FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1999
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: 0-29126
JENNA LANE, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3351399
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1407 Broadway, Suite 2400
New York, New York 10018
(Address of principal executive offices)
(Zip Code)
(212) 704-0002
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
As of December 31, 1999, there were 3,970,421 shares of registrant's Common
Stock, par value $.01 per share, outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Page of
Form 10-Q
Item 1. Financial Statements.
Consolidated Balance Sheet as of December 31, 1999 (Unaudited)
and March 31, 1999 (as restated) 3
Consolidated Statements of Operations for the three months ended
December 31, 1999 and 1998 (Unaudited) 4
Consolidated Statements of Cash Flows for the three months ended
December 31, 1999 and 1998 (Unaudited) 5
Notes to Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 10-12
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REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
<PAGE>
Item 1. FINANCIAL STATEMENTS
The Company has completed a previously announced review of its financial results
for the fiscal year ended March 31, 1999, the three months ended June 30, 1999
and the six months ended September 30, 1999, and the Company intends to restate
its financial statements for such period. The Company was unable to timely
complete the information necessary to file the above financial statements and
notes thereto required by Forms 10-Q/A and 10-K/A. Such inability could not have
been eliminated by the registrant without unreasonable effort or expense. The
Company intends to file such Forms 10-Q/A and 10-K/A within the next few weeks.
March 31, 1999 information contained herein reflects restated financial
information.
JENNA LANE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1999 1999
-------------------- --------------------
(Unaudited) (As restated -
see Note 2)
<S> <C> <C>
Current Assets:
Cash $ 46,212 $ 41,465
Receivables 322,383 365,616
Advances to suppliers and others 571,764 664,704
Inventories 9,135,124 10,591,842
Prepaid expenses and other 324,584 445,713
Prepaid and refundable income taxes 1,157,935 542,847
Deferred income taxes 65,000 70,000
-------------------- --------------------
Total Current Assets 11,623,002 12,722,187
Property and Equipment, net 1,809,663 1,310,337
Deferred Income Taxes 763,000 -
Other Assets 760,545 784,772
-------------------- --------------------
$ 14,956,210 $ 14,817,296
==================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,737,067 $ 4,610,341
Payable to factors 4,052,047 1,258,674
Accrued liabilities 141,998 329,281
Current maturities of long-term debt 308,091 184,276
-------------------- --------------------
Total Current Liabilities 8,239,203 6,382,572
-------------------- --------------------
Long-Term Debt 1,107,468 690,463
-------------------- --------------------
Deferred Income Taxes - 76,000
-------------------- --------------------
Shareholders' Equity:
Common stock, $.01 par value; 18,000,000 shares
authorized; issued, 4,100,421 and 4,414,707 shares
respectively; outstanding 3,970,421 and 4,339,707
shares respectively 41,004 44,147
Capital in excess of par value 7,980,635 7,980,635
(Accumulated deficit) Retained earnings (2,164,701) (209,803)
Treasury stock, 130,000 and 75,000 shares, respectively, at cost (247,399) (146,718)
-------------------- --------------------
Total Shareholders' Equity 5,609,539 7,668,261
-------------------- --------------------
$ 14,956,210 $ 14,817,296
==================== ====================
</TABLE>
See notes to unaudited consolidated financial statements.
