<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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


                                       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.)

 635 59th Street, West New York, New Jersey                07093
-------------------------------------------    --------------------------------
   (Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code:  (201) 868-9400

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                     American Stock Exchange

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

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. [ ]

The  aggregate  market value of the voting stock (based on the closing  price of
such  stock  on the  American  Stock  Exchange)  held by  non-affiliates  of the
Registrant at September 15, 1999 was approximately $ 6,948,000.

There were 2,711,405 shares of Common Stock outstanding at September 15, 1999.


                           [Cover Page: 1 of 2 Pages]
<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

PART III  Certain Portions of the Registrant's Proxy Statement for the
          Registrant's Annual Meeting of Stockholders scheduled to be held on
          November 30, 1999.



                           [Cover Page: 2 of 2 Pages]
<PAGE>

                                TABLE OF CONTENTS
                                -----------------


<TABLE>
<CAPTION>
                                  Item                                                                           Page
                                  ----                                                                           ----


<S>                               <C>                                                                            <C>
PART I                            1.     Business.................................................................1

                                  2.     Properties...............................................................4

                                  3.     Legal Proceedings........................................................5

                                  4.     Submission of Matters to a
                                         Vote of Security Holders.................................................5

PART II                           5.     Market for the Registrant's Common Equity
                                         and Related Stockholder Matters..........................................6

                                  6.     Selected Financial Data..................................................7

                                  7.     Management's Discussion and Analysis of
                                         Financial Condition and Results of
                                         Operations...............................................................8

                                  7A.    Quantitative and Qualitative disclosures about
                                         Market & Risk............................................................12

                                  8.     Financial Statements and Supplementary
                                         Data.....................................................................12

                                  9.     Changes in and Disagreements with
                                         Accountants on Accounting and Financial
                                         Disclosure...............................................................12

PART III                          10.    Directors and Executive Officers
                                         of the Registrant........................................................12

                                  11.    Executive Compensation...................................................12

                                  12.    Security Ownership of Certain
                                         Beneficial Owners and Management.........................................13

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

PART IV                           14.    Exhibits, Financial Statement
                                         Schedules and Reports on Form 8-K........................................13

SIGNATURES........................................................................................................17
</TABLE>
<PAGE>

                                     PART I
                                     ------



Item 1.      Business.
------       --------

                   Jaclyn, Inc.  (incorporated in the State of Delaware in 1968)
("Jaclyn") and its subsidiaries  (collectively  the  "Registrant") are primarily
engaged in the design, manufacture,  distribution and sale of vinyl, leather and
fabric  handbags,  sport  bags  and  related  products  (collectively,  "handbag
products"),  and apparel items. The Registrant markets its handbag products in a
variety of popularly  priced  fashions and designs,  with an emphasis on casual,
travel and sport  styles.  The  Registrant's  apparel lines are wide ranging and
include women's loungewear,  sleepwear,  dresses, sportswear,  vests, as well as
lingerie.

                   General.  Styling is an important factor in the merchandising
of all  of the  Registrant's  products.  The  Registrant's  staff  of  full-time
designers  studies fashion trends in order to anticipate  consumer  demand.  The
design  staff works  closely with the  purchasing  department  to determine  the
styling and  material  components  for its handbag  products,  and  concepts and
fabrics  for its  apparel  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.  The Registrant  changes
most of its designs from season to season.

                   Finished   merchandise,   other  than   merchandise  for  the
Registrant's  newly acquired women's apparel catalogue  business (the "Catalogue
Business")   discussed  below,  is  received  at  independently   owned  outside
warehouses located in New Jersey,  Florida,  California and Indiana.  From these
locations product is shipped under different selling names to customers all over
the country. Product for the Catalogue Business is shipped directly from outside
contractor  locations to the customer.  The  Registrant's  handbag  products are
intended to retail at between $6 and $275.  The  Registrant's  better  price and
designer lines of handbag products, which are sold under the "ANNE KLEIN(TM)",
"A LINE(TM)"and "Susan Gail" names, are marketed through better department
stores and specialty shops. The Registrant's other handbag products are marketed
primarily through general merchandise, chain and department stores. In addition,
the Registrant markets its apparel lines to existing customers of its handbag
products as premium and/or special order items, as well as to major mail order
catalog chains and other retailers.

                   The Registrant  markets its handbag products under trademarks
and trade names which it owns,  including  "Shane"and "Aetna," "Susan Gail," and
"Robyn Lyn". In addition,  the Registrant is licensed to manufacture  and market
handbag products under the names "Looney Tunes(TM)" under three agreements which
expire December 31, 1999 and one other expiring March 30, 2003, "South Park(TM)"
under an agreement which expires December 31, 2000,"Crayola(TM)" under an
agreement which expires December 31, 1999, "Dr. Seuss(TM)" under two agreements
which expire December 31, 1999 and June 30, 2000, and "ANNE KLEIN(TM)" and "A
LINE(TM)" under an agreement which expires December 31, 2001. The Registrant's
apparel lines are marketed under the names "Robyn Lyn," "Saddle River," "Susan
Gail," "Emerson Road," Dawson Road," and "Banner New York." The Registrant also
manufactures apparel items for sale as private-label merchandise. The Registrant
considers all of its licensed trademarks, trade names and other intellectual
property rights to be of significant value in the marketing of its products.
<PAGE>

