UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                             ----------------------

                                    FORM 10-K

(Mark One)

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

For the fiscal year ended June 30, 2007

                                       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 No. 1-5863

                                  JACLYN, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

               Delaware                                 22-1432053
---------------------------------------  ---------------------------------------
   State or other jurisdiction of                    (I.R.S. Employer
   incorporation or organization)                   Identification No.)

        197 West  Spring Valley Ave.,
            Maywood, New Jersey                            07607
----------------------------------------  --------------------------------------
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code: (201) 909-6000

Securities registered pursuant to Section 12(b) of the Act:

                                                    Name of each exchange
           Title of Class                            on which registered
           --------------                            -------------------

Common Stock, $1 par value per share               American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by  check mark if the  registrant  is a  well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ]  No [X]

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 [ ]

Indicate by check mark if disclosure of delinquent  filers pursuant to  Item 405
of Regulation S-K is not contained  herein,  and  will  not be contained, to the
best of Registrant's  knowledge, in definitive  proxy or  information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the Registrant is a  large accelerated  filer, an
accelerated filer, or a non-accelerated filer.  See  definition of  "accelerated
filer  and large  accelerated filer"  in Rule 12b-2 of the  Exchange Act. (Check
one):

Large Accelerated Filer [ ]    Accelerated Filer [ ]   Non-Accelerated Filer [X]

Indicate by check mark whether the registrant is a shell company (as  defined in
Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value  of  the  voting  common equity (based on the closing
price of such stock on the American Stock  Exchange)  held by  non-affiliates of
the  Registrant  as of the last  business  day of the  Company's  most  recently
completed   second    fiscal  quarter  (December  31,  2006)  was  approximately
$27,760,000.

There were 2,468,614 shares of common stock outstanding at September 10, 2007.

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain Portions of the Registrant's Proxy Statement for the Registrant's Annual
Meeting  of  Stockholders  scheduled  to  be  held  on  November  28,  2007  are
incorporated by reference into Part III of this Form 10-K.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
          Item                                                                                    Page
          ----                                                                                    ----
<S>       <C>  <C>                                                                                  <C>
PART I.   1.   Business. ............................................................................1

          2.   Properties. ..........................................................................8

          3.   Legal Proceedings. ...................................................................9

          4.   Submission of Matters to a Vote of Security Holders. .................................9

PART II.  5.   Market for the Registrant's Common Equity, Related Stockholder
               Matters and Issuer Purchases of Equity Securities. ...................................9

          6.   Selected Financial Data. ............................................................11

          7.   Management's Discussion and Analysis of Financial Condition and
               Results of Operations. ..............................................................13

          8.   Financial Statements and Supplementary Data. ........................................22

          9.   Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure. ...............................................................23

PART III. 10.  Directors and Executive Officers of the Registrant. .................................23

          11.  Executive Compensation. .............................................................23

          12.  Security Ownership of Certain Beneficial Owners and Management. .....................24

          13.  Certain Relationships and Related Transactions. .....................................24

          14.  Principal Accountant Fees and Services. .............................................24

PART IV.  15.  Exhibits and Financial Statement Schedule. ..........................................24
</TABLE>
<PAGE>

                           Forward-Looking Statements.
                           ---------------------------

       In  order  to  keep  stockholders  and  investors informed of the  future
plans of  Jaclyn, Inc.  (which,  together  with its subsidiaries, is referred to
alternatively  in  this  Form 10-K as  the "Company," "we," "us," and/or "our"),
this  Form  10-K  contains  and, from  time  to  time, other reports and oral or
written   statements  issued  by  us  may  contain,  forward-looking  statements
concerning, among other  things, our future plans and objectives that are or may
be  deemed  to  be "forward-looking statements." Our ability to do this has been
fostered  by the Private Securities Litigation Reform Act of 1995 which provides
a "safe harbor" for forward-looking statements to encourage companies to provide
prospective  information   so  long  as  those  statements  are  accompanied  by
meaningful  cautionary statements identifying important factors that could cause
actual  results  to differ materially from those discussed in the statement. Our
forward-looking  statements  are  subject to a number of known and unknown risks
and  uncertainties  that could cause actual results, performance or achievements
to  differ  materially  from  those described  or implied in the forward-looking
statements,  including,  but  not  limited  to,  general  economic  and business
conditions,  competition;  potential changes in customer spending; acceptance of
our  product  offerings  and  designs;  the  variability  of  consumer  spending
resulting  from  changes  in  domestic  economic  activity; a highly promotional
retail  environment;  any  significant variations between actual amounts and the
amounts  estimated  for  those  matters  identified  as  our critical accounting
estimates  as  well  as  other  significant  accounting  estimates  made  in the
preparation of  our  financial  statements; and the impact of hostilities in the
Middle East and the possibility of hostilities in other geographic areas as well
as   other   geopolitical  concerns.  Accordingly,  actual  results  may  differ
materially  from  such forward-looking statements. You are urged to consider all
such  factors.  In  light  of  the  uncertainty inherent in such forward-looking
statements,  you should not consider their inclusion to be a representation that
such  forward-looking  matters  will  be  achieved.  We assume no obligation for
updating  any such forward-looking statements to reflect actual results, changes
in  assumptions  or  changes  in  other  factors  affecting such forward-looking
statements.

Item 1.    Business.

       Jaclyn,  Inc., which was incorporated in the State of Delaware  in  1968,
and  its  subsidiaries,  are  primarily  engaged  in  the  design,  manufacture,
distribution and sale of women's  and children's apparel, and vinyl, leather and
fabric  handbags,  sport  bags,  backpacks,  cosmetic bags, and related products
(collectively, "handbag products").

       Styling  is  an  important  factor  in  the  merchandising  of all of our
products.  Our  staffs  of  full-time designers study fashion trends in order to
anticipate  consumer  demand. The design staff works closely with the purchasing
department  to  determine  concepts and fabrics for apparel products, as well as
the styling  and material components for handbag products. The design staff also
works  with  the  production  and  engineering  staffs to determine the costs of
production and  the  technical  problems  involved  in producing a new style. We
change most of our designs from season to season.

       We do not own or operate manufacturing facilities, either in Hong Kong or
elsewhere. All of our products are manufactured by outside contractors. Finished
merchandise is received  at  independently  owned  outside  warehouses and/or at
facilities we  lease  in  Florida, California and Indiana. From these locations,
products  are  shipped  under  different selling names to customers all over the
country.  Certain handbag and apparel products manufactured in the Far  East are
shipped  directly to customers from Hong Kong. We market our apparel and handbag
products   primarily  through  general  merchandise,  retail  chain  stores  and
department  stores. We sell our products throughout the United States using both
our own salespersons and independent sales representatives.

       We  manufacture  and  market  apparel  products  under  the  trade  names
"Topsville", "I. Appel", "Smart Time", and "Emerson Road", each of which we own.
We also manufacture apparel items for sale
<PAGE>

as private-label merchandise.  In addition, during fiscal 2007, we were licensed
to  manufacture  and  market  apparel  products under the name "Vanity Fair(TM)"
under an agreement which  expired  December 31, 2006, and are presently licensed
for "Seventeen" and "CosmoGirl" under an agreement which expires April 30, 2008,
and children's apparel based on  the  "Messages from the Heart" collection under
an  agreement  which  expires  June 30, 2008.  We  market  our  handbag products
under  trademarks  and  trade  names that we own, including "Shane" and "Aetna,"
"Susan Gail," and "Robyn Lyn". We consider our owned and licensed trademarks and
trade names,  as  well  as  our  other, related intellectual property rights, to
be of significant value in the marketing of our products.

       Sales of  apparel  items  during  each of the fiscal years ended June 30,
2007, 2006 and 2005 represented 65%, 64%, and 70%, respectively, of consolidated
net  sales.  Sales   of  handbag  products  represented  the  remainder  of  our
consolidated  net sales. We customarily offer our customers credit terms.  We do
not have long-term contracts with any of our customers.

       Our imports  of  apparel  products  and  handbag  products  accounted for
substantially  all  of  the  consolidated  net sales in fiscal 2007 and 2006 and
2005. Imports offer us the benefit of diversification of styling and the benefit
of  cost  savings related to such purchases. While our operations are subject to
the  usual  risks  associated  with  purchases from foreign countries, our other
foreign  and domestic manufacturing sources provide us with alternative  sources
and facilities.

       Our  international  operations  consist  of  offices  in  Hong  Kong, and
Shanghai and  Dong  Guan, China. Personnel in our foreign offices coordinate and
track  orders for products, invoice certain shipments and conduct inspections of
the  factories  of  outside  contractors  in  the  Far  East who manufacture our
products.  We  do  not  believe,  however, that our international operations are
material to our business.

       Approximately 73% of the Company's consolidated net sales for fiscal 2007
were  to  general  merchandise, chain, and department stores retailers, with the
balance  consisting  of  sales to smaller specialty shops, smaller retail stores
and cosmetic firms. During the fiscal year ended June 30, 2007, two customers of
the  Company contributed approximately 63% of consolidated net sales as follows:
Wal-Mart  Stores, Inc., 43%, and Estee Lauder, 20%. During the fiscal year ended
June  30,  2006,  Wal-Mart  Stores,  Inc.  and   Estee   Lauder   accounted  for
approximately  42%,  and  22%, respectively,  of our consolidated net sales, and
during  the  fiscal  year  ended  June 30, 2005, Wal-Mart Stores, Inc. and Estee
Lauder  accounted  for  approximately  44%  and  19%  of consolidated net sales,
respectively. We believe that the loss of either of these customers would have a
material adverse effect on our results of operations.

       We deal with a number of sources for our purchases of  finished  apparel,
handbags  and  related  products,  no  one  of  which  accounted  for  more than
approximately  18%  of  total  cost of goods sold during fiscal 2007. We have no
long-term  supply  contracts  with  our Far East or European sources of finished
handbags  and  related products or apparel items and we are subject to the usual
risks associated with that.  While we have no long-term supply contracts, as the
finished  products  are   available  from  various  sources,  we  anticipate  no
difficulty  in  the  future  in  obtaining  finished  product  necessary for our
business.

       We  offer  Fall/Winter, Holiday and Spring/Summer product  lines  and, in
almost  all instances, manufacture products to meet the specific requirements of
our  customers. Our business is seasonal in nature and is influenced by a number
of other factors, including general economic conditions.  Accordingly, we do not
believe that  quarterly  net  sales are necessarily indicative of future trends.
Nevertheless,  we  anticipate  that  during  fiscal 2008 we again will have more
sales  volume  and  earnings  in  the  first-half of the fiscal year than in the
second  half.  We  refer to Note L, "Unaudited Quarterly Financial Data," of the
Notes  to  Consolidated  Financial Statements on page F-23 of this Form 10-K for
additional information about historical quarterly results.

                                        2
<PAGE>

       At September  18,  2007,  unfilled  orders were approximately $55,000,000
compared  to  approximately  $74,000,000  at September 15, 2006. In the ordinary
course of business,  the  dollar amount of unfilled orders at a particular point
in  time  is  affected  by  factors, including scheduling of the manufacture and
shipping  of  goods  (which,  in  turn,  may be dependent on the requirements of
customers).  Accordingly, a comparison of backlog from period to period alone is
not necessarily meaningful and may not be indicative of future sales patterns or
shipments.

       At June 30,  2007,  we  employed 164 persons; 121 were salaried employees
and the  balance  were  paid  on an hourly basis. We consider relations with our
employees to be satisfactory.

       We  compete  with numerous  domestic and foreign manufacturers of apparel
items  and  handbag  products,  and  we  believe our  sales of apparel items and
handbag  products  are  not  significant  in  light of total apparel and handbag
industry sales. Our business is dependent, among other things, on our ability to
anticipate and respond  to  changing consumer preferences, to remain competitive
in price,  style  and quality, and to meet our customers' various production and
delivery  requirements. While some competitors may be larger or may have greater
resources  than ours, we believe that our size and financial position will allow
us to continue to respond to changes in consumer demand and remain competitive.

       Recent Developments

       On April 16, 2007, we announced the termination of the option contract we
previously  entered into relating to the sale of the Company's executive offices
and  warehouse facility, as well as two adjacent lots, located in West New York,
New Jersey.

       The  option contract had been subject to a number  of  contingencies  and
conditions, including  receipt by the optionee of governmental approvals for the
use  of  the  Company's  West  New  York,  New  Jersey properties as residential
housing.  The  Company  had previously granted to the optionee extensions of the
time  to  obtain  the  approvals.  However,  the  optionee had not received, and
advised  us  that  he  did  not  expect  to  receive,  the  necessary approvals.
Accordingly,  at  the optionee's request, the parties agreed to a termination of
the contract. The option contract was set to expire by its terms on May 2, 2007.
Under  the  option  contract,  the  Company  retained  approximately $268,000 in
payments  made by the optionee during the term of the option contract, including
interest.  This  amount  is reflected in the Company's financial results for the
fourth quarter of fiscal 2007.

       In June 2007,  the Company  entered  into an  agreement  with a different
party  for the sale of the  Company's  former  executive  office  and  warehouse
facility,  as well as two adjacent  lots,  located in West New York, New Jersey.
The proposed purchase price is $8,000,000,  the substantial  portion of which is
payable at closing.  The closing of the sale is scheduled for February 15, 2008,
although the proposed purchaser has the right to extend the closing date for one
additional  4-month  period upon  payment of an  extension  fee.  The closing is
contingent  on  the  proposed  purchaser's  receipt  of  governmental  approvals
required for the construction of residential, multi-family housing consisting of
150  residential  units,  as  well  as  a  number  of  other  contingencies  and
conditions,   including  the  receipt  of  acquisition  and  construction   loan
commitments.  However,  since the proposed transaction is subject to a number of
conditions  and  contingencies,  including the receipt of required  governmental
approvals, there is no assurance that a sale of the property will be concluded.

       In  May  2007  the  Company relocated its executive offices from West New
York,  New  Jersey  to leased premises in Maywood, New Jersey. The lease for our
new executive offices began September 1, 2006, has a 10-year term, and grants to
the  Company  an  option to purchase the building at any time during the term of
the  lease at a purchase price not to exceed $3,075,000, plus increases based on
a multiple of the consumer price index. We believe that the new corporate office
building presents a more

                                        3
<PAGE>

suitable,  practical space for our operations than our previous  location (which
is the subject of a contract of sale as described above). The other party to the
lease agreement  purchased the corporate office building at a closing which also
took place in August 2006. We provided the purchaser with $2,200,000 in mortgage
financing,  secured by a first priority  mortgage in favor of the Company on the
land, office building, and other customary rights of a mortgagor.  Funds for the
mortgage  financing were provided by borrowings under our bank loan facility and
from our own funds.

Item 1A.   Risk Factors.

       You  should carefully  consider  all  of  the  information set  forth  or
incorporated by reference in this Annual Report on Form 10-K, including, without
limitation,  the  following risk factors. Any of these risks, and any additional
risks not  presently known to us, or that we do not presently consider material,
could  adversely  affect our business, operating results or financial condition,
and  could  cause  actual  results  or  events  to  differ materially from those
anticipated.

       RISKS RELATING TO OUR INDUSTRY AND OUR BUSINESS

       Our business is influenced by general economic and geopolitical
       conditions.

       We have no control over the economy in general, political events, or upon
the  overall  level of consumer spending. As domestic and international economic
and  geopolitical  conditions  change,  trends  in  consumer spending may become
unpredictable  and could be subject to reductions due to uncertainties about the
future.  Negative  economic  trends,  such  as increases in gas and other energy
prices,  increases  in  interest  rates, a recessionary period or depression, as
well  as actual or threatened terrorist events, conflicts around the world, acts
of  nature,  and  other  similar  events,  may  depress  the  level  of consumer
confidence, and  consumer spending in general, and on our products specifically.
Similarly,  our  customers  may  anticipate  and  respond  to adverse changes or
perceptions of changes in economic and/or geopolitical conditions by limiting or
canceling  purchases  of  our  products  in  order  to reduce their inventories.
Accordingly,  any  substantial deterioration of, or change in, these conditions,
trends  or  events that weaken consumer confidence and spending could reduce our
sales and adversely affect our financial condition and results of operations.

       The apparel and handbag industry is highly competitive.

       We  operate  in  a  highly  competitive industry. We compete with a large
number  of  domestic  and  foreign  manufacturers, designers and distributors of
products,  as  well  as  private  label  programs  of  retailers.  Many of these
manufacturers,  designers,  distributors  and  retailers  may be larger and have
greater resources than we do. We believe that our ability to effectively compete
depends on a number of factors, including the following:

       o    designing and  developing products that have strong and broad appeal
            to consumers;
       o    pricing  products  appropriately  and  providing  strong   marketing
            support for them;
       o    meeting  the  service  and  technology interface requirements of our
            customers;
       o    ensuring timely availability of products to our customers;
       o    anticipating and responding to changing consumer tastes in a  timely
            manner; and
       o    obtaining access  to  retail  outlets and sufficient floor space for
            our products.

       We need to monitor and meet continually changing consumer preferences.

       Consumer  tastes  and  fashion trends change rapidly. We believe that our
success  depends  in  large  part  on  anticipating  and  responding to changing
consumer tastes and fashion trends in a timely manner. If

                                        4
<PAGE>

we  misjudge  the  market  for our product lines, we may be faced with having to
provide  our customers with significant amounts of sales allowances, which could
have an adverse effect on us.

       We source all of our products.

       We no longer  operate  manufacturing  facilities. As a result, we rely on
third  parties for the manufacture of our products. The failure of these parties
to  fulfill orders,  deliver  goods  in  a timely manner, or increase prices all
could adversely affect our business. We do not have long-term contracts with any
suppliers  or  manufacturers,  and  our  business   is  dependent  on  continued
satisfactory  relationships with our vendors. In addition, our manufacturers and
other vendors do not supply products for us exclusively. As a result, we compete
with  other  companies  for the supply of the production capacity of independent
manufacturers. If  our  vendors  or  manufacturers  fail to ship our products on
time,  fail  to meet our quality standards, or are unable to fill our orders, we
may not be able to deliver our products to customers on a timely basis. Further,
while  we  have  identified  alternative  suppliers  and  manufacturers which we
believe we would  be  able  to utilize within a relatively short period of time,
unexpected  disruption  of  our  present  source of supply could have an adverse
effect   on  our  business  in  the  short-term  depending  upon  our   shipping
requirements at that time.

       We face risks inherent with sourcing our products overseas.

       Substantially all  of  our  products  are manufactured outside the United
States, and our business is subject to risks of doing business abroad. The costs
of importing  products  may  be  adversely  affected by taxes, tariffs, customs,
duties  and  transportation  costs.  Our  ability  to  continue  to purchase our
products  overseas  is  also subject to political instability in countries where
our  contractors  and  suppliers  are  located,  actual  or  threatened  acts of
terrorism  and  other  conflicts  around  the  world,  delays  or disruptions in
shipping of our goods, the effect of regulation, and quotas or other legislation
that  limit  the  quantity of goods which may be imported into the United States
from  China  or  other  countries,  labor disputes, severe weather, or increased
homeland security  requirements  in the United States and in other countries. In
addition,  we  import  a  substantial portion of our products from the Far East.
Further  outbreaks  of  Avian  flu, or a recurrence of SARS, having an impact on
China  or  other  countries  where  our  vendors  are  located could also have a
negative impact on their operations, including delaying or preventing shipments.
The  occurrence  of any of these events, which are beyond our control and we are
unable  to predict, could adversely affect our ability to import our products at
current  or increased levels or at all from certain countries and could harm our
business.

