<PAGE>

<PAGE>


                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

[X]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended     July 31, 1997
 
                                       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               0-18183
 

                            G-III APPAREL GROUP, LTD.
             (Exact name of registrant as specified in its charter)

        Delaware                                           41-1590959
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                        Identification No.)

  345 West 37th Street, New York, New York                    10018
  (Address of Principal Executive Office)                   Zip Code)

                                 (212) 629-8830
              (Registrant's telephone number, including area code)


_____________________________________________________________________________
              (Former name, former address and former fiscal year,
                          if changed since last report)

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

Yes  XX     No

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of September 1, 1997.

Common Stock, $.01 par value per share:  6,485,781 shares.


<PAGE>



<PAGE>



<TABLE>
<CAPTION>


Part I        FINANCIAL INFORMATION                                                              Page No.

<S>           <C>                                                                              <C>

    Item 1.   Financial Statements *

                Consolidated Balance Sheets -
                        January 31, 1997 and July 31, 1997 ...........................................3

                Consolidated Statements of Operations -
                        For the Three Months Ended
                        July 31, 1996 and 1997........................................................4

                Consolidated Statements of Operations -
                        For the Six Months Ended
                        July 31, 1996 and 1997........................................................5

                Consolidated Statements of Cash Flows -
                        For the Six Months Ended
                        July 31, 1996 and 1997........................................................6

                Notes to Financial Statements.......................................................7-8


    Item 2.     Management's Discussion and Analysis of
                Financial Condition and Results of
                Operations.........................................................................9-10


Part II       OTHER INFORMATION


    Item 4.     Submission of Matters to a Vote of Stockholders......................................11


    Item 6.     Exhibits and Reports on Form 8-K

                (a) 1997 Stock Option Plan

*   The Balance Sheet at January 31, 1997 has been taken from the audited
    financial statements at that date. All other financial statements are
    unaudited.

                                      - 2 -


<PAGE>



<PAGE>



                   G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

               (in thousands, except share and per share amounts)


</TABLE>


<TABLE>
<CAPTION>

                                                                  JANUARY 31,                    JULY 31,
ASSETS                                                               1997                          1997
- ------                                                               ----                          ----
                                                                                                (unaudited)
<S>                                                           <C>                         <C>             
Current Assets:
     Cash and Cash Equivalents                                $        13,067             $            926
     Accounts Receivable - Net                                          7,176                       23,163
     Inventories - Net                                                 13,986                       29,620
     Prepaid and Refundable Income Taxes                                                               607
     Prepaid Expenses and Other Current Assets                            969                        1,266
                                                                     --------                      -------
           Total Current Assets                                        35,198                       55,582

Property, Plant and Equipment - Net                                     5,030                        3,118
Deferred Income Taxes                                                   3,351                        3,351
Other Assets                                                              976                        1,043
                                                                     --------                      -------
                                                              $        44,555             $         63,094
                                                                     ========                      =======

LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------

Current Liabilities:

     Notes Payable                                            $         3,459             $         22,014

     Current Maturities of Obligations
        Under Capital Leases                                              376                          247
     Federal and Foreign Income Taxes Payable                             447                          103
     Accounts Payable                                                   2,169                        4,711
     Accrued Expenses                                                   2,101                        2,551
     Accrued Nonrecurring Charges                                       2,149                          514
                                                                      -------                     --------
           Total Current Liabilities                                   10,701                       30,140

Obligations Under Capital Leases                                          554                          435
Nonrecurring Charges - Long Term                                          475                          475


Stockholders' Equity:

     Preferred Stock, 1,000,000 shares authorized;
       no shares issued and outstanding in all periods

     Common Stock, $.01 par value: authorized,
       20,000,000 shares; issued and outstanding,
       6,477,156 shares and 6,485,781 share on
       January 31, 1997 and July 31, 1997, respectively                    65                           65
     Additional Paid-in Capital                                        23,638                       23,661
     Retained Earnings                                                  9,122                        8,318
                                                                      -------                      -------
                                                                       32,825                       32,044
                                                                      -------                      -------
                                                              $        44,555             $         63,094
                                                                      =======                      =======
</TABLE>


See Accompanying Notes to Financial Statements.