                   The Registrant sells throughout the United States through its
own  salesmen  and  through   independent   sales   representatives.   Sales  of
domestically  manufactured  merchandise,  including  those  assembled in Central
America and in Mexico  from  domestically  produced  components,  accounted  for
approximately 29% of the Registrant's consolidated net sales for the fiscal year
ended June 30, 1999.  During fiscal 1998, sales of such  merchandise,  including
those assembled in Central America and in Mexico from domestically  manufactured
components, accounted for approximately 33% of consolidated net sales.

                   In fiscal 1999, the Registrant's imports of merchandise
manufactured in the Far East accounted for approximately 71% of consolidated net
sales, compared to approximately 67% of consolidated net sales in fiscal 1998.
Imports offer the Registrant the benefit of a greater diversification of styling
resulting from volume purchases and the benefit of cost savings related to such
purchases. While the Registrant's operations are subject to the usual risks
associated with purchases from foreign countries, the Registrant's other foreign
and domestic manufacturing sources provide it with alternative sources and
facilities.

                   Approximately 75% of the Registrant's  consolidated net sales
for  fiscal  1999 were to  general  merchandise,  chain,  department  stores and
catalogue  retailers,  with the balance consisting of sales to smaller specialty
shops,  smaller retail stores and cosmetic  firms.  During the fiscal year ended
June  30,  1999,  four  customers  of the  Registrant  accounted  for 37% of the
Registrant's  consolidated  net sales,  of which the  Registrant's  two  largest
customers ( Estee Lauder and Wal-Mart Stores, Inc.) accounted for 16% and 11% of
such sales,  respectively.  Four major customers of the Registrant accounted for
approximately 44% of the Registrant's consolidated net sales for the fiscal year
ended June 30, 1998, of which the Registrant's  three largest  customers ( Estee
Lauder,  Wal-Mart Stores, Inc.and Target Stores) accounted for 15% , 12% and 10%
of such sales,  respectively.  Sales of apparel  items during each of the fiscal
years  ended  June  30,  1999,  1998  and  1997  represented  34%,  35% and 32%,
respectively,  of consolidated net sales. Sales of handbag products  represented
the remainder of the Registrant's consolidated net sales. The Registrant's sales
are customarily  offered on credit terms. The Registrant does not have long-term
contracts with any of its customers.

                   The   Registrant   purchases  its  handbag  and  apparel  raw
materials,  primarily  fabrics,  vinyl and urethane plastics,  leather,  frames,
ornaments,  trim and other materials, and certain of its finished products, from
a variety of sources.  In most cases,  the Registrant  assists its suppliers and
contractors  in  the  design  and  style  of the  materials  it  purchases.  The
Registrant's  largest  expenditures for raw materials are for fabrics,  leather,
vinyl  and  urethane  plastics,  which the  Registrant  purchases  from  several
suppliers,  one of which  provided  about 4% of its raw material needs in fiscal
1999. While the Registrant has no long-term supply contracts,  the raw materials
it uses are available  from various  sources and it anticipates no difficulty in
the future in obtaining the necessary  raw  materials for its  operations.  With
respect to its domestic  manufacturing and imported  purchases from the Far East
and Europe of finished handbags and related products,  the Registrant deals with
a number of sources, both domestically and in the Far East and Europe, no one of
which accounted for more than 27% of the Registrant's  total cost of goods sold.
The Registrant has no long-term  supply  contracts with its Far East or European
sources of  finished  handbags  and  related  products  or apparel  items and is
subject to the usual risks associated therewith.



                                       -2-
<PAGE>

                   The  Registrant  generally  offers  Fall/Winter,  Holiday and
Spring/Summer  product lines and in most instances  manufactures product to meet
the specific  requirements of its customers.  The Registrant's business has been
somewhat seasonal in nature, with shipments generally being greater in the first
two  quarters  of its fiscal  years and lower in the third and  fourth  quarters
although due to scheduling and customer requirements and, in part, to the
Catalogue Business, sales in the first and fourth quarters were greater in
fiscal 1999. Reference is made to Note L, "Unaudited Quarterly Financial Data,"
of the Notes to Consolidated Financial Statements on page F-17 of this Form 10-K
for additional information about quarterly results.

                   At September 15, 1999, the Registrant had unfilled  orders of
approximately $24,149,000 compared to approximately $18,834,000 at September 15,
1998. The increase in backlog is primarily attributable to an increases in the
volume of the women's sleepwear business coupled with backlog related to the
acquisition of the Catalogue Business. In the ordinary course of business, the
amount of unfilled orders at a particular point in time is affected by several
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 is not necessarily meaningful and
may not be indicative of future sales patterns or shipments.