       We are dependent on a limited number of customers for a large portion  of
       our revenues.

       Net  sales to our largest customer totaled approximately 43% of our total
net  sales  in  fiscal  2007,  and  consolidated  net  sales  to our two largest
customers  totaled  approximately  63% of total consolidated net sales for 2007.
Whether  because  of  economic  conditions, a change of the focus of products it
purchases  or other strategic shifts in its business, financial difficulties, or
otherwise,  a  decision  by one of our largest customers to reduce its purchases
from  us,  to  reduce  floor  space  or  advertising of our products, to require
increased  allowances  or reduced prices, or to take other action, may adversely
affect  our  business  and  financial  condition.  Further, consolidation in the
retail  industry  may result in store closures, increased customer leverage over
its suppliers resulting in lower product prices or margins, inventory management
resulting  in  lower retail inventory levels and decreased orders from us, and a
greater potential exposure to credit risk, all of which may adversely affect our
business.

                                        5
<PAGE>

       Our operating results are subject to seasonal fluctuations.

       As is customary in our industry, results of  operations are somewhat more
meaningful  on  a  seasonal  basis,  rather  than  on a quarterly basis. In that
regard,  our  net  sales  and net earnings generally have been higher during the
period  from  June  to  November  (which includes our first fiscal quarter and a
portion  of  our second and fourth fiscal quarters) coinciding with sales to our
customers  for  back-to-school  and  holiday  shopping,  while net sales and net
earnings  for  the  other  months of our fiscal year are typically lower due, in
part,  to  the  traditional  slowdown by our customers immediately following the
winter  holiday  season. Accordingly, any significant decrease in back-to-school
and  winter  holiday  shopping  could  have  a  material  adverse  effect on our
financial condition and results of operations.

       Our failure to retain our senior management and other key personnel could
adversely affect our business.

       Our  business depends in large part on the personal efforts and abilities
of  our  senior executive officers, particularly Robert Chestnov, our  President
and  Chief Executive Officer, Allan Ginsburg, our Chairman, and Howard Ginsburg,
our  Vice  Chairman, as well as other key personnel. If any of these individuals
become  unable or unwilling to continue in their present positions, our business
could be adversely affected.

       Our revolving credit  facility  contains  financial  and  other  covenant
restrictions.

       Our revolving credit facility contains financial and operating covenants,
including  a minimum effective tangible net worth requirement and a maximum debt
to  effective  tangible  net  worth ratio, as well as certain limitations on our
ability  to  sell  all or substantially all of our assets and engage in mergers,
consolidations  and  certain  acquisitions.  In  addition,  advances  under  the
revolving  credit  facility  are subject to borrowing base requirements based on
our  inventory  and  accounts  receivable  levels.  Many  of these covenants are
customary  for  companies  like  ours that borrow money from banks and financial
institutions.  Failure  to  comply with any of the covenants, which could result
from,  among  other  things,  changes in our results of operations or changes in
general economic conditions, might result in our lender asking for the repayment
of its loans to us sooner than is currently contemplated by our agreement.

       RISKS RELATING TO OUR COMMON STOCK

       There may be a limited trading market for our stock.

       Over  50%  of  the  issued and outstanding shares of our common stock  is
presently  held by individuals and entities, including a number of our directors
and officers, who are parties to an amended and restated stockholders agreement.
This  stockholders  agreement  requires,  among other things, that any party who
wishes  to sell or otherwise transfer shares of our common stock first offer the
shares for  purchase  by  the Company and the other parties to the stockholders'
agreement.  Due to the concentration of ownership  or our shares of common stock
by parties  to  the stockholders agreement, and the rights of purchase contained
in the  stockholders'  agreement,  there may be a limited trading market for our
shares.

       Provisions  in our Certificate of Incorporation and Delaware law, as well
as  the  Amended  and  Restated  Stockholders Agreement, may delay or prevent an
acquisition of the Company by a third party.

       Our  certificate  of incorporation contains provisions that could make it
more difficult for a third party to acquire us. Our certificate of incorporation
permits the  Board of Directors to establish, and to set the preferences, rights
and  other  terms of various series of preferred stock (commonly known as "blank

                                        6
<PAGE>

check preferred").  Accordingly, the Board could establish a series of preferred
stock  that  could  have  the  effect  of  delaying,  deferring  or preventing a
transaction  with, or a change of control of, the Company. In addition, Delaware
law  contains  certain  provisions  that  could  prevent  the acquisition of the
Company  by  a  third  party  if  the  Board  of  Directors does not approve the
transaction.  Section  203  of  the  Delaware  General Corporation Law generally
prohibits  stockholders  owning  in  excess  of 15% of the Company's outstanding
voting stock  from  merging  or  combining with the Company for a period of time
after acquiring such shares without the approval of the Board of Directors.

       Furthermore, the amended and restated stockholders agreement, among other
things,  entitles a four-person committee (presently consisting of Abe Ginsburg,
the  Chairman  of our Executive Committee, Robert Chestnov, our President, Allan
Ginsburg,  our  Chairman, and Howard Ginsburg, our Vice Chairman) to direct  the
voting of the  shares of common stock, now or in the future, owned by parties to
that  agreement, or as to which they have or may have voting power. The right to
direct voting extends to all matters submitted to stockholders of the Company at
any  annual  or special meeting of stockholders or pursuant to a written consent
in  lieu  thereof.  Accordingly,  as  long  as  the parties to the stockholder's
agreement  hold a majority of our common stock, and the "stockholders committee"
may  vote  or  direct  the  vote of these shares, the stockholders agreement may
allow  them  to delay  or prevent a change in control of, or a transaction with,
the Company.

                                    * * * * *

       This  list of risk factors, together with the note set forth above Part I
of  this  Form  10-K  under  the  caption  "Forward  Looking Statements," is not
exhaustive.  For  example,  there  can  be  no  assurance that we have correctly
identified  and  appropriately  assessed  all factors affecting our business, or
that  the publicly available and other information with respect to these matters
is complete and correct.  Additional risks and uncertainties not presently known
to us  or  that we currently believe to be immaterial  also may adversely impact
our business.  Should  any  risks  or  uncertainties develop into actual events,
these  developments  could  have  adverse  effects  on  our  business, financial
condition,  and results of operations. We assume no obligation (and specifically
disclaim  any  such  obligation)  to  update  these  Risk  Factors  or any other
forward-looking  statements  contained  in  this  Form  10-K  to  reflect actual
results,  changes in assumptions or other factors affecting such forward-looking
statements.

Item 1B.   Unresolved Staff Comments.

       Not applicable.

Item 2.    Properties.

       We  own  a  140,000 square foot  facility in West  New York, New  Jersey,
which,  until  May  2007,  housed our executive offices and one of our warehouse
facilities. We have agreed to sell this facility, as described above in "Item 1.
Business"  of  this  Form  10-K  under  the  caption  "Recent Developments."  We
currently  lease  approximately  45,000  square feet of this facility to outside
parties. This rental income is used to defray a portion of the operating cost of
the building  and,  as  such,  is included as an offset to those expenses in our
shipping, selling and administrative expenses.

       As is  also  noted above under the caption "Recent Developments" in "Item
1. Business"  of  this  Form  10-K,  we  leased  a new corporate office building
containing  approximately  16,000  square feet, and have relocated the Company's
executive offices from West New York, NJ to Maywood, NJ. The lease has a 10-year
term,  and  grants to the Company an option to purchase the building at any time
during  the term of the lease at a purchase price not to exceed $3,075,000, plus
increases based  on  a  multiple of the consumer price index. We currently lease
approximately 4,000 square feet of this facility to outside

                                        7
<PAGE>

parties. This rental income is used to defray a portion of the operating cost of
this  building  and,  as such, is included as an offset to those expenses in our
shipping, selling and administrative expenses.

       We  also  lease  five  other  office  and  showroom  facilities, totaling
approximately  32,000  square  feet,  in  New York City,  as  well as a shipping
facility  in  Medley,  Florida  for  our Topsville operations with approximately
35,000  square  feet  of  warehouse  and  office  space.  We  refer  to  Note D,
"Commitments   and  Contingencies,"  of  the  Notes  to  Consolidated  Financial
Statements on  page  F-13 of this Form 10-K for additional information about our
commitments under the terms of non-cancelable leases.

       In  addition, and we noted in "Item 1. Business" above, our international
operations consist of  three leased offices in Hong Kong, Shanghai and Don Guan,
China, aggregating approximately 18,000 square feet.

Item 3.    Legal Proceedings.

       (a) We are not a party to, nor is any of our property the subject of, any
material pending legal proceeding.

       (b) No material pending legal proceeding was terminated during the three-
month period ended June 30, 2007.

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

       None

Executive Officers of the Registrant

       Our  executive  officers  are  listed  below.  All executive officers are
elected  at the annual meeting or at interim meetings of the Board of Directors,
and  hold  their  offices,  at the pleasure of the Board of Directors, until the
next  annual  meeting  of  the Board and the election and qualification of their
respective  successors.  No  arrangement  or  understanding  exists  between any
executive  officer  and any other person pursuant to which the executive officer
was elected.

<TABLE>
<CAPTION>
       Name                                       Age   Position and Period Served
       ----                                       ---   --------------------------
       <S>                                         <C>  <C>
       Abe Ginsburg...........................     90   Chairman  of  the Executive Committee
                                                        for more  than  the past  five  years
       Allan Ginsburg.........................     65   Chairman of the Board  for more  than
                                                        the past five years
       Robert Chestnov........................     59   President and Chief Executive Officer
                                                        for more  than  the  past  five years
       Howard Ginsburg........................     65   Vice   Chairman   of  the  Board  and
                                                        President   of  the  Company's  Shane
                                                        Handbag  Division  for  more than the
                                                        past five years
       Anthony Christon.......................     62   Chief Financial Officer for more than
                                                        the past five years
</TABLE>

                                        8
<PAGE>

                                     PART II.
                                     --------

Item 5.    Market  for  the  Registrant's  Common Equity, Related Stockholder
           Matters and Issuer Purchases of Equity Securities.

       Common Equity and Related Stockholder Matters

       The  Company's  common stock, $1.00 par value per share, is traded on the
American  Stock  Exchange  (Symbol: "JLN").   The following table sets forth the
high  and  low  closing  sales  prices  for our common stock, as reported by the
American Stock Exchange, for each quarterly period during our fiscal years ended
June 30, 2007 and 2006.

<TABLE>
<CAPTION>
      Fiscal Year Ended June 30, 2007                     High          Low
      -------------------------------                    ------        ------
      <S>                                                 <C>           <C>
      First Quarter                                      $ 7.70        $ 7.30
      Second Quarter                                      11.80          7.70
      Third Quarter                                       14.25         10.36
      Fourth Quarter                                      12.03          8.50

<CAPTION>
      Fiscal Year Ended June 30, 2006                     High          Low
      -------------------------------                    ------        ------
      <S>                                                 <C>           <C>
      First Quarter                                      $ 7.97        $ 6.34
      Second Quarter                                       8.09          7.25
      Third Quarter                                        8.90          7.40
      Fourth Quarter                                       8.25          7.28
</TABLE>

       We  did  not  pay  cash  dividends  during fiscal 2007 or 2006 and do not
anticipate paying cash dividends in the foreseeable future.

       At  September  7, 2007, there were approximately 455 holders of record of
our common stock.

       Performance Graph

       The  following  graph  compares the cumulative total return of our common
stock  for  the  five fiscal years ended June 30, 2007 with (i) Hemscott, Inc.'s
American  Stock  Exchange  Market  Value  Index,  and (ii) a peer group of three
companies,  consisting  of  Samsonite  Corporation,  Movie  Star, Inc. and Tandy
Brands  Accessories,  Inc.,  which  during  fiscal 2007 either competed with the
Company  in  one of its product categories or was engaged in related industries.
The  comparison assumes an investment of $100 on July 1, 2002 in the Company and
that  all  dividends  were reinvested (the Company paid no dividends during this
period):

                                  9
<PAGE>

COMPARISON OF CUMULATIVE TOTAL

                            [GRAPHIC CHART OMITTED]


              COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
          COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS

<TABLE>
<CAPTION>
                              ------------------------ FISCAL YEAR ENDING ---------------------
COMPANY/INDEX/MARKET           6/28/2002  6/30/2003  6/30/2004  6/30/2005  6/30/2006  6/29/2007
<S>                               <C>        <C>        <C>        <C>        <C>        <C>
Jaclyn Inc.                       100.00     139.66     290.50     363.13     412.85     635.75
Customer Selected Stock List      100.00     117.27     130.82      98.89      97.62     153.61
AMEX Market Index                 100.00     111.40     132.73     146.13     167.95     201.01
</TABLE>


RETURN

       The  performance  graph  shall  not  be deemed  "soliciting material"  or
"filed"  for  purposes  of Section 18 of the Securities Exchange Act of 1934, as
amended,  or  otherwise subject to the liabilities under that section, and shall
not  be  deemed  to  be incorporated by reference into any filing of the Company
under  the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended.

       Issuer Purchases of Equity Securities

       The  following table  provides  certain  information as to repurchases of
shares of our common stock during the three months ended June 30, 2007:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                              (c) Total Number            (d) Maximum Number
                         (a) Total            (b)            of Shares (or Units)       (or Approximate Dollar
                         Number of          Average           Purchased as Part          Value) of Shares (or
                         Shares (or        Price Paid            of Publicly            Units) that May Yet Be
                           Units)        per Share (or         Announced Plans           Purchased Under the
Period                   Purchased           Unit)              or Programs (1)           Plans or Programs
--------------------------------------------------------------------------------------------------------------
<S>                        <C>              <C>                    <C>                         <C>
April 1, 2007-
April 30, 2007             28,557           $13.03                 28,557                      159,831
--------------------------------------------------------------------------------------------------------------
May 1, 2007-
May 31, 2007                 --               --                     --                        131,274
--------------------------------------------------------------------------------------------------------------
</TABLE>

                                  10

<PAGE>

<TABLE>
<S>                        <C>              <C>                    <C>                         <C>
--------------------------------------------------------------------------------------------------------------
June 1, 2007-
June 30, 2007                --               --                     --                        131,274
--------------------------------------------------------------------------------------------------------------
Total                      28,557           $13.03                 28,557                      131,274
--------------------------------------------------------------------------------------------------------------
</TABLE>

---------------

(1)    On  December  3,  2002, we publicly announced that the Board of Directors
       authorized  the  repurchase  of up to 350,000 shares of common stock, and
       that  repurchases  would  be  made  from  time to time in the open market
       and/or  through  privately  negotiated  transactions,  subject to general
       market  and  other  conditions.  In  addition, on September 27, 2006, the
       Board  of  Directors  authorized  the repurchase of an additional 125,000
       shares  of  the  Company's  common  stock.   We  refer  to  "Management's
       Discussion and Analysis of Financial Condition and Results of Operations"
       and to Notes F and K of the Notes to Consolidated Financial Statements on
       pages  F-14  and  F-22 of this Form 10-K for additional information about
       repurchases of shares of common stock.

       Sale of Equity Securities

       On  June  6,  2007, the Company issued 17,500 shares of common stock upon
the  exercise  of a stock option previously granted under a stockholder approved
stock  option  plan.  The  Company received $134,750 in cash from the individual
optionee  exercising  the option in payment of the exercise price for the issued
shares.

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

                                  11
<PAGE>

Item 6.    Selected Financial Data.

       We  have  derived  the  selected  financial data presented below from our
audited  consolidated  financial  statements for the Fiscal Years ended June 30,
2007,  2006,  2005, 2004, and 2003. The selected financial information presented
below  should be read in conjunction with such consolidated financial statements
and notes thereto.

<TABLE>
<CAPTION>
Years ended June 30,                     2007             2006            2005            2004            2003
                                     ------------     ------------    ------------    ------------    ------------
<S>                                  <C>              <C>             <C>             <C>             <C>
Net Sales                            $154,507,000     $126,601,000    $126,477,000    $123,850,000    $108,960,000
Cost of Goods Sold                    118,247,000       95,735,000      97,952,000      92,658,000      83,506,000
                                     ------------     ------------    ------------    ------------    ------------
Gross Profit                           36,260,000       30,866,000      28,525,000      31,192,000      25,454,000
                                     ------------     ------------    ------------    ------------    ------------
Shipping, selling and
administrative expenses                30,573,000       27,574,000      26,172,000      27,979,000      23,620,000
Pension plan settlement (1)             3,089,000
Interest expense                        1,001,000          586,000         639,000         574,000         546,000
Interest income                            (5,000)          (5,000)         (1,000)         (3,000)         (5,000)
Provision (benefit) for income
taxes                                     893,000        1,181,000         666,000       1,184,000         610,000
                                     ------------     ------------    ------------    ------------    ------------
NET EARNINGS                         $    709,000     $  1,530,000    $  1,049,000    $  1,458,000        $683,000
                                     ------------     ------------    ------------    ------------    ------------
Weighted average shares - Basic         2,478,000        2,480,000       2,596,000       2,531,000       2,521,000
Net earnings per common share -
Basic                                $        .29     $        .62    $        .40    $        .58    $        .27
                                     ------------     ------------    ------------    ------------    ------------
Weighted average shares -
Diluted                                 2,528,000        2,557,000       2,702,000       2,687,000       2,547,000
Net earnings per common share -
Diluted                              $        .28     $        .60    $        .39    $        .54    $        .27
                                     ------------     ------------    ------------    ------------    ------------
TOTAL ASSETS                         $ 38,077,000     $ 41,702,000    $ 32,492,000    $ 34,489,000    $ 33,005,000
                                     ------------     ------------    ------------    ------------    ------------
Mortgage Payable - Long-Term
portion                              $  2,387,000     $  2,563,000    $  2,727,000    $  2,880,000    $  3,023,000
                                     ------------     ------------    ------------    ------------    ------------
Stockholders' equity                 $ 19,274,000     $ 19,047,000    $ 16,674,000    $ 17,276,000    $ 16,220,000
                                     ------------     ------------    ------------    ------------    ------------
</TABLE>

--------------

(1) The fiscal 2007  pension plan  settlement  totaling  $3,089,000  ($1,970,000
after tax), in connection with the final settlement distribution to participants
of the  Company's  pension plan,  consists of the  write-off of the  unamortized
pension costs totaling $2,188,000,  plus a final cash contribution to fully fund
the pension plan totaling approximately $901,000.

                                  12
<PAGE>

Item 7.    Management's  Discussion  and  Analysis  of  Financial  Condition and
           Results of Operations.

