                                                             |                       |   |
|                                                                                     | **Cash and cash                    equivalents at end of period**                | **$ 107**             | **$ 337** |

| **Cash paid                    during the nine months for:**      |                       |                       |
|-------------------------------------------------------------------|----------------------------|----------------------------|
| Interest                                                          | $                    1,177 | $                    1,185 |
| Taxes                                                             | $                    2,493 | $ 114                      |
| Supplemental                    non-cash disclosure:              |                       |                       |
| Conversion of                    convertible note to common stock | $ -                        | $ 350                      |

*The accompanying notes are        an integral part of the condensed financial statements.*

         

6

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**SWANK, INC.****Notes to Condensed Financial Statements        (Unaudited)**

(1)    Basis        of Presentation. The unaudited information furnished herein reflects all adjustments        (consisting only of normal recurring adjustments) which are, in the opinion of management,        necessary to present a fair statement of the results for the periods ended September 30,        2007 and 2006. The financial information contained herein represents condensed financial        data and, therefore, does not include all footnote disclosures required to be included in        financial statements prepared in conformity with generally accepted accounting principles.        Footnote information was included in the financial statements included in the        Company’s 2006 Annual Report on Form 10-K. The condensed financial data included        herein should be read in conjunction with the information in the Annual Report. The results        of operations for the nine months ended September 30, 2007 may not be indicative of the        results that may be expected for the year ended December 31, 2007 or any other        period.

     

(2)    The        following table sets forth the computation of the net income per share for the periods        ended September 30, 2007 and September 30, 2006 (in thousands, except for share and per        share data):

|                                                                                                                                      | Quarter                                                         | Nine                    Months                                        |
|-------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------|-----------------------------------------------------------------------|
|                                                                                                                                      | Ended                    September 30,                          | Ended                    September 30,                                |
|                                                                                                                                      | 2007                                                            | 2006                                                                  | 2007 | 2006 |
| Numerator:                                                                                                                                |                                                            |                                                                  |   |   |
| Net income as                    reported                                                                                                 | $ 830                                                           | $                    3,095                                            | $ 1,494 | $ 4,095 |
| **Add back interest expense on convertible note due to affiliate, net of income                    taxes**                                |                            - |                             - |          - |                           12 |
| **Net income used for diluted earnings per share calculation**                                                                            | $ 830                                                      | $ 3,095                                                          | $ 1,494 | $ 4,107 |
| **Denominators:**                                                                                                                         |                                                            |                                                                  |   |   |
| Shares used in                    computing basic net income per weighted average common share                    outstanding             | 6,076,366                                                       | 5,943,907                                                             | 6,075,255 | 5,819,392 |
| Effect of                    dilutive securities                                                                                          |   2,940                                               |    77,046                                              |   3,030 |   140,866 |
| Shares used in                    computing net income per weighted average common share outstanding assuming                    dilution | 6,079,306                                                       | 6,020,953                                                             | 6,078,285 | 5,960,258 |
|                                                                                                                                      |                                                            |                                                                  |   |   |
| Basic net income                    per weighted average common share outstanding                                                         | $ .14                                                           | $ .52                                                                 | $ .25 | $ .70 |
| Diluted net                    income per weighted average common share outstanding                                                       | $ .14                                                           | $ .51                                                                 | $ .25 | $ .69 |

       There were no anti-dilutive        securities not included in the computation of diluted earnings per weighted averagecommon share.

(3)    Segment        Information. We presently have one reportable segment, men's accessories, consisting of        men's costume jewelry, belts and suspenders and personal leather goods.

(4)           Conversion of Convertible Note. During the nine-month period ended September 30, 2006, the        Estate of Marshall Tulin (the “Estate”) converted the Amended and Restated        Convertible Promissory Note of the Company dated April 1, 2004, as amended and restated as        of June 30, 2004, and payable to the order of the Estate (the “Note”) in the        amount of $350,000, into 116,666 shares of the Company’s common stock, $.10 par value        per share ("Common Stock") pursuant to a formula set forth in the Note.

(5)     Share-Based        Compensation. In December 2004, the Financial Accounting Standards Board        (“FASB”) issued Statement of Financial Accounting Standards No. 123 (revised        2004, "SFAS 123R"),        “*Share-Based        Payment*.”        SFAS 123R addresses the accounting for share-based payments to employees, including grants        of employee stock options. Under the new standard, companies are no longer permitted to        account for share-based compensation transactions using the intrinsic value method in        accordance with APB Opinion No. 25,        “Accounting        For Stock Issued To        Employees”        (“APB 25”). Prior to the adoption of SFAS 123R, we accounted for share-based        compensation using the intrinsic value method prescribed in APB 25 and related        interpretations. Instead, companies are now required to account for such transactions using        a fair-value method and recognize the expense in the statement of income. We adopted SFAS        123R under the modified prospective method effective January 1, 2006. Under that        method, compensation cost is recognized for share-based payments granted prior to January        1, 2006, but not yet vested, based on the grant date fair value estimated in accordance        with the provisions of SFAS 123. The results for prior periods are not restated. Stock        options issued by us previously to certain executives and non-employee directors under        either our

         

7

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1998 Equity Incentive        Compensation Plan (the “1998 Plan”) or 1994 Non-Employee Director Plan (the        “1994 Director Plan”) respectively, vested immediately. We did not grant any        stock options during either of the quarters ended September 30, 2007 or September 30, 2006.             

