Two things can happen to molecules as they gain kinetic energy (temperature):
1. They can start to move more freely with their newfound energy, and their average kinetic energy (temperature) can rise (to a certain degree/picture a solid lattice with all molecules shaking).
2. The molecules can can use the energy input to overcome the attractive forces to each other (change state of matter).
Therefore, if we see the temperature increasing, we know that the phase of the atoms cannot be changing, and if the atoms are gaining energy, but the temperature is not increasing, then they must be changing state.
We know that the substance is a solid in stage 1 (it is not changing state because we see the temperature rising). During stage 2, the temperature increase ceases, but there is continued heat input, so the substance is melting/(freezing in the reverse process) during stage 2. At stage three, the substance has melted (has become liquid), and continues to increase in temperature. At stage 4, the liquid stops rising in temperature, and begins to evaporate/(or condense in the reverse direction). Finally at stage 5, the now gaseous substance is rising in temperature in its final phase.
Therefore: During stage 3, the substance is in the liquid state. (B)