- 3 -
<PAGE>
JENNA LANE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------------------- -----------------------------------
1999 1998 1999 1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 9,701,441 $ 9,253,459 $ 48,584,176 $ 40,200,658
Cost of Sales 7,792,981 7,356,595 40,816,309 31,958,643
----------- ----------- ------------ ------------
Gross Profit 1,908,460 1,896,864 7,767,867 8,242,015
Operating Expenses 2,797,120 2,335,839 9,721,573 6,868,663
----------- ----------- ------------ ------------
Operating (Loss) Income (888,660) (438,975) (1,953,706) 1,373,352
Interest Expense 287,545 286,069 968,227 867,119
----------- ----------- ------------ ------------
(1,176,205) (725,044) (2,921,933) 506,233
Litigation Settlement - - 165,000 -
----------- ----------- ------------ ------------
(Loss) Income Before Income Taxes (1,176,205) (725,044) (3,086,933) 506,233
(Credit) Provision for Income Taxes (436,434) (330,207) (1,132,034) 183,793
----------- ----------- ------------ ------------
Net (Loss) Income $ (739,771) $ (394,837) $ (1,954,899) $ 322,440
=========== =========== ============ ============
Net (Loss) Income Per Share:
Basic and Diluted $ (0.15) $ (0.09) $ (0.48) $ 0.07
=========== =========== ============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
- 4 -
<PAGE>
JENNA LANE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
--------------------------- ---------------------------
1999 1998 1999 1998
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Operating Activities:
Net (loss) income $ (739,771) $ (394,837) $(1,954,899) $ 322,440
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 83,739 71,935 272,917 128,335
Deferred income taxes (479,000) (14,000) (834,000) (5,000)
Write-off of notes receivable - - - 35,760
Other - - 5,876 -
Changes in assets and liabilities:
Receivables 61,923 - 43,233 -
Payable to factors 2,760,172 2,173,953 2,793,373 3,030,791
Inventories (2,279,432) (1,899,153) 1,456,718 (1,289,175)
Advances to suppliers and others 54,913 - 98,779 -
Prepaid expenses and other 190,710 115,874 121,129 (457,944)
Income taxes (10,277) (387,142) (614,888) (452,467)
Accounts payable and accrued liabilities 380,194 445,983 (1,060,757) (386,015)
---------- ---------- ----------- ---------
Net Cash Provided By Operating
Activities 23,171 112,613 327,481 926,725
---------- ---------- ----------- ---------
Investing Activities:
Acquisition of business - - - (630,209)
Capital expenditures 17,413 (5,564) (49,840) (75,489)
Security deposits 630 (1,378) 12,410 (22,950)
Issuance of notes receivable - (20,000) (70,876) (114,627)
Repayment of notes receivable 9,258 16,122 59,161 69,644
---------- ---------- ----------- ---------
- -
Net Cash Provided By (Used In)
Investing Activities 27,301 (10,820) (49,145) (773,631)
---------- ---------- ----------- ---------
Financing Activities:
Principal payments on capital lease obligations (49,966) (21,624) (169,765) (29,207)
Repurchase of stock (14,118) (103,330) (100,681) (103,330)
Repurchase of performance shares - - (3,143) (3,143)
---------- ---------- ----------- ---------
Net Cash Used In Financing Activities (64,084) (124,954) (273,589) (135,680)
---------- ---------- ----------- ---------
Net Increase (Decrease) In Cash (13,612) (23,161) 4,747 17,414
Cash at beginning 59,824 47,170 41,465 6,595
---------- ---------- ----------- ---------
Cash at end $ 46,212 $ 24,009 $ 46,212 $ 24,009
========== ========== =========== =========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 287,545 $ 158,046 $ 968,227 $ 446,311
========== ========== =========== =========
Income taxes paid $ 40,080 $ 67,797 $ 294,281 $ 633,742
========== ========== =========== =========
Noncash Transactions:
Capital lease obligations incurred for the
acquisition of equipment $ 100,692 $ 484,501 $ 710,585 $ 484,501
========== ========== =========== =========
</TABLE>
See notes to unaudited consolidated financial statements.
- 5 -
<PAGE>
JENNA LANE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Jenna
Lane, Inc. and its wholly-owned subsidiaries (collectively, the
"Company"). The financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and the instructions for Form 10-Q. Accordingly, certain
information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These
consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended March 31, 1999 (although those
financial statements are in the process of being restated and an
amendment to such Form 10-K with respect thereto filed, See Note 2). In
the opinion of management, all adjustments (which include only normal
recurring adjustments) considered necessary for a fair presentation of
interim results have been included. The results of operations for the
nine months ended December 31, 1999 are not necessarily indicative of
the operating results for the full year.