     

(6)   Stock        Options. In 1994, we established the 1994 Director Plan pursuant to which options could be        granted to non- employee directors to purchase up to 50,000 shares of common stock at        market value on the date of grant. Options granted under the 1994 Director Plan were for a        period of five years and were immediately exercisable. All of the shares available for        grant under the 1994 Director Plan have been granted. In April 1998, our stockholders        approved the 1998 Equity Incentive Compensation Plan (the “1998 Plan”), which        replaced our prior incentive stock plans, all of which had expired by their terms. The 1998        Plan permits our Board of Directors to grant a maximum of 1,000,000 shares to key employees        through stock options, stock appreciation rights, restricted stock units, performance        awards and other stock-based awards. We granted options for 625,000 shares under the 1998        Plan in 2001. These shares vested immediately. Under the 1998 Plan, 375,000 shares remain        available for future grants.

A summary of        option activity under the stock-based compensation plans as of September 30, 2007 and        changes during the nine-month period then ended, is detailed below:

|                                                                | Number of                    Shares                                                           | Weighted Average                    Exercise Price                                       | Weighted Average                    Remaining Contractual Term (years)                         | Aggregate                    Intrinsic                    Value                    (in thousands) |
|---------------------------------------------------------------------|-----------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|
| Outstanding at                    December 31, 2006                 | 8,333                                                                                         | $.79                                                                                     | 2.41                                                                                           | $ 64                                                                                              |
| Granted                                                             | -                                                                                             | -                                                                                        | -                                                                                              | -                                                                                                 |
| Exercised                                                           | (5,000)                                                                                       | $.73                                                                                     | -                                                                                              | $ 30                                                                                              |
| Forfeited/                    Expired                               |                                 - |                                 - |                                  - |                                 -          |
| Outstanding at                    September 30, 2007                | 3,333                                                                                         | $.89                                                                                     | 1.43                                                                                           | $ 22                                                                                              |
|                                                                |                                                                                          |                                                                                     |                                                                                           |                                                                                              |
| Vested or expected                    to vest at September 30, 2007 | 3,333                                                                                         | $.89                                                                                     | 1.43                                                                                           | $ 22                                                                                              |
|                                                                |                                                                                          |                                                                                     |                                                                                           |                                                                                              |
| Exercisable at                    September 30, 2007                | 3,333                                                                                         | $.89                                                                                     | 1.43                                                                                           | $ 22                                                                                              |

All options granted under the        1994 Director Plan are vested as of September 30, 2007.

The table above reflects        3,333 option shares issued, outstanding, and exercisable at prices ranging from $.18to $1.60 per share under the        1994 Director Plan. All options issued under the 1998 Plan have been either exercised or        forfeited and no shares are outstanding.

| (7)    | Income Taxes. We                    adopted the provisions of FASB Interpretation No.                    48, “*Accounting for Uncertainty in Income Taxes – an interpretation of FASB                    Statement No. 109”*                    (“FIN 48”), on January 1, 2007. FIN 48 prescribes the recognition and                    measurement of a tax position taken or expected to be taken in a tax return. It                    also provides guidance on derecognition, classification, interest and                    penalties, accounting in interim periods, disclosure and transition. We                    performed a comprehensive review of our tax positions in accordance with                    recognition standards established by FIN 48. In this regard, an uncertain tax                    position represents the company’s expected treatment of a tax position                    taken in a filed tax return, or planned to be taken in a future tax return,                    that has not been reflected in measuring income tax expense for financial                    reporting purposes. As a result of this review, we do not believe that we have                    included any “uncertain tax positions” in our federal income tax                    return or any of the state income tax returns we are currently filing. With few                    exceptions, we are no longer subject to federal income tax examinations for                    years before 2002. |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

     

| (8)    | Recent Accounting                    Pronouncements. In February 2007, the FASB issued Statement of Financial                    Accounting Standards No. 159,                    “*The                    Fair Value Option for Financial Assets and Financial Liabilities*                    ”                    (“SFAS 159”) including an amendment of FASB Statement No. 115. SFAS                    159 permits companies to choose to measure certain financial instruments and                    certain other items at fair value. The standard requires that unrealized gains                    and losses on items for which the fair value option has been elected, be                    reported in earnings. SFAS 159 is effective for us beginning in the first                    quarter of fiscal year 2008, although earlier adoption is permitted. We are                    currently assessing the impact of SFAS 159, but do not presently anticipate it                    will have a material effect on our financial condition, results of operations,                    or cash flows. |
|-----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