                   The  Registrant  employed 138 persons as of June 30, 1999, of
whom 85 were on a salaried basis and the balance on an hourly basis. At June 30,
1999, 18 of the Registrant's  employees were members of the Four Joint Boards of
New  York,  New  Jersey,  Pennsylvania  and New  England,  affiliated  with  the
International  Leather Goods,  Plastics and Novelty Workers Union,  AFL-CIO. The
Registrant considers its relations with its employees to be satisfactory.

                   The Registrant competes with hundreds of domestic and foreign
manufacturers  of popular  priced  handbags and  apparel,  very few of which are
believed  to account  for as much as 1% of  industry  sales.  In  addition,  the
Registrant competes with numerous manufacturers of apparel items. The Registrant
believes  its  sales of  apparel  items  are not  significant  in light of total
apparel  industry sales.  The  Registrant's  business is dependent,  among other
things,   on  its  ability  to  anticipate  and  respond  to  changing  consumer
preferences,  to remain  competitive in price, style and quality and to meet its
customers' production and delivery requirements.  While some of the Registrant's
competitors may be larger or may have greater resources than the Registrant, the
Registrant  believes  that its  size and  financial  position  will  allow it to
continue to respond to changes in consumer demand and meet its competition.

                   On January 11,1999,  the Registrant acquired the business and
certain assets of the catalogue  division of Banner Industries of New York, Inc.
("Banner"),  a manufacturer  and  distributor of sportswear and dresses.  Assets
acquired  included,  among  other  things,  work-in-process,  piece  goods,  raw
materials,  customer  orders,  trademarks  and trade  names,  office  equipment,
furniture and fixtures.  The  Registrant  also operates a New York City showroom
formerly  operated  by Banner.  The  acquired  business  manufactures  and sells
apparel  lines to major mail order  catalogues.  The  aggregate  purchase  price
(after  giving effect to certain  post-closing  adjustments)  was  approximately
$2,861,000,  of which  $2,411,671.21  was paid at the closing of the transaction
and the remainder of which,  approximately $450,000 (subject to adjustment),  is
payable  during the one-year  period after closing.  The  Registrant  used funds
generated from


                                       -3-
<PAGE>

operations to pay the purchase price,  which was determined through arm's length
negotiations  with the Seller.  One of the  principals of Banner was retained by
the Registrant as a consultant, primarily to provide advice and other assistance
in  connection  with the transfer of the acquired  assets and  operations to the
Registrant,  for a period of one year from closing  (ending  January  2000) at a
consulting fee of $50,000.

                   As previously  announced,  during fiscal 1999 the  Registrant
commenced the process of evaluation  its  operations  with a view to eliminating
unprofitable  businesses.  During the year ended June 30, 1999,  the  Registrant
closed  three   unprofitable   divisions,   including  the   operations  of  its
wholly-owned subsidiary,  JLN, Inc., located in Ferris Texas. As a result of the
closure of one of its handbag  divisions  (discussed  below in this Item 1), the
Registrant recorded a pre-tax charge for the write-off of goodwill in the amount
of  approximately  $1,100,000.  In  connection  with the  closure  of the  Texas
operations  of JLN,  JLN's real  property and certain  related fixed assets were
sold and a pretax gain of $324,000 from the sale was recorded by the Registrant.
Reference is made to Item 7,  Management's  Discussion and Analysis of Financial
Condition  and Results of  Operations  for further  information  concerning  the
closing of such divisions.

                   In  January  1996,  the  Registrant   entered  into  a  sales
agreement to  manufacture  and  distribute an existing line of women's robes and
sleepwear.  In  addition,  in April 1998,  the  Registrant  entered into a sales
agreement to manufacture and distribute an existing line of junior intimates and
daywear.  The Registrant did not incur any significant  expenditures as a result
of either of these agreements.

                   On June 18, 1996, the Registrant  acquired certain trademarks
and  other  assets  from  McCrackin  Industries,   Inc.  ("McCrackin")  and  its
affiliates for a purchase price of $1,500,000.  The trademarks  included "Saddle
River,"  under which the  Registrant  has been  manufacturing  and  distributing
ladies' handbags for more than 9 years. In March 1999, the Registrant  concluded
that this line of  moderately  priced  handbags,  which were  primarily  sold to
department stores, was not profitable and consequently  closed operations.  This
resulted in a goodwill  pretax  writeoff of  approximately  $1.1 million  during
fiscal 1999.

Item 2.      Properties.
------       ----------

                   The Registrant's  executive  offices and one of its warehouse
facilities,  containing  140,000  square feet, are located in West New York, New
Jersey.  The Registrant  occupied these  facilities  under long-term leases from
1968 to 1981,  when these  facilities  were  purchased  by the  Registrant.  The
Registrant currently leases to outside parties  approximately 59,000 square feet
of the West New York  facilities.  The Registrant also leases three showroom and
office  facilities in New York City totaling  approximately  20,000 square feet.
The executive offices, and manufacturing, distribution and warehouse facilities,
of the Registrant's wholly-owned subsidiary, JLN, Inc., containing 93,250 square
feet,  located in Ferris,  Texas were sold during  fiscal 1999.  The  Registrant
realized a pretax gain of $324,000 on the sale of land,  buildings and equipment
at this location.