2. RESTATEMENT OF FINANCIAL RESULTS
On January 31, 2000 the Company announced that it would conduct a
review of prior financial results. The Company also announced that it
had retained the services of Mahoney Cohen & Company to assist in the
review. The review has been completed and, as a result of its findings,
the Company will issue restatements of its consolidated financial
statements for the fiscal year ended March 31, 1999, the three months
ended June 30, 1999 and for the six months ended September 30, 1999. It
was determined that certain sales were improperly recognized including
sales recognized in the incorrect period and certain costs and
allowances were recorded in the incorrect period or improperly
recorded. The financial results for the fiscal year ended March 31,
1999 as restated will show additional charges to sales, sales
allowances, and costs of sales of $1,651,000. Accordingly, net income
of $741,569 previously reported has been restated to reflect a net loss
of $254,431, net of an income tax benefit of $655,000. A summary of the
effects of the March 31, 1999 restatement is follows:
- 6 -
<PAGE>
JENNA LANE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
At March 31, 1999
--------------------------------------------------
As previously As
reported Restated
----------------------- --------------------
<S> <C> <C>
BALANCE SHEET
Current Assets:
Cash $ 41,465 $ 41,465
Receivables 282,942 365,616
Advances to suppliers 664,704 664,704
Inventories 10,464,842 10,591,842
Prepaid expense and other 445,713 445,713
Refundable income taxes - 542,847
Deferred income taxes 70,000 70,000
----------------------- --------------------
Total Current Assets 11,969,666 12,722,187
Property and Equipment, Net 1,310,337 1,310,337
Other Assets 784,772 784,772
----------------------- --------------------
$ 14,064,775 $ 14,817,296
======================= ====================
Current Liabilities:
Acounts payable $ 4,008,341 $ 4,610,341
Due to factor - 1,258,674
Accrued liabilities 329,281 329,281
Income taxes payable 112,153 -
Current maturities of debt 184,276 184,276
----------------------- --------------------
Total current liabilities 4,634,051 6,382,572
Long-Term Debt 690,463 690,463
Deferred Income Taxes 76,000 76,000
Shareholders' Equity:
Common stock 44,147 44,147
Capital in excess of par value 7,980,635 7,980,635
Retained earnings 786,197 (209,803)
Treasury stock (146,718) (146,718)
----------------------- --------------------
Total Shareholders' Equity 8,664,261 7,668,261
----------------------- --------------------
$ 14,064,775 $ 14,817,296
======================= ====================
INCOME STATEMENT
Net Sales $ 60,392,370 $ 59,216,370
Cost of Sales 47,491,745 47,966,745
----------------------- --------------------
Gross Profit 12,900,625 11,249,925
Operating Expenses 10,930,312 10,930,312
----------------------- --------------------
Operating (Loss) Income 1,970,313 319,313
Interest Expense 666,676 666,676
----------------------- --------------------
(Loss) Income Before Income Taxes 1,303,637 (347,363)
(Credit) Provision for Income Taxes 562,068 (92,932)
----------------------- --------------------
Net (Loss) Income $ 741,569 $ (254,431)
======================= ====================
Net (Loss) Income Per Share
Basic $ 0.17 $ (0.06)
======================= ====================
Diluted $ 0.16 $ (0.06)
======================= ====================
</TABLE>
- 7 -
<PAGE>
JENNA LANE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company has not yet filed its Form 10-K/A for March 31, 1999 or its
Forms 10-Q/A for the three months ended June 30, 1999 and the six
months ended September 30, 1999. The comparative financial information
contained herein is reflective of the restated financial results for
the periods presented.
3. INVENTORIES
December 31, March 31,
1999 1999
----------- -----------
(Unaudited) (As restated -
see Note 2
Raw materials $ 3,076,429 $ 2,921,489
Work-in-process 1,527,006 1,612,193
Finished goods 4,531,689 6,058,160
----------- -----------
$ 9,135,124 $10,591,842
----------- -----------
4. EARNINGS PER SHARE
Earnings per share are calculated using the weighted average number of
shares outstanding of common stock and dilutive common stock
equivalents during each period presented. The Company has adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share," which requires the presentation of: (1) "Basic Earnings per
Share," computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding during the
period and (2) "Diluted Earnings per Share," which gives effect to all
dilutive potential common shares that were outstanding during the
period, by increasing the denominator to include the number of
additional common shares that would have been outstanding if dilutive
potential common shares had been issued. For the nine months ended
December 31, 1999 and for the three months ended December 31, 1999 and
1998, the effect of computing dilutive common shares is antidilutive.
5. SHAREHOLDERS' EQUITY
During the nine months ended December 31, 1999, the Company repurchased
314,286 performance shares for $3,143 ($.01 per share).
