<PAGE>   1

                                  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 December 31, 1998.

                                       OR

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities 
     Exchange  Act  of 1934 for the transition  period from _________________ to
     _______________.

                         Commission file number: 0-24636


                         THE SIRENA APPAREL GROUP, INC.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                          36-2998726
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                         Identification No.)


                               10333 VACCO STREET
                        SOUTH EL MONTE, CALIFORNIA 91733
               (Address of principal executive offices)(Zip code)
                                  (626)442-6680
               (Registrant's telephone number including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                                              [X] Yes   [ ] No

AT JANUARY 31, 1999, 5,067,391 SHARES OF $0.01 PAR VALUE COMMON STOCK OF THE
REGISTRANT WERE OUTSTANDING.


<PAGE>   2

                                    FORM 10-Q



                                      INDEX

<TABLE>
<CAPTION>
                         PART I - FINANCIAL INFORMATION                       PAGE
                                                                              ----
<S>       <C>                                                                 <C>
Item 1.   Financial Statements

          Consolidated Balance Sheets as of December 31,
          1998 (unaudited) and June 30, 1998                                   3

          Consolidated Statements of Operations for the
          Three and Six months ended December 31, 1998
          and 1997 (unaudited)                                                 5

          Consolidated Statements of Cash Flows for the six
          months ended December 31, 1998 and 1997 (unaudited)                  6

          Notes to Consolidated Financial Statements
          December 31, 1998                                                    7

Item 2.   Management's Discussion and Analysis of                              
          Financial Condition and Results of Operations                        9

Item 3.   Quantitative and Qualitative Disclosures about
          Market Risk                                                         14

                           PART II - OTHER INFORMATION

Item 1.   Legal Proceedings                                                   14

Item 2.   Changes in Securities and Use of Proceeds                           14

Item 3.   Defaults Upon Senior Securities                                     14

Item 4.   Submission of Matters to a Vote of Security Holders                 14

Item 5.   Other Information                                                   15

Item 6.   Exhibits and Reports on Form 8-K                                    16

Signatures                                                                    17
</TABLE>



                                       2
<PAGE>   3

                         PART I - FINANCIAL INFORMATION


Item 1. Financial Statements

                         THE SIRENA APPAREL GROUP, INC.
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                               December 31,          June 30,
                                                   1998                1998
                                               ------------        ------------
                                               (Unaudited)
<S>                                            <C>                 <C>         
ASSETS
Current assets
 Cash                                          $    321,000        $     95,000
 Accounts receivable, net of
  allowance of $ 1,661,000
  (December 31, 1998) and
  $1,908,000 (June 30, 1998)
  (Note 3)                                        4,999,000           6,884,000
 Inventories (Note 4)                            19,554,000           7,016,000
 Prepaids and other current assets                1,050,000             408,000
                                               ------------        ------------
Total current assets                             25,924,000          14,403,000

Equipment and leasehold improvements:
 Furniture, fixtures and equipment                3,989,000           3,917,000
 Leasehold improvements                           1,023,000             903,000
 Computer projects in progress                      913,000             778,000
                                               ------------        ------------
                                                  5,925,000           5,598,000
 Less accumulated depreciation
 and amortization                                (3,747,000)         (3,526,000)
                                               ------------        ------------
                                                  2,178,000           2,072,000

Equipment under capital lease,
 less accumulated amortization
 of $101,000 (December 31, 1998)
 and $79,000 (June 30, 1998)                        113,000             135,000

Intangible assets, less accumu-
 lated amortization of $1,301,000
 (December 31, 1998) and $1,145,000
 (June 30, 1998)                                  5,117,000           5,271,000

Deposits                                            241,000             149,000
                                               ------------        ------------
Total assets                                   $ 33,573,000        $ 22,030,000
                                               ============        ============
</TABLE>

See accompanying notes.