                                       -3-



<PAGE>


<PAGE>



                   G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

               (in thousands, except share and per share amounts)


<TABLE>
<CAPTION>

                                                                       THREE MONTHS ENDED JULY 31,
                                                      ----------------------------------------------------------
                                                                1996                                   1997
                                                                ----                                   ----
                                                                                (Unaudited)

<S>                                                  <C>                                     <C>              
Net Sales                                            $           26,209                      $          33,109

Cost of Goods Sold                                               17,005                                 22,743
                                                             ----------                              ---------

       Gross Profit                                               9,204                                 10,366

Selling, General and

   Administrative Expenses                                        5,401                                  5,897
                                                             ----------                              ---------

       Operating Profit                                           3,803                                  4,469

Interest and Financing Charges, Net                                 493                                    506
                                                             ----------                              ---------

       Income Before Minority Interest and Taxes                  3,310                                  3,963

Minority Interest                                                                                          113
                                                             ----------                              ---------

       Income Before Taxes                                        3,310                                  4,076

Income Taxes                                                      1,316                                  1,632
                                                             ----------                              ---------

       Net Income                                    $            1,994                      $           2,444
                                                             ==========                              =========


INCOME PER COMMON SHARE:

Primary and Fully Diluted;

   Net Income per common share                       $              .30                       $            .35
                                                             ==========                              =========

   Weighted average number of

      shares outstanding                                      6,739,098                              7,075,394
                                                             ==========                              =========
</TABLE>



See Accompanying Notes to Financial Statements.

                                       -4-



<PAGE>


<PAGE>



                   G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

               (in thousands, except share and per share amounts)


<TABLE>
<CAPTION>

                                                                           SIX MONTHS ENDED JULY 31,
                                                        -------------------------------------------------------
                                                                1996                                   1997
                                                                ----                                   ----
                                                                                 (Unaudited)

<S>                                                  <C>                                     <C>             
Net Sales                                            $            31,272                      $         39,640

Cost of Goods Sold                                                21,916                                28,812
                                                                --------                               -------

       Gross Profit                                                9,356                                10,828

Selling, General and

   Administrative Expenses                                        11,061                                11,711
                                                                --------                               -------

       Operating Loss                                             (1,705)                                 (883)

Interest and Financing Charges, Net                                  705                                   566
                                                               ---------                             ---------

       Income Before Minority Interest and Taxes                  (2,410)                               (1,449)

Minority Interest                                                                                          113
                                                               ----------                            ---------
       Loss Before Taxes                                          (2,410)                               (1,336)

Income Tax Benefit                                                  (964)                                 (532)
                                                               ---------                             ---------

       Net Loss                                      $            (1,446)                    $            (804)
                                                               =========                             =========



LOSS PER COMMON SHARE:

Primary and Fully Diluted;

   Net Loss per common share                         $              (.22)                    $            (.12)
                                                               =========                             =========

   Weighted average number of

      shares outstanding                                       6,466,471                             6,479,121
                                                               =========                             =========
</TABLE>



See Accompanying Notes to Financial Statements.

                                       -5-



<PAGE>


<PAGE>



                   G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)

<TABLE>
<CAPTION>

                                                                          SIX MONTHS ENDED JULY 31,
                                                                 ---------------------------------------------
                                                                         1996                       1997

                                                                                   (Unaudited)
<S>                                                         <C>                         <C>
Cash Flows from Operating Activities:

    Net Loss                                                 $          (1,446)          $             (804)
    Adjustments to Reconcile Net Loss:
       Depreciation and Amortization                                       752                          618

Changes in Operating Assets and Liabilities:

    Accounts Receivable                                                (17,870)                     (15,987)
    Inventory                                                          (19,275)                     (15,634)
    Federal and Foreign Income Taxes                                      (765)                        (951)
    Prepaid Expenses                                                      (726)                        (297)
    Other Assets                                                           (68)                         (67)
    Accounts Payable and Accrued Expenses                               12,169                        2,992
    Accrued Nonrecurring Charge                                           (112)                         (33)
                                                                    ----------                   ----------
                                                                       (26,647)                     (29,977)
                                                                    ----------                   ----------

Net Cash Used in Operating Activities                                  (27,341)                     (30,163)
                                                                    ----------                   ----------

Cash Flows for Investing Activities:

    Capital Expenditures                                                  (245)                        (311)
    Capital Dispositions                                                    87                            3
                                                                    ----------                   ----------

Net Cash Used in Investing Activities:                                    (158)                        (308)
                                                                    ----------                   ----------

Cash Flows from Financing Activities:

    Increase in Notes Payable, net                                      20,810                       18,555
    Payment of Capital Lease Obligations                                  (300)                        (248)
    Proceeds from Exercise of Stock Options                                  3                           23
                                                                    ----------                   ----------

Net Cash Provided by Financing Activities                               20,513                       18,330
                                                                    ----------                   ----------

Net Decrease in Cash                                                    (6,986)                     (12,141)

Cash at Beginning of Period                                              7,617                       13,067
                                                                    ----------                   ----------

Cash at End of Period                                        $             631           $              926
                                                                    ==========                   ==========

Supplemental Disclosures of Cash Flow Information
    Cash Paid During the Period for:

         Interest                                            $             534           $              415
         Income Taxes                                        $              68           $              442
</TABLE>



See Accompanying Notes to Financial Statements.