In September 1998, the Company adopted a share repurchase program to
buy back up to 500,000 shares of the Company's stock. As of December
31, 1999, the Company has repurchased 130,000 shares at an aggregate
cost of $247,339, including 55,000 shares repurchased during the nine
months ended December 31, 1999. The program expires March 31, 2000.
- 8 -
<PAGE>
JENNA LANE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. LITIGATION
Estate of Cheng Gen Zhang v. Jenna Lane, Inc. et al. This case was
commenced in October 1999 and alleges that the Company's employee,
while driving within the scope of his employment, struck and killed Mr.
Zhang. The complaint alleges $10 million in damages. This amount is
significantly greater than the Company's current limits on its relevant
insurance coverage and the Company has engaged separate counsel with
respect to this excess amount. The Company has recently been advised
that this case has settled for $225,000, an amount well within the
Company's insurance coverage limits.
7. NASDAQ DELISTING
On February 1, 2000, Nasdaq's Listing Qualifications Panel determined
to delist the Company's securities from the Nasdaq Stock Market
effective with the close of business on that date. Effective February
2, 2000, the Company's securities have been listed on the OTC Bulletin
Board. The Company does not intend to appeal the decision of the Panel.
8. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued the
Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities", which
will be effective for the Company's fiscal year 2000. This statement
establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an
asset or liability measured at its fair value. The statement also
requires that changes in the derivative's fair value be recognized in
earnings unless specific hedge accounting criteria are met. The Company
is not currently affected by SFAS 133.
- 9 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the three and nine months ended December 31, 1999
and 1998, respectively.
The Company has completed a previously announced review of its financial results
for the fiscal year ended March 31, 1999, the three months ended June 30, 1999
and the six months ended September 30, 1999, the Company intends to restate its
financial statements for such period. The Company was unable to timely complete
the information necessary to file the above financial statements and notes
thereto required by Forms 10-K/A and 10-Q/A. Such inability could not have been
eliminated by the registrant without unreasonable effort or expense. The Company
intends to file such Forms 10-Q/A and 10-K/A within the next few weeks. March
31, 1999 information contained herein reflects restated financial information.
Results of Operations
The following table sets forth, for the periods indicated, the Company's
statements of operation data as a percentage of net sales.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------------------- ---------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 80.3 79.5 84.0 79.5
------------ ------------- ------------ ------------
Gross profit 19.7 20.5 16.0 20.5
Operating expenses 27.1 25.2 20.0 17.1
------------ ------------- ------------ ------------
Operating (loss) income (7.4) (4.7) (4.0) 3.4
Interest expense 3.0 3.1 2.0 2.2
------------ ------------- ------------ ------------
(10.4) (7.8) (6.0) 1.2
Litigation settlement 1.7 - 0.3 -
------------ ------------- ------------ ------------
(Loss) income before income taxes (12.1) (7.8) (6.3) 1.2
(Credit) provision for income taxes (5.9) (3.6) (2.4) 0.5
------------ ------------- ------------ ------------
Net (Loss) Income (6.2) % (4.2)% (3.9)% 0.7 %
============ ============= ============ ============
</TABLE>
Three Months Ended December 31, 1999 Compared with Three Months Ended
December 31, 1998
Net sales of $9.7 million in the three months ended December 31, 1999
represented an increase of $400,000, or 4.3% over net sales of $9.3 million in
the three months ended December 31, 1998. The increase in net sales was
primarily attributable to the JLNY sales group, catalog sales group, and the
children's sales group (TLC for Kidz), offset by the elimination of its sweater
sales group.
The Company's gross profit was virtually unchanged at $1.9 million for the three
months ended December 31, 1999 and 1998. Gross profit margin decreased to 19.7%
in the three months ended December 31, 1999 from 20.5% in the three months ended
December 31, 1998.
- 10 -
<PAGE>
Operating expenses increased $465,000, or 19.9%, to $2.8 million in the three
months ended December 31, 1999 from $2.3 million in the three months ended
December 31, 1998. The increase was primarily due to costs incurred for
additional personnel and related expenses associated with the projected sales
volume for the period, which did not fully materialize. Though the Company
initiated certain overhead reductions during September 1999, some operating cost
continuations occurred during the three months ended December 31, 1999.