Overview

       We  are  engaged  in  the  design,  manufacture, distribution and sale of
women's  and  children's  apparel, and vinyl, leather and fabric handbags, sport
bags, backpacks, cosmetic bags, and related products.  Our apparel lines include
women's  loungewear, sleepwear, dresses and sportswear, and lingerie, as well as
infants' and children's clothing.

       Our  products  are  mostly  made to order,  and we market  and  sell  our
products to a range of retailers,  including  general merchandise stores, retail
chain  stores,  department  stores,  cosmetic  companies,  and  other  specialty
retailers.  Our business is subject to seasonal variations. Consistent with what
we believe is the general  pattern associated with sales to the retail industry,
our results of operations  are  somewhat more  meaningful  on a seasonal  basis,
rather  than on a  quarterly  basis.  In that  regard,  our  net  sales  and net
earnings  generally have been  higher  during  the  period from June to November
(which includes  our first fiscal quarter and a portion of our second and fourth
fiscal quarters), during  which time our  customers generally increase inventory
levels in anticipation of both  back-to-school and holiday sales.  Net sales and
net earnings  for the other  months of our fiscal year typically have been lower
due, in part, to the traditional slowdown by our customers immediately following
the winter holiday season.  That trend  has continued  during fiscal 2007 and we
anticipate  this  pattern  to continue in fiscal 2008.  However,  our  quarterly
results of operations  may also  fluctuate significantly as a result of a number
of other  factors, including  the timing  of shipments  to customers and general
economic  conditions.  Accordingly,  comparisons between seasons or quarters may
not necessarily be meaningful, and the results for any one quarter or season are
not  necessarily   indicative  of  future  quarterly  results  or  of  full-year
performance.

       Certain financial highlights of fiscal 2007 were:

       o    Net  sales  increased  $27,906,000  to  $154,507,000  compared  with
            $126,601,000  in fiscal 2006, although gross margins decreased by to
            23.5%, a decrease of .9% from 24.4% last year.

       o    Gross  profit  increased  $5,394,000  to  $36,260,000, compared with
            $30,866,000 in fiscal 2006.

       o    Net  earnings  were  lower  at  $709,000  or  $.28 per diluted share
            (including  a  $3,089,000  pre-tax  charge for the Company's pension
            settlement, $2,008,000 after-tax), compared with $1,530,000 or $0.60
            per diluted share in the prior fiscal year.

Critical Accounting Policies and Estimates

       The  preparation  of  financial  statements  in conformity with generally
accepted   accounting   principles   requires  the  appropriate  application  of
accounting  policies, many of which require us to make estimates and assumptions
about  future  events  and  their impact on amounts reported in our consolidated
financial  statements  and  related notes.  Since future events and their impact
cannot  be  determined with certainty, the actual results will inevitably differ
from  our  estimates.  Such  differences  could  be material to the consolidated
financial statements.

       We  believe  that  application  of accounting policies, and the estimates
inherently  required by the policies, are reasonable.  These accounting policies
and  estimates  are  periodically  reevaluated,  and  adjustments  are made when
facts  and  circumstances  dictate  a  change.  Historically,  we have found the

                                  13
<PAGE>

application of  accounting  policies to be appropriate, and actual  results have
not differed materially from those determined using necessary estimates.

       Our  accounting   policies  are  more  fully  described  in  Note  A   to
the  consolidated financial statements.  We  have  identified  certain  critical
accounting policies that are described below.

       Merchandise  inventory. Our merchandise inventory is carried at the lower
of cost (on a first-in, first-out basis) or market.  We write down our inventory
for  estimated  obsolescence  or  unmarketable  inventory based upon assumptions
about future demand and market conditions.  If actual market conditions are less
favorable than those projected by management, additional  inventory  write-downs
may  be  required.  Adjustments  to earnings resulting from changes in estimates
have been insignificant for the years ended June 30, 2007, 2006 and 2005.

       Allowance  for  doubtful accounts.  We  maintain  allowances for doubtful
accounts  for  estimated losses resulting from the inability of our customers to
make required  payments,  and  we also maintain accounts receivable insurance on
certain  of  our  customers. If the financial condition of our customers were to
deteriorate,  resulting  in  an  impairment  of  their ability to make payments,
additional allowances may be required. We have not incurred significant bad debt
account expenses for the years ended June 30, 2007, 2006 and 2005.

       Market  development  accruals.  We  estimate  reductions  to  revenue for
customer programs and incentive offerings, including special pricing agreements,
price  protection,  promotions  and  other  volume-based  incentives. If  market
conditions  were  to decline, we may take actions to increase customer incentive
offerings  possibly resulting in an incremental reduction of revenue at the time
the incentive  is  offered. We review and refine these estimates on a  quarterly
basis based on current experience, trends and our customers'  performance. Sales
discounts, returns,  marketing  programs and allowances were 6.2%, 5.4% and 5.8%
of sales for the years ended June 30, 2007, 2006 and 2005, respectively.

       Goodwill.  We  evaluate  goodwill annually or whenever events and changes
in circumstances suggest that the carrying amount may  not  be  recoverable.  In
making  this  assessment,  we  rely  on a  number of factors including operating
results, business plans, economic considerations, anticipated future  cash flows
and marketplace data.  A change  in  these  underlying  assumptions  may cause a
change in the estimated fair value.  If we estimated fair value to  be less than
the carrying value, we would  be required  to  record a charge that would reduce
earnings.

       Income taxes. Income taxes are accounted for under Statement of Financial
Accounting  Standards  ("SFAS")  No.  109,  "Accounting  for  Income Taxes."  In
accordance with SFAS No. 109, deferred tax assets and liabilities are recognized
for the  future  tax  consequences  attributable to differences in the financial
statement  carrying  amount  of  existing  assets  and  liabilities   and  their
respective  tax bases,  as measured by enacted tax rates that are expected to be
in  effect  in  the  periods  when  the  deferred tax assets and liabilities are
expected  to  be  settled or  realized.  Significant  judgement is  required  in
determining the provisions for income taxes.

       We  establish  the  provisions  based  upon  management's  assessment  of
exposure associated  with  permanent  tax  differences, tax credits and interest
expense  applied  to  temporary difference  adjustments.  The tax provisions are
analyzed periodically  (at least annually) and  adjustments  are  made as events
occur that warrant adjustments to those provisions.

                                       14
<PAGE>

Liquidity and Capital Resources

Cash Flows

Certain information about our financial position as of June 30, 2007, 2006 and
2005 is presented in the following table:

<TABLE>
<CAPTION>
                                                                   June 30,
                                                  -------------------------------------------
                                                      2007           2006             2005
                                                  -----------     -----------     -----------
    <S>                                           <C>             <C>             <C>
    Cash and Cash Equivalents                     $ 1,349,000     $   932,000     $   893,000
    Working Capital                               $14,524,000     $16,953,000     $13,286,000
    Long-term debt - Mortgage Payable             $ 2,387,000     $ 2,563,000     $ 2,727,000
    Stockholders' equity                          $19,274,000     $19,047,000     $16,674,000
</TABLE>

Cash flows provided by (used in) operating, investing and financing activities
for the years ended June 30, 2007, 2006 and 2005 were as follows:

<TABLE>
<CAPTION>
                                                                   June 30,
                                                  -------------------------------------------
                                                      2007           2006             2005
                                                  -----------     -----------     -----------
    <S>                                           <C>             <C>              <C>
    Operating activities                          $ 9,891,000     $(3,118,000)    $  (587,000)
    Investing activities                          $(3,158,000)    $  (172,000)    $  (449,000)
    Financing activities                          $(6,316,000)    $ 3,329,000     $ 1,303,000
    Net increase in cash                          $   417,000     $    39,000     $   267,000
</TABLE>

       The net  increase  in cash and cash equivalents for the fiscal year ended
June  30,  2007  of $417,000  was the  result  of  funds  provided  by operating
activities totaling $9,891,000, offset by funds  used in investing activities of
$3,158,000, and by funds used in financing activities  totaling $6,316,000.  Net
cash  provided  by  operating  activities  resulted primarily from a decrease in
accounts  receivable of $7,240,000 (reflecting  primarily  better collections of
accounts receivable of a  significant customer, as well as a greater  proportion
of  direct ship business which has shorter payment terms, in  the fourth quarter
of fiscal  2007 compared  to  the  prior  comparable period), the  write-off  of
unamortized pension costs relating to the final  settlement distribution  by the
Company  to participants in  its  pension plan  ($2,188,000),  net earnings from
operations  of  $709,000,  and  an  increase  in   accounts  payable  and  other
liabilities totaling  $1,266,000, offset  somewhat by  an  increase in inventory
totaling $2,063,000 (mostly  attributable  to anticipated higher  first  quarter
sales for fiscal 2008 versus the first quarter in 2007).

       Net  cash  used in  investing  activities  totaling  $3,158,000 primarily
reflects the $2,200,000 mortgage  receivable and a $200,000 option deposit given
with respect to the Company's  new  executive  office  building  in Maywood, New
Jersey, and other property and equipment purchase totaling $706,000.  Funds used
in financing activities  were, for  the most part, related to a net repayment of
bank borrowing  under the Company's bank line of credit totaling $5,670,000, the
repurchase of the  Company's  Common Stock under the  Company's stock repurchase
program  totaling $768,000, and  payments  on  our outstanding mortgage totaling
$164,000, offset by $229,000 in stock option proceeds.

       In September 2006, the Company amended its existing bank credit facility.
The amended facility, which expires  December 1, 2008,  provides for  short-term
loans and the issuance of  letters  of  credit in  an aggregate  amount  not  to
exceed $50,000,000.  Based  on a borrowing formula, the Company may borrow up to
$30,000,000  in short-term  loans  and  up to  $50,000,000  including letters of
credit.  The borrowing  formula  allows  for  an additional  amount of borrowing
during  the Company's peak borrowing season from June to October.  Substantially
all of the Company's assets  are  pledged  to the bank as collateral (except for
the West New York, New  Jersey  facility, which has been separately mortgaged as
noted below). The

                                       15
<PAGE>

line of credit requires that the Company maintain a minimum  tangible net worth,
as defined, and imposes certain debt to  equity ratio  requirements. The Company
was in  compliance with all  applicable financial covenants as of June 30, 2007.
As of June 30, 2007, borrowing on the short-term line of  credit was $4,515,000,
and at that date the  Company had $19,626,000 of  additional availability (based
on  the  borrowing  formula) under  the  credit  facility. At June 30, 2007, the
Company was  contingently  obligated on open letters of credit with an aggregate
face amount of approximately $16,558,000.  Borrowing  during the year was at the
bank's prime, or below, at the option of the  Company.  The bank's prime rate at
June 30, 2007 was 8.25%.

       During fiscal 2007, the average amount outstanding under  the  short-term
line  was $10,467,000 with a  weighted average interest  rate  of 7.71%.  During
2006, the average  amount  outstanding  under the short-term line was $7,289,000
with a weighted  average interest  rate of 6.49%. The maximum amount outstanding
during   fiscal  2007  and   fiscal  2006  was   $20,385,000  and   $13,280,000,
respectively.

       In  August 2002, the Company consummated a mortgage loan in the amount of
$3,250,000.  The  financing is  secured  by a mortgage of the Company's West New
York, New Jersey headquarters and warehouse facility (see  the information under
the caption "Item 2. Properties").  The mortgage loan  bears interest at a fixed
rate of 7% per annum.  The financing has a fifteen-year term, but is callable by
the bank lender  at any time after September 1, 2008 and  may be  prepaid by the
Company, along  with a prepayment fee,  from time to time during the term of the
financing. At June  30, 2007, the outstanding  balance  of the mortgage loan was
$2,563,000.

       The  Company believes that funds provided by operations, existing working
capital, and  the  Company's bank line of  credit should  be  sufficient to meet
working capital  needs for the next twelve months.  Reference is made to Note E,
"Credit Facilities,"  of the Notes to Consolidated Financial Statements  on page
F-13  of  this  Form 10-K  for additional information about the Company's credit
lines.

       There  were no  material commitments for capital expenditures at June 30,
2007.

       In  December  2002,  Company  announced  that  the  Board  of   Directors
authorized  the  repurchase by  the  Company  of  up  to  350,000  shares of the
Company's common stock. On September 27, 2006, the Board of Directors authorized
an increase in  the Company's  common stock  repurchase program of an additional
125,000 shares. Purchases  may be  made from time to time in the open market and
through privately negotiated  transactions,  subject to general market and other
conditions.  The Company generally finances these repurchases from its own funds
from operations and/or from  its bank credit  facility. During fiscal 2007, 2006
and  2005  the  Company  repurchased  41,105, 57,838  and 19,923  shares  of the
Company's common  stock at  a  cost of  approximately,  $504,000,  $450,000  and
$148,000,  respectively.  As of June 30, 2007, the Company has purchased 343,726
shares of its common stock at a cost of approximately $1,966,000.

Contractual Obligations and Commercial Commitments

       To  facilitate  an  understanding  of  our  contractual  obligations  and
commercial commitments, the following data is provided as of June 30, 2007:

                                        16
<PAGE>

                             Payments Due by Period
                             ----------------------

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Contractual Obligations (1)          Total        Less than         2-3 Years       4-5 Years       After
                                                    1 Year                                         5 years
------------------------------------------------------------------------------------------------------------
<S>                               <C>              <C>              <C>            <C>            <C>
Notes Payable (2)                 $ 4,515,000      $4,515,000       $       --     $       --     $      --
------------------------------------------------------------------------------------------------------------
Mortgage Payable                    2,563,000         176,000          393,000        452,000      1,542,000
------------------------------------------------------------------------------------------------------------
Royalties                             183,000          64,000          119,000            ---            ---
------------------------------------------------------------------------------------------------------------
Operating Leases                    5,476,000       1,462,000        1,744,000        834,000      1,436,000
------------------------------------------------------------------------------------------------------------
Total Contractual Obligations     $12,737,000      $6,217,000       $2,256,000     $1,286,000     $2,978,000
------------------------------------------------------------------------------------------------------------
</TABLE>

                   Amount of Commitment Expiration Per Period
                   ------------------------------------------

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Other Commercial                     Total           Within       2-3 Years        4-5 Years         After
  Commitments                       Amounts          1 Year                                         5 Years
                                   Committed
------------------------------------------------------------------------------------------------------------
<S>                               <C>              <C>               <C>              <C>           <C>
Letters of Credit                 $16,558,000      $16,558,000      $       --     $       --     $       --
------------------------------------------------------------------------------------------------------------
Total Other
------------------------------------------------------------------------------------------------------------
Commercial Commitments            $16,558,000      $16,558,000      $       --     $       --     $       --
------------------------------------------------------------------------------------------------------------
</TABLE>

------------------------

   (1) We  enter  into  arrangements  with vendors to purchase merchandise up to
       three  months  in advance of expected delivery.  These purchase orders do
       not  contain  any  significant termination payments or other penalties if
       cancelled.

   (2) The  notes  payable  balance  does  not  include  any  amounts for future
       interest  costs.  The  outstanding  balance  under our short-term line of
       credit at September 25, 2007 was $12,835,000.

       The Company  made a final contribution of  approximately  $901,000 to its
defined  benefit  pension plan  during the fiscal year ending June 30, 2007.  As
noted  above, the pension plan has been  terminated and the Company made a final
settlement  distribution to pension  plan participants during the second half of
fiscal 2007.

Off-Balance Sheet  Arrangements

       Except  as  described below, the Company  has  not created, and  is not a
party to,  any  special-purpose or off-balance sheet entities for the purpose of
raising  capital,  incurring  debt  or  operating  the  Company's business.  The
Company does not have any  arrangements or relationships with entities  that are
not consolidated  into  the  financial statements that are reasonably likely  to
materially  affect  the  Company's  liquidity  or  the  availability  of capital
resources.

       On August 22, 2006,  the Company entered into a lease agreement for a new
corporate  office  building, and  relocated the Company's executive offices from
West  New York, NJ to  Maywood, New  Jersey during fiscal 2007.  The lease has a
10-year  term, and grants  to the  Company an option to purchase the building at
any  time  during the  term of the lease  at a  purchase  price  not  to  exceed
$3,075,000, plus increases based on a multiple of the consumer price index.  The
lessor,  195  Spring  Valley  Associates,  LLC,  (the "Lessor"),  purchased  the
corporate  office building at  a  closing, which also took place in August 2006.
The Company  provided  the Lessor with $2,200,000 in mortgage financing, secured
by a first

                                        17
<PAGE>

priority  mortgage in  favor of the  Company on the  land, office  building, and
other  customary rights of the mortgagor.  The Company placed a deposit with the
Lessor in the  amount of  $200,000 in connection with the option to purchase the
property.   For accounting purposes, the Company determined that the Lessor is a
variable  interest  entity and the Company is its primary beneficiary as defined
by  FASB Interpretation No. 46(R), "Consolidation of Variable Interest Entities"
("FIN 46(R)").   Accordingly,  the  financial  statements  of  the  Lessor  were
consolidated with those of the Company.

Results of Operations

2007 Compared to 2006

       Net  sales  for  fiscal  2007  totaled   $154,507,000,  an   increase  of
$27,906,000, or 22.0%, compared to the prior fiscal year.  The increase reflects
significantly  higher children's apparel and premium incentive net sales.  Sales
by category were as follows:

       Net  sales  for the Apparel category in fiscal 2007 were $100,007,000, an
increase  of  $18,833,000, or 23.2% from the prior fiscal year.  The increase in
net sales was primarily  due to increases in our children's apparel business due
to expanded programs  with one customer as a result of recent strong performance
of our product offerings at retail, and additional business from our "Messages
from the Heart" license.

       Net sales for the  Handbags  category in fiscal 2007 were $54,500,000, or
20%  higher than  the prior  fiscal  year's  total  of  $45,427,000.   The sales
increase is mostly attributable to  increased sales  for  the  premium incentive
business reflecting  continued  growth  with  its most significant customer, not
offset by somewhat lower net sales in our other handbag division.

       Gross  margins  were  23.5% in fiscal 2007 compared to 24.4% in 2006. The
decrease in  gross  margins  is  a function of lower apparel and handbag margins
this fiscal year as described below. Gross margins by category were as follows:

       Gross margin for the Apparel category in 2007 decreased to 26.8% compared
to 28% in 2006.  This  1.2  percentage point decrease was primarily attributable
to much lower  gross  margins  in  the  women's  sleepwear  business,  primarily
resulting  from  a  product mix. In addition,  we  experienced  higher  customer
allowances in our  children's apparel business which caused slightly lower gross
margins.

       Gross margin  for  the  Handbags  category  in  2007  decreased  to 17.4%
compared  to  17.9%.  This  decrease  was  mainly due to  much lower competitive
margins  in our  premium incentive  business reflecting marketplace competition,
which resulted in  the Company having to reduce its gross profit margin in order
to  maintain  sales. While  not offsetting this decrease, we  experienced higher
handbag  business  margins  due  to  favorable  product  mix  and lower customer
allowances in the current fiscal year compared to fiscal 2006.