8

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In September 2006, the FASB        issued SFAS No. 157,        “*Fair Value        Measurements*”        (“SFAS 157”). SFAS 157 establishes a common definition for fair value to be        applied to US GAAP guidance requiring use of fair value, establishes a framework for        measuring fair value, and expands disclosure about such fair value measurements. SFAS 157        is effective for fiscal years beginning after November 15, 2007. We are currently assessing        the impact of the adoption of SFAS 157 but do not presently anticipate it will have a        material effect on our financial condition, results of operations, or cash flows.                  In June 2006, the FASB issued FIN 48 which clarifies the accounting for uncertainty in        income taxes recognized in a company’s financial statements in accordance with FASB        Statement No. 109,        “*Accounting        for Income        Taxes*”. See        Footnote 7 above.

| (9)    | Statement ofStockholders’ Equity and Comprehensive Income. Our statement of changesin stockholders’ equity and comprehensive income for the year endedDecember 31, 2006 reflected the adoption of FASB Statement of FinancialAccounting Standards No. 158,“*Employers’ Accounting for Defined Benefit Pension and OtherPostretirement Plans – An Amendment of FASB Statements No. 87, 88, 106and 132(R)*”(“SFAS158”). Our presentation included a $595,000 after-tax charge for theimpact of the adoption which was incorrectly included as a component ofcurrent-period other comprehensive income instead of as an adjustment toaccumulated other comprehensive income as required by SFAS 158. Accordingly, wewill revise the statement of changes in stockholders’ equity andcomprehensive income for the year ended December 31, 2006 in our Annual Reporton Form 10-K for the year ending December 31, 2007. This revision will have noimpact on net income, total accumulated other comprehensive income, totalassets or cash flows for the year ended December 31, 2006. |
|-----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

9

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

***Overview***

        We are currently engaged in the importation, sale and distribution of men's belts, leather        accessories, suspenders, and men's jewelry. Our products are sold both domestically and        internationally under a broad assortment of brands including both licensed tradenames and        private labels. We distribute our merchandise principally through department stores and        through a wide variety of specialty stores and mass merchandisers. We also operate a number        of factory outlet stores primarily to distribute excess and out of line        merchandise.

        Our net sales during the quarter ended September 30, 2007 decreased 5.7% to $31,277,000        compared to $33,172,000 for the corresponding period in 2006 but, for the nine-month        period, increased 4.6% to $85,521,000 compared to $81,786,000. The decrease during the        quarter was mainly due to a reduction in men’s jewelry net sales and the effect of        certain merchandise launches during last year’s third quarter offset in part by an        increase in personal leather goods net sales. The increase during the year was due        principally to higher net sales of both personal leather goods and belt merchandise offset        in part by a reduction in jewelry net sales and a less favorable returns adjustment which        was recorded during the second quarter compared to the returns adjustment during the prior        fiscal year. Gross profit dollars for the quarter and nine-month periods decreased 15.1%        and 1.9%, respectively, compared to the same periods last year. Gross profit expressed as a        percentage of net sales for the quarter declined to 31.5% from 35.0% and, for the        nine-month period, fell to 31.8% from 33.9%, in each case as compared to the prior year.        The decrease in gross profit during both the quarter and year to date periods ended        September 30, 2007 was mainly due to an increase in merchandise cost and a less favorable        sales mix reflecting a reduction in higher-margin jewelry net sales. The decrease during        the quarter was also due to lower net sales generally during the period and increases in        certain inventory control costs. Selling and administrative expenses for the quarter ended        September 30, 2007 decreased $55,000, or 0.7%, and for the nine-month period increased        $959,000, or 4.3% compared to the same periods last year. The increase during the        nine-month period ending September 30, 2007 was primarily due to variable sales-related        expenses associated with higher net sales and increases in product development costs, as        well as a one-time reduction in an accrual associated with certain environmental matters        that was recorded during last year’s second quarter.

***Critical Accounting Policies and Estimates***

        We believe that the accounting policies discussed below are important to an understanding        of our financial statements because they require management to exercise judgment and        estimate the effects of uncertain matters in the preparation and reporting of financial        results. Accordingly, management cautions that these policies and the judgments and        estimates they involve are subject to revision and adjustment in the        future.

        Net sales are generally recorded upon shipment, provided there exists persuasive evidence        of an arrangement, the fee is fixed or determinable and collectability of the related        receivable is reasonably assured. We record revenues net of sales allowances, including        cash discounts, in-store customer allowances, cooperative advertising, and customer        returns, which are all accounted for in accordance with Statement of Financial Accounting        Standards No. 48, “Revenue Recognition When Right of Return Exists,” and        Emerging Issues Task Force Issue No. 01-9, "Accounting for Consideration Given by a Vendor        to a Customer or Reseller of the Vendor's Products". Sales allowances are estimated using a        number of factors including historical experience, current trends in the retail industry        and individual customer and product experience. We reduce net sales and cost of sales by        the estimated effect of future returns of current period shipments. Each spring upon the        completion of processing returns from the preceding fall season, we record adjustments to        net sales in the second quarter to reflect the difference between customer returns of prior        year shipments actually received in the current year and the estimate used to establish the        allowance for customer returns at the end of the preceding fiscal year.