                                      -6 -



<PAGE>


<PAGE>



                   G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - General Discussion

The results for the three and six month periods ended July 31, 1997 are not
necessarily indicative of the results expected for the entire fiscal year. The
accompanying financial statements included herein are unaudited. In the opinion
of management, all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented have been reflected.

During the quarter ended July 31, 1997, a newly formed subsidiary, BET Design
Studio, LLC commenced operations. The Company owns 50.1% of the subsidiary, and
accordingly consolidates its results from its startup date in May 1997.

The accompanying financial statements should be read in conjunction with the
financial statements and notes included in the Company's Form 10-K filed with
the Securities and Exchange Commission for the year ended January 31, 1997.

Note 2 - Inventories

<TABLE>
<CAPTION>

                                                                      January 31,                 July 31,
    Inventories consist of:                                              1997                      1997
                                                                         ----                      ----
                                                                                  (in thousands)
<S>                                                              <C>                        <C>            
         Finished products.................                      $        10,382            $        23,202
         Work-in-process...................                                   27                        636
         Raw materials.....................                                3,577                      5,782
                                                                         -------                    -------
                                                                 $        13,986            $        29,620
                                                                         =======                    =======
</TABLE>



Note 3 - Net Income (Loss) Per Common Share

Net Income (Loss) per common share is based on the weighted average number of
common shares outstanding during each of the periods, adjusted for the dilutive
effect of common stock equivalents, when applicable.

Note 4 - Notes Payable

The Company has a two year loan agreement with three banks which expires on May
31, 1999. The agreement provides for a line of credit in the amount of
$52,000,000 from May 31 to October 30, and $40,000,000 from October 31 to May 30
during each year of the agreement. The amounts available include direct
borrowings of $40,000,000 from May 31 to November 14, and $30,000,000 from
November 15 to May 30, during each year of the agreement. The balance of the
credit line may be used for letters of credit. All amounts available for
borrowing are subject to borrowing base formulas.

                                       -7-


<PAGE>



<PAGE>




Note 5 - Nonrecurring Charges

As of the year ended January 31, 1997, the Company had a remaining reserve of
approximately $2.6 million related to closure of a domestic factory and an Asian
factory. The domestic factory was closed during the fiscal year ended January
31, 1995. During the quarter ended July 31, 1997, the Company applied
approximately $1.6 million of the reserve as a reduction of Property, Plant and
Equipment, since the Company cannot assume that there will be any recoveries in
connection with a disposition of the Asian factory. The Asian factory had net
sales of $1.2 million and $1.3 million, and a net loss of $559,000 and
$413,000 for the six-month periods ended July 31, 1996 and 1997, respectively.
The status of the provision at the end of the period was:


<TABLE>
<CAPTION>
                                                   Balance                    1997                  Balance
                                               January 31, 1997              Activity            July 31, 1997
                                               ----------------              --------            -------------
                                                                         (in thousands)
<S>                                            <C>                       <C>                    <C>
Closure of domestic
    and foreign facilities                       $      2,624             $    (1,635)             $     989
                                                        =====                  ======                    ===
</TABLE>





Note 6 -  Future Effects of Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," which is effective for
financial statements both interim and annual periods ending after December 15,
1997. Early adoption of the new standard is not permitted. The new standard
eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together with disclosure of
how the per share amounts were computed. Had this new standard been effective
during the quarter ended July 31, 1997, basic income per share would have been
$.38 for the three months ended July 31, 1997 and basic loss per share would
have been $.12 for the six months ended July 31, 1997. Diluted income per share
would have been $.35 for the three months ended July 31, 1997 and diluted loss
per share would have been $.12 for the six months ended July 31, 1997.