       As  a  percentage of  net  sales,  shipping,  selling  and administrative
expenses declined to 19.8% for the fiscal year ended June 30, 2007 from 21.8% in
fiscal 2006. However, shipping, selling and administrative expenses increased by
$2,999,000  in  fiscal  2007  to  $30,573,000,  mainly  due  to  higher  selling
commissions  and  sales  related costs totaling $1,596,000 relating to increased
sales  volume  in  the  2007  fiscal  year, higher  product development costs of
$1,112,000  for  both  children's  apparel  and  premium  business  relating  to
potential  additional future  business,  and  a $261,000 increase in general and
administrative costs, principally due to higher compensation costs. In addition,
royalty expense was

                                        18
<PAGE>

$111,000 higher than fiscal 2006 due to certain minimum royalty commitments that
were not met and  had to be  expensed.  Finally,  higher  shipping and warehouse
costs  totaling $56,000  related to the  increased level of sales in the current
fiscal year compared to fiscal 2006.

       As a result of the termination and final pension plan distribution to the
plan's  participants, the Company  incurred a one-time pretax pension settlement
charge totaling  approximately  $3,089,000 ($1,970,000 after tax) for the fiscal
year ended  June 30, 2007, consisting of a non-cash portion  totaling $2,188,000
to  write  off  unamortized  prepaid pension costs and a final cash contribution
totaling $901,000.

       Our  results  for  fiscal  2007  also include a fourth quarter reserve of
approximately  $284,000  relating  to  a  product  which  was  manufactured by a
foreign,  third-party  supplier  and  which  did not meet our quality standards.
This  reserve relates to the estimated costs of repairing or replacing a portion
of  this  product shipped during the fourth quarter of fiscal 2007.  The Company
anticipates  that the total cost of repair and replacement (the balance of which
we  intend  to ship in fiscal 2008) may approximate $1,000,000 and, accordingly,
our  fiscal  2008  earnings  may be adversely affected by an amount equal to the
remaining actual costs of repair or replacement.

       Interest  expense  was  $1,001,000, an increase of $415,000 from the last
fiscal  year, primarily the result of about a 1.2% higher average borrowing cost
in the current  fiscal year, coupled with a higher level of average borrowing to
finance the increase in sales volume in fiscal 2007 compared to fiscal 2006.

       The Company  experienced a 55.7 % effective tax rate compared to 43.6% in
fiscal 2006.  The primary  reason for the increase in the effective rate results
from the decline in  earnings  relating to the  $3,089,000  pre-tax pension plan
settlement  charge  to  earnings  discussed  above,  resulting in the  Company's
inability to utilize  certain  state  net operating  loss carry-forwards and the
write-off of other deferred tax assets.

       Net earnings of $709,000 for the fiscal year ended June 30, 2007 compared
to  $1,530,000 in the  prior  fiscal year.  This year's lower net  earnings were
primarily  due to the fiscal 2007 third quarter impact of the charge to earnings
relating  to the  pension plan settlement and the resulting higher effective tax
rate discussed above.

2006 Compared to 2005

       Net sales for  fiscal 2006 totaled $126,601,000, an increase of $124,000,
or .1%, compared to fiscal 2005. Sales by category were as follows:

       Net sales for the Apparel  category  in  fiscal  2006 were $81,174,000, a
decrease of $6,542,000, or 7.5%, compared to fiscal 2005. The sales decrease for
this  category was primarily due to a $10,574,000 decrease in net sales from the
women's sleepwear business, which resulted mostly from decreased orders from one
customer  based  on prior season sell-through of both private label and licensed
product.  This decrease was offset, in part, by a $6,816,000, or 16.4%, increase
in sales of children's apparel reflecting a higher level of reorders from one of
our  customers  due  to  favorable  prior  sales  of similar items.  Our catalog
business continued lower demand for mail-order apparel with a $2,784,000 decline
in net sales in fiscal 2006 compared with the prior year.

       Net sales for the  Handbags  category were $45,427,000 for the year ended
June 30, 2006,  an increase of $6,666,000, or about 17% above the same period in
the prior  year,  reflecting a  $3,580,000  increase  in the  premium  incentive
business as a result of increased orders by one of its significant

                                        19
<PAGE>

customers,  and  a  $3,086,000  increase  in our handbag  business  attributable
to an increase in sales of denim related products.

       Overall  gross  margins were 24.4% in 2006 compared to 22.6% in the prior
fiscal year.

       Gross margins by category were as follows:

       Gross  margin  for  the  Apparel  category in 2006 improved to 28.0% from
25.6%  in  the  prior  fiscal  year. The  2.4  percentage  point improvement was
primarily  attributable  to higher margins contributed by the children's apparel
business  due  to  a  favorable  product  mix,  as well as higher margins in the
women's  sleepwear  business, attributable to approximately $10 million of lower
margin business from one customer which was not reordered in fiscal 2006.

       Gross  margin  for  the  Handbags  category  increased  to  17.9% in 2006
compared  to  15.7%  in  the similar prior year.  The higher gross margin in the
handbag  business,  for  the  most  part, reflects both product mix and improved
costing measures in both the premium incentive and the handbag business.

       Shipping,  selling and administrative expenses increased by $1,402,000 in
fiscal  2006 to $27,574,000 (21.8% of net sales).  The prior fiscal year totaled
$26,172,000  (20.7%  of  net sales).  A significant part of the net increase was
attributable   to  higher  compensation  costs  (approximately  $1,400,000)  and
increased  product development costs ($734,000) relating to further expansion of
our premium and children's apparel businesses, as well as higher royalty expense
($17,000)  relating  to additional licensed product sales.  These increases were
not  fully  offset  by lower shipping and warehousing costs ($681,000) resulting
from  a  combination  of  lower  sales volume for one division having relatively
higher  shipping and handling costs and sales mix for another division requiring
lower shipping supplies and temporary help, as well as lower selling commissions
as a result of changes in sales mix (a decrease of $73,000).

       Interest expense was $586,000, a decrease of $53,000 from the last fiscal
year, despite  higher interest rates in fiscal 2006 compared to fiscal 2005. The
net  decreased  level  of borrowing more than offset the higher weighted average
interest  rate  in  the  current  fiscal  year  compared  to  fiscal 2005 and is
primarily  the  reason  for  the  lower  interest  expense.  Lower  borrowing is
attributable  to  the  timing  of  sales  this year with resulting improved cash
flows.

       Net  earnings  of  $1,530,000  for  the  fiscal  year ended June 30, 2006
compared to net earnings of $1,049,000 in the prior year. This year's higher net
earnings  were  primarily  due  to  improved  gross  margins  and lower interest
expense,  not  completely  offset by higher shipping, selling and administrative
expenses, as discussed above.

Recently Issued Accounting Standards:

       In  June  2006,  the  FASB  issued FIN 48, "Accounting for Uncertainty in
Income  Taxes - an  interpretation  of  FASB Statement 109," which clarifies the
accounting  for  uncertainty  in  income  taxes  recognized  in  an enterprise's
financial statements in accordance with SFAS 109, "Accounting for Income Taxes."
FIN  48  prescribes  a  recognition  threshold and measurement attribute for the
financial  statement  recognition  and  measurement  of  a tax position taken or
expected  to  be  taken in a tax return. FIN 48 is effective for the fiscal year
beginning July 1, 2007. The Company is currently evaluating the impact of FIN 48
on the Company's consolidated financial statements.

       In  September  2006, the FASB issued SFAS 157, "Fair Value Measurements."
SFAS 157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles

                                       20
<PAGE>

and  expands  disclosures  about  fair  value  measurements.  This  statement is
effective  for  the fiscal year beginning on July 1, 2007.  The Company does not
expect  the  adoption  of  SFAS  157  to have a material impact on the Company's
consolidated financial statements.

       In  September  2006, the FASB issued SFAS 158, "Employers' Accounting for
Defined Benefit  Pension  and Other Postretirement Plans -- an amendment of FASB
Statements  No.  87, 88, 106  and  132(R)."  SFAS  158  requires  an employer to
recognize  the  funded  status  of  a  benefit  plan, measured as the difference
between  plan  assets at fair value and the projected benefit obligation, in its
statement  of  financial position. SFAS 158 also requires an employer to measure
defined  benefit  plan  assets  and obligations as of the date of the employer's
fiscal  year-end statement of financial position. This statement is effective as
of the end of the fiscal year ended June 30, 2007, except for the requirement to
measure  plan  assets  and  obligations  as of the date of the employer's fiscal
year-end statement of financial position, which is effective for the fiscal year
ending  June 30, 2009. As noted in Note I, the Company terminated their defined-
benefit  pension  plan  effective  January  31, 2006  and  the  final settlement
distribution  was  made  on March 29, 2007 as such, the adoption of SFAS 158 did
not have an impact on the Company's consolidated financial statements.

       In  September  2006, the SEC issued Staff Accounting Bulletin ("SAB") No.
108,  "Considering  the  Effects  of  Prior  Year Misstatements When Quantifying
Misstatements  in  Current  Year  Financial Statements." SAB 108 states that SEC
registrants  should  use  both  a balance sheet approach and an income statement
approach  when  quantifying  and  evaluating  the materiality of a misstatement,
contains  guidance  on  correcting  errors  under the dual approach and provides
transition  guidance  for  correcting errors existing in prior years. SAB 108 is
effective  for  annual  financial statements covering the fiscal year ended June
30, 2007.  The  adoption  of  SAB  108  did  not have an impact on the Company's
consolidated financial statements.

       In February  2007,  the FASB  issued SFAS 159, "The Fair Value Option for
Financial Assets  and  Financial  Liabilities -- Including  an amendment of FASB
Statement  No. 115."  SFAS 159  permits  entities  to  choose  to  measure  many
financial instruments  and certain other items at fair value.  This statement is
effective for  the Company's fiscal  year beginning July 1, 2008. The Company is
currently evaluating  the  impact  of  SFAS  159  on the Company's  consolidated
financial statements.

Item 7A.     Quantitative and Qualitative Disclosures About Market Risk.

       In  the  normal course of doing business, we are exposed to interest rate
change  market  risk.  Since  our  borrowing  patterns  are cyclical, we are not
dependent  on borrowing throughout the year.  Nevertheless, a sudden increase in
interest  rates  (which under our bank line of credit is at the prime rate or at
LIBOR  plus  200 basis points) may, especially during our peak borrowing period,
potentially  have a significant negative impact on our results of operations. We
estimate  that a 100 basis point fluctuation in applicable market interest rates
would  increase  or decrease interest expense by approximately $105,000 based on
our average commercial borrowing levels during fiscal 2007.

       We  have  not used, and currently do not anticipate using, any derivative
financial  instruments.  In  addition,  we  have not been materially impacted by
fluctuations  in  foreign  currency  exchange rates, as substantially all of our
business is transacted in, and is expected to continue to be transacted in, U.S.
dollar-based currencies.

                                       21
<PAGE>

Item 8.      Financial Statements and Supplementary Data.

       Financial Statements
       --------------------

       The  report  dated  September  26, 2007  of  Deloitte  &  Touche  LLP, an
independent  registered  public  accounting  firm,  on  the consolidated balance
sheets  of  Jaclyn,  Inc.  and subsidiaries as of June 30, 2007 and 2006 and the
related   consolidated   statements   of   earnings,  stockholders'  equity  and
comprehensive earnings (loss), and cash flows for each of the three fiscal years
in  the  period  ended  June  30, 2007,  and  Notes  to  Consolidated  Financial
Statements, appear on pages F-2 through F-23 of this Form 10-K.

       Supplementary Data
       ------------------

       Selected  unaudited  quarterly  financial data for the fiscal years ended
June  30, 2007  and  June 30, 2006  is set forth at Note L, "Unaudited Quarterly
Financial Data," on page F-23 of this Form 10-K.

Item 9.      Changes  in  and  Disagreements  with Accountants on Accounting and
             Financial Disclosure.

       Not applicable.

Item 9A.     Controls and Procedures.

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

Item 9A(T).  Controls and Procedures.

       Not applicable.

Item 9B.     Other Information.

       Not applicable.

                                    PART III.
                                    ---------

Item 10.     Directors and Executive Officers of the Registrant.

       The  information  required  by  this item (other than the information set
forth  below,  and  certain  information  as  to  our  executive officers, which
information  is  set  forth  after  Part I   of this Form 10-K under the caption
"Executive  Officers  of the Registrant") is incorporated herein by reference to
our  definitive   Proxy  Statement  relating  to  the  2007  Annual  Meeting  of
Stockholders  to  be  filed  pursuant  to  Regulation  14A  under the Securities
Exchange Act of 1934, as amended.

       The  Company  has  adopted  a  code of ethics for its principal executive
officer,   principal   financial   officer,   principal  accounting  officer  or
controller, and persons performing similar functions.

                                       22
<PAGE>

Item 11.     Executive Compensation.

       The information required by this item is incorporated herein by reference
to  our  definitive  Proxy  Statement  relating  to  the  2007 Annual Meeting of
Stockholders  to  be  filed  pursuant  to  Regulation  14A  under the Securities
Exchange Act of 1934, as amended.

Item 12.     Security Ownership of Certain Beneficial Owners and Management.

       The information required by this item is incorporated herein by reference
to  our  definitive  Proxy  Statement  relating  to  the  2007 Annual Meeting of
Stockholders  to  be  filed  pursuant  to  Regulation  14A  under the Securities
Exchange Act of 1934, as amended.

Item 13.     Certain Relationships and Related Transactions.

       The information required by this item is incorporated herein by reference
to  our  definitive  Proxy  Statement  relating  to  the  2007 Annual Meeting of
Stockholders  to  be  filed  pursuant  to  Regulation  14A  under the Securities
Exchange Act of 1934, as amended.

Item 14.     Principal Accountant Fees and Services.

       The information required by this item is incorporated herein by reference
to  our  definitive  Proxy  Statement  relating  to  the  2007 Annual Meeting of
Stockholders  to  be filed  pursuant  to  Regulation  14A  under  the Securities
Exchange Act of 1934, as amended.

                                    PART IV.
                                    --------

Item 15.     Exhibits and Financial Statement Schedule.

(a)    The  following  financial  statements,  financial  statement schedule and
exhibits are filed as part of this report:

       (1)   Financial Statements:
             ---------------------

             Report of Independent Registered Public Accounting Firm

             Consolidated Balance Sheets -- June 30, 2007 and 2006

             Consolidated Statements of Earnings -- for the years ended June 30,
             2007, 2006 and 2005

             Consolidated  Statements  of Cash Flows -- for the years ended June
             30, 2007, 2006 and 2005

             Consolidated  Statements  of Stockholders' Equity and Comprehensive
             Earnings (Loss) -- for the years ended June 30, 2007, 2006 and 2005

             Notes to Consolidated Financial Statements

       (2)   Financial Statement Schedule:
             -----------------------------

             Schedule II - Valuation and Qualifying Accounts

             All  other  schedules  are  omitted   because   they   are   either
             inapplicable, not  required, or because the required information is
             included in the consolidated financial statements or notes thereto.

                                       23
<PAGE>

       (3)   Exhibits:  Exhibits are listed in response to Item 15(b) below.
             ---------

(b)    Exhibits:
       ---------

Exhibit No.  Description
-----------  -----------

3(a)         Certificate of Incorporation of the Registrant (incorporated herein
             by  reference  to Exhibit 3(a) to the Registrant's Annual Report on
             Form  10-K,  File  No. 1-5863,  for  the fiscal year ended June 30,
             2005).

3(b)         By-Laws  of  the  Registrant  (incorporated  herein by reference to
             Exhibit  3(b)  to the Registrant's Annual Report on Form 10-K, File
             No. 1-5863, for the fiscal year ended June 30, 1991).

4(a)         Promissory  Note of the Registrant dated August 14, 2002 payable to
             the  order  of Hudson United Bank ("HUB") in the original principal
             amount  of  $3,250,000 (incorporated herein by reference to Exhibit
             4(a)  to  the  Registrant's  Annual  Report  on Form 10-K, File No.
             1-5863, for the fiscal year ended June 30, 2002).

4(b)         Mortgage,  Security  Agreement and Financing Statement dated August
             14, 2002  between  the  Registrant  and HUB (incorporated herein by
             reference to Exhibit 4(b) to the Registrant's Annual Report on Form
             10-K, File No. 1-5863, for the fiscal year ended June 30, 2002).

4(c)         Revolving  Loan  Agreement  dated  December  23, 2002  between  the
             Registrant  and  HUB  (incorporated  herein by reference to Exhibit
             4(c) to  the  Registrant's  Annual  Report  on  Form 10-K, File No.
             1-5863, for the fiscal year ended June 30, 2003).

4(d)         First  Amendment  to  Revolving Loan Agreement, Promissory Note and
             Other  Loan Documents dated October 23, 2003 between the Registrant
             and  HUB  (incorporated  herein by reference to Exhibit 4(d) to the
             Registrant's  Annual  Report on Form 10-K, File No. 1-5863, for the
             fiscal year ended June 30, 2005).

4(e)         Second  Amendment  to Revolving Loan Agreement, Promissory Note and
             Other  Loan Documents dated October 23, 2003 between the Registrant
             and  HUB  (incorporated  herein by reference to Exhibit 4(a) to the
             Registrant's  Quarterly  Report  on Form 10-Q, File No. 1-5863, for
             the fiscal quarter ended March 31, 2005).

10(a)        Third  Amendment  to  Revolving Loan Agreement, Promissory Note and
             Other   Loan   Documents  dated  September  22,  2006  between  the
             Registrant  and  HUB  (incorporated  herein by reference to Exhibit
             10.1  to  the  Registrant's  Current  Report  on Form 8-K, File No.
             1-5863, dated September 26, 2006).

10(b)        2000  Stock  Option  Plan of the Registrant (incorporated herein by
             reference  to  Exhibit  10(b)  to the Registrant's Annual Report on
             Form  10-K,  File No.  1-5863,  for  the fiscal year ended June 30,
             2006).*

10(c)        Second  Amended  and Restated Stockholders' Agreement dated May 12,
             2003 among  the  Registrant  and  the  persons listed on Schedule A
             thereto (incorporated herein by reference to Exhibit U to Amendment
             No. 9  to the Schedule 13D dated May 15, 2003 of

                                       24
<PAGE>

Exhibit No.  Description
-----------  -----------

             Allan   Ginsburg,   Robert   Chestnov,   Abe  Ginsburg  and  Howard
             Ginsburg.).

10(d)        Letter  Agreement  dated  as  of  December  29,  1997  between  the
             Registrant and Robert Chestnov (incorporated herein by reference to
             Exhibit 2.1  to  the  Registrant's Current Report on Form 8-K, file
             No. 1-5863, for the fiscal year ended June 30, 1998).*

10(e)        Purchase  and  Sale  Agreement  dated January 10, 2002 between Mark
             Nitzberg  and  the  Registrant (incorporated herein by reference to
             Exhibit 2.1  to the  Registrant's  Current Report on Form 8-K, File
             No. 1-5863, dated January 24, 2002).

10(f)        Consulting  Agreement  dated January 10, 2002 between Natoosh, LLC,
             Mark  Nitzberg and the Registrant (incorporated herein by reference
             to Exhibit 2.2 to the Registrant's Current Report on Form 8-K, File
             No. 1-5863, dated January 24, 2002).