                                       3
<PAGE>   4

<TABLE>
<CAPTION>
                                               December 31,           June 30,
                                                   1998                1998  
                                               ------------        ------------
                                               (Unaudited)
<S>                                            <C>                 <C>         
LIABILITIES AND STOCKHOLDERS'
 EQUITY
Current liabilities
 Bank overdraft                                $  2,002,000        $    920,000
 Due to factor                                    7,000,000                  --
 Accounts payable                                 8,255,000           1,968,000
 Note payable (Note 6)                              237,000             237,000
 Accrued liabilities                                506,000           1,855,000
Current portion of
 capital lease obligations                           43,000              46,000
Current portion-note payable
 to factor                                          200,000             200,000
                                               ------------        ------------
Total current liabilities                        18,243,000           5,226,000

Capital lease obligations,
 less current portion                                73,000              95,000
Note payable to factor, less
 current portion                                    117,000             217,000

Stockholders' equity
 Common Stock,$0.01 par value
  Authorized, 20,000,000 shares
  Issued and outstanding,
  5,067,391 shares (December 31,
  1998) and 5,019,391 (June 30, 1998)                51,000              50,000
 Additional paid-in capital                      34,064,000          33,897,000
 Accumulated deficit                            (18,975,000)        (17,455,000)
                                               ------------        ------------
 Total stockholders' equity                      15,140,000          16,492,000
                                               ------------        ------------
Total liabilities and stock-
 holders' equity                               $ 33,573,000        $ 22,030,000
                                               ============        ============
</TABLE>

See accompanying notes



                                       4
<PAGE>   5

                         THE SIRENA APPAREL GROUP, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                          Three Months Ended                     Six Months Ended
                                                             December 31,                           December 31,   
                                                  --------------------------------        --------------------------------
                                                      1998                1997                1998                1997
                                                  ------------        ------------        ------------        ------------
<S>                                               <C>                 <C>                 <C>                 <C>         
Net sales                                         $ 11,760,000        $  9,627,000        $ 14,056,000        $ 11,160,000
Cost of goods sold                                   5,966,000           5,529,000           7,668,000           7,055,000
                                                  ------------        ------------        ------------        ------------
Gross profit                                         5,794,000           4,098,000           6,388,000           4,105,000
Selling, general, & administrative expenses          4,696,000           3,266,000           7,279,000           5,395,000
Depreciation and amortization                          122,000              82,000             268,000             160,000
                                                  ------------        ------------        ------------        ------------
Total operating expenses                             4,818,000           3,348,000           7,547,000           5,555,000
                                                  ------------        ------------        ------------        ------------
Income (loss) from operations                          976,000             750,000          (1,159,000)         (1,450,000)
Interest expense                                      (243,000)           (133,000)           (332,000)           (168,000)
                                                  ------------        ------------        ------------        ------------
Income (loss) before provision
 for income taxes                                      733,000             617,000          (1,491,000)         (1,618,000)
Provision for income taxes (Note 5)                     29,000              25,000              29,000              25,000
                                                  ------------        ------------        ------------        ------------
Net income (loss)                                 $    704,000        $    592,000        $ (1,520,000)       $ (1,643,000)
                                                  ============        ============        ============        ============
Net income (loss) per share-basic                 $       0.14        $       0.13        $(      0.30)       $(      0.35)
                                                  ============        ============        ============        ============
Net income (loss) per share-diluted               $       0.14        $       0.13        $(      0.30)       $(      0.35)
                                                  ============        ============        ============        ============


Weighted average number of
  common shares outstanding:
  Basic                                              5,041,791           4,649,230           5,030,591           4,649,230
  Diluted                                            5,201,712           4,695,462           5,030,591           4,649,230
</TABLE>



See accompanying notes.



                                       5
<PAGE>   6

                         THE SIRENA APPAREL GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                      Six Months Ended
                                                        December 31,  
                                             ----------------------------------
                                                 1998                  1997 
                                             ------------          ------------
<S>                                          <C>                   <C>          
OPERATING ACTIVITIES
Net (loss)                                   $ (1,520,000)         $ (1,643,000)
Adjustments to reconcile
 net (loss) to net
 cash used in
 operating activities:
  Depreciation and amortization                   399,000               273,000
  Changes in operating
   assets and liabilities:
  Accounts receivable and
   due to/from factor                           8,885,000             6,776,000
  Inventories                                 (12,538,000)           (8,937,000)
  Prepaid and other assets                       (734,000)             (147,000)
  Accounts payable                              6,287,000             3,673,000
  Accrued liabilities                          (1,349,000)             (681,000)
                                             ------------          ------------
  Net cash used in operat-
   ing activities                                (570,000)             (686,000)