                   Reference is made to Note D,  "Commitments,"  of the Notes to
Consolidated  Financial Statements on page F-10 of this Form 10-K for additional
information about the Registrant's commitments under the terms of non-cancelable
leases.



                                       -4-
<PAGE>

Item 3.      Legal Proceedings.
------       -----------------

                   (a)  The  Registrant  is not a  party  to,  nor is any of its
property the subject of, any material pending legal proceeding.


                   (b) No  material  pending  legal  proceeding  was  terminated
during the three-months ended June 30, 1999.

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

                   The  Registrant  did not submit any  matters to a vote of its
security holders,  through the solicitation of proxies or otherwise,  during the
three-months ended June 30, 1999.


                                       -5-
<PAGE>

                                     PART II
                                     -------

Item 5.      Market for the Registrant's Common Equity
             and Related Stockholder Matters.
             -----------------------------------------

                   The Registrant'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 the  Registrant's  Common Stock,
as reported by the American Stock Exchange, for each quarterly period during the
Registrant's fiscal years ended June 30, 1999 and June 30, 1998.

     Fiscal Year Ended June 30, 1999             High              Low
     -------------------------------             ----              ---

     First Quarter                               5 1/4             3 5/8
     Second Quarter                              4                 3 1/8
     Third Quarter                               4                 2 3/8
     Fourth Quarter                              3 3/16            2 3/16

     Fiscal Year Ended June 30, 1998             High              Low
     -------------------------------             ----              ---

     First Quarter                               5 1/8             3 7/8
     Second Quarter                              4 15/16           4 3/16
     Third Quarter                               5  5/16           4
     Fourth Quarter                              5 13/16           4 3/4

                   The Registrant did not pay cash dividends  during fiscal 1999
or 1998 and does not anticipate the payment of cash dividends in the foreseeable
future.

                   At June 30,  1999,  there were  approximately  699 holders of
record of the Registrant's Common Stock.



                                       -6-
<PAGE>

Item 6. Selected Financial Data.
------  -----------------------

<TABLE>
<CAPTION>
===================================================================================================================================
Years ended June 30,                                   1999              1998              1997              1996              1995
===================================================================================================================================
<S>                                        <C>              <C>               <C>               <C>               <C>
Net Sales                                  $     58,766,000 $      68,263,000 $      77,156,000 $      72,312,000 $      73,577,000
Cost of Goods Sold                               44,873,000        51,401,000        56,825,000        53,836,000        58,639,000

-----------------------------------------------------------------------------------------------------------------------------------
Gross Profit                                     13,893,000        16,862,000        20,331,000        18,476,000        14,938,000
-----------------------------------------------------------------------------------------------------------------------------------
Shipping, selling and administrative
    expenses                                     16,073,000        16,870,000        19,206,000        17,553,000        17,834,000
Writeoff of goodwill - See note below             1,124,000                 -                 -                 -                 -
Restructuring costs                                       -                 -                 -                 -           995,000
Interest expense                                      4,000           182,000           181,000           119,000           309,000
Interest income                                     207,000           294,000           277,000           338,000           313,000
Other income, net                                   324,000                 -            10,000                 -             4,000
(Benefit) provision for income taxes              (998,000)            37,000           468,000           457,000       (1,563,000)
-----------------------------------------------------------------------------------------------------------------------------------
NET (LOSS) EARNINGS                        $    (1,779,000) $          67,000 $         763,000 $         685,000 $     (2,320,000)
===================================================================================================================================
Weighted average shares outstanding               2,711,000         2,707,000         2,705,000         2,692,000         2,691,000
===================================================================================================================================
   Net Earnings per common share-
    Basic and Diluted                      $          (.66) $             .02 $             .28 $             .25 $           (.86)
Cash dividends paid                        $              - $               - $                 $                 $             .25
===================================================================================================================================
TOTAL ASSETS                               $     25,595,000 $      24,572,000 $      34,063,000 $      31,981,000 $      28,409,000
===================================================================================================================================
Long term debt:
    Guaranteed bank loan - ESOP                           - $          56,000 $         509,000 $         704,000 $         888,000
    Other non-current liabilities                         -                 - $          28,000 $          32,000 $          33,000
Stockholders' equity                       $     16,659,000 $      18,394,000 $      17,785,000 $      16,838,000 $      15,942,000
===================================================================================================================================
Stockholders' equity per share             $           6.15 $            6.80 $            6.57 $            6.26 $            5.92
===================================================================================================================================
</TABLE>


Note: Goodwill writeoff totaling $1,124,000 resulted from closing one of three
----
unprofitable divisions during fiscal 1999.