                                       -8-



<PAGE>



<PAGE>



I
TEM 2


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

Statements in this Quarterly Report on Form 10-Q concerning the Company's
business outlook or future economic performance; anticipated revenues, expenses
or other financial items; product introductions and plans and objectives related
thereto; and statements concerning assumptions made or expectations as to any
future events, conditions, performance or other matter, are "forward-looking
statements" as that term is defined under the Federal securities laws.
Forward-looking statements are subject to risks, uncertainties and other factors
which could cause actual results to differ materially from those stated in such
statements. Such risks, uncertainties and factors include, but are not limited
to, reliance on foreign manufacturers, the nature of the apparel industry,
including changing consumer demand and tastes, seasonality, customer acceptance
of new products, the impact of competitive products and pricing, dependence on
existing management, general economic conditions, as well as other risks
detailed in the Company's filings with the Securities and Exchange Commission,
including this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS

Net sales for the three months ended July 31, 1997 were $33.1 million compared
to $26.2 million for the same period last year. For the six months ended July
31, 1997, net sales were $39.6 million compared to $31.3 million for the same
period in the prior year. The revenue increase during the three and six month
periods is attributable to the men's and moderately-priced women's lines, as
well as continued growth in the Kenneth Cole and sports licensing product lines.

Gross profit was $10.4 million for the three months ended July 31, 1997,
compared to $9.2 million in the same period last year. Gross profit as a
percentage of net sales was 31.3% for the three months ended July 31, 1997,
compared to 35.1% for the same period last year. For the six month period ended
July 31, 1997, gross profit was $10.8 million, or 27.3% of net sales, compared
to $9.4 million, or 29.9% of net sales for the same period last year. The
decrease in the gross profit percentage resulted primarily from a higher volume
of activity in certain letter of credit transactions where the Company acts as
agent for the retailer and charges a commission for services rendered.

Selling, general and administrative expenses of $5.9 million for the three
months ended July 31, 1997 were approximately $500,000 higher than in the same
period last year. As a percentage of net sales, selling, general and
administrative expenses were 17.8% in this period compared to 20.6% last year.
For the six month period ended July 31, 1997, selling, general and
administrative expenses were $11.7 million, or 29.5% of net sales, compared to
$11.1 million, or 35.4% of net sales for the same period last year. The decrease
as a percentage of net sales was the result of spreading such expenses over a
higher sales base. The increase in selling, general and administrative expenses
for the three and six month periods ended July 31, 1997 was primarily
attributable to salary increases, increased advertising costs resulting from the
requirements of certain license agreements, and start-up expenses in BET Design
Studio, LLC.

                                      - 9 -


<PAGE>



<PAGE>




Interest expense of $506,000 was $13,000 higher in the quarter ended July 31,
1997, compared to $493,000 in the same period last year. For the six months
ended July 31, 1997, interest expense was $566,000, a decrease of $139,000 from
the prior year. Lower interest rates under the Company's amended bank facility,
partially offset by an increase in the average outstanding balance during the
quarter ended July 31, 1997, were the primary cause of lower interest expense.

Income taxes of $1.6 million reflect an effective tax rate of 40.0% for the
three months ended July 31, 1997, compared to income taxes of $1.3 million
(effective tax rate of 40.0%) in the comparable period in the prior year. For
the six months ended July 31, 1997, the income tax benefit of $532,000 reflects
an effective tax rate of 40.0%, compared to an income tax benefit of $964,000 or
40.0% in the same period last year.

As a result of the foregoing, for the three month period ended July 31, 1997 the
Company had net income of $2.4 million, or $.35 per share, compared to a net
income of $2.0 million, or $.30 per share, for the comparable period in the
prior year. For the six month period ended July 31, 1997, the Company had a net
loss of $804,000, or $.12 per share, compared to a net loss of $1.4 million, or
$.22 per share, for the same period in the prior year.

LIQUIDITY AND CAPITAL RESOURCES

During the second quarter, the Company's loan agreement was extended for two
years, with the extended term expiring on May 31, 1999. The agreement provides
for a line of credit in the amount of $52,000,000 from May 31 to October 30, and
$40,000,000 from October 31 to May 30 during each year of the agreement. The
amounts available include direct borrowings of $40,000,000 from May 31 to
November 14, and $30,000,000 from November 15 to May 30, during each year of the
agreement. The balance of the credit line may be used for letters of credit. All
amounts available for borrowing are subject to borrowing base formulas and
overadvances specified in the agreement.

Direct borrowings bear interest at the agent's prime rate (8.5% as of September
1, 1997) or LIBOR plus 250 basis points at the election of the Company. All
borrowings are collateralized by the assets of the Company. The loan agreement
requires the Company, among other covenants, to maintain certain earnings and
tangible net worth levels, and prohibits the payment of cash dividends. As of
July 31, 1997, there were $18.8 million in direct borrowings and approximately
$19.5 million of contingent liability under open letters of credit. The amount
borrowed under the line of credit varies based upon the Company's seasonal
requirements.