10(g)        Amendment  to Consulting  Agreement dated December 15, 2003 between
             Natoosh, LLC, Mark Nitzberg and the Registrant (incorporated herein
             by  reference  to  Exhibit   Annual   Report  on  Form  10-K,  File
             No. 1-5863, for the fiscal year ended June 30, 2004).

10(h)        Payment and Indemnification Agreement dated January 10, 2002 by and
             among Capital Factors, Inc., Topsville, Inc., Mark Nitzberg and the
             Registrant  (incorporated herein by reference to Exhibit 2.3 to the
             Registrant's  Current Report  on  Form 8-K, File  No. 1-5863, dated
             January 24, 2002).

10(i)        Consent  and  Joinder  Agreement  dated  August  10, 2004 among the
             Registrant,  Mark  Nitzberg  and  the  persons listed on Schedule A
             thereto (incorporated herein by reference to Exhibit U to Amendment
             No. 12 to the Schedule 13D dated August 16, 2004 of Allan Ginsburg,
             Robert Chestnov, Abe Ginsburg and Howard Ginsburg.).

10(j)        Consent  and  Joinder  Agreement  dated  June  6,  2006  among  the
             Registrant, Bruce Cahill, John Halbreich, and the persons listed on
             Schedule  A  thereto  (incorporated herein  by reference to Exhibit
             10(l)  to  the  Registrant's  Annual  Report  on  Form  10-K,  File
             No. 1-5863, for the fiscal year ended June 30, 2006).

10(k)        Mortgage  dated  as of August 31, 2006 of Spring Valley Associates,
             LLC  in  favor  of the Company (incorporated herein by reference to
             Exhibit 10.01 to  the Registrant's Current Report on Form 8-K, File
             No. 1-5863, dated September 1, 2006).

10(l)        Promissory  Note  dated  as  of  August  31, 2006  of Spring Valley
             Associates,  LLC  in  favor  of the Company (incorporated herein by
             reference  to  Exhibit  10.02 to the Registrant's Current Report on
             Form 8-K, File No. 1-5863, dated September 1, 2006).

10(m)        Agreement  of  Lease  dated  as  of  September  1, 2006 between the
             Company  and  Spring Valley Associates, LLC (incorporated herein by
             reference  to  Exhibit  10.01 to the Registrant's Current Report on
             Form 8-K, File No. 1-5863, dated August 23, 2006).

10(n)        Agreement  to  Sell and Purchase Real Property dated as of June 15,
             2007   between   the   Company   and  5801  Jefferson  Street,  LLC
             (incorporated   herein   by  reference  to  Exhibit  10.01  to  the
             Registrant's  Current  Report  on  Form 8-K, File No. 1-5863, dated
             June 25, 2007).

                                       25
<PAGE>

Exhibit No.  Description
-----------  ----------



14           Code  of  Ethics  for   Finance  Professionals  of  the  Registrant
             (incorporated herein by reference to Exhibit 14 to the Registrant's
             Annual  Report  on  Form 10-K, File No. 1-5863, for the fiscal year
             ended June 30, 2004).

21           Subsidiaries of the Registrant (incorporated herein by reference to
             Exhibit 21 to the Registrant's Annual Report on Form 10-K, File No.
             1-5863, for the fiscal year ended June 30, 2006).

31(a)        Rule  13a-14(a)  Certification  of  Robert  Chestnov, President and
             Chief Executive Officer of the Company.+

31(b)        Rule   13a-14(a)   Certification  of  Anthony  Christon,  Principal
             Financial Officer of the Company.+

32           Certification  Pursuant  to  18  U.S.C.  Section  1350,  as Adopted
             Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+

99(a)        Code of Business Conduct and Ethics of the Registrant (incorporated
             herein  by  reference  to  Exhibit 99(a) to the Registrant's Annual
             Report  on  Form  10-K,  File No. 1-5863, for the fiscal year ended
             June 30, 2004).

----------------------
*Management contract or compensatory plan or arrangement.
+Filed with this Form 10-K.

(c)    Financial Statement Schedules.
       ------------------------------

       Financial Statement Schedules are listed in response to Item 15(a)(2).

                                       26
<PAGE>

                                   SIGNATURES
                                   ----------

       Pursuant  to  the  requirements  of Section 13 or 15(d) 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.

                                        JACLYN, INC.

                                        By: /s/ ALLAN GINSBURG
                                            ------------------------------------
September 26, 2007                          Allan Ginsburg, Chairman
                                            of the Board

       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by  the  following  persons  on  behalf of the
Registrant and in the capacities and on the dates indicated:

<TABLE>
<S>                             <C>                           <C>
/s/ ALLAN GINSBURG              Chairman of the Board         September 26, 2007
--------------------            and Director
ALLAN GINSBURG


/s/ ROBERT CHESTNOV             President, Principal          September 26, 2007
--------------------            Executive Officer and
ROBERT CHESTNOV                 Director


/s/ ANTHONY CHRISTON            Chief Financial Officer,      September 26, 2007
--------------------            Principal Financial and
ANTHONY CHRISTON                Accounting Officer


/s/ ABE GINSBURG                Director                      September 26, 2007
--------------------
ABE GINSBURG


/s/ HOWARD GINSBURG             Director                      September 26, 2007
--------------------
HOWARD GINSBURG


/s/ NORMAN AXELROD              Director                      September 26, 2006
--------------------
NORMAN AXELROD


/s/ MARTIN BRODY                Director                      September 26, 2007
--------------------
MARTIN BRODY


/s/ RICHARD CHESTNOV            Director                      September 26, 2007
--------------------
RICHARD CHESTNOV


/s/ ALBERT SAFER                Director                      September 26, 2007
--------------------
ALBERT SAFER


/s/ HAROLD SCHECHTER            Director                      September 26, 2007
--------------------
HAROLD SCHECHTER
</TABLE>

                                       27
<PAGE>

JACLYN, INC. AND SUBSIDIARIES

TABLE OF CONTENTS                                               PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM         F-1
FINANCIAL STATEMENTS:
   CONSOLIDATED BALANCE SHEETS - AS OF JUNE 30, 2007 AND 2006   F-2
   CONSOLIDATED STATEMENTS OF EARNINGS - FOR THE YEARS ENDED
      JUNE 30, 2007, 2006 AND 2005                              F-3
   CONSOLIDATED STATEMENTS OF CASH FLOWS - FOR THE YEARS
      ENDED JUNE 30, 2007, 2006 AND 2005                        F-4 TO F-5
   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
      COMPREHENSIVE EARNINGS (LOSS)- FOR THE YEARS ENDED
      JUNE 30, 2007, 2006 AND 2005                              F-6
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                   F-7 TO F-23
FINANCIAL STATEMENT SCHEDULE:
VALUATION AND QUALIFYING ACCOUNTS                               F-24

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Jaclyn, Inc.
Maywood, New Jersey

       We have audited the  accompanying consolidated  balance sheets of Jaclyn,
Inc. and subsidiaries as of June 30, 2007 and 2006, and the related consolidated
statements of earnings, stockholders' equity and comprehensive  earnings  (loss)
and  cash  flows for each of the three fiscal years in the period ended June 30,
2007.  Our audits  also included the  consolidated financial  statement schedule
listed in  the Index at Item 15(a)(2).  These financial statements and financial
statement  schedule  are  the  responsibility  of the Company's management.  Our
responsibility  is  to  express  an  opinion  on these  financial statements and
financial statement schedule based on our audits.

       We  conducted  our  audits  in  accordance  with  standards of the Public
Company  Accounting  Oversight  Board (United States).  Those  standards require
that we plan and perform the audit to  obtain reasonable assurance about whether
the financial statements are  free of material misstatement.  The Company is not
required  to  have, nor were  we engaged to perform, an audit  of  its  internal
control over financial reporting.  Our audits included consideration of internal
control over financial reporting as a basis for  designing audit procedures that
are appropriate in the circumstances,  but not for the purpose of  expressing an
opinion on the effectiveness  of the Company's  internal control  over financial
reporting.  Accordingly,  we express  no  such opinion.  An audit  also includes
examining, on a  test  basis,  evidence supporting  the amounts and  disclosures
in the  financial statements,  assessing  the  accounting   principles  used and
significant  estimates  made  by  management, as well as evaluating  the overall
financial  statement  presentation.  We  believe  that  our  audits   provide  a
reasonable basis for our opinion.

       In our opinion, such consolidated financial statements present fairly, in
all  material  respects, the financial position of Jaclyn, Inc. and subsidiaries
as of June 30, 2007 and 2006, and the results of their operations and their cash
flows for each  of the three fiscal years in the period ended June 30, 2007,  in
conformity  with  accounting  principles generally accepted in the United States
of  America.  Also, in  our  opinion,  such  financial  statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole,  presents  fairly  in  all  material  respects  the information set forth
therein.

       As  discussed  in  Note F  to  the consolidated  financial statements, in
fiscal 2006  the Company  adopted Statement  of  Financial  Accounting Standards
No. 123(R), "Share-Based Payment," as revised, effective July 1, 2005.

Deloitte & Touche LLP
New York, New York

September 26, 2007

                                       F-1
<PAGE>

--------------------------------------------------------------------------------
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2007 AND 2006

<TABLE>
<CAPTION>

                                                                      2007              2006
                                                                   -----------       -----------
<S>                                                                <C>               <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS                                          $ 1,349,000       $   932,000
ACCOUNTS RECEIVABLE, LESS SALES RETURNS, SALES
DISCOUNTS, SALES ALLOWANCE, & ALLOWANCE FOR DOUBTFUL
ACCOUNTS: 2007: $3,269,000; 2006: $2,933,000                        17,787,000        25,071,000
INVENTORIES                                                          9,243,000         7,180,000
PREPAID EXPENSES AND OTHER CURRENT ASSETS                              832,000         3,466,000
DEFERRED INCOME TAXES                                                  956,000           396,000
                                                                   -----------       -----------
TOTAL CURRENT ASSETS                                                30,167,000        37,045,000
----------------------------------------------------------------   -----------       -----------
PROPERTY, PLANT AND EQUIPMENT - NET                                  3,921,000           673,000
ASSETS HELD FOR SALE                                                   357,000           357,000
GOODWILL                                                             3,338,000         3,338,000
OTHER ASSETS                                                           271,000           176,000
DEFERRED INCOME TAXES                                                   23,000           113,000
                                                                   -----------       -----------
                                                                   $38,077,000       $41,702,000
                                                                   -----------       -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE - BANK                                               $ 4,515,000       $10,185,000
ACCOUNTS PAYABLE                                                     4,411,000         4,547,000
COMMISSIONS PAYABLE                                                  2,292,000         1,256,000
ACCRUED PAYROLL AND RELATED EXPENSES                                 2,962,000         2,647,000
OTHER CURRENT LIABILITIES                                            1,287,000         1,293,000
MORTGAGE PAYABLE - CURRENT PORTION                                     176,000           164,000
                                                                   -----------       -----------
TOTAL CURRENT LIABILITIES                                           15,643,000        20,092,000
----------------------------------------------------------------   -----------       -----------
MORTGAGE PAYABLE                                                     2,387,000         2,563,000
                                                                   -----------       -----------
DEFERRED INCOME TAXES                                                  325,000                --
                                                                   -----------       -----------
MINORITY INTEREST                                                      448,000                --
                                                                   -----------       -----------
COMMITMENTS AND CONTINGENCIES - NOTE D
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, PAR VALUE $1: AUTHORIZED, 1,000,000
SHARES; ISSUED
AND OUTSTANDING, NONE
COMMON STOCK, PAR VALUE $1:  AUTHORIZED, 5,000,000 SHARES;
ISSUED 2007 AND 2006: 3,368,733 SHARES; OUTSTANDING 2007:
2,468,614; 2006: 2,483,219 SHARES                                    3,369,000         3,369,000
ADDITIONAL PAID-IN CAPITAL                                           9,518,000         9,563,000
RETAINED EARNINGS                                                   13,004,000        12,295,000
                                                                   -----------       -----------
                                                                    25,891,000        25,227,000
LESS: TREASURY STOCK AT COST (2007: 900,119 AND 2006: 885,514
SHARES)                                                              6,617,000         6,180,000
                                                                   -----------       -----------
TOTAL STOCKHOLDERS' EQUITY                                          19,274,000        19,047,000
                                                                   -----------       -----------
                                                                   $38,077,000       $41,702,000
                                                                   -----------       -----------
</TABLE>

--------------------------------------------------------------------------------

The accompanying  notes are  an integral  part of these  consolidated  financial
statements.

                                       F-2
<PAGE>

--------------------------------------------------------------------------------
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JUNE 30, 2007, 2006 AND 2005

<TABLE>
<CAPTION>
                                                                2007             2006              2005
                                                            ----------------------------------------------
<S>                                                         <C>              <C>              <C>
Net sales                                                   $154,507,000     $126,601,000     $126,477,000

Cost of goods sold                                           118,247,000       95,735,000       97,952,000
                                                            ----------------------------------------------
Gross profit                                                  36,260,000       30,866,000       28,525,000
                                                            ----------------------------------------------
Shipping, selling and administrative expenses                 30,573,000       27,574,000       26,172,000
Pension plan settlement                                        3,089,000
Interest expense                                               1,001,000          586,000          639,000
Interest income                                                   (5,000)          (5,000)          (1,000)
                                                            ----------------------------------------------
EARNINGS BEFORE PROVISION FOR INCOME TAXES                     1,602,000        2,711,000        1,715,000
PROVISION FOR INCOME TAXES                                       893,000        1,181,000          666,000
                                                            ----------------------------------------------
NET EARNINGS                                                $    709,000     $  1,530,000     $  1,049,000
                                                            ----------------------------------------------
NET EARNINGS PER COMMON SHARE - BASIC                       $        .29     $        .62     $        .40
                                                            ----------------------------------------------
Weighted average number of shares outstanding - basic          2,478,000        2,480,000        2,596,000
                                                            ----------------------------------------------
NET EARNINGS PER COMMON SHARE - DILUTED                     $        .28     $        .60     $        .39
                                                            ----------------------------------------------
Weighted average number of shares outstanding - diluted        2,528,000        2,557,000        2,702,000
                                                            ----------------------------------------------
</TABLE>

The accompanying  notes are  an integral  part of these  consolidated  financial
statements.

                                       F-3
<PAGE>

--------------------------------------------------------------------------------
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2007, 2006 AND 2005

<TABLE>
<CAPTION>
                                                                      2007              2006              2005
                                                                   ----------------------------------------------
<S>                                                                <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings                                                       $  709,000       $ 1,530,000       $ 1,049,000
Adjustments to reconcile net earnings to net
   cash provided by (used in) operating activities:
   Pension plan settlement - non-cash portion                       2,188,000                --                --
   Depreciation and amortization                                      368,000           300,000           380,000
   Deferred income taxes                                             (145,000)          679,000           222,000
   Stock based compensation                                                             147,000
   Excess tax benefit from stock options                              (57,000)          (29,000)
   Provision for doubtful accounts                                     44,000           (49,000)          (53,000)
   Changes in assets and liabilities:
      Decrease (increase) in accounts receivable                    7,240,000        (5,282,000)       (1,793,000)
      (Increase) decrease in inventories                           (2,063,000)       (3,492,000)        4,189,000
      Decrease (increase) in prepaid expenses and other
         current assets                                               446,000           118,000          (538,000)
      (Increase) in other assets                                     (105,000)          (49,000)           (3,000)
      Increase (decrease) in accounts payable and other
         current liabilities`                                       1,266,000         3,009,000        (4,040,000)
                                                                   ----------------------------------------------
      Net cash provided by (used in) operating activities           9,891,000        (3,118,000)         (587,000)
                                                                   ----------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
(Continued)

                                       F-4
<PAGE>

--------------------------------------------------------------------------------
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2007, 2006 AND 2005-(Continued)

<TABLE>
<CAPTION>
                                                                    2007              2006             2005
                                                                 ---------------------------------------------
<S>                                                              <C>               <C>              <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
   Investment in leased building                                 (2,452,000)               --               --
   Purchases of property and equipment                             (706,000)         (172,000)        (449,000)
                                                                ----------------------------------------------
Net cash used in investing activities                            (3,158,000)         (172,000)        (449,000)
                                                                ----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   (Decrease) increase in notes payable - bank, net              (5,670,000)        4,425,000        1,540,000
   Payment of long-term debt                                       (164,000)         (153,000)        (143,000)
   Exercise of stock options                                        229,000           141,000          314,000
   Excess tax benefit from stock options                             57,000            29,000                -
   Repurchase of common stock                                      (768,000)       (1,113,000)        (408,000)
                                                                ----------------------------------------------
Net cash (used in) provided by financing activities              (6,316,000)        3,329,000        1,303,000
                                                                ----------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS                           417,000            39,000          267,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                        932,000           893,000          626,000
                                                                ----------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                          $ 1,349,000       $   932,000      $   893,000
                                                                ----------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
   Interest                                                     $ 1,014,000       $   571,000      $   631,000
                                                                ----------------------------------------------
   Income taxes                                                 $   411,000       $   287,000      $ 1,006,000
                                                                ----------------------------------------------
   NON-CASH ITEMS:
   Common stock repurchase and exercise of stock options        $        --       $    56,000      $    50,000
   -----------------------------------------------------        ----------------------------------------------
   Pension adjustment                                           $        --       $ 2,321,000               --
                                                                ----------------------------------------------
   Tax benefit of non-qualified stock option exercise           $        --       $        --      $    96,000
   --------------------------------------------------           ----------------------------------------------
</TABLE>

The accompanying  notes are  an integral  part of these  consolidated  financial
statements.

(Concluded)

                                       F-5
<PAGE>

--------------------------------------------------------------------------------
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE EARNINGS
(LOSS)
YEARS ENDED JUNE 30, 2007, 2006, AND 2005

<TABLE>
<CAPTION>
                                        COMMON STOCK                                                           TREASURY STOCK
                     ------------------------------------------------------                               ------------------------

                                                                             Accumulated
                                                                                Other         Compre-
                                                  Additional                   Compre-        hensive
                                                   Paid in       Retained      hensive       Earnings
                        Shares       Amount        Capital       Earnings        Loss         (Loss)         Shares      Amount
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
<S>                    <C>        <C>           <C>            <C>           <C>            <C>             <C>        <C>
BALANCE, JULY 1,
  2004                 3,368,733  $  3,369,000  $ 10,390,000   $  9,716,000            --            --      892,854   $ 6,199,000
Net earnings                  --            --                    1,049,000            --   $ 1,049,000           --            --
Minimum Pension
  Liability, net
  of taxes                                                                   $ (1,653,000)   (1,653,000)          --            --
                                                                                            -----------
Other comprehensive
  earnings - net                                                                               (604,000)
                                                                                            -----------
Repurchase of
  common stock                --            --            --                           --            --       71,203       458,000
Exercise of
  Stock Options               --            --      (720,000)            --            --            --     (170,000)   (1,180,000)
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------

BALANCE, JUNE 30,
  2005                 3,368,733     3,369,000     9,670,000     10,765,000    (1,653,000)           --      794,057     5,477,000
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
Net earnings                  --            --            --      1,530,000            --     1,530,000           --            --
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
Minimum Pension
  Liability, net
  of taxes                    --            --            --             --     1,653,000     1,653,000           --            --
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
Other comprehensive
  earnings - net              --            --            --             --            --     3,183,000           --            --
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
Repurchase of
  common stock                --            --            --             --            --            --      158,457     1,170,000
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
Exercise of
  stock options               --            --      (254,000)            --            --            --      (67,000)     (467,000)
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
Value of
  stock options               --            --       147,000             --            --            --           --            --
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------

BALANCE, JUNE 30,
  2006                 3,368,733     3,369,000     9,563,000     12,295,000            --            --      885,514     6,180,000
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
Net earnings                                                        709,000                     709,000
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
Repurchase of
  common stock                --            --            --             --            --            --       61,105       768,000
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
Exercise of
  stock options               --            --       (45,000)            --            --            --      (46,500)     (331,000
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
Value of
  stock options               --            --            --             --            --            --           --            --
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------

BALANCE, JUNE 30,
  2007                 3,368,733  $  3,369,000  $  9,518,000   $ 13,004,000  $         --   $        --      900,119   $ 6,617,000
                     -----------  ------------  ------------   ------------  ------------   -----------   ----------   -----------
</TABLE>

The accompanying  notes are  an integral  part of these  consolidated  financial
statements.