                                       -7-
<PAGE>

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

Liquidity and Capital Resources

          The net decrease in cash and cash equivalents in the fiscal year ended
June  30,  1999 was  $1,125,000,  resulting  from an  excess  of  funds  used in
operating  activities  $1,425,000  and an  excess  of  funds  used in  investing
activities $1,475,000, offset, in part, by cash provided by financing activities
of $1,775,000. Funds used in operating activities in fiscal 1999 principally was
the result of an increase in accounts receivable (attributable to a higher level
of shipping  in the fourth  quarter of fiscal  1999  compared to the  comparable
quarter in fiscal 1998)  offset,  for the most part,  by a decrease in inventory
(attributable  to closing  three  unprofitable  businesses  and  acquiring a new
women's apparel business,  which manufactures and distributes women's apparel to
catalogue retailers,  with faster inventory turnover). In addition, the increase
in the Company's net loss offset by a write-off of approximately $1.1 million of
goodwill  associated with one of the three unprofitable closed operations during
fiscal 1999 and an increase in prepaid and refundable  income taxes,  were other
factors which  contributed to the net cash used in operating  activities.  Funds
used in investing activities resulted mainly from the acquisition of the women's
apparel  business in January 1999  (described  above),  offset by proceeds  from
sales of securities  available for sale. Funds provided by financing  activities
were the result of bank borrowing of $1,775,000 at June 30, 1999 under Company's
existing credit facility.

          During fiscal 1999, the Company completed the renewal of a $23,000,000
bank line of credit  which  extends  through  June 30,  2000.  Changes  from the
previous bank line of credit  include,  among other things,  an increase in loan
availability  from $10,000,000 to $13,000,000  with the Company's  inventory and
accounts  receivable  pledged to the bank as  collateral,  a minimum quick ratio
requirement of 1 to 1, and the  maintenance  of a minimum  tangible net worth of
$14,000,000.  The Company  believes that funds provided by operations,  existing
working capital and the Company's bank line of credit will be sufficient to meet
foreseeable  working  capital  needs.  Reference  is  made  to  Note  E  "Credit
Facilities," of the Notes to Consolidated  Financial  Statements on page F-10 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, 1999.

          The net  increase  in cash  and cash  equivalents  in  fiscal  1998 of
$596,000 was the result of an excess of funds provided from operating activities
totaling  $4,042,000  and investing  activities of $633,000,  over funds used in
financing activities of $4,079,000.  Funds provided by operating activities were
principally from a $1,985,000 decrease in inventory  (resulting from lower first
quarter fiscal 1999 shipping) and a $5,648,000  decrease in accounts  receivable
(attributable  to a lower level of shipping in the fourth quarter of fiscal 1998
compared to the  comparable  quarter in fiscal 1997).  The resulting  cash flows
were mostly used to decrease  accounts payable and other current  liabilities by
$5,056,000. Cash provided by investing activities resulted mainly from an excess
of proceeds from securities available for sale over purchases of such securities
and the purchases of property and equipment.  Funds used in financing activities
were mostly to pay down all  outstanding  notes  payable to the  Company's  bank
under the existing credit facility.

          The net increase in cash and cash  equivalents in fiscal 1997 totaling
$915,000 was the result of an excess of funds from  financing  activities  (bank
borrowing  under the  Company's  credit line) of  $3,063,000  over funds used in
investing  activities  of $467,000  and funds used in  operating  activities  of
$1,681,000.  Funds from operating activities were used mainly to reduce accounts
payable and other

                                       -8-
<PAGE>

current  liabilities  totaling $1,677,000 and to finance the $1,179,000 increase
in accounts  receivable.  These funds were  principally  offset by a decrease in
inventories  of  $1,010,000  which  resulted  from higher  shipping in June 1997
compared to June 1996 and net earnings from operations of $763,000. Cash used in
investing activities was primarily for property and equipment additions.

          As of June 30, 1999, 1998 and 1997,  working capital was  $15,069,000,
$16,695,000  and  $16,697,000, respectively.  The ratio of current  assets to
current  liabilities for those same periods was 2.9 to 1, 4.4 to 1 and 2.2 to 1,
respectively.  The decrease in the current ratio in fiscal 1999 is the result of
using a greater  portion of the proceeds from the securities  available for sale
to fund part of the  Company's  working  capital  needs and from  using  cash to
purchase the women's apparel catalogue  business  (including  approximately $1.3
million of goodwill  for this  business)  and from a higher  level of both notes
payable to the Company's bank and accounts  payable.  The Company's  cash,  cash
equivalents  and  marketable  securities  totaled  $2,725,000,   $4,911,000  and
$5,187,000, at June 30, 1999, 1998 and 1997, respectively.

Results of Operations

1999 Compared to 1998

          Net sales of $58,766,000  were $9,497,000  below fiscal 1998. This was
due primarily to the closing of three unprofitable operations,  as well as lower
volume in the Company's  medium  priced  handbag  business  due, in general,  to
reduced  retail  demand for  non-branded  handbag and  accessories  merchandise,
offset partly by improved premium handbag and women's apparel sales and by sales
from the newly acquired women's apparel business selling to catalogue retailers.