The Company's wholly-owned Indonesian subsidiary has a line of credit with a
bank for approximately $3.5 million which is supported by a $2.0 million
stand-by letter of credit issued under the Company's loan agreement. As of July
31, 1997, the borrowing by the Indonesian subsidiary under its line of credit
approximated $3.2 million.

                                      -10-



<PAGE>



<PAGE>




I
tem 4.    Submission of Matters to a Vote of Stockholders

           (a)  The Company's Annual Meeting of Stockholders was held on June
                19, 1997 (the "Annual Meeting").

           (b)  The following matters were voted upon and approved by the
                Company's stockholders at the Annual Meeting:

               (i)  The election of nine directors to serve for the ensuing
                    year. The following nominees were elected as directors of
                    the Company (with the Company's stockholders having voted as
                    set forth below):

<TABLE>
<CAPTION>

            NOMINEE                      VOTES FOR              WITHHELD AUTHORITY TO VOTE
<S>                                      <C>                               <C>  
Morris Goldfarb                          6,262,685                         4,313
Aron Goldfarb                            6,263,685                         3,313
Lyle Berman                              6,263,685                         3,313
Thomas J. Brosig                         5,900,805                       366,193
Alan Feller                              6,263,685                         3,313
Carl Katz                                6,263,685                         3,313
Willem van Bokhorst                      5,900,805                       366,193
Sigmund Weiss                            5,900,805                       366,193
George J. Winchell                       5,900,805                       366,193
</TABLE>


               (ii) The adoption of the 1997 Stock Option Plan. The Company's
                    stockholders voted as follows:

<TABLE>

<S>                                                             <C>      
                            FOR:                                4,356,248
                            AGAINST:                              570,062
                            ABSTENTIONS:                           12,335
                            BROKER NON-VOTES:                   1,328,353
</TABLE>


               (iii)The ratification of the appointment of Grant Thornton LLP as
                    the Company's independent certified public accountants for
                    the fiscal year ending January 31, 1998. The Company's
                    stockholders voted as follows:


<TABLE>
<S>                                                             <C>      
                            FOR:                                6,259,744
                            AGAINST:                                1,044
                            ABSTENTIONS:                            6,210
                            BROKER NON-VOTES:                           0
</TABLE>




Item 6.    Exhibits and Reports on Form 8-K

           (a)  1997 Stock Option Plan

                                      -11-




<PAGE>

<PAGE>





                                   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.

                                    G-III APPAREL GROUP, LTD.

                                    (Registrant)

Date:    September 12, 1997         By: /s/ MORRIS GOLDFARB
                                        ------------------------------------
                                        Morris Goldfarb
                                        President and Chief
                                        Executive Officer


Date:    September 12, 1997         By: /s/ ALAN FELLER
                                        ------------------------------------
                                        Alan Feller
                                        Chief Financial Officer,
                                        Treasurer, and Secretary


<PAGE>






<PAGE>
                           G-III APPAREL GROUP, LTD.
                             1997 STOCK OPTION PLAN
 
     1.  Purpose. The  purpose of  the G-III  Apparel Group,  Ltd. 1997 Employee
Stock Option  Plan (the  'Plan') is  to enable  G-III Apparel  Group, Ltd.  (the
'Company') and its stockholders to secure the benefits of common stock ownership
by  personnel of the Company and its subsidiaries. The Board of Directors of the
Company (the 'Board') believes that the granting of options under the Plan  will
foster  the Company's ability to attract,  retain and motivate those individuals
who will be largely responsible for the profitability and growth of the Company.
 
     2. Stock Subject to the Plan. Subject  to the provisions of Section 6,  the
Company  may issue and sell a total of  500,000 shares of its common stock, $.01
par value (the 'Common Stock'), pursuant to the Plan. Such shares may be  either
authorized  and unissued or held by the  Company in its treasury. Subject to the
provisions of Section  6, the  maximum number of  shares with  respect to  which
options  may be granted to any employee of the Company during any fiscal year is
100,000. New options may  be granted under  the Plan with  respect to shares  of
Common Stock which are covered by the unexercised portion of an option which has
terminated or expired by its terms,
 by cancellation or otherwise.
 