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

        In accordance with AICPA Statement of Position 96-1, “Environmental Remediation        Liabilities”, environmental expenditures that relate to current operations are        expensed or capitalized, as appropriate. Expenditures that relate to an existing condition        caused by past operations, and which do not contribute to current or future revenue        generation, are expensed. Liabilities are recorded when environmental assessments and/or        remedial efforts are probable and the costs can be reasonably estimated. Generally,        adjustments to these accruals coincide with the completion of a feasibility study or a        commitment made by us to a formal plan of action or other appropriate        benchmark.

         

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        Inventories are stated at the lower of cost (principally average cost which approximates        FIFO) or market. Our inventory is somewhat fashion oriented and, as a result, is subject to        risk of rapid obsolescence. We believe that our inventory has been adequately adjusted,        where appropriate, and that we have adequate channels to dispose of excess and obsolete        inventory.

        We determine the valuation allowance for deferred tax assets based upon projections of        taxable income or loss for future tax years in which the temporary differences that created        the deferred tax asset are anticipated to reverse, and the likelihood that the Company's        deferred tax assets will be recovered.

***Results of Operations***

        As is customary in the fashion accessories industry, we make modifications to our        merchandise lines coinciding with our Spring (January - June) and Fall (July - December)        selling seasons. We believe that the results of operations are more meaningful on a        seasonal basis than on a quarterly basis. The timing of shipments can be affected by the        availability of materials, retail sales, and fashion trends. These factors may shift volume        between quarters within a season differently in one year than in another. Due to        seasonality and other factors, the results for the quarter are not necessarily indicative        of the results to be expected for the full year.

***Net Sales***

        Net sales for the quarter ended September 30, 2007 totaled $31,277,000, a decrease of        $1,895,000 or 5.7% compared to the quarter ended June 30, 2006. For the nine-month period        ended September 30, 2007, net sales totaled $85,521,000, an increase of $3,735,000 or 4.6%        compared to the corresponding period last year. The decrease during the quarter was due        primarily to a decline in men’s jewelry and belt net sales resulting in large part        from the effects of certain product launches during last year’s third quarter, offset        in part by an increase in net sales of our personal leather goods merchandise. Initial        shipments under new jewelry and belt merchandise programs accounted for approximately        $3,000,000 in incremental net sales during the quarter ended September 30, 2006 as compared        to the corresponding period this year. Personal leather goods net sales increased 21.0%        during the current quarter principally due to the launch of our new Tumi merchandise, which        began shipping this summer, as well as a sharp increase in international        shipments.

        The increase in net sales during the nine-month period was principally due to increased        shipments of belt and personal leather goods merchandise, offset partially by a decline in        our jewelry business and by a less favorable adjustment for customer returns recorded        during the quarter ended June 30, 2006 (see discussion below). Net sales of our men's belt        and personal leather goods merchandise increased 7.3% and 19.4%, respectively, during the        nine-month period ended September 30, 2007 compared to the prior year. In belts, the        increase reflects higher shipments of our Nautica, and new Concepts by Claiborne and Tumi        collections as well as increases in several of our private label programs shipped to a        number of retailers including, among others, for Kohl’s and Target. Certain of these        programs were launched or expanded during the fall 2006 or spring 2007 seasons. The        increase in our personal leather goods business was also due to higher shipments for        several merchandise collections including Tumi, Concepts by Claiborne and a variety of        private label programs including Kohl’s. The increase in personal leather goods net        sales was also driven in part by strong international sales. Net sales for our men’s        jewelry category decreased 19.0% during the year to date period mainly due to heavy        shipments associated with certain product launches during last year’s third        quarter.

        Total net sales to international customers (including certain military accounts but        excluding shipments for Tumi’s international operations) during the quarter more than        doubled compared to the same time last year and increased 98.6% for the year to date        period. The increases were due primarily to higher shipments of personal leather goods and        belts made to certain foreign licensor distributors, particularly for our Tommy Hilfiger        and Guess merchandise.

        Included in net sales for the nine months ended September 30, 2007 and 2006, are annual        second quarter adjustments to record the variance between customer returns of prior year        shipments actually received in the current year and the allowance for customer returns        which was established at the end of the preceding fiscal year. This adjustment increased        net sales by $637,000 for the nine-month period ended September 30, 2007, compared to an        increase of $1,248,000 for the comparable period in 2006. The favorable adjustments        resulted from actual returns experience during both the spring 2007 and spring 2006 seasons        being better than anticipated compared to the reserves established at December 31, 2006 and        December 31, 2005. The reserve at December 31, 2006 was established in consideration of        shipments made during the fall 2006 season

         

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        associated with a variety of new merchandise programs. During the spring 2007 season,        customer returns of men’s jewelry were lower than anticipated, while during the        spring 2006 season, returns were lower than expected mainly for belts and personal leather        goods. We established our reserve for returns as of December 31, 2006 based on our estimate        of merchandise to be received during the spring 2007 season which was generally shipped to        retailers for the 2006 fall and holiday selling seasons. During the past few seasons, we        have assisted our retail partners in promoting excess and discontinued merchandise        following the holiday season to accelerate retail sales of these goods to reduce the        overall amount of customer returns.