INVESTING ACTIVITIES
Purchases of property,
 plant and equipment                             (328,000)             (139,000)
                                             ------------          ------------
Net cash used in investing
 activities                                      (328,000)             (139,000)

FINANCING ACTIVITIES
Payment on capital lease
 obligations                                      (25,000)              (19,000)
Payment on note payable                          (100,000)                   --
Increase in bank
 overdraft                                      1,082,000             1,142,000
Proceeds from options
 exercised                                       167,000                    -- 
                                             ------------          ------------
Net cash provided by
 financing activities                           1,125,000             1,123,000
                                             ------------          ------------
Increase in cash                                  226,000               298,000
Cash at beginning of period                        95,000               202,000
                                             ------------          ------------
Cash at end of period                        $    321,000          $    500,000
                                             ============          ============
</TABLE>


See accompanying notes.



                                       6
<PAGE>   7

                         THE SIRENA APPAREL GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.      BASIS OF PRESENTATION

        The accompanying unaudited consolidated financial statements have been
        prepared in accordance with generally accepted accounting principles for
        interim financial information and with the instructions to Form 10-Q and
        Article 10 of Regulation S-X. Accordingly, they do not include all of
        the information and footnotes required by generally accepted accounting
        principles for complete financial statements. In the opinion of
        management, all adjustments (consisting of normal recurring accruals)
        considered necessary for a fair presentation of the results of
        operations for the periods presented have been included. Operating
        results for the six months ended December 31, 1998 are not necessarily
        indicative of the results that may be expected for the year ending June
        30, 1999. For further information, refer to the consolidated financial
        statements and footnotes thereto included in the Company's Annual Report
        on Form 10-K for the year ended June 30, 1998.


2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        COMPANY BACKGROUND AND NATURE OF BUSINESS - The Sirena Apparel Group,
        Inc. (the "Company ") was incorporated in Delaware and designs,
        manufactures and markets branded and private label swimwear, resortwear
        and intimate apparel for each principal part of the women's market.

        PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
        include the accounts of the Company and its wholly owned subsidiary,
        SIRENAMEX S.A. de C.V., a Mexican corporation. All the significant
        intercompany accounts and transactions have been eliminated.

        REVENUE RECOGNITION - The Company recognizes revenue as of the date the
        merchandise is shipped to its customers. Allowance for estimated returns
        and discounts is provided when the related revenue is recorded.

        ADVERTISING COSTS - The Company expenses nonreimbursable advertising
        costs in the period incurred.

3.      ACCOUNTS RECEIVABLE

        The Company factors substantially all of its accounts receivable with
        Heller Financial ("Heller"). Under the 



                                       7
<PAGE>   8

        factoring agreement the Company may draw short-term advances up to 80%
        of uncollected receivables, less reserves as determined by the factor.
        In addition, the Company may draw short-term advances up to 50% of
        eligible inventory, as defined in the factoring agreement, to a maximum
        of $5.0 million (in January, February and March) and ranging to a
        maximum of $1.0 million (in June and July). The Company may also borrow
        seasonal over-advances from September 1 to March 31 each year up to a
        maximum of $2.0 million (in December and January). Interest at the prime
        rate plus 0.375%, 2.0% and 2.0% is to be charged on factor advances,
        short-term advances and seasonal over-advances, respectively. Aggregate
        obligations under the agreement cannot exceed $20.0 million. The
        agreement expires on August 18, 2000 and includes certain financial
        covenants, including minimum tangible net worth, working capital, and
        debt to tangible net worth ratio requirement. The Company was in
        compliance with all the covenants at December 31, 1998.

4.      INVENTORIES

        Inventories consist of the following:

<TABLE>
<CAPTION>
                                       December 31,           June 30,
                                          1998                  1998 
                                       -----------           -----------
<S>                                    <C>                   <C>        
        Raw materials                  $ 6,298,000           $ 4,001,000
        Work-in-process                  4,997,000               989,000
        Finished goods                   8,259,000             2,026,000
                                       -----------           -----------
        Total                          $19,554,000           $ 7,016,000
                                       ===========           ===========
</TABLE>


5.      INCOME TAXES

        No benefit for income taxes for the loss incurred during the six months
        ended December 31, 1998 and 1997 has been recorded as the Company has
        historically not been a taxpayer.