     3.  Administration.  The  Plan will  be  administered by  a  committee (the
'Committee') consisting of at  least two directors appointed  by and serving  at
the pleasure of the Board. Subject to the provisions of the Plan, the Committee,
acting  in its sole and absolute discretion,  will have full power and authority
to grant options under the Plan, to interpret the provisions of the Plan, to fix
and interpret  the provisions  of  option agreements  made  under the  Plan,  to
supervise  the administration of the Plan, and  to take such other action as may
be necessary or desirable in  order to carry out the  provisions of the Plan.  A
majority of the members of the Committee will constitute a quorum. The Committee
may  act by the vote of a majority of  its members present at a meeting at which
there is a quorum  or by unanimous  written consent. The  Committee will keep  a
record  of its proceedings and acts and will keep or cause to be kept such books
and records as may be necessary in connection with the proper administration  of
the  Plan. The  Company shall  indemnify and  hold harmless  each member  of the
Committee and any employee or director of the Company or of a subsidiary to whom
any duty or power relating to  the administration or interpretation of the  Plan
is  delegated from and against any loss, cost, liability (including any sum paid
in settlement of a  claim with the  approval of the  Board), damage and  expense
(including legal and other expenses incident thereto) arising out of or incurred
in  connection with the  Plan, unless and  except to the  extent attributable to
such person's fraud or wilful misconduct.
 
     4. Eligibility. Options may be granted under the Plan to present or  future
employees  of the Company or  a subsidiary of the  Company and to consultants to
and directors of the  Company or a subsidiary  who are not employees  (provided,
however, that, notwithstanding anything to the contrary contained herein, unless
the Board determines otherwise, the Board shall have sole authority with respect
to  the granting  and interpretation  of options granted  under the  Plan to any
director of the Company or a subsidiary who is not an employee and who serves as
a member of the Committee). Subject to the provisions of the Plan, the Committee
will from time to time select the persons to whom
 
                                      A-1
 

<PAGE>

<PAGE>
options will be granted, and will fix the number of shares covered by each  such
option  and  establish  the  terms and  conditions  thereof,  including, without
limitation, exercise price and restrictions  on exercisability of the option  or
on  the shares of Common  Stock issued upon exercise  thereof and whether or not
the option is to be treated as  an incentive stock option within the meaning  of
Section 422 of the Internal Revenue Code of 1986 (an 'Incentive Stock Option').
 
     5. Terms and Conditions of Options. Each option granted under the Plan will
be  subject to  the terms and  conditions set  forth in this  paragraph and such
additional terms and conditions not inconsistent with the Plan as the  Committee
deems appropriate.
 
          (a)  Option  Exercise Price.  In the  case  of an  option that  is not
     treated as an Incentive Stock Option, the exercise price per share may  not
     be  less than  the par value  of a  share of Common  Stock on  the date the
     option is  granted; and,  in the  case of  an Incentive  Stock Option,  the
     exercise price per share may not be less than 100% of the fair market value
     of  a share of Common Stock on the  date the option is granted (110% in the
     case of  an optionee  who, at  the time  the option  is granted,  is a  ten
     percent  shareholder described in Section 422(b)(6) of the Internal Revenue
     Code of 1986). For  purposes hereof, the  fair market value  of a share  of
     Common  Stock on any date will be equal to the closing sale price per share
     as published  by a  national securities  exchange on  which shares  of  the
     Common  Stock are  traded on such  date or, if  there is no  sale of Common
     Stock on  such date,  the  average of  the bid  and  asked prices  on  such
     exchange at the closing of trading on such date or, if shares of the Common
     Stock  are not listed on  a national securities exchange  on such date, the
     closing price or, if none, the average  of the bid and asked prices in  the
     over  the counter market  at the close of  trading on such  date, or if the
     Common Stock is not  traded on a national  securities exchange or the  over
     the counter market, the fair market value of a share of the Common Stock on
     such date as determined in good faith by the Committee.
 
          (b)  Option Period. The period during which an option may be exercised
     will be fixed by the Committee and will not exceed ten years from the  date
     the  option is granted (five years in the case of an Incentive Stock Option
     granted to a 'ten percent shareholder').
 
          (c) Exercise of Options. No option will become exercisable unless  the
     person  to whom the option was granted  remains in the continuous employ or
     service of the Company or a subsidiary for at least six months (or for such
     other period as the  Committee may designate) from  the date the option  is
     granted.  The Committee may establish any  vesting or other restrictions on
     the exercisability of an option, subject to earlier termination as provided
     herein. All  or  part  of the  exercisable  portion  of an  option  may  be
     exercised  at any time during the option period. An option may be exercised
     by transmitting to the Company (1)  a written notice specifying the  number
     of  shares to be purchased,  and (2) payment of  the exercise price (or, if
     applicable, delivery of a secured  obligation therefor), together with  the
     amount, if any, deemed necessary by the Company to enable it to satisfy its
     income  tax withholding obligations  with respect to  such exercise (unless
     other arrangements acceptable to the Company  are made with respect to  the
     satisfaction of such withholding obligations).
 