***Gross profit***

        Gross profit for the quarter ended September 30, 2007 decreased $1,749,000 or 15.1% and for        the nine-month period, decreased $526,000 or 1.9%, in each case as compared to the        corresponding period last year. Gross profit, expressed as a percentage of net sales for        the quarter, was 31.5% compared to 35.0% last year and, for the nine-month period was 31.8%        compared to 33.9% last year.

        The decrease in gross profit during both the quarter and year to date periods ended        September 30, 2007 was mainly due to an increase in certain merchandise-related costs and a        less favorable sales mix reflecting both a reduction in higher-margin jewelry net sales and        an increase in our private label businesses. The decrease during the third quarter was also        due to lower net sales generally during the period and increases in certain inventory        control costs while gross profit for the nine-month period was adversely affected by a        smaller second quarter returns adjustment relative to last year.

        Included in gross profit for the quarter and nine months ended September 30, 2007 and 2006,        are annual second quarter adjustments to record the variance between customer returns of        prior year shipments actually received in the current year and the allowance for customer        returns which was established at the end of the preceding fiscal year. The adjustment to        net sales recorded in the second quarter described above resulted in a favorable adjustment        to gross profit of $783,000 and $943,000 for the nine-month periods ended September 30,        2007 and September 30, 2006, respectively. As discussed above, customer returns were lower        than anticipated during both the spring 2007 and spring 2006 seasons due mainly to our        efforts to more aggressively promote excess and discontinued merchandise to stimulate        retail sales and minimize returns.

***Selling and Administrative Expenses***

        Selling and administrative expenses for the quarter ended September 30, 2007 decreased        $55,000 or 0.7% and, for the nine-month period, increased $959,000 or 4.3%, both as        compared to the same periods last year. Selling and administrative expenses expressed as a        percentage of net sales were 25.4% and 24.1% for the quarters ended September 30, 2007 and        2006 respectively, and 27.3% for the nine month periods ended September 30, 2007 and        2006.

        Selling expenses for the quarter were approximately even with last year but as a percentage        of net sales increased to 19.3% of net sales from 18.2% last year. For the nine-month        period ended September 30, 2007, selling expenses increased $864,000 or 5.1% but as a        percentage of net sales were approximately even with last year at 20.6%. Merchandising and        design costs, primarily compensation and related expenses, increased during both the        quarter and year, but, during the quarter, were offset by a decrease in certain variable        sales-related costs. During the past year, we have generally been expanding our product        development and design staff in response to the recent growth in our various        businesses.

        We routinely make expenditures for advertising and promotion as necessary to maintain and        enhance our business. Certain of our license agreements also require specified levels of        spending. These expenditures, which consist primarily of media and print advertising, image        fund contributions and other promotional costs, are included in selling and administrative        expenses as incurred. In addition, we frequently make expenditures in connection with        cooperative advertising programs to support various marketing initiatives sponsored by our        customers. Accruals associated with cooperative advertising expenditures are recorded as a        reduction to net sales. Expenditures for advertising and promotion, including cooperative        advertising, totaled $879,000 or 2.9% percent of net sales compared to $912,000 or 2.8% of        net sales for the quarters ended September 30, 2007 and 2006, respectively. Advertising and        promotion expenses, including cooperative advertising, for the nine months ended September        30, 2007 were $2,600,000 or 3.1% of net sales compared to $2,474,000 or 3.1% of net sales        for the corresponding period last year. The decrease during the quarter was due to a        reduction in expenditures based on a percentage of net sales offset in part by an increase        in cooperative advertising expenses. The increase for the year to date period is due mainly        to higher display costs as well as increases in cooperative advertising        expenses.

         

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        For the quarter and nine-months ended September 30, 2007, administrative expenses decreased        $54,000 or 2.7% and increased $95,000 or 1.7%, respectively, compared to the same periods        last year. Administrative expenses expressed as a percentage of net sales were 6.2% and        6.0% for the quarters ended September 30, 2007 and 2006, respectively, and 6.5% and 6.8%        for the nine months ended September 30, 2007 and 2006, respectively. The decrease during        the quarter was due to lower professional fees while the increase during the nine-month        period was mainly due to a one-time reduction of an accrual related to certain        environmental matters which was recorded during last year’s second        quarter.