6.      NOTE PAYABLE

        The Company has entered into a $500,000 term loan with Heller to finance
        the acquisition of Jezebel (balance was $317,000 at December 31, 1998).
        The term loan bears interest at the rate established from time to time
        by Bank of America (7.75% at December 31, 1998) plus 1.5%, commenced on
        January 29, 1998, and is payable in 29 equal monthly installments of of
        $16,667, with the remainder to be paid in full on June 30, 2000. Annual
        maturities of the note for the fiscal years ended June 30, 1999 and 2000
        are $199,902 and $216,678, respectively.



                                       8
<PAGE>   9

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

RESULTS OF OPERATIONS

This Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 which are subject to a variety
of risks and uncertainties. The Company's actual results, performance, or
achievements may differ significantly from the results, performance, or
achievements expressed or implied in such forward-looking statements. For a
discussion of some of the factors that could cause actual results to differ
materially from the Company's expectations, see "Item 7. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Factors That May
Affect Future Results" contained in the Company's Annual Report on Form 10-K for
the year ended June 30, 1998.

The following discussion is intended to provide a better understanding of the
significant changes in the trends relating to the Company's financial condition
and results of operations. Managements Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with the
accompanying consolidated financial statements and the notes thereto.

NET SALES. Net sales increased to $11,760,000 for the second quarter ended
December 31 1998 from $9,627,000 in the comparable period last year, an increase
of 22.2%. Net sales in the six months ended December 31, 1998 increased to
$14,056,000 from $11,160,000 in the comparable period last year, an increase of
25.9%. The increase of $2.1 million in net sales for the second quarter is
mainly due to: (i) a 100% ($1.5 million) increase in the revenues of the new
Jezebel intimate apparel division, for which there were no comparable revenues
last year,(ii) a 9.8% increase in the revenues of the Branded swimwear division
which resulted from the re-launched Rose Marie Reid brand ($0.2 million), Anne
Klein Brand ($0.2 million) and the new Hang Ten brand ($0.2 million), for which
there were no comparable revenues in the prior year; and (iii) lower levels of
returned merchandise.

The $2.9 million increase in net sales for the six months ended December 31,
1998 over the comparable period last year resulted from: (i) increased revenues
of $2.8 million of the new Jezebel intimate apparel division, for which there
were no comparable revenues last year; and (ii) lower levels of returned
merchandise.

GROSS PROFIT. Gross profit increased to $5,794,000 (49% of net sales) for the
second quarter ended December 31, 1998 from $4,098,000 (43% of net sales) for
the comparable period last year, an increase of $1.7 million or 41%. Gross
profit in the six months ended December 31, 1998 increased to $6,388,000 (45% of
net sales) from $4,105,000 (37% of net sales) for the comparable period last



                                       9
<PAGE>   10

year, an increase of $2.3 million or 56%. The increase in gross profit for the
second quarter resulted from the increase in net sales, and an increase in gross
profit as a percentage of net sales. Gross margin increased in the second
quarter due to improved performance of the Branded and Resortwear divisions and
the increased shipments in the Jezebel intimate apparel division, reflecting the
impact of favorable higher initial selling prices, lower returned merchandise
levels, and less inventory liquidation.

The increase in gross profit and gross margin for the six months ended December
31, 1998 resulted from increased net sales generally including increased net
sales in branded merchandise as compared to off-price merchandise, less
inventory liquidation sales at low margins due to the lower inventory levels of
such merchandise and the impact of lower levels of returned merchandise compared
to the same period in the prior year.

OPERATING EXPENSES. Operating expenses increased to $4,818,000 (41% of net
sales) for the second quarter ended December 31, 1998 from $3,348,000 (35% of
net sales) in the comparable period last year, an increase of 44%. Operating
expenses increased to $7,547,000 (54% of net sales) for the six months ended
December 31, 1998 from $5,555,000 (50% of net sales) in the comparable period
last year, an increase of 26%. The increase in such expenses in both the three
and six month periods ended December 31, 1998 was due to (i)higher selling and
design expenses associated with the new Hang Ten line and Jezebel intimate
apparel division, the re-launching of the Rose Marie Reid label and the costs
associated with entering into the license agreement for the new Anne Klein
intimate line, (ii) charges relating to upgrading the Company's computer system
and (iii) costs related to the move and relocation to the Company's new
headquarters.