                                       F-6
<PAGE>

JACLYN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

       Jaclyn,  Inc. and  its  subsidiaries (the "Company") are  engaged  in the
design,  manufacture, marketing and sale of apparel,  handbags,  accessories and
related  products.  The  Company  sells  its products  to  retailers,  including
department  and specialty stores, national chains, major  discounters  and  mass
volume  retailers,  throughout  the  United  States.

       The consolidated financial statements include the accounts of the Company
and   all  of  its  wholly-owned  subsidiaries.  All  significant   intercompany
transactions and balances have been eliminated.

Consolidation of Variable Interest Entity

       On August 22, 2006, the  Company entered into a lease agreement for a new
corporate office  building,  and  relocated the Company's executive offices from
West New York,  New Jersey to Maywood,  New Jersey during fiscal 2007. The lease
has a 10-year term, and grants to the Company an option to purchase the building
at any  time during the  term of the  lease at a  purchase price  not  to exceed
$3,075,000, plus increases based on a multiple of the consumer price index.

       The lessor, 195 Spring Valley Associates, LLC, (the "Lessor"),  purchased
the corporate office building at a closing which also took place in August 2006.
The Company  provided the Lessor with  $2,200,000 in mortgage financing, secured
by  a  first  priority  mortgage  in  favor of the Company  on the land,  office
building,  and  other  customary  rights of  the mortgagor. The Company placed a
deposit with the Lessor in the amount of $200,000 in connection with the  option
to purchase the property.

       For  accounting  purposes,  the  Company determined that  the Lessor is a
variable interest entity and the  Company is its primary beneficiary  as defined
by  Financial  Accounting  Standards  Board  ("FASB")  Interpretation No. 46(R),
"Consolidation  of  Variable  Interest Entities" ("FIN 46(R)"). Accordingly, the
financial  statements  of  the  Lessor  have been consolidated with those of the
Company.

       The effect of the Company's consolidation of the Lessor is that the lease
transaction  is treated as a financing, and the lease obligation, mortgage notes
and  deposits  have been eliminated in consolidation. The cost of the  building,
approximately  $2,900,000,  and the  $500,000 unamortized  capital of the equity
owners of  the Lessor (minority interest), approximately $448,000 as of June 30,
2007,  are reflected in the June 30, 2007 Consolidated Balance Sheet.  There was
no significant impact to net earnings.

Use of Estimates

       The  preparation  of  financial statements in  conformity with accounting
principles  generally  accepted  in  the  United  States  of  America   requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities,  and disclosure of contingent liabilities at the date of
the  financial  statements,  and  the  reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those estimates.

                                       F-7
<PAGE>

       The most  significant  estimates made by management include those made in
the areas of receivables, inventory, goodwill, deferred taxes, and sales returns
and allowances.

       Management  periodically  evaluates  estimates used in the preparation of
the consolidated financial statements for continued reasonableness.  Appropriate
adjustments, if any, to the estimates used  are made prospectively based on such
periodic evaluations.

Cash and Cash Equivalents

       Cash in excess of daily  requirements is invested  in money market  funds
with  original  maturities  of  three  months  or  less.  Such  investments  are
presented as cash equivalents.

Fair Value of Financial Instruments

       The carrying amount of cash,  accounts  receivable,  accounts  and  notes
payable and accrued expenses are assumed to approximate fair value  due to their
short maturities.  The  carrying value of the  Company's bank loan,  which bears
interest at a variable rate, approximates fair value.  The carrying value of the
Company's mortgage loan  approximates fair value based upon the relatively small
change in interest rates since inception of the mortgage.

Inventories

       Inventory is carried at the lower of cost on a first-in, first-out basis,
or  market.  Management  writes  down  inventory  for  estimated obsolescence or
unmarketable  inventory  based upon  assumptions  about future demand and market
conditions.

Allowances for Doubtful Accounts/Sales Discounts

       The  Company  maintains  allowances  for doubtful  accounts for estimated
losses resulting from the inability of its customers  to  make required payments
and also maintains accounts receivable insurance on certain of its customers.

       The Company  estimates reductions to  revenue for  customer  programs and
incentive  offerings  including  special  pricing  agreements, price protection,
promotions  and  other  volume-based incentives, based on terms of the agreement
and/or historical experience.

License Agreements

       The Company enters into  license agreements  from time to time that allow
it to use certain trademarks and trade names on certain  of its products.  These
agreements require the Company to pay royalties, generally based on the sales of
such products, and may require guaranteed minimum royalties,  a portion of which
may be paid in advance.  The Company's  accounting  policy  is to match  royalty
expense with revenue by recording royalties  at the time of  sale at the greater
of the contractual rate or an effective rate calculated based  on the guaranteed
minimum royalty and the Company's estimate of sales  during the contract period.
If  a  portion  of  the  guaranteed  minimum  royalty  is  determined  not to be
recoverable,  the  unrecoverable  portion  is  charged to  expense at that time.
Guaranteed  minimum  royalties  paid in advance are recorded in the consolidated
balance  sheets  as  other  assets.  As of June 30, 2007 and 2006, there were no
advances.

       Royalty amounts expensed for each of the three  fiscal  years  ended June
30, 2007, 2006, and 2005 were $662,000, $551,000, and $534,000, respectively.

                                       F-8
<PAGE>

Property, Plant and Equipment

       Property, plant and equipment  are stated at cost.  The Company  provides
for depreciation and amortization on the straight-line method over the following
estimated useful lives:

       Buildings                   25 to 40 years
       Machinery and equipment     5 years
       Furniture and fixtures      5 years
       Leasehold improvements      Lesser of  estimated useful life of the asset
                                   or life of the lease
       Automobiles and trucks      3 to 5 years

Intangibles

       Intangibles, included in other assets, are being amortized on a straight-
line basis over periods not exceeding 10 years.

       Other  intangibles   totaling  $45,000  as  of  June  30,  2007,  net  of
accumulated  amortization  of $55,000,  included  in "Other Assets",  consist of
amounts  allocated  to trade names  and  patents  relating to the acquisition of
Topsville, Inc.  The  Company  incurred $10,000 of amortization expense in 2007,
2006  and  2005.  Additional  annual  amortization  expense  of  $10,000 will be
incurred through 2011.

Impairment of Finite-Lived Assets

       The Company evaluates finite-lived assets in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 144,  "Accounting for the Impairment
or  Disposal  of  Long-lived Assets."  Finite-lived  assets  are  evaluated  for
recoverability  in  accordance  with  SFAS No. 144 whenever events or changes in
circumstances  indicate  that an asset may have been impaired.  In evaluating an
asset for recoverability,  the Company  estimates the future cash flows expected
to result from the use of the asset and eventual disposition.  If the sum of the
expected  future cash  flows (undiscounted and without interest charges) is less
than the  carrying  amount of the asset, an impairment loss, equal to the excess
of the carrying amount over the fair market value of the asset, is recognized.

Goodwill

       The Company accounts for goodwill under SFAS No. 142, "Goodwill and Other
Intangible  Assets."   Under  SFAS No. 142,  goodwill  is not  amortized, but is
reviewed for impairment annually or more frequently if certain indicators arise.
Management  believes  at this  time,  based on the valuation process undertaken,
that the carrying value continues to be appropriate.

Revenue Recognition

       Revenue is recognized at the time merchandise is shipped or received by a
third  party  consolidator,  normally the same day as the shipment.  The Company
offers various sales discounts and incentives to its customers.  These discounts
and incentives  are  recorded at the time of sales as a reduction of sales based
on  historical  experience  and  the  terms of  agreements,  if any, between the
Company  and its  customers.  Products  are  shipped directly to customers using
third  party  carriers.  The  customer  takes  title  and  assumes the risks and
rewards  of  ownership of the products when the merchandise leaves the Company's
warehouse or is received by a third party consolidator, as applicable.

                                       F-9
<PAGE>

Shipping and Handling Costs

       Included  in  Shipping,  Selling  and  Administrative  Expenses  are  all
shipping  and  handling costs incurred by the Company, except for amounts billed
to a  customer  in a sale transaction related to shipping and handling which are
included  in revenues.  Shipping and handling reimbursements included in revenue
amounted  to approximately  $2,000,  $14,000 and $2,000 for the years ended June
30, 2007, 2006, and 2005, respectively.

Cost of Goods Sold

       Cost  of  goods sold  includes  the following:  purchasing and  receiving
costs,  factory  inspections,  customs duty,  freight  (including ocean  and air
freight),  marine insurance,  brokerage,  in-bound  trucking  and other freight,
internal transfer costs and other costs of our distribution network.

Shipping, Selling, and Administrative Expenses

       Shipping,  selling,  and administrative  expenses include  the following:
public  warehousing,  carton  and  shipping  expenses,   warehouse  supervision,
salesmen's salaries and commissions,  showroom costs,  salesperson's  travel and
entertainment and other miscellaneous costs relating to the selling of products,
design and sample making,  accounting and computer costs, management and general
supervisory  costs  and related overhead.  Charges  recorded in the consolidated
statement of operations for shipping and handling costs  amounted to $2,218,000,
$2,162,000,  and  $2,843,000  for the years  ended June 30, 2007, 2006 and 2005,
respectively.

       The Company currently leases approximately 45,000 square feet of its West
New  York,  New  Jersey  facility  and  effective  in  fiscal  2007,  sub-leases
approximately  4,000  square feet of its Maywood, New Jersey leased headquarters
facility  to  outside parties.  This rental  income,  amounting to approximately
$270,000,  $247,000 and $256,000 in fiscal 2007, 2006 and 2005, respectively, is
used to  offset a  portion of the operating cost of the facilities and, as such,
is included in our shipping, selling and administrative expenses.

Income Taxes

       The  Company  accounts  for  income  taxes  in accordance  with SFAS 109,
"Accounting  for  Income Taxes."   Under SFAS 109,  a deferred  tax liability or
asset  is  recognized  for the  estimated  future tax  consequences of temporary
differences  between  the  carrying  amount  of  assets  and  liabilities in the
financial statements and their respective tax bases.

Share-Based Compensation

       The Company accounts for share-based compensation in accordance with SFAS
123R,  "Share-Based  Payment."  Accordingly,  the  Company  measures the cost of
employee services received  in exchange for an award of equity instruments based
on the grant-date fair value of the award.

Segment Reporting

       The Company  operates in a  single operating segment - the manufacture of
apparel, women's  handbags and related accessories.  Revenues from customers are
derived from merchandise  sales.  The Company's merchandise sales mix by product
category for the last three years was as follows:

<TABLE>
<CAPTION>
                                                   Year ended June 30,
                                        -------------------------------------
       Product Category                 2007            2006            2005
                                        -----           -----           -----
       <S>                                 <C>             <C>             <C>
       Apparel                             65%             64%             70%

       Handbags                            35%             36%             30%
                                        -----           -----           -----
                                          100%            100%            100%
</TABLE>

                                      F-10
<PAGE>

       During  the  years  ended  June 30, 2007,  2006 and 2005,  sales revenues
derived  from  one  customer were 43%,  42%  and 44%,  respectively.  Sales to a
second customer were 20%,  22% and 19%, and to a third customer were 5%,  5% and
8%,  respectively.  Management  believes  that  the  loss of  any one  of  these
customers would have a material adverse  effect on the Company's operations.  At
June 30,  2007 and 2006, accounts receivable due from  one customer was  35% and
46%,  respectively,  and accounts receivable  due from a second customer was 34%
and 29%, respectively, of total accounts receivable.  Should either customer not
be  able to pay any substantial  obligation to the  Company, however, management
believes that such a failure  to pay would have a material adverse effect on the
Company's  operating  results.  No other  customer  comprised 10% or more of our
total net accounts receivable as at either of those dates.

       The Company relies  on suppliers to purchase a variety of finished goods.
The Company had one supplier who in the  aggregate constituted approximately 18%
of the Company's  finished goods purchases for both the year ended June 30, 2007
and 2006.  Management believes that the  loss of this supplier  would not have a
material adverse effect on the  Company's operations since there are alternative
suppliers available.

New Accounting and Financial Reporting Pronouncements

       In June 2006,  the FASB  issued FIN 48,  "Accounting  for Uncertainty  in
Income Taxes - an interpretation  of FASB  Statement 109,"  which  clarifies the
accounting  for  uncertainty  in  income  taxes  recognized  in  an enterprise's
financial  statements  in  accordance  with  SFAS 109,  "Accounting  for  Income
Taxes." FIN 48 prescribes a recognition  threshold and measurement attribute for
the financial statement recognition and measurement  of a  tax position taken or
expected  to  be taken in a tax return. FIN 48 is effective for  the fiscal year
beginning July 1, 2007. The Company is currently evaluating the impact of FIN 48
on the Company's consolidated financial statements.

       In September 2006,  the FASB issued SFAS 157,  "Fair Value Measurements."
SFAS 157 defines fair value, establishes a framework for measuring fair value in
generally  accepted  accounting  principles  and expands  disclosures about fair
value measurements. This statement is effective for the fiscal year beginning on
July 1, 2007.  The  Company  does not  expect the adoption of SFAS 157 to have a
material impact on the Company's consolidated financial statements.

       In September 2006,  the FASB issued SFAS 158,  "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans -- an  amendment  of FASB
Statements  No. 87,  88,  106  and 132(R)."  SFAS 158  requires an  employer  to
recognize  the funded  status of  a benefit  plan,  measured  as  the difference
between plan assets at fair value and the  projected  benefit obligation, in its
statement of financial position.  SFAS 158  also requires an employer to measure
defined benefit  plan  assets  and obligations  as of the date of the employer's
fiscal year-end statement of financial position.  This statement is effective as
of the end of the fiscal year ended June 30, 2007, except for the requirement to
measure plan assets and obligations as  of the  date  of  the  employer's fiscal
year-end statement of financial position, which is effective for the fiscal year
ending  June 30,  2009.  As  noted  in  Note  I,  the  Company  terminated their
defined-benefit pension plan effective January 31, 2006 and the final settlement
distribution  was  made on March 29, 2007 as such,  the adoption of SFAS 158 did
not have an impact on the Company's consolidated financial statements.

       In September 2006,  the  SEC issued Staff Accounting Bulletin ("SAB") No.
108,  "Considering  the  Effects  of  Prior Year Misstatements When  Quantifying
Misstatements in Current Year Financial

                                      F-11
<PAGE>

Statements." SAB 108 states that SEC registrants should use both a balance sheet
approach  and  an income  statement approach when quantifying and evaluating the
materiality of a misstatement, contains guidance  on correcting errors under the
dual approach and provides transition guidance for correcting errors existing in
prior years. SAB 108 is  effective  for annual financial statements covering the
fiscal year ended June 30, 2007.  The adoption of SAB 108 did not have an impact
on the Company's consolidated financial statements.

       In February 2007,  the FASB issued SFAS 159,  "The Fair Value  Option for
Financial Assets  and Financial  Liabilities -- Including  an amendment  of FASB
Statement  No. 115."  SFAS 159  permits  entities  to  choose  to  measure  many
financial  instruments  and certain other items at fair value. This statement is
effective  for the fiscal  year beginning July 1, 2008. The Company is currently
evaluating  the  impact  of SFAS 159  on  the  Company's  consolidated financial
statements.

NOTE B - INVENTORIES

       Inventories consist of the following:

<TABLE>
<CAPTION>
                                                           June 30,
                                               ---------------------------------
                                                  2007                   2006
                                               ----------             ----------
       <S>                                     <C>                    <C>
       Raw material                            $   42,000             $  692,000
       Work in process                                 --                 49,000
       Finished goods                           9,201,000              6,439,000
                                               ----------             ----------
                                               $9,243,000             $7,180,000
                                               ----------             ----------
</TABLE>

NOTE C - PROPERTY, PLANT AND EQUIPMENT

       Property, plant and equipment is summarized as follows:

<TABLE>
<CAPTION>
                                                           June 30,
                                               ---------------------------------
                                                  2007                   2006
                                               ----------             ----------
       <S>                                     <C>                    <C>
       Buildings                               $3,170,000             $       --
       Machinery and equipment                  1,150,000              1,288,000
       Furniture and fixtures                     458,000                417,000
       Leasehold improvements                     544,000                539,000
       Automobiles and trucks                      77,000                 77,000
                                               ----------             ----------
                                                5,399,000              2,321,000
       Less: accumulated depreciation and
          amortization                          1,478,000              1,648,000
                                               ----------             ----------
                                               $3,921,000             $  673,000
                                               ----------             ----------
</TABLE>

       There  was  $357,000  of net assets held for sale under the agreement for
purchase  and  sale  of the Company's West New York, New Jersey facility at June
30, 2007 and 2006.

       Depreciation and amortization expense of $358,000,  $290,000 and $370,000
was recorded during the years ended June 30, 2007,  2006 and 2005, respectively.

                                      F-12
<PAGE>

NOTE D - COMMITMENTS AND CONTINGENCIES

       The Company  leases office  facilities under  non-cancelable leases, with
escalation clauses, that expire in various years through the year ended June 30,
2016.

       Future  minimum  payments  under  non-cancelable  operating  leases  with
initial or remaining terms of one year or more are as follows:

<TABLE>
<CAPTION>
              Year Ended                        Office and
               June 30,                      Showroom Facilities
              ----------                     -------------------
              <S>                                 <C>
                 2008                             $1,462,000
                 2009                              1,166,000
                 2010                                578,000
                 2011                                427,000
                 2012                                407,000
              Thereafter                           1,436,000
</TABLE>

       Rental expense, including  real estate  taxes,  for all operating leases,
totaled  $1,428,000,  $1,323,000,  and  $1,268,000  for the years ended June 30,
2007,  2006 and  2005, respectively.  The Company currently leases approximately
45,000  square  feet of  its West New  York, New Jersey  facility and sub-leases
approximately 4,000  square feet of its Maywood, New Jersey leased  headquarters
facility  to  outside parties.  Rental income in  fiscal 2007, 2006 and 2005 was
$270,000,  $247,000  and  $256,000,  respectively,  and is included in shipping,
selling  and  administrative  expenses  as  an  offset to operating costs of the
facility.