***Interest Expense***

        Net interest expense for the quarter and nine-month periods ended September 30, 2007        decreased by $68,000 and $8,000, respectively, compared to the same periods in 2006. The        decrease during both the quarterly and year to date periods was due to lower average        borrowings and also, during the quarter, to lower average interest rates as compared to the        same periods in 2006. Average outstanding borrowings decreased by approximately 7% and 1%        during the quarter and nine-month periods, respectively, while average borrowing costs        declined approximately 84 basis points for the quarter. Our average borrowing costs for the        year to date period were approximately even with last year. During the third quarter, we        amended our Loan and Security Agreement dated as of June 30, 2004, as amended by and        between us and Wells Fargo Foothill, Inc. which in addition to certain other changes,        reduced the interest rates payable on outstanding borrowings (see Liquidity and Capital        Resources” below).

***Income Taxes***

        We recorded an income tax provision for the quarter and nine months ended September 30,        2007 of $698,000 and $1,208,000, respectively, reflecting an effective tax rate of        approximately 45%. We recorded a $59,000 and an $84,000 income tax provision on our pretax        income during the quarter and nine months ended September 30, 2006, respectively. We        recorded a minimal tax provision on our operating income before taxes during the first        three quarters of fiscal 2006 reflecting the utilization of net operating loss        carryforwards to offset then current tax liability. Those net operating loss carryforwards        were fully utilized at December 31, 2006 and accordingly, beginning in fiscal 2007, we        began recording a tax provision on our pretax income at a rate approximating statutory        federal and state income tax rates.

        During fiscal 2001, we began recording a valuation reserve against all of our deferred tax        assets. In accordance with the criteria established in Statement of Financial Accounting        Standards No. 109, “*Accounting for Income Taxes*” (“SFAS        109”), we regularly assess the status of the valuation allowance based upon a number        of factors including future reversals of existing taxable temporary differences which would        enable us to offset gross deferred tax assets against gross deferred tax liabilities; the        availability of taxable income in carry-back prior years (if carry-back is permitted under        the tax law); tax planning strategies; and projections of future taxable income exclusive        of reversing temporary differences and carry-forwards. Based upon the results of that        evaluation, we determined at December 31, 2006 that it was more likely than not that our        existing deferred tax assets will be fully utilized in the normal course of operations and        accordingly, reversed the remaining valuation allowance.

***Liquidity and Capital Resources***

        As is customary in the fashion accessories industry, substantial percentages of our sales        and earnings occur in the months of September, October and November, when we make        significant shipments of our products to retailers for sale during the holiday season. As a        result, accounts receivable peak in the fourth quarter. We build inventory during the year        to meet the demand for the holiday season. The required cash is provided by a revolving        credit facility.

        Our working capital increased by $1,103,000 during the nine-month period ended September        30, 2007 compared to an increase of $4,716,000 for the nine months ended September 30,        2006. The increase this year was mainly due to higher net inventory and accounts receivable        balances along with decreases in accounts payable, accrued employee compensation and all        other current liabilities, all offset in part by increased bank borrowings under our        revolving credit agreement. The increase during the nine-month period ended September 30,        2006 was also due to higher net inventory and accounts receivable balances and decreases in        accounts payable and other current liabilities which were partially offset by increases in        accrued employee compensation and bank borrowings. Our overall inventory investment in 2007        has increased compared to last year mainly due to additional commitments made in support of        specific businesses, a decrease in net sales of certain merchandise lines during the third        quarter relative to the same time last year, and the general expansion of our merchandise        collections that cover a wide variety of licensed brands and private labels for numerous        retailers. Our bank borrowings normally increase during the fall season in advance of our        holiday shipping period as we finance the inventory and other working capital requirements        associated with those sales.

         

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        Cash used in operations during the nine months ended September 30, 2007 totaled $13,880,000        compared to cash used in operations of $12,085,000 for the corresponding period last year.        Cash was used in operations during both years mainly to fund additional inventory and        accounts receivable investment and for payments of accounts payable and other accrued        liabilities. Cash was provided during both periods by net income, depreciation and        amortization. We generally use cash during the first nine months of the year to build        inventories for the upcoming holiday selling season and to fund payments of accounts        payable and certain other short-term liabilities that may be seasonal in nature. However,        as noted above, the increase in our inventory investment has been more significant during        2007 as compared to the prior year mainly due to commitments we made earlier this year to        support certain specific programs. In addition, the recent expansion of our business has        led to an increase in the number of merchandise collections we offer that cover a large        selection of licensed brands and private labels. We have generally increased our inventory        investment in support of each of those businesses in order to continue to meet the        increasingly demanding requirements of our retail customers and provide them with the        freshest and most compelling new merchandise concepts. Accounts receivable balances        generally increase during the first nine months of the year as we enter our seasonally        heavy shipping period. During the period ended September 30, 2007, accounts receivable        increased at a lesser rate compared to the same time last year mainly due to a reduction in        the rate of growth of our net sales this year relative to last year.