INTEREST EXPENSE. Interest expense increased to $243,000 (2% of net sales) for
the second quarter ended December 31, 1998 from $133,000 (1% of net sales) in
the comparable period last year, an increase of 83%. Interest expense increased
to $332,000 (2% of net sales) in the six months ended December 31, 1998 from
$168,000 (2% of net sales) in the comparable period last year, an increase of
98%. Such increase resulted from higher borrowings on the seasonal line of
credit from the Company's factor in the three and six month periods.

NET INCOME. Net income increased to $704,000, $0.14 per common share (Basic and
Diluted), for the second quarter ended December 31, 1998 from $592,000, $0.13
per common share (Basic and Diluted), in the comparable period last year. Net
loss decreased to $1,520,000, ($0.35) per common share (Basic and Diluted), for
the six months ended December 31, 1998 from a loss of $1,643,000, ($0.35) per
common share (Basic and Diluted), in the comparable period last year. The
increase in net income for the three months ended December 31, 1998 and the
decrease in net loss for the six months ended December 31, 1998 was due to (i)
an increase in net 



                                       10
<PAGE>   11

sales, (ii) increased gross profit, and(iii) higher gross margin percentages.
These effects were partially offset by the increase in selling, general, and
administrative expenses and higher interest expenses described above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary need for funds has been to finance its growth in sales and
inventory, the development of new product lines and the improvement of its
operating, manufacturing and customer service capabilities. The Company has
financed its working capital requirements from its cash flow from operations,
advances drawn under its factoring and revolving credit arrangements and
proceeds from its initial public offering in 1994 and secondary public offering
in November 1995. The Company regularly evaluates its sources of working capital
to enable it to finance its growth for the foreseeable future. There can be no
assurance that such sources will be available or sufficient to meet the
Company's needs.

Net cash used in operating activities for the six months ended December 31, 1998
was $570,000 compared to $686,000 in the comparable period last year. Increased
bookings of sales for future delivery required the Company to carry higher
inventory levels, which consumed more cash.

At December 31, 1998, working capital was approximately $8,017,000 compared to
approximately $6,564,000 at December 31, 1997. The decrease in working capital
resulted primarily from increased accounts payable related to the purchases of
raw material inventory. Inventory increased to $19,554,000 at December 31, 1998
from $13,188,000 at December 31, 1997, an increase of 48.3%. This increase was a
result of a higher work-in-process level, which is consistent with the level of
bookings activity in the period and the addition of the Jezebel intimate apparel
division.

The Company has an accounts receivable, inventory, seasonal overadvance and
factoring services arrangement with Heller pursuant to which the Company sells
to Heller all of the Company's accounts receivable at their net invoice price
less a commission of 0.60% with no minimum or ancillary fees. Advances are made
without recourse for the financial inability of the customer to pay with respect
to all accounts receivable approved by Heller. The Company bears the entire risk
of non-approved receivables and accounts receivable returned by the factor to
the Company. Prior to Heller's payment, the Company may draw short-term advances
from Heller up to 80% of the uncollected receivables less reserves as determined
by Heller, which advances bear interest at an annual rate of 0.375% over the
prime rate established from time to time by Bank of America (7.75% at December
31, 1998). Additional interest of 1% is due on excess inventory levels, as
defined in 



                                       11
<PAGE>   12

the factoring agreement, over short-term advances. Heller collects such advances
and interest by offsetting against amounts due to the Company upon the
collection of factored receivables. In addition, the Company may draw short-term
advances from Heller of (i) up to 50% of eligible inventory which is current
season inventory and (ii) up to 40% prior to October 31 and up to 25% during the
period between November 1 and June 30, in each case of eligible inventory which
is not current season inventory, less (iii) such reserves as Heller elects to
establish.