          The gross  profit  margin for fiscal  1999 was 23.6 %, or a decline of
1.1% from the prior  year,  which  resulted  from a higher  level of  inventory
markdowns due to closing three  unprofitable  operations and also from off-price
sales in the  children's and medium priced handbag  business.  Margins  improved
somewhat,  however,  in the premium and the women's apparel business.  Shipping,
selling and  administrative  expenses  decreased  by $797,000  related to lower
shipping,   royalty  and   administrative   expense  offset, in part, by higher
product development costs. Also included in fiscal 1999 are business integration
costs of approximately $230,000 associated with the acquisition of the new
women's apparel business. As a percentage of net sales, the current fiscal year
was 27.4% compared to 24.7% in the prior fiscal year, attributable to the
relatively higher level of fixed costs.

          Interest  expense was much lower in fiscal 1999  compared to the prior
year because the Company  utilized  its  available  investment  funds in lieu of
borrowing in the current fiscal year compared to the prior year.

          Interest  income,   decreased  $87,000  from  the  prior  fiscal  year
generally due to a lower level of interest rates on the investment portfolio and
from the greater  utilization of investment  funds for working  capital needs in
fiscal 1999 compared to the prior fiscal year.

          Other  income (net) is comprised of a pretax gain on the sale of fixed
assets totaling  $324,000 from one of the unprofitable  businesses closed during
fiscal 1999.



                                       -9-
<PAGE>

          The decrease in earnings before income taxes for the fiscal year ended
June 30, 1999  compared to the prior year was  primarily  due to the decrease in
sales, a 1.1% decrease in the gross profit margin discussed above, the goodwill
write-off  of   approximately   $1.1  million   associated  with  one  of  three
unprofitable businesses closed during fiscal 1999 and business integration costs
associated with the acquisition of the women's apparel catalogue  business.  The
foregoing was offset,  in part, by lower  shipping,  selling and  administrative
expenses,  as well as the pre-tax  gain on the sale of fixed assets as discussed
above.


1998 Compared to 1997

          Net sales of  $68,263,000  were  $8,893,000  below fiscal  1997.  This
decrease was due primarily to significantly  lower sales volume in the Company's
children's  division  resulting  mostly from the  non-renewal  of the  Company's
"Winnie The Pooh(TM)"  license and lower volume in the  Company's  medium priced
handbag  business,  due  to  lower  retail  demand  for  non-brand  handbag  and
accessories  merchandise,  offset partly by improved premium and women's apparel
sales.

          The gross  profit  margin for fiscal  1998 was 24.7%,  or a decline of
1.7%  from the prior  year,  which  resulted  from a higher  level of  inventory
markdowns  and  off-price  sales in the  children's  and medium  priced  handbag
business.  Margins improved  somewhat,  however,  in the premium and the women's
apparel business.  Shipping,  selling and  administrative  expenses decreased by
$2,336,000.  As a  percentage  of net sales,  the current  fiscal year was 24.7%
compared to 24.9% in the prior  fiscal year,  attributable  to lower fiscal 1998
shipping, royalty and product development costs.

          Other income,  comprised  almost  exclusively  from  interest  income,
declined  slightly from the prior fiscal year  generally due to a lower level of
interest rates on the investment portfolio.

          The decrease in earnings before income taxes for the fiscal year ended
June 30, 1998  compared to the prior year was  primarily  due to the decrease in
sales and the 1.7% decrease in the gross profit margin discussed above.

1997 Compared to 1996

          Net sales were  $77,156,000,  or $4,844,000  greater than fiscal 1996.
This increase was primarily due to increased  apparel sales,  an increase in the
premium  business and an increase in the children's  licensing  business  offset
somewhat by a decrease in moderately priced handbag line.

          Gross profit margins totaling 26.4% improved  slightly due to stronger
margins from licensed products and from improved apparel business margins.

          Other income,  almost exclusively from investments,  declined due to a
lower level of investments in fiscal 1997 compared to fiscal 1996.

          The earnings increase for the fiscal year ended June 30, 1997 compared
to the prior year was due to slightly  higher gross profit  margins on increased
sales and a slightly lower  effective tax rate compared to the prior fiscal year
offset by higher shipping, selling and administrative expenses.




                                      -10-
<PAGE>

Recently Issued Accounting Standards

          In June 1998 the Financial  Accounting Standards Board issued SFAS No.
133,  "Accounting  for  Derivative  Instruments  and Hedging  Activities."  This
statement, which is effective for the Company for the year ending June 30, 2001,
establishes  accounting and reporting  standards for derivative  instruments and
hedging  activities.  The Company has not yet determined whether the application
of SFAS No. 133 will have a material impact on its financial position or results
of operations.


Year 2000 Compliance

          The Company  has  completed  its  assessment  of the changes  that are
needed  to make its  critical  and  other  data  processing  systems  Year  2000
compliant.  The changes, which include a combination of software  modifications,
upgrades,  hardware changes and significant  customer testing have substantially
been  completed.  The Company's  internal  target date to be fully  compliant is
October 1999 with continued  testing to take place during the balance of 1999 in
order to minimize the risks associated with Year 2000 systems changes.

          Existing data  processing  personnel  are being  utilized to implement
Year 2000  changes.  To date,  total  costs  incurred  have  been  approximately
$20,000,  with total  aggregate costs to become Year 2000 compliant not expected
to exceed $25,000.