        Cash used in investing activities was $962,000 for the nine-month period ended September        30, 2007 compared to cash used of $156,000 for the nine-month period ended September 30,        2006. In both periods, cash was used for capital expenditures and premiums on certain life        insurance contracts owned by us. Our capital expenditures increased during the first nine        months of 2007 relative to the prior year due to leasehold improvements for our New York        showrooms and higher plant and equipment purchases associated with our warehouse and        distribution facilities.

        Cash provided by financing activities for the nine months ended September 30, 2007 and        September 30, 2006 was $14,050,000 and $12,073,000, respectively, reflecting in both years        net borrowings under our revolving credit agreement. The proceeds were used to fund our net        working capital requirements.

        In the ordinary course of business, we are contingently liable for performance under        letters of credit. At September 30, 2007, outstanding letters of credit totaled $90,000. We        presently are required to pay a fee quarterly equal to 2.00% per annum on outstanding        letters of credit.

        On July 2, 2007, we entered into a Sixth Amendment (the “Sixth Amendment”) to        the Loan and Security Agreement dated as of June 30, 2004, as amended (the        “Agreement”) by and between us and Wells Fargo Foothill, Inc. (the        “Lender”). Among other things, the Sixth Amendment extends the maturity date of        the Agreement to June 29, 2012, sets the maximum amount of extensions of credit that may be        made by the Lender to us under the Agreement at $32,000,000, reduces the interest rates        payable on outstanding amounts under the Agreement, revises financial covenant levels and        certain reporting requirements, and releases certain collateral security for our        obligations to the Lender.

        The following chart summarizes our contractual obligations as of December 31, 2006 (in        thousands):

|                                                                                          | **Payments due                    by period** |
|-----------------------------------------------------------------------------------------------|-----------------------------------------------|
|                                                                                          | **Total**                                     | **Less than 1                    year** | **1-3                    years** | **3-5                    years** | **More than 5                    years** |
|                                                                                          |                                          |   |   |   |   |
| Operating                    leases                                                           | $                    8,725                    | $                    2,307 | $                    4,599 | $                    1,770 | $ 49 |
| Minimum royalty                    and advertising payments required under License Agreements | 19,890                                        | 9,347 | 10,429 | 114 | - |
| Postretirement                    benefits                                                    | 3,860                                         | 364 | 762 | 784 | 1,950 |
| Deferred                    compensation                                                      | 349                                           | 139 | 210 | - | - |
| **Total**                                                                                     | **$ 32,824**                             | **$ 12,157** | **$ 16,000** | **$ 2,668** | **$ 1,999** |

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

        During the quarter ended September 30, 2007, there were no material changes outside the        ordinary course of business in the contractual obligations set forth in the above        chart.

         

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        The Company is subject to legal proceedings and claims which arise in the ordinary course        of its business. Although there can be no assurance as to the disposition of these        proceedings, we do not anticipate that these matters will have a material impact on our        results of operations or financial condition.

***"Forward Looking Statements"***

        Certain of the preceding paragraphs contain "forward looking statements" which are based        upon current expectations and involve certain risks and uncertainties. Under the safe        harbor provisions of the Private Securities Litigation Reform Act of 1995, readers should        note that these statements may be impacted by, and the Company's actual performance may        vary as a result of, a number of known and unknown risks and uncertainties that could cause        actual results, performance or achievements to differ materially from those described or        implied in the forward-looking statements, including, but not limited to, general economic        and business conditions, competition in the accessories markets; potential changes in        customer spending; acceptance of our product offerings and designs; the level of        inventories maintained by our customers; the variability of consumer spending resulting        from changes in domestic economic activity; a highly promotional retail environment; any        significant variations between actual amounts and the amounts estimated for those matters        identified as our critical accounting estimates as well as other significant accounting        estimates made in the preparation of our financial statements; and the impact of the        hostilities in the Middle East and the possibility of hostilities in other geographic areas        as well as other geopolitical concerns. Accordingly, actual results may differ materially        from such forward-looking statements.

        You are urged to consider all such factors. In light of the uncertainty inherent in such        forward-looking statements, you should not consider their inclusion to be a representation        that such forward-looking matters will be achieved. We assume no obligation for updating        any such forward-looking statements to reflect actual results, changes in assumptions or        changes in other factors affecting such forward-looking statements.

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

        During the quarter and nine-months ended September 30, 2007, there were no material changes        in the information called for by this item from the information contained in Item 7A of our        Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

**Item 4.   Controls and Procedures**

        At the end of the period covered by this report, we carried out an evaluation, with the        participation of our management including our Chief Executive Officer and Chief Financial        Officer, of the effectiveness of our disclosure controls and procedures. Based on our        evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our        disclosure controls and procedures were effective. There was no change in our internal        control over financial reporting during the quarter ended September 30, 2007 that has        materially affected, or is reasonably likely to materially affect, our internal control        over financial reporting.