The Company's short-term advances are limited to a maximum of $5,000,000 (in
January and February) and ranging downward to a maximum of $1,000,000 (in June
and July) or $1,000,000 in excess of the Company's projected short-term advance
requirements, whichever is less. The Company may also borrow seasonal
overadvances of up to $500,000 from September 1 to September 30, $1,000,000 from
October 1 to October 30, $1,500,000 from November 1 to November 30, $2,000,000
from December 1 to January 31, $1,000,000 from February 1 to March 31, and $0
from April 1 through August 30 of each year. The inventory advances and the
overadvances bear interest at an annual rate of 2% over the prime rate
established from time to time by Bank of America. Finally, the Company may
request Heller to issue guarantees for the Company's purchase of raw materials
for up to $575,000 at any one time. Under the Company's agreement with Heller,
the maximum credit available to the Company at any time is limited to $20
million. The Company's agreement with Heller has a term expiring on August 18,
2000, after which time either party may terminate upon 60 days written notice.
The Company's obligations to Heller are secured by the Company's accounts
receivable, inventory, general intangibles, other than trademarks or trade
names, and cash deposit accounts. In addition, the agreement provides for
various financial covenants to be maintained.

The balance of seasonal short-term advances from the factor ("due to factor")
was $7,000,000 at December 31, 1998, compared to $2,615,000 at December 31,
1997. At December 31, 1998, the amount payable to factored receivables upon the
collection thereof less the amount of outstanding advances to the Company
("amount due from factor ") was $3,896,000, compared to $3,566,000 at December
31, 1997.

During the second quarter of fiscal 1999 the Company developed plans for sales
of its products over the Internet. The Company's Online Store, which is expected
to be open to consumers sometime in March 1999, will initially feature swimwear,
intimates and active wear under the Company's Rose Marie Reid and Hot Water
labels at normal retail prices. The initial cost for the development of the
Online Store is expected to be approximately $50,000. The Company plans to
support the Online Store with on-line advertising, through hyperlinks to other
web pages.

The Company leases the premises of its manufacturing facilities in



                                       12
<PAGE>   13

Sonora, Mexico from American Industries, Inc. ("AII"), a corporation controlled
by Howard Hedinger, a principal stockholder and a director of the Company. In
late December 1998, the second factory building was completed by AII. The
Company will lease the new premises from AII. The Company currently is in a
process of hiring new factory workers. The Mexican factory currently operates at
50% of capacity. Production is expected to be 100% by the end of February 1999.

In December 1998, the Company finalized its plans to relocate its South El Monte
executive offices, manufacturing and distribution facilities to a new location
in Vernon, California, formerly the manufacturing site for another apparel firm.
It is anticipated that the new facilities will require minimal leasehold
improvements and capital investments to make the facility fully functional for
the Company's needs. In addition, the Company will acquire specialized apparel
production equipment, worth approximately $1.5 million, at minimal additional
cost to the Company. The Company also negotiated the lease for a seven year
term, commencing on June 1, 1999 at a base rate of $62,500 per month for the
first 21 months, increasing to $68,310 per month for the following 30 months and
increasing to $76,600 per month for the remaining 33 months.


YEAR 2000 COMPLIANCE

Following a comprehensive study of the Company's current systems and future
system requirements, the Company initiated a program in October 1997 to update
or replace existing systems with enhanced hardware and software applications.
The objectives of the new program are to achieve competitive benefits for the
Company, as well as assuring that all systems are Year 2000 compliant.
Implementation of this program is expected to require expenditures of
approximately $1,100,000 and to be completed in three phases by June 30, 1999,
of which the first two phases have already been completed. The first phase of
the program, which involved updating the Company's financial systems, was
completed by August 30, 1998 at a cost of $450,000. The second phase involved
updating and replacing the Company's systems relating to distribution and
manufacturing and was completed on October 19, 1998 at a cost of approximately
$400,000. Under the third and final phase of the program, which is expected to
be completed by March 31, 1999 at a cost of approximately $250,000, the Company
will update its manufacturing system, the software connecting the Company to its
other offices and replace and upgrade hardware.

The Company has not yet established a contingency plan in the event that the
Company's Year 2000 program does not successfully convert its software and
hardware to be Year 2000 compliant. However, the Company intends to establish a
contingency plan by May 1999. Funding requirements have been incorporated into
the 



                                       13
<PAGE>   14

Company's capital and operating expenditure plans and are not expected to
have a material adverse effect on the Company's financial condition or results
of operations. The Company initiated formal communications with its major
customers, vendors and others in November 1997 to determine the extent to which
the Company is vulnerable to those third parties' failure to remediate their own
Year 2000 compliance issue and at this time does not believe that such third
parties' failure will have a material adverse effect on the Company's financial
condition or results of operations.