          Most of the Company's major customers have already indicated that they
are or will be Year 2000  compliant  before the end of 1999.  The Company is not
computer  interdependent with its significant suppliers and,  accordingly,  does
not believe that the failure of suppliers  to be Year 2000  compliant  will pose
any significant  risk to the Company's  business  operation.  In any event,  the
Company presently has and expects it will have alternative  sources of supply if
existing  vendors  are unable to supply the Company in the event they may not be
Year 2000  compliant  and is taking  measures to have  certain raw  materials on
hand, in certain  instances,  to assure  continuity in the first month or two of
the year 2000.

          The  foregoing   constitute  forward  looking  statements  based  upon
management's  best  estimates  concerning  future  events.  Actual results could
differ as a result of a number of factors,  including  future costs of Year 2000
compliance,  success of testing,  successful  completion  by third  parties with
their respective Year 2000 compliance programs, and similar uncertainties.




                                      -11-
<PAGE>

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

          The  Registrant,   in  the  normal  course  of  doing   business,   is
theoretically  exposed to interest  rate change  market risk with respect to its
Securities  Available for Sale and its line of credit. As borrowing patterns are
seasonal,  the  Registrant  is not dependent on borrowing  throughout  the year.
Therefore,  a sudden  increase in interest rates (which under the line of credit
is at the prime  rate or lower)  may,  during  peak  borrowing,  have a negative
impact on short-term  results,  but would unlikely  impact  longer-term  results
since a cost pass-through would offset such higher interest expense.

          All of the  Registrant's  Securities  Available  for  Sale  are  state
government or municipal bonds. As of June 30, 1999, the cost and market value of
such bonds was $1,651,000 and $1,674,000,  respectively.  A significant increase
in  interest  rates would  result in a decrease in the market  value of the bond
prices. However, to minimize risk, the Registrant has a policy of investing only
in high rated  instruments (substantially  all have Aa or better  Moody's bond
ratings) and generally uses short-term maturities (currently the average life is
about three  years).  In addition,  the proceeds  from such  securities  are not
essential to the working  capital needs of the business and  therefore  could be
held to maturity for full face value.

Item 8.      Financial Statements and Supplementary Data.
-------      --------------------------------------------

          (a) Financial Statements
              --------------------

          The  report  dated  September  22,  1999 of  Deloitte  &  Touche  LLP,
independent  auditors,  the  consolidated  balance  sheets of Jaclyn,  Inc.  and
subsidiaries  as of  June  30,  1999  and  1998  and  the  related  consolidated
statements of  operations,  stockholders'  equity and cash flows for each of the
three  years in the  period  ended  June  30,  1999  and  Notes to  Consolidated
Financial Statements appear on pages F-2 through F-17 of this Form 10-K.

          (b) Supplementary Data
              ------------------

          Selected unaudited quarterly financial data for the fiscal years ended
June 30,  1999 and June 30,  1998 is set forth at Note L,  "Unaudited  Quarterly
Financial Data" on page F-17 of this Form 10-K.

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

          Not Applicable.


                                    PART III
                                    --------

Item 10.     Directors and Executive Officers of the Registrant.
--------     ---------------------------------------------------

          The  information  required  by this  item is  incorporated  herein  by
reference  to  the  Registrant's  definitive  Proxy  Statement  relating  to the
Registrant's  1999  Annual  Meeting  of  Stockholders  to be filed  pursuant  to
Regulation 14A under the Securities Exchange Act of 1934, as amended.

Item 11.     Executive Compensation.
--------     -----------------------

          The  information  required  by this  item is  incorporated  herein  by
reference  to  the  Registrant's  definitive  Proxy  Statement  relating  to the
Registrant's  1999  Annual  Meeting  of  Stockholders  to be filed  pursuant  to
Regulation 14A under the Securities Exchange Act of 1934, as amended.



                                      -12-
<PAGE>

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

          The  information  required  by this  item is  incorporated  herein  by
reference  to  the  Registrant's  definitive  Proxy  Statement  relating  to the
Registrant's  1999  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  the  Registrant's  definitive  Proxy  Statement  relating  to the
Registrant's  1999  Annual  Meeting  of  Stockholders  to be filed  pursuant  to
Regulation 14A under the Securities Exchange Act of 1934, as amended.


                                     PART IV
                                     -------

Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K.
--------     ----------------------------------------------------------------

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

          1.   Financial Statements:
               --------------------

               Independent Auditors' Report

               Consolidated Balance Sheets -- June 30, 1999 and 1998

               Consolidated Statements of Operations -- years ended June 30,
               1999, 1998 and 1997

               Consolidated  Statements of  Stockholders'  Equity -- years ended
               June 30, 1999, 1998 and 1997

               Consolidated  Statements  of Cash  Flows -- years  ended June 30,
               1999, 1998 and 1997

               Notes to Consolidated Financial Statements

         2.    Financial Statement Schedules:
               -----------------------------

               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.

         3.    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, 1994).



                                      -13-
<PAGE>

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).