Operating loss was $724,000 for the three months ended December 31, 1999
compared to operating loss of $439,000 for the three months ended December
31, 1998.
Interest expense remained virtually unchanged at $286,000 and $288,000 for the
three months ended December 31, 1998 and 1999, respectively.
As a result of the above factors, pre-tax loss increased from $725,000 in the
three months ended December 31, 1998 to $1,176,000 in the three months ended
December 31, 1999.
Nine Months Ended December 31, 1999 Compared with Nine Months Ended December
31, 1998
Net sales of $48.6 million in the nine months ended December 31, 1999
represented an increase of $8.5 million, or 21.1% over net sales of $40.2
million in the nine months ended December 31, 1998. The increase in net sales
was primarily attributable to the JLNY sales group, the catalog sales group and
its children's sales group (TLC for Kidz), offset by the elimination of its
sweater sales group.
The Company's gross profit decreased $475,000, or 5.8% to $7.8 million for the
nine months ended December 31, 1999 from $8.2 million for the nine months ended
December 31, 1998. Gross profit margin decreased to 16.0% in the nine months
ended December 31, 1999 from 20.5% in the nine months ended December 31, 1998.
This decrease was primarily due to liquidation of certain excess import
inventories as well as an increase in customers' discounts, claims and
allowances during the nine months ended December 31, 1999.
Operating expenses increased $2.8 million or 40.7% to $9.7 million in the nine
months ended December 31, 1999 from $6.9 million in the nine months ended
December 31, 1998. The increase was primarily due to costs incurred for
additional personnel and related expenses associated with the projected sales
volume for the period, which did not fully materialize. Additionally, and
primarily during the six months ended September 30, 1999, the Company incurred
certain inefficiencies and cost overlaps related to its move to its new
warehouse and distribution center in Secaucus, New Jersey and the consolidation
of its showrooms.
Interest expense increased from $867,000 in the nine months ended December 31,
1998 to $968,000 in the nine months ended December 31, 1999. This is primarily
the result of additional borrowings for working capital needs.
As a result of the above factors, pre-tax income decreased from $506,000 in the
nine months ended December 31, 1998 to a pre-tax loss of $3.1 million in the
nine months ended December, 1999.
- 11-
<PAGE>
Liquidity and Capital Resources
Operating activities provided net cash of $23,000 and $327,000 for the three
and nine months ended December 31, 1999, respectively.
The Company's capital expenditures totalled $870,000 for the nine months ended
December 31, 1999, of which $710,000 was financed through a leasing company. The
Company does not have any material commitments for capital expenditures at this
time.
In September 1998, the Company adopted a share repurchase program to buy back up
to 500,000 shares of the Company's stock over an eighteen month period. As of
December 31, 1999, the company has repurchased 130,000 shares at an average
price of $1.90. This program expired March 31, 2000.
In September, 1999, the Company initiated certain cost reduction programs which
are inclusive of personnel reductions, the closing of certain under-performing
sales groups, and the streamlining of internal operations and procedures. The
result to date has been a decrease of approximately 20% of fixed operating
expenses.
The Company believes that existing cash, anticipated cash flows from operations
and availability of advances under its factoring arrangement will be sufficient
to support the Company's operations for at least the next 12 months.
- 12 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: Except as described below there are no material
pending legal proceedings to which the Company is a party or to which
any of its property is subject. The Company is subject to normal
litigations in the ordinary course of business.
Jenna Lane, Inc. v. S.M.B. Textiles, Howard Bromberg, The Feldman Co.,
Nissho Iwai Textile Inc. and North Pole LLC. The Company filed this suit in
Supreme Court, New York County, New York State, alleging late delivery of goods,
resulting in over $125,000 in damages. The dispute with Nissho Iwai Textiles is
now the subject of a separate arbitration proceeding. Remaining defendants are
North Pole LLC and Howard Bromberg. Defendant North Pole has answered the
complaint and asserted counterclaims for goods allegedly delivered and unpaid
for. Defendant Bromberg has answered the complaint without asserting any
counterclaims. It is premature to estimate the likelihood of an unfavorable
outcome.