       The  Company  has  entered  into  licensing   arrangements  with  several
companies.  The Company  is  obligated,  in certain  instances, to  pay  minimum
royalties over the term  of  the  licensing  agreements  that expire in  various
years through 2009. Aggregate minimum commitments by fiscal year are as follows:

<TABLE>
<CAPTION>

              Year Ended                               Minimum
               June 30,                              Commitments
              ----------                             -----------
                 <S>                                    <C>
                 2008                                   $64,000
                 2009                                   119,000
</TABLE>

       From  time  to time,  the Company  and its subsidiaries may be subject to
claims  and may  become a party to legal  proceedings that arise  in the  normal
course of  business.  At June 30,  2007,  there were  no material, pending legal
proceedings or material claims to which the Company was a party.  In the opinion
of  management,  disposition of all claims and legal proceedings is not expected
to materially  affect the Company's financial position, cash flows or results of
operations.

       The Company has not provided any financial guarantees as of June 30, 2007
and 2006.

NOTE E - CREDIT FACILITIES

       In September 2006, the Company amended its existing bank credit facility.
The  amended  facility,  which expires December 1, 2008, provides for short-term
loans and the issuance of letters of credit in an aggregate amount not to exceed
$50,000,000.  Based  on  a  borrowing  formula,  the  Company  may  borrow up to
$30,000,000  in short-term  loans  and  up  to  $50,000,000 including letters of
credit.  The borrowing  formula  allows  for an  additional  amount of borrowing
during  the Company's peak borrowing season from June to October.  Substantially
all  of  the  Company's assets are pledged to the bank as collateral (except for
the  West  New York, New Jersey facility, which has been separately mortgaged as
noted below).  The  line  of credit requires that the Company maintain a minimum
tangible net worth, as defined, and imposes

                                      F-13
<PAGE>

certain  debt to equity ratio requirements.  The Company  was in compliance with
all  applicable financial covenants  as of June 30, 2007.  As of  June 30, 2007,
borrowing on the  short-term line of credit was $4,515,000, and at that date the
Company had  approximately $19,626,000 of  additional availability (based on the
borrowing formula)  under the credit facility.  At June 30, 2007 the Company was
contingently  obligated  on open letters of credit with an aggregate face amount
of approximately $16,558,000.  Borrowing during the year was at the bank's prime
rate, or below, at the option of the Company.  The bank's prime rate at June 30,
2007 was 8.25%.

       During 2007, the average amount outstanding under the short-term line was
$10,467,000 with a weighted average interest rate of 7.71%.  During fiscal 2006,
the average amount  outstanding under the short-term line was  $7,289,000 with a
weighted average  interest rate of 6.49%.  The maximum amount outstanding during
fiscal 2007 and fiscal 2006 was $20,385,000 and $13,280,000, respectively.

       In August 2002,  the Company consummated a mortgage loan in the amount of
$3,250,000.  The financing  is  secured by a mortgage of the  Company's West New
York, New Jersey facility. The mortgage  loan bears interest  at a fixed rate of
7% per  annum through August 31,  2008,  at which time the interest rate will be
reset, for the period commencing September 1, 2008 through August 31, 2012, to a
fixed  rate based on the  Amortization Annual Rate of the Federal Home Loan Bank
Board of  New York plus 250  basis points. The financing has a fifteen-year term
and may be prepaid  by the  Company,  but  is callable by the bank lender at any
time after September 1, 2008  and  may  be  prepaid by the Company, along with a
prepayment fee, from time to time during the  term of the financing. The balance
of the mortgage as of June 30, 2007 is approximately $2,563,000.

       Principal mortgage payments for  the next five years and thereafter,  are
as follows:

<TABLE>
                    <S>                           <C>
                    2008                          $  176,000
                    2009                             189,000
                    2010                             203,000
                    2011                             218,000
                    2012                             234,000
                    Thereafter                     1,543,000
</TABLE>

NOTE F - STOCK OPTIONS

       On July 1,  2005,  the  Company  adopted the  provisions of  Statement of
Financial  Accounting Standards  No. 123(R), Share-Based Payment,  a revision of
SFAS No. 123, Accounting for  Stock-Based  Compensation, or  SFAS No. 123(R), as
interpreted by SEC Staff Accounting Bulletin No. 107. Under SFAS No. 123(R), all
forms  of  share-based  payment  to  employees  and  directors,  including stock
options, must be treated as compensation and recognized in the income statement.
No stock options  were  granted  during  fiscal  2007.  The  Company  recognized
$147,000 ($147,000 after-tax, or $.06 per diluted share) in compensation expense
related  to  stock options during fiscal 2006.  Previous to the adoption of SFAS
No. 123(R),  the  Company  accounted  for stock  options under the provisions of
Accounting  Principles  Board  Opinion  No. 25,  Accounting  for Stock Issued to
Employees,  and,  accordingly,  did  not  recognize  compensation expense in our
consolidated financial statements. The Company selected the modified prospective
method of  transition  method  provided under SFAS No. 123(R), and consequently,
has not retroactively adjusted results from prior periods. Under this method, in
addition to reflecting compensation  expense for new share-based awards, expense
is also recognized  to  reflect the remaining service period of awards that have
been included in pro-forma disclosures in prior periods.  All stock

                                      F-14
<PAGE>

options granted by the Company as of  the adoption  date, had been fully  vested
upon  grant.  Accordingly,  as  of July 1, 2005,  the effective date of SFAS No.
123R), the Company had no unrecognized compensation cost related to stock awards
as the Company has historically granted options that vested immediately.

       Under  SFAS No.  123(R),  the  Company  is required to select a valuation
technique  or  option-pricing  model  that meets  the  criteria as stated in the
standard, which includes a binomial model  and the  Black-Scholes  model. At the
present time,  the  Company  will continue to use the Black-Scholes model, which
requires  the  input  of  subjective  assumptions.  These   assumptions  include
estimating  the  length of time employees will retain their vested stock options
before  exercising  them  ("expected term"),  the  estimated volatility  of  the
Company's  common  stock price  over the expected term and the number of options
that  will  ultimately  not complete their vesting requirements ("forfeitures").
Changes in the subjective assumptions can materially affect the estimate of fair
value of  stock -- based  compensation  and  consequently,  the  related  amount
recognized in the consolidated statements of income.

       In  November 2005,  the FASB  issued FASB  Staff Position  No. FAS 123R-3
"Transition  Election  Related  to  Accounting  for Tax Effects  of  Share-Based
Payment Awards."  The Company elected to adopt the alternative transition method
provided  in  the  FASB  Staff  Position  for  calculating  the  tax  effects of
stock-based compensation pursuant to SFAS No. 123(R). The alternative transition
method  includes   simplified  methods to establish the beginning balance of the
additional  paid-in  capital  pool  ("APIC pool")  related to the tax effects of
employee stock-based compensation, and to determine the subsequent impact on the
APIC  pool  and Consolidated  Statements  of Cash  Flows  of the tax  effects of
employee  stock-based  compensation awards that are outstanding upon adoption of
SFAS No. 123(R).

       Prior to the adoption of  SFAS No. 123(R),  the Company presented all tax
benefits resulting from the exercise of stock options as operating cash flows in
the Condensed  Consolidated  Statement  of Cash Flows.  SFAS No. 123(R) requires
that  cash flows  resulting  from  tax  deductions  in excess  of the cumulative
compensation  cost  recognized  for options exercised be classified as financing
cash flows. Previously, all tax benefits from stock options had been reported as
an operating  activity. For the years ended June 30, 2007 and June 30, 2006, net
cash  used in  operating  activities  decreased,  and cash provided by financing
activities  increased,  by $57,000 and $29,000,  respectively, related to excess
tax benefits realized from the exercise of stock options.

       The Company maintains two stockholder-approved Stock Option Plans for key
employees and consultants of the Company and one non-employee director plan.

       The Company's  2000  Stock  Option  Plan,  as  amended (the "2000 Plan"),
provided  for  the grant of options to purchase up  to 300,000 shares of  common
stock,  and was  amended  during fiscal 2004 to increase the number of shares of
common  stock for  which options may be granted by an additional 250,000 shares,
for  a  total of 550,000  shares.  The 1990 Stock Option Plan of the Company, as
amended  (the "1990 Plan"),  provided  for  the grant of an aggregate of 500,000
shares  of  common  stock. Options may no longer be granted under the 1990 Plan,
although  at  June 30, 2007 the plan remains  in effect for options outstanding.
The Company also has the 1996 Non-Employee Director Stock Option Plan (the "1996
Plan").  No  further options are being granted  under  the  1996  Plan,  but  it
remains in effect for options outstanding.

       As of June 30, 2007, 185,000 shares were available for future grant under
our plans.  Stock  options may not be granted at less than the fair market value
at the date of grant or 110% of the fair market value for individuals who own or
are deemed  to own more than  10% of the combined voting power of all classes of
stock of the company.  Stock options generally vest immediately and expire after
ten years.

                                      F-15
<PAGE>

       Stock option transactions are summarized below:

<TABLE>
<CAPTION>
                                                      2007                        2006                        2005
                                            ------------------------      ----------------------      ------------------------
                                                           Weighted                     Weighted                      Weighted
                                                            Average                      Average                      Average
                                                           Exercise                     Exercise                      Exercise
                                             Shares          Price         Shares         Price        Shares          Price
                                            -------        ---------      -------       --------      --------        --------
<S>                                         <C>                <C>        <C>              <C>        <C>                <C>
Outstanding -beginning of year              156,000            $5.03      182,500          $3.07       377,500           $2.26
Granted                                          --               --       57,500           8.24        10,000            6.70
Exercised                                   (46,500)            4.92      (67,000)          2.83      (170,000)           2.19
Expired                                     (12,000)            2.66      (17,000)          3.22       (25,000)           4.13
Forfeited                                        --                           --              --       (10,000)           2.65
                                            -------                       -------        -------      --------        --------
Outstanding and exercisable end
of year                                      97,500            $5.39      156,000          $5.03       182,500           $3.07
                                            -------        ---------      -------        -------      --------        --------
Weighted-average fair value of
options granted during the year                                   --                       $2.56                         $6.61
                                                           ---------                     -------                      --------
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

       The intrinsic value for outstanding and exercisable options  at  June 30,
2007  and  2006  was  $584,000  and $358,000, respectively.  The total intrinsic
value  of  options  exercised  during  fiscal 2007,  2006 and 2005 was $253,000,
$336,000 and $659,000, respectively.

       During the fiscal  year ended June 30, 2007, one officer and one director
of  the  Company  exercised  options  to  purchase  17,500  and  18,000  shares,
respectively,  of the Company's common stock.  The Company received an aggregate
of $134,750  and  $72,490, respectively in cash in payment of the exercise price
for the issued shares.

       During the fiscal year ended June 30, 2006 and June 30, 2005, the Company
issued  an  aggregate  of  67,000  shares and 50,000 shares of its common stock,
respectively, upon the exercise  by employees and a director of the Company (the
"optionees")  of  stock  options  previously  granted.   The Company received an
aggregate of  $141,000  and  $63,258, respectively in cash from the optionees in
partial  payment  of the exercise price for the issued shares.  The Company also
received  an  aggregate  of  6,838  (totaling  approximately  $56,000) and 6,632
(totaling  approximately  $50,000) mature  shares of common stock, respectively,
from  the  optionees  in  partial  payment  of the exercise price for the issued
shares  under  terms of the stock option plan under which the stock options were
granted.  The stock option plan permits the use of previously acquired shares of
common stock in full or partial payment of the applicable exercise price.

       During  fiscal  2005,  a  sales  representative  of the Company exercised
non-qualified  stock  options to purchase 120,000 shares of the Company's common
stock at $2.10 per share, or $252,000.  The shares related to these options were
issued from the Company's treasury shares at an average cost of $6.94 per share,
or approximately $832,800.

                                      F-16
<PAGE>

       Prior  to  fiscal  2006, no compensation expense was recognized for stock
options. Had  compensation  cost for our  stock  option  plans  been  determined
consistent  with  SFAS No. 123(R), our net income and earnings per share for the
fiscal 2005 would have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
Net earnings - Years ended June, 30                                      2005
                                                                      ----------
<S>                                                                   <C>
   As reported                                                        $1,049,000
   Deduct: Total stock based employee compensation
           expense determined under fair value based
           method, net of taxes                                           36,000
   Pro forma Net Earnings                                             $1,013,000
Basic net earnings per share:
----------------------------
   As reported                                                        $      .40
   Pro forma                                                          $      .39
Diluted net earnings per share:
------------------------------
   As reported                                                        $      .39
   Pro forma                                                          $      .37
</TABLE>

       The weighted average fair  value of stock options was calculated with the
following  weighted  average  assumptions  used for  grants in  their respective
periods.  For 2007: there  were no options  granted during the  fiscal year. For
2006:  no  dividend yield; expected volatility of 45.3%; risk free interest rate
of 4.95%; and expected life of 2.83 years. For 2005: no dividend yield; expected
volatility  of 164%; risk free  interest rate of 1.75%; and expected  life of 10
years.

NOTE G - PREFERRED STOCK

       The Board of Directors  of the Company has  authority  (without action by
the stockholders) to issue the authorized and unissued preferred stock in one or
more  series  and,  within  certain limitations, to determine the voting rights,
preference  as to  dividends  and in liquidation, conversion and other rights of
each such series.  No shares of preferred stock have been issued.

                                      F-17
<PAGE>

NOTE H - INCOME TAXES

       The  components  of  the Company's tax provision (benefit) for  the years
ended June 30, 2007, 2006 and 2005 are as follows:

<TABLE>
<CAPTION>
                                                             June 30,
                                             ---------------------------------------
                                                2007           2006           2005
                                             ----------     ----------      --------
       <S>                                   <C>            <C>             <C>
       Current:
       Federal                               $  735,000     $  252,000      $ 75,000
       State and Local                          217,000         67,000        78,000
       Foreign                                   86,000        183,000       193,000
                                             ----------     ----------      --------
                                              1,038,000        502,000       346,000
                                             ----------     ----------      --------
       Deferred:
       Federal and State                       (145,000)       679,000       320,000
                                             ----------     ----------      --------
       Provision                             $  893,000     $1,181,000      $666,000
                                             ----------     ----------      --------
</TABLE>

       Reconciliation  between  the  provision  for  income  taxes  computed  by
applying the federal statutory rate to income before income taxes and the actual
provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                                             June 30,
                                            ---------------------------------------
                                               2007            2006          2005
                                            ----------      ---------      --------
       <S>                                  <C>             <C>            <C>
       Provision (benefit) for income taxes       34.0%          34.0%         34.0%
          at statutory rate
       State and local income taxes net of         6.5            4.1           4.2
          federal tax benefit
       Stock option grants                          --            1.8            --
       Pension settlement                         12.8             --            --
       Valuation Allowance for expiring             --             --          (2.0)
          foreign tax credits
       Other                                       2.4            3.7           2.6
                                            ----------      ---------      --------
       Effective tax rate percent                 55.7%          43.6%         38.8%
                                            ----------      ---------      --------
</TABLE>

       The  Company  recorded  a net tax expense of  $160,000 as a result of the
Company's pension plan settlement.

       Deferred  income   taxes  reflect  the  net  tax   effects  of  temporary
differences between the carrying amounts of assets and liabilities for financial
reporting  purposes  and the  amounts used for income tax purposes.  Foreign tax
credits are expected to expire through June 30, 2012.  The income tax effects of
significant  items  comprising  the  Company's   net  deferred   tax assets  and
liabilities as of June 30, 2007 and 2006 are as follows:

<TABLE>
<CAPTION>
                                                                                          June 30,
                                                               --------------------------------------------------------------
                                                                         2007                                2006
                                                               ----------------------------       ---------------------------
                                                                 Assets         Liabilities        Assets         Liabilities
                                                               ---------        -----------       --------        -----------
<S>                                                            <C>               <C>              <C>               <C>
Depreciation and amortization                                  $      --         $189,000         $100,000          $    --
State net operating loss carryforward                            103,000               --           68,000               --
Foreign taxes                                                         --          136,000           13,000               --
Inventory                                                        233,000               --          306,000               --
State net operating loss carryforward
  valuation allowance                                           (103,000)              --          (68,000)              --
Bad debt, sales allowances and other reserves                    537,000               --               --           84,000
Other                                                            209,000               --          174,000               --
                                                               --------------------------------------------------------------
                                                                $979,000          $325,000        $593,000          $84,000

</TABLE>

                                      F-18
<PAGE>

       During the year ending June 30, 2007, the Company increased the valuation
allowance  for separate return state net operating losses by $35,000 since there
is not enough evidence to suggest that these separate state net operating losses
would be utilized.

       At June 30,  2007,  the  Company had  a deferred tax asset related to net
operating loss carry forwards of approximately $1,961,000 that could be utilized
to  reduce  the  tax  liabilities  of  future years.  The  carry forwards expire
between 2008 and 2026.

NOTE I - EMPLOYEES' BENEFIT PLANS

       The  Company  had  a  trusteed,  defined-benefit  pension  plan, covering
certain  of  its  salaried  and hourly employees, which was terminated effective
January 31, 2006.  The pension  plan had provided for pension benefits that were
based on a fixed amount of  compensation per year of service, career average pay
or on the employee's  compensation  during  a  specified  number of years before
retirement.  In December  2006,  the  Company received a favorable determination
letter  that  permitted  the  Company  to begin to calculate and to make a final
settlement distribution to the  pension plan participants.  The final settlement
distribution  was  made  on  March  29,  2007.  At  the  time  of the settlement
distribution, the Company  recorded a  charge to earnings before income taxes of
approximately $3,089,000  ($1,970,000 after tax), consisting of the write-off of
the unamortized  pension  costs of $2,188,000, plus a final cash contribution to
fully fund the pension plan totaling approximately $901,000.

<TABLE>
<CAPTION>
                                                    Fiscal Year Ended June 30,
                                                   ----------------------------
                                                       2007            2006
                                                   -----------      -----------
<S>                                                <C>              <C>
CHANGE IN BENEFIT OBLIGATION:
Net benefit obligation at beginning of year        $ 6,002,000      $ 7,366,000
Service cost                                                --          314,000
Interest cost                                          172,000          334,000
Curtailment                                                 --       (1,294,000)
Actuarial (gain) loss                                1,191,000         (609,000)
Benefits paid                                       (7,365,000)        (109,000)
                                                   -----------      -----------
Net benefit obligation at end of year              $         0      $ 6,002,000
                                                   -----------      -----------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year     $ 6,310,000      $ 5,199,000
Employer contributions                                 901,000        1,073,000
Benefits paid                                       (7,365,000)        (109,000)
Actual gain on plan assets                             154,000          147,000
                                                   -----------      -----------
Fair value of plan assets at end of year           $         0      $ 6,310,000
                                                   -----------      -----------
Funded status at end of year                                --          308,000
Unrecognized net actuarial loss                             --        2,013,000
                                                   -----------      -----------
Net amount recognized                              $        --      $ 2,321,000
                                                   -----------      -----------
</TABLE>

       As of  June 30,  2006,  an additional minimum liability was not necessary
because  the  accumulated benefit obligation was less than the fair value of the
Plan's  assets.  The Company's  funding  policy is  to make annual contributions
required by the Employee Retirement Income Security Act of 1974.