SUBSEQUENT EVENTS

During February 1999, the Company borrowed from AII $2,000,000 to be payable
under two separate promissory notes payable sixty days from the date of issuance
at the rate of 12% per annum. The Company believes that such promissory notes
were issued to AII on standard market terms and conditions.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Not applicable.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

        On September 30,1998, Mr. Ellison C. Morgan, a director of the Company,
        settled an action brought by the Securities and Exchange Commission
        (the"SEC") alleging a violation of Section 10(b) of the Securities
        Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder
        that is unrelated to Mr. Morgan's position with the Company. Without
        admitting or denying the allegations of the SEC's complaint, Mr. Morgan
        agreed to disgorge profits and pay civil penalties totaling $229,808,
        and consented to a permanent injunction requiring him to comply with the
        relevant sections of the federal securities laws and rules.

Item 2. Changes in Securities. None


Item 3. Defaults Upon Senior Securities. None


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

        (a)    The Annual Meeting of Stockholders was held on November 19, 1998.



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        (b)    At the Meeting, management's nominee as set forth in the proxy
               statement for the Meeting, Howard H. Hedinger, was elected. The
               election of Mr. Hedinger was approved by a vote of 4,438,798
               shares in favor and 5,500 shares withheld. Maurice B. Newman and
               Douglas Arbetman will continue to serve as directors of the
               Company until the Annual Meeting of the Company to be held in
               fiscal 2000 and Ellison C. Morgan will continue to serve as a
               director of the Company until the Annual Meeting of the Company
               to be held in fiscal 2001.

        (c)    The proposal to ratify the appointment of Ernst & Young LLP as
               the Company's independent public accountants for the year ending
               June 30, 1999 was approved by a vote of 4,442,598 shares in
               favor, 1,700 shares against and zero shares abstained.

               There were no broker non-votes for the election of directors or
               ratification of independent public accountants at the Annual 
               Meeting.

Item 5. Other information.

ANNE KLEIN INTIMATE APPAREL AGREEMENT

The Company signed an agreement on December 10, 1998 with Anne Klein Company to
license intimate apparel articles to include bras, daywear and shapewear as well
as large-sizes for these categories under "Anne Klein" and related labels. The
intimate apparel collection is planned to launch to the trade at May 1999 market
for in-store deliveries beginning in September 1999.

NEW CORPORATE HEADQUARTERS

The Company is moving its entire facilities into a 208,000 square foot building
in Vernon, California effective March 1999. The Company's new address and phone
number will be:

                         The Sirena Apparel Group, Inc.
                         2825 South Santa Fe Avenue
                         Vernon, California 90058-1408
                         Main Phone Number: (323)581-9700
                         Main Fax Number : (323)581-9100

The new building will house the Company's entire operations, including its
corporate headquarters, manufacturing, raw materials and trimming, design
studios and distribution facilities. The move will begin in January 1999 and
will conclude with the transfer of the manufacturing facilities on June 1, 1999.
The Company's current 126,000 square foot South El Monte facility, in use since
the Company was started in 1959, will continue in operation until June 1, 1999.



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Item 6. Exhibits and Reports on Form 8-K.

     (a)  Exhibits

          10.1*     License Agreement between The Sirena Apparel Group, Inc. and
                    Anne Klein LLC effective as of December 14, 1998.

          10.2      Standard Lease Agreement by and between The Sirena Apparel
                    Group, Inc. and On Santa Fe Partners, LLC dated November 19,
                    1998.

          27.1      Financial Data Schedule.


     (b)  Reports on Form 8-K

          None.




        *       The Company has requested confidential treatment for a portion
                of this exhibit.




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                                   SIGNATURES



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


                                             THE SIRENA APPAREL GROUP, INC.




Date:  February 12, 1999                     By /S/ RICHARD A. GERHART
       -----------------                        --------------------------------
                                                RICHARD A. GERHART
                                                Chief Financial Officer
                                                  Duly Authorized Officer and
                                                  Principal Financial and
                                                  Chief Accounting Officer)



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