Estate of Cheng Gen Zhang v. Jenna Lane, Inc. et al. This case was
commenced in October 1999 and alleges that the Company's employee, while driving
within the scope of his employment, struck and killed Mr. Zhang. The complaint
alleges $10 million in damages. This amount is significantly greater than the
Company's current limits on its relevant insurance coverage and the Company has
engaged separate counsel with respect to this excess amount. The Company has
recently been advised that this case has been settled for $225,000, an amount
well within the Company's insurance coverage limits.
Item 2. Changes in Securities: None.
Item 3. Defaults Upon Senior Securities: None.
Item 4. Submissions of Matters to a Vote of Security Holders: None.
Item 5. Other Information:
Financial Review
On January 31, 2000, the Company announced that it is reviewing its
financial results for the fiscal year ended March 31, 1999, the three months
ended June 30, 1999 and the six months ended September 30, 1999 regarding the
timing of recordation of certain revenue and expense items and related
inventory. The review has been completed and the Company will restate its
previously issued consolidated financial statements for such periods. It was
determined that certain sales were improperly recognized including sales
recognized in the incorrect period and certain costs and allowances were
recorded in the incorrect period or improperly recorded. The financial results
for the fiscal year ended March 31, 1999 as restated will show additional
charges to sales, sales allowances, and costs of sales of $1,651,000.
Accordingly, net income of $741,569 previously reported has been restated to
reflect a net loss $254,431, net of an income tax benefit of $655,000.
<PAGE>
Nasdaq De-Listing
On February 1, 2000, Nasdaq's Listing Qualifications Panel determined
to delist the Company's securities from the Nasdaq Stock Market effective with
the close of business on that date. Effective February 2, 2000, the Company's
Common Stock has been listed on the OTC Bulletin Board. The Company does not
intend to appeal the decision of the Panel.
Dobies Resignation from Board of Directors
In December 1999, Mitchell Dobies, former President and Co-Chief Executive
Officer of the Company, resigned from the Board of Directors. Mr. Dobies'
Consulting Agreement with the Company expired on January 31, 2000.
Stock Repurchase Program
As of December 31, 1999, the Company has repurchased an aggregate of
130,000 shares of its Common Stock under its stock repurchase program at an
average price of $1.90 per share. The program expired March 31, 2000.
Expiration of Warrants
On March 15, 2000, the Company issued a press release confirming that all
of its then outstanding Class A Common Stock Purchase Warrants, exercisable at
$6.36 per share (after adjusting for a stock dividend effected in 1998), would
expire in accordance with their terms on March 19, 2000. The warrants, which
traded on the NASDAQ OTC Bulletin Board under the symbol "JLNYW," could not be
traded after March 19, 2000. The Company permitted a three trading day broker
protect period for the exercise of any warrants into shares of Common Stock
taking place prior to March 19, 2000. This broker protect period expired at
5:00 pm on Wednesday, March 22, 2000.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K: No reports on Form 8-K were filed
during the quarter ended December 31, 1999.
- 2 -
<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.
Dated: April 7, 2000
JENNA LANE, INC.
By: /s/ Charles Sobel
Charles Sobel
President and Chief Executive Officer
By: /s/ Gary A. Coffey
Gary A. Coffey
Vice-President and
Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Jenna Lane, Inc. and subsidiaries included in the
Company's Form 10-Q for the period ended December 31, 1999, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 46,211
<SECURITIES> 0
<RECEIVABLES> 322,383
<ALLOWANCES> 0
<INVENTORY> 9,135,124
<CURRENT-ASSETS> 12,498,002
<PP&E> 2,439,694
<DEPRECIATION> 630,031
<TOTAL-ASSETS> 15,068,210
<CURRENT-LIABILITIES> 8,239,203
<BONDS> 0
0
0
<COMMON> 41,004
<OTHER-SE> 5,568,535
<TOTAL-LIABILITY-AND-EQUITY> 15,068,210
<SALES> 48,584,176
<TOTAL-REVENUES> 48,584,176
<CGS> 40,816,309
<TOTAL-COSTS> 9,721,573
<OTHER-EXPENSES> 165,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 968,227
<INCOME-PRETAX> (3,086,933)
<INCOME-TAX> (1,132,034)
<INCOME-CONTINUING> (1,954,899)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,954,899)
<EPS-BASIC> (0.48)
<EPS-DILUTED> (0.48)
</TABLE>