                                      F-19
<PAGE>

<TABLE>
<CAPTION>
                                                             Fiscal Year Ended June 30,
                                                           -----------------------------
                                                              2007              2006
                                                           -----------       -----------
<S>                                                        <C>               <C>
Amounts recognized in the consolidated balance sheets:
(Accrued) prepaid benefit cost                             $        --       $ 2,321,000
Accumulated other comprehensive income                              --                --
                                                           -----------       -----------
Net amount recognized                                      $        --       $ 2,321,000
</TABLE>

       Information for pension plans  with  an accumulated benefit obligation in
excess of plan assets follows:

<TABLE>
<CAPTION>
Fiscal Year Ended June 30,                                    2007              2006
                                                           -----------       -----------
<S>                                                        <C>               <C>
Projected benefit obligation                               $        --       $ 6,002,000
Accumulated benefit obligation                                      --         6,002,000
Fair value of plan assets                                           --         6,310,000
</TABLE>

       Pension expenses includes the following components:

<TABLE>
<CAPTION>
Fiscal Years Ended June 30,                                   2007              2006              2005
                                                           -----------       -----------       -----------
<S>                                                        <C>               <C>               <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost                                               $        --       $   314,000       $   389,000
Pension Settlement Cost                                      3,089,000                --                --
Interest cost                                                  172,000           334,000           295,000
Expected return on plan assets                                (249,000)         (323,000)         (319,000)
Amortization of net loss                                       210,000           213,000           109,000
Amortization of actuarial loss                                      --                --            (9,000)
Amortization of prior service cost                                  --                --             1,000
                                                           -----------       -----------       -----------
Net periodic pension cost                                  $ 3,222,000       $   538,000       $   466,000
                                                           -----------       -----------       -----------
</TABLE>

       Assumptions used to determine Benefit Obligation at June 30,  2006 are as
follows (2007 assumptions  are  not applicable  "N/A"  since  the  plan has been
terminated and all benefits to participants were paid prior to June 30, 2007):

<TABLE>
<CAPTION>
                                                              2007              2006
                                                           -----------       -----------
<S>                                                           <C>               <C>
Discount rate                                                 N/A               6.00%
Expected long-term return on plan assets                      N/A               5.75%
Rate of compensation increase                                 N/A                  0%
</TABLE>

      Assumptions used in determining the net periodic cost:

<TABLE>
<CAPTION>
                                                              2007              2006              2005
                                                           -----------       -----------       -----------
<S>                                                           <C>               <C>               <C>
Discount rate                                                 5.25%             4.70%             5.50%
Rate of increase in compensation levels                          0%             1.70%             3.75%
Expected long-term rate of return on assets                   5.75%             5.75%             6.00%
</TABLE>

       The Company had the responsibility to formulate the investment policy and
strategy  for  the  Pension  Plan's  assets.  The  overall  policy and  strategy
included  maintaining  the  highest  return, with the lowest assumed risk, while
striving to have the Plan fully funded.

       The Company  had  retained  the  professional services  of a bond broker,
which  selected  investment  high-grade  government  bonds,  consistent with the
Company's  risk  and investment strategy.  This broker had investment discretion
over  the  assets  placed  under  its  management,  provided  it  was within the
Company's risk and investment strategy.

                                      F-20
<PAGE>

        The Company's pension plan asset allocation during fiscal 2007 until all
plan assets were distributed to participants  was 99% for debt securities and 1%
for other cash equivalents.

       During  the  fiscal  year ending June 30, 2007,  the Company made a final
contribution  totaling  approximately  $901,000  to its  defined benefit pension
plan.  Subsequently,  all  participants  received their vested benefits totaling
approximately $7,365,000.

       Beginning  in  fiscal 2007,  the Company established,  for certain of its
salaried  and  hourly employees,  a new 401(k) benefit plan which is expected to
have a lower employee benefit cost than the terminated pension plan.

       The  Company  also  has  a  401(K)  savings  plan for  the benefit of its
Topsville, Inc.  employees,  which existed prior to the Company's acquisition of
Topsville.  No  contributions  by the Company were made during fiscal 2007, 2006
and 2005.

       The Company  entered  into an  amendment  to  its  collective  bargaining
agreement with Local 62-32, UNITE, AFL-CIO, which covers all 9 of Jaclyn's union
employees.  The  term of the agreement was extended until May 31, 2007, at which
time the agreement terminated.

                                      F-21
<PAGE>

NOTE J - NET EARNINGS PER SHARE

       The Company's calculation of Basic and Diluted Net Earnings Per Share are
as follows:

<TABLE>
<CAPTION>
                                                                 Year Ended June 30,
                                                    --------------------------------------------
                                                       2007            2006             2005
                                                    ----------      -----------      -----------
<S>                                                 <C>             <C>              <C>
Basic Net Earnings Per Share:
Net Earnings                                        $  709,000      $ 1,530,000      $ 1,049,000
                                                    ----------      -----------      -----------
Basic Weighted Average Shares Outstanding            2,478,000        2,480,000        2,596,000
                                                    ----------      -----------      -----------
Basic Net Earnings Per Common Share                 $      .29      $       .62      $       .40
                                                    ----------      -----------      -----------
Diluted Net Earnings Per Share:
Net Earnings                                        $  709,000      $ 1,530,000      $ 1,049,000
                                                    ----------      -----------      -----------
Basic Weighted Average Shares Outstanding            2,478,000        2,480,000        2,596,000
Add:  Dilutive Options                                  50,000           77,000          106,000
                                                    ----------      -----------      -----------
Diluted Weighted Average Shares Outstanding          2,528,000        2,557,000        2,702,000
                                                    ----------      -----------      -----------
Diluted Net Earnings Per Common Share               $      .28      $       .60      $       .39
                                                    ----------      -----------      -----------
</TABLE>

       There were no options to purchase shares of the Company's Common Stock as
of June 30, 2007 that were anti-dilutive.  Options to purchase 40,000 and 10,000
common  shares  were outstanding as of June 30, 2006 and 2005, respectively, but
were  not  included in the computation of diluted earnings per share because the
exercise  price  of the options exceeded the average market price and would have
been anti-dilutive.

NOTE K - REPURCHASE OF SHARES FOR TREASURY

       The  Company  announced  in  December  2002  that  the Board of Directors
authorized  the  repurchase  by  the  Company  of  up to  350,000  shares of the
Company's  common  stock.  On  September  27,  2006,   the  Board  of  Directors
authorized  an increase  in the Company's  common stock repurchase program of an
additional  125,000 shares.  Purchases may be made from time to time in the open
market and  through privately negotiated transactions, subject to general market
and other conditions.  The Company generally finances these repurchases from its
own funds from  operations and/or from  its bank credit facility.  During fiscal
2007, 2006 and 2005 the Company  repurchased 41,105, 57,838 and 19,923 shares of
the Company's  common  stock at a cost of approximately, $504,000,  $450,000 and
$148,000,  respectively.  As of June 30, 2007, the Company has purchased 343,726
shares of its common stock at a cost of approximately $1,966,000.

                                      F-22
<PAGE>

NOTE L - UNAUDITED QUARTERLY FINANCIAL DATA

       Summarized  quarterly  financial data amounts for the fiscal  years ended
June 30, 2007 and 2006 are as follows:

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                        ----------------------------------------------------------------------
                                                         June 30,            March 31,         December 31,      September 30,
                                                           2007                2007               2006               2006
                                                        -----------         -----------        ------------      -------------
<S>                                                     <C>                 <C>                 <C>                <C>
Net sales                                               $31,594,000         $34,705,000         $47,584,000        $40,624,000
Gross profit                                              7,043,000           8,854,000          11,860,000          8,503,000
Net earnings (loss)                                          17,000          (1,487,000)*         1,716,000            463,000
Net earnings (loss) per common share - basic            $       .01         $      (.60)        $       .69        $       .19
Net earnings (loss) per common share - diluted          $       .01         $      (.60)        $       .68        $       .18
</TABLE>

* Includes a $1,970,000  after-tax pension  settlement cost in the period ending
  March  31, 2007

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                        ----------------------------------------------------------------------
                                                         June 30,            March 31,         December 31,      September 30,
                                                           2006                2006               2005               2005
                                                        -----------         -----------        ------------      -------------
<S>                                                     <C>                 <C>                 <C>                <C>
Net sales                                               $33,900,000         $27,939,000         $35,514,000        $29,248,000
Gross profit                                              8,174,000           6,553,000           9,518,000          6,621,000
Net earnings (loss)                                         475,000             (22,000)            931,000            146,000
Net earnings (loss) per common share - basic            $       .19         $      (.01)        $       .38        $       .06
Net  earnings (loss) per common share - diluted         $       .18         $      (.01)        $       .37        $       .06
</TABLE>

Note: The per share amounts are calculated independently  for each quarter.  The
sum of the quarters may not equal the annual per share amounts.

                                      F-23
<PAGE>

--------------------------------------------------------------------------------
JACLYN INC. AND SUBSIDIARIES

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                Column A                                     Column B             Column C          Column D           Column E

                                                                                  Additions
                                                             Balance at          charged to
                                                            beginning of          costs and                          Balance at end
               Description                                     period              expense         Deductions          of period
-----------------------------------------------------       ------------          ----------       ----------        ---------------
<S>                                                         <C>                   <C>              <C>               <C>
Fiscal Year ended June 30, 2007
-------------------------------
Allowance for doubtful accounts                             $     75,000              44,000          (28,000)       $        91,000
                                                            ------------          ----------       ----------        ---------------
Allowance for sales discounts, returns and allowances          2,858,000          10,166,000       (9,846,000)             3,178,000
                                                            ------------          ----------       ----------        ---------------
Fiscal Year ended June 30, 2006
-------------------------------
Allowance for doubtful accounts                             $    124,000                  --          (49,000)       $        75,000
                                                            ------------          ----------       ----------        ---------------
Allowance for sales discounts, returns and allowances       $  3,264,000           7,192,000       (7,598,000)       $     2,858,000
                                                            ------------          ----------       ----------        ---------------
Fiscal Year ended June 30, 2005
-------------------------------
Allowance for doubtful accounts                             $    177,000                  --          (53,000)       $       124,000
                                                            ------------          ----------       ----------        ---------------
Allowance for sales discounts, returns and allowances       $  2,384,000           7,720,000       (6,840,000)       $     3,264,000
                                                            ------------          ----------       ----------        ---------------
</TABLE>

                                      F-24
<PAGE>

                                  EXHIBIT INDEX
                                  -------------

Exhibit No.  Description
-----------  -----------

3(a)         Certificate of Incorporation of the Registrant (incorporated herein
             by reference to Exhibit 3(a) to the  Registrant's  Annual Report on
             Form 10-K, File No.  1-5863,  for  the  fiscal year  ended June 30,
             2005).

3(b)         By-Laws  of  the  Registrant  (incorporated  herein by reference to
             Exhibit 3(b) to the Registrant's Annual  Report  on Form 10-K, File
             No. 1-5863, for the fiscal year ended June 30, 1991).

4(a)         Promissory Note of the Registrant dated  August 14, 2002 payable to
             the order  of  Hudson United Bank ("HUB") in the original principal
             amount  of  $3,250,000 (incorporated herein by reference to Exhibit
             4(a)  to the  Registrant's  Annual  Report  on  Form 10-K, File No.
             1-5863, for the fiscal year ended June 30, 2002).

4(b)         Mortgage,  Security Agreement and Financing Statement dated  August
             14, 2002  between  the  Registrant  and HUB (incorporated herein by
             reference to Exhibit 4(b) to the Registrant's Annual Report on Form
             10-K, File No. 1-5863, for the fiscal year ended June 30, 2002).

4(c)         Revolving  Loan  Agreement  dated  December  23, 2002  between  the
             Registrant  and  HUB  (incorporated  herein by reference to Exhibit
             4(c)  to  the  Registrant's  Annual  Report  on Form 10-K, File No.
             1-5863, for the fiscal year ended June 30, 2003).

4(d)         First Amendment to  Revolving  Loan  Agreement, Promissory Note and
             Other  Loan Documents dated October 23, 2003 between the Registrant
             and  HUB  (incorporated  herein by reference to Exhibit 4(d) to the
             Registrant's  Annual  Report on Form 10-K, File No. 1-5863, for the
             fiscal year ended June 30, 2005).

4(e)         Second Amendment  to  Revolving Loan Agreement, Promissory Note and
             Other  Loan Documents dated October 23, 2003 between the Registrant
             and  HUB (incorporated herein  by  reference to Exhibit 4(a) to the
             Registrant's  Quarterly  Report  on Form 10-Q, File No. 1-5863, for
             the fiscal quarter ended March 31, 2005).

10(a)        Third  Amendment  to  Revolving Loan Agreement, Promissory Note and
             Other   Loan   Documents  dated  September  22,  2006  between  the
             Registrant and  HUB  (incorporated  herein  by reference to Exhibit
             10.1  to  the  Registrant's  Current  Report on  Form 8-K, File No.
             1-5863, dated September 26, 2006).

10(b)        2000 Stock Option  Plan  of  the Registrant (incorporated herein by
             reference  to  Exhibit  10(b)  to the Registrant's Annual Report on
             Form  10-K,  File  No. 1-5863,  for  the fiscal year ended June 30,
             2006).*

10(c)        Second  Amended and Restated Stockholders' Agreement dated May  12,
             2003  among the  Registrant and  the  persons listed on Schedule  A
             thereto (incorporated herein by reference to Exhibit U to Amendment
             No. 9  to  the  Schedule  13D dated May 15, 2003 of Allan Ginsburg,
             Robert Chestnov, Abe Ginsburg and Howard Ginsburg.).

10(d)        Letter  Agreement  dated  as  of  December  29,  1997  between  the
             Registrant and Robert Chestnov (incorporated herein by reference to
             Exhibit 2.1 to the Registrant's Current
<PAGE>

Exhibit No.  Description
-----------  -----------

             Report on Form 8-K, file No. 1-5863, for the fiscal year ended June
             30, 1998).*

10(e)        Purchase  and  Sale  Agreement dated January 10, 2002 between  Mark
             Nitzberg  and  the  Registrant (incorporated herein by reference to
             Exhibit  2.1  to  the Registrant's Current Report on Form 8-K, File
             No. 1-5863, dated January 24, 2002).

10(f)        Consulting  Agreement dated January  10, 2002 between Natoosh, LLC,
             Mark  Nitzberg and the Registrant (incorporated herein by reference
             to Exhibit 2.2 to the Registrant's Current Report on Form 8-K, File
             No. 1-5863, dated January 24, 2002).

10(g)        Amendment  to Consulting  Agreement dated December 15, 2003 between
             Natoosh, LLC, Mark Nitzberg and the Registrant (incorporated herein
             by  reference  to  Exhibit  Annual  Report  on  Form 10-K, File No.
             1-5863, for the fiscal year ended June 30, 2004).

10(h)        Payment and Indemnification Agreement dated January 10, 2002 by and
             among Capital Factors, Inc., Topsville, Inc., Mark Nitzberg and the
             Registrant  (incorporated herein by reference to Exhibit 2.3 to the
             Registrant's  Current  Report  on  Form 8-K, File No. 1-5863, dated
             January 24, 2002).

10(i)        Consent  and  Joinder  Agreement  dated  August  10, 2004 among the
             Registrant,  Mark  Nitzberg  and  the  persons listed on Schedule A
             thereto (incorporated herein by reference to Exhibit U to Amendment
             No. 12 to the Schedule 13D dated August 16, 2004 of Allan Ginsburg,
             Robert Chestnov, Abe Ginsburg and Howard Ginsburg.).

10(j)        Consent  and  Joinder  Agreement  dated  June  6,  2006  among  the
             Registrant, Bruce Cahill, John Halbreich, and the persons listed on
             Schedule  A  thereto  (incorporated  herein by reference to Exhibit
             10(l) to  the  Registrant's  Annual  Report  on Form 10-K, File No.
             1-5863, for the fiscal year ended June 30, 2006).

10(k)        Mortgage dated as of  August 31, 2006 of Spring Valley  Associates,
             LLC  in  favor of the Company  (incorporated herein by reference to
             Exhibit  10.01 to the Registrant's Current Report on Form 8-K, File
             No. 1-5863, dated September 1, 2006).

10(l)        Promissory  Note  dated  as  of  August  31,  2006 of Spring Valley
             Associates, LLC  in  favor  of  the Company (incorporated herein by
             reference  to  Exhibit  10.02 to the Registrant's Current Report on
             Form 8-K, File No. 1-5863, dated September 1, 2006).

10(m)        Agreement  of  Lease  dated  as  of  September  1, 2006 between the
             Company and  Spring  Valley Associates, LLC (incorporated herein by
             reference  to  Exhibit  10.01 to the Registrant's Current Report on
             Form 8-K, File No. 1-5863, dated August 23, 2006).

10(n)        Agreement to  Sell and  Purchase Real Property dated as of June 15,
             2007   between   the   Company  and  5801  Jefferson   Street,  LLC
             (incorporated   herein   by  reference  to  Exhibit  10.01  to  the
             Registrant's  Current  Report  on  Form 8-K, File No. 1-5863, dated
             June 25, 2007).

14           Code  of  Ethics   for  Finance  Professionals  of  the  Registrant
             (incorporated herein by reference to Exhibit 14 to the Registrant's
             Annual  Report  on Form 10-K, File No. 1-
<PAGE>

Exhibit No.  Description
-----------  -----------
             5863, for the fiscal year ended June 30, 2004).

21           Subsidiaries of the Registrant (incorporated herein by reference to
             Exhibit 21 to the Registrant's Annual Report on Form 10-K, File No.
             1-5863, for the fiscal year ended June 30, 2006).

14           Code  of  Ethics  for  Finance   Professionals  of  the  Registrant
             (incorporated herein by reference to Exhibit 14 to the Registrant's
             Annual  Report on Form 10-K, File No. 1-5863, for the  fiscal  year
             ended June 30, 2004).

21           Subsidiaries of the Registrant (incorporated herein by reference to
             Exhibit 21 to the Registrant's Annual Report on Form 10-K, File No.
             1-5863, for the fiscal year ended June 30, 2006).

31(a)        Rule  13a-14(a)  Certification  of  Robert  Chestnov, President and
             Chief Executive Officer of the Company.+

31(b)        Rule   13a-14(a)   Certification  of  Anthony  Christon,  Principal
             Financial Officer of the Company.+

32           Certification  Pursuant  to  18  U.S.C.  Section  1350,  as Adopted
             Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+

-----------------
*Management contract or compensatory plan or arrangement.
+Filed with this Form 10-K.