         

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**PART II - OTHER INFORMATION**

**Item 1A. Risk Factors.**

        There were no material changes from the risk factors previously disclosed in Item 1A to        Part I of our Annual Report on Form 10-K for the fiscal year ended December 31,        2006.

**Item 2. Unregistered Sales of Equity Securities and Use of        Proceeds.**

        (a)      During the three-month period ended September 30, 2007,        we issued 5,000 shares of our common stock, $.10 par value per share ("Common Stock"), upon        the exercise of stock options previously granted under a stockholder approval stock option        plan of the Company. We received $3,650.51 in cash from the individual exercising the        options (the "Optionee") in payment of the exercise price for the issued        shares.

        We are relying on an exemption from registration contained in Section 4(2) of the        Securities Act of 1933, as amended (the "Securities Act"), in connection with the issuance        of the shares of Common Stock. The Optionee has represented, warranted and agreed, among        other things, that the shares of Common Stock issued upon the exercise of the applicable        options have been acquired for his own account, for investment only and not with a view to        the resale or distribution thereof; and understands that the shares of Common Stock must be        held indefinitely unless the sale or other transfer thereof is subsequently registered        under the Securities Act or an exemption from such registration is available at that time.        Each Optionee has also represented that he has knowledge and experience in financial and        business matters that he is capable of evaluating the merits and risks of his investment in        the shares of Common Stock; has adequate means of providing for his current needs and        possible future contingencies; is able to bear the economic risks of his investment in the        shares of Common Stock; is able to hold the shares of Common Stock for an indefinite period        of time and has a sufficient net worth to sustain a loss of his investment in the shares of        Common Stock in the event any loss should occur, and has had access to and received such        documents and information concerning the Company as he has requested. A Securities Act        restrictive legend was placed on each certificate representing the issued shares of Common        Stock and stop transfer instructions are placed on such certificates as may be necessary or        appropriate to, among other things, prevent a violation of, or to perfect an exemption        from, the registration requirements of the Securities Act and any applicable state        securities laws.

        (b)     Not Applicable.

        (c)      Not Applicable.

**Item 4.   Submission of Matters to a Vote of Security        Holders**

        Our 2007 Annual Meeting of Stockholders (the "Annual Meeting") was held on August 23, 2007.        At the Annual Meeting, stockholders:

| (a)    | Elected the                    following directors to serve as Class III directors of the Company until our                    2010 Annual Meeting of Stockholders and until election and qualification of                    their respective successors by the following vote: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                             |   |   |
|   | Director                                                                                                                                                                                                                                                                         | For | Withheld |
|   | Raymond                    Vise                                                                                                                                                                                                                                                  | 5,213,796 | 92,876 |
|   | Michael M.                    Rubin                                                                                                                                                                                                                                              | 5,293,371 | 13,300 |
|   |                                                                                                                                                                                                                                                                             |   |   |
|   |                                                                                                                                                                                                                                                                             |   |   |
| (b)    | Approved the                    appointment of BDO Seidman LLP as the independent registered public accounting                    firm of the Company for the fiscal year ended December 31, 2007 by the                    following vote:                                      |
|   |                                                                                                                                                                                                                                                                             |   |   |
|   | For                                                                                                                                                                                                                                                                              | Against | Abstain |
|   | 5,282,357                                                                                                                                                                                                                                                                        | 6,676 | 17,639 |

         

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**Item 6.    Exhibits**

| Exhibit |                                                                                                                                                          |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  | Description                                                                                                                                                   |
|    |                                                                                                                                                          |
| 31.01   | Rule 13a-14(a)                    Certification of John Tulin, Chief Executive Officer of the Company.                                                        |
|    |                                                                                                                                                          |
| 31.02   | Rule 13a-14(a)                    Certification of Jerold R. Kassner, Executive Vice President and Chief                    Financial Officer of the Company. |
|    |                                                                                                                                                          |
| 32.01   | Certification                    Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the                    Sarbanes-Oxley Act of 2002. |

         

         

         

         

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**SIGNATURES**

Pursuant to the requirements        of the Securities Exchange Act of 1934, the registrant has caused this report to be signed        on its behalf by the undersigned thereunto duly authorized.

SWANK, INC.

Registrant

/s/ Jerold R.        Kassner

_______________________________

Jerold R. Kassner,

Executive Vice President,        Chief Financial Officer and Treasurer

         

Date:   November 14, 2007        

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**EXHIBIT INDEX**

| Exhibit |                                                                                                                                       |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------|
| Number  | Description                                                                                                                                |
|    |                                                                                                                                       |
| 31.01   | Rule 13a-14(a) Certification of John Tulin, Chief Executive Officer of the                    Company.                                     |
|    |                                                                                                                                       |
| 31.02   | Rule 13a-14(a) Certification of Jerold R. Kassner, Executive Vice President and                    Chief Financial Officer of the Company. |
|    |                                                                                                                                       |
| 32.01   | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to                    Section 906 of the Sarbanes-Oxley Act of 2002. |