          (d)  Payment of Exercise Price. The purchase price of shares of Common
     Stock acquired pursuant to the exercise of an option granted under the Plan
     may be paid in cash and/or such  other form of payment as may be  permitted
     under the option agreement, including, without limitation, previously-owned
     shares  of Common Stock. The  Committee may permit the  payment of all or a
     portion of the purchase price in installments (together with interest) over
     a period of not more than five years.
 
                                      A-2
 

<PAGE>

<PAGE>
          (e) Rights as a Stockholder. No shares of Common Stock will be  issued
     in  respect of the exercise of an  option granted under the Plan until full
     payment therefor has been made (and/or provided for where all or a  portion
     of the purchase price is being paid in installments).
 
          (f)  Option Transfers.  The Committee,  acting in  its discretion, may
     authorize an optionee to make an inter vivos gift of all or a portion of an
     option (other  than an  Incentive Stock  Option) granted  to such  optionee
     under  the Plan  to (1)  the optionee's  spouse, children  or grandchildren
     ('Immediate Family Members'), (2) a trust for the exclusive benefit of  one
     or  more Immediate Family Members, (3)  a partnership in which the optionee
     and one or more Immediate Family Members are the only partners or (4)  such
     other  persons  as the  Committee  may permit.  The  Company shall  have no
     obligation to provide  notice to  any transferee  of the  occurrence of  an
     event  (such as the termination of  an optionee's service with the Company)
     that could  affect the  transferee's  rights under  the Plan.  Options  are
     transferable  upon an option holder's death  to a beneficiary designated by
     the  option  holder  in  accordance  with  procedures  established  by  the
     Committee or, if no designated beneficiary shall survive the option holder,
     pursuant   to  the  option  holder's  will  or  the  laws  of  descent  and
     distribution. An option that  is transferred to  a permitted transferee  in
     accordance  with the provisions hereof will remain subject to the terms and
     conditions  of  the  Plan  and  of  the  option  agreement  governing   the
     transferred  option. Except as otherwise  permitted hereby, options are not
     transferable and are exercisable during life only by the optionee.
 
          (g) Termination of Employment or Other Service. If an optionee  ceases
     to be employed by or to perform services for the Company and any subsidiary
     for  any reason other  than death or disability  (defined below), then each
     outstanding option granted to him or  her under the Plan will terminate  on
     the  date three months after the date  of such termination of employment or
     service or  on  such  other date  as  may  be specified  by  the  Committee
     provided, however, if the optionee's employment or service is terminated by
     the Company for cause (defined below), then each outstanding option granted
     to  him  or  her  will  terminate upon  the  date  of  such  termination of
     employment or service. If an optionee's employment or service is terminated
     by reason  of the  optionee's death  or disability  (or if  the  optionee's
     employment  or service is terminated by reason of his or her disability and
     the optionee dies within one year  after such termination of employment  or
     service),  then each outstanding  option granted to  the optionee under the
     Plan will terminate on the date one year after the date of such termination
     of employment or service (or one year  after the later death of a  disabled
     optionee)  or on such other date as  may be specified by the Committee. For
     purposes hereof, the term 'disability'  means the inability of an  optionee
     to  perform the customary duties of his  or her employment or other service
     for the Company  and its  subsidiaries by reason  of a  physical or  mental
     incapacity  which  is  expected to  result  in  death or  be  of indefinite
     duration; and, the term 'cause' means an optionee's (1) failure or  refusal
     to  perform his  or her  duties for  the Company  or its  subsidiaries, (2)
     commission of  a  crime  involving  moral  turpitude,  (3)  conviction  for
     commission  of  a felony,  (4) attempt  to  improperly secure  any personal
     profit in connection with the business  of the Company or its  subsidiaries
     or  (5) dishonesty or  willful engagement in conduct  which is injurious to
     the business  or reputation  of the  Company or  its subsidiaries,  all  as
     determined by the Committee in its sole discretion.
 
          (h)  Other Provisions. The Committee  may impose such other conditions
     with respect to the exercise of options, including, without limitation, any
     conditions relating to the application of federal or state securities laws,
     as it may deem necessary or advisable.
 
                                      A-3
 

<PAGE>

<PAGE>
     6. Capital Changes, Reorganization, Sale.
 
          (a) Adjustments Upon Changes  in Capitalization. The aggregate  number
     and  class of shares for  which options may be  granted under the Plan, the
     maximum number of  shares that may  be granted to  any individual during  a
     fiscal year, and the number and class of shares covered by each outstanding
     option  and the exercise price  per share shall all  be adjusted to reflect
     any increase or  decrease in the  number of issued  shares of Common  Stock
     resulting  from a split-up  or consolidation of shares  or any like capital
     adjustment, or the payment of a stock dividend.
 
          (b) Cash, Stock or Other Property for Stock. In the case of a  merger,
     sale of assets or similar transaction which results in a replacement of the
     Company's  shares of  Common Stock with  stock of  another corporation, the
     Company will  make a  reasonable  effort, but  shall  not be  required,  to
     replace  any outstanding  options with  comparable options  to purchase the
     stock  of  such   other  corporation,   or  will   provide  for   immediate
     exercisability  of  all outstanding  options,  with all  options  not being
     exercised within the time period specified by the Board being terminated.
 
          (c) Fractional Shares. In the event of any adjustment in the number of
     shares covered  by  any  option  pursuant to  the  provisions  hereof,  any
     fractional  shares resulting from  such adjustment will  be disregarded and
     each such option will cover only  the number of full shares resulting  from
     the adjustment.
 
          (d)  Determination of  Board to be  Final. All  adjustments under this
     paragraph 6 shall be made  by the Board, and  its determination as to  what
     adjustments  shall be made, and the extent thereof, shall be final, binding
     and conclusive.
 
     7. Amendment  and Termination  of  the Plan.  Except  as may  otherwise  be
required  by law, the Board,  acting in its sole  discretion and without further
action on the part of the stockholders of the Company, may amend the Plan at any
time and from time to time and may terminate the Plan at any time. No  amendment
or  termination may affect adversely any  outstanding option without the written
consent of the option holder.
 
     8. No Rights Conferred. Nothing contained herein will be deemed to give any
individual a right to receive an option under the Plan or to be retained in  the
employ or service of the Company or any subsidiary.
 
     9.  Governing Law. The Plan and each  option agreement shall be governed by
the laws of the State of Delaware.
 
     10. Decisions and Determinations to be Final. Any decision or determination
made by the Board pursuant  to the provisions hereof  and, except to the  extent
rights  or powers under this Plan are reserved specifically to the discretion of
the Board,  all decisions  and determinations  of the  Committee are  final  and
binding.
 
     11.  Term of the Plan. The Plan shall  be effective on the date on which it
is adopted by  the Board, subject  to the  approval of the  stockholders of  the
Company.  The  Plan will  terminate  on the  date ten  years  after the  date of
adoption  by  the  Board,  unless  sooner  terminated  by  the  Board.   Options
outstanding  at the time  of the termination  of the Plan  shall not be affected
solely by reason of  the termination and shall  continue in force in  accordance
with their terms.
 
                                      A-4



<PAGE>




<TABLE> <S> <C>

<ARTICLE>                                       5
<MULTIPLIER>                                1,000
       
<S>                                                     <C>
<PERIOD-TYPE>                                                             6-MOS
<FISCAL-YEAR-END>                                                   JAN-31-1998
<PERIOD-END>                                                        JUL-31-1997
<CASH>                                                                      926
<SECURITIES>                                                                  0
<RECEIVABLES>                                                            26,023
<ALLOWANCES>                                                             (2,860)
<INVENTORY>                                                              29,620
<CURRENT-ASSETS>                                                         55,582
<PP&E>                                                                   10,648
<DEPRECIATION>                                                           (7,530)
<TOTAL-ASSETS>                                                           63,094
<CURRENT-LIABILITIES>                                                    30,140
<BONDS>                                                                       0
<COMMON>                                                                     65
<PREFERRED-MANDATORY>                                                         0
<PREFERRED>                                                                   0
<OTHER-SE>                                                               31,979
<TOTAL-LIABILITY-AND-EQUITY>                                             63,094
<SALES>                                                                  39,640
<TOTAL-REVENUES>                                                         39,640
<CGS>                                                                    28,812
<TOTAL-COSTS>                                                            28,812
<OTHER-EXPENSES>                                                              0
<LOSS-PROVISION>                                                              0
<INTEREST-EXPENSE>                                                          566
<INCOME-PRETAX>                                                          (1,449)
<INCOME-TAX>                                                               (532)
<INCOME-CONTINUING>                                                        (804)
<DISCONTINUED>                                                                0
<EXTRAORDINARY>                                                               0
<CHANGES>                                                                     0
<NET-INCOME>                                                               (804)
<EPS-PRIMARY>                                                             (0.12)
<EPS-DILUTED>                                                             (0.12)
       

</TABLE>