10(a)                      Lease dated as of February 11, 1993 with 33 East 33rd
                           Street Realty Associates relating to showroom,
                           warehouse and distribution facilities of the
                           Registrant located in New York, New York
                           (incorporated herein by reference to Exhibit 10(d) to
                           the Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1993).

10(b)                      Lease dated January 27, 1999 with Ruth R. Abrams LLC,
                           Rosalie Abrams Katz, First Half Realty Co., Inc. and
                           Second Half Realty Co., Inc. relating to office and
                           showroom facilities located in New York, New York.

10(c)                      Lease dated October 14, 1998 with Statecourt
                           Enterprises, Inc. relating to office and showroom
                           facilities located in New York, New York.

10(d)                      Incentive Stock Option Plan of the Registrant
                           (incorporated herein by reference to Exhibit 10(f) to
                           the Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1988).*

10(e)                      1984 Employee Stock Option Plan of the Registrant
                           (incorporated herein by reference to Exhibit 10(f) to
                           the Registrant's Annual Report on Form 10-K, File
                           No. 1-5863, for the fiscal year ended June 30,
                           1989).*

10(f)                      1990 Stock Option Plan of the Registrant, as amended
                           (incorporated herein by reference to Exhibit 10(g) to
                           the Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1991).*

10(g)                      Amended and Restated Stockholders' Agreement dated
                           July 30, 1996 among the Registrant and the persons
                           listed on Schedule A thereto (incorporated herein by
                           reference to Exhibit 10(j) to the Registrant's Annual
                           Report on Form 10K, file number 1-5863, for the
                           fiscal year ended June 30, 1996).

10(h)                      Key Executive Disability Plan of the Registrant
                           (incorporated herein by reference to Exhibit 10(m) to
                           the Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1988).*

10(i)                      Non-Qualified Stock Option Contract dated December 2,
                           1998 between the Registrant and Martin Brody.

10(j)                      Non-Qualified Stock Option Contract dated December 2,
                           1998 between the Registrant and Richard Chestnov


                                      -14-
<PAGE>

10(k)                      Non-Qualified Stock Option Contract dated December 2,
                           1998 between the Registrant and Albert Safer.

10(l)                      Split-Dollar Insurance Agreement dated August 15,
                           1987 between the Registrant and Robert Chestnov
                           (incorporated herein by reference to Exhibit 10(m) to
                           the Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1990).*

10(m)                      Split-Dollar Insurance Agreement dated August 15,
                           1987 between the Registrant and Howard Ginsburg
                           (incorporated herein by reference to Exhibit 10(n) to
                           the Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1990).*

10(n)                      Split-Dollar Insurance Agreement dated August 15,
                           1987 between the Registrant and Allan Ginsburg
                           (incorporated herein by reference to Exhibit 10(o) to
                           the Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1990).*

10(o)                      1996 Non-Employee Director Stock Option Plan
                           (incorporated by reference to Exhibit 10(o) to the
                           Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1998).*

10(p)                      Non-Qualified Stock Option Contract dated December
                           3,1996 between the Registrant and Martin Brody
                           (incorporated by reference to Exhibit 10(p) to the
                           Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1997).

10(q)                      Non-Qualified Stock Option Contract dated December 3,
                           1996 between the Registrant and Richard Chestnov
                           (incorporated by reference to Exhibit 10(q) to the
                           Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1997).

10(r)                      Non-Qualified Stock Option Contract dated August 19,
                           1997 between the Registrant and Al Safer
                           (incorporated by reference to Exhibit 10(r) to the
                           Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1997).

10(s)                      Non-Qualified Stock Option Contract dated December 3,
                           1997 between the Registrant and Martin
                           Brody. (incorporated by reference to Exhibit 10(s) to
                           the Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1998).


                                      -15-
<PAGE>

10(t)                      Non-Qualified Stock Option Contract dated December 3,
                           1997 between the Registrant and Richard Chestnov.
                           (incorporated by reference to Exhibit 10(t) to the
                           Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1998).

10(u)                      Non-Qualified Stock Option Contract dated December 3,
                           1997 between the Registrant and Albert Safer.
                           (incorporated by reference to Exhibit 10(u) to the
                           Registrant's Annual Report on Form 10-K, File No.
                           1-5863, for the fiscal year ended June 30, 1998).

10(v)                      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(w)                      Purchase and Sale Agreement dated January 11, 1999
                           between Banner Industries of New York, Inc. and
                           Jaclyn, Inc. (incorporated herein by reference to
                           Exhibit 2.1 to the Registrant's Current Report on
                           Form 8-K, file No. 1-5863, dated January 26, 1999).


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, 1995).

27                         Financial Data Schedule.

--------------------
*Management contract or compensatory plan or arrangement


(b)      Reports on Form 8-K.

              No  reports on Form 8-K were  filed by the  Registrant  during the
three months ended June 30, 1999.

(c)      Exhibits.

              Exhibits are listed in response to Item 14(a)3.

(d)      Financial Statement Schedules.

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


                                      -16-
<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 22, 1999                             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 22, 1999
----------------------------------          and Director
ALLAN GINSBURG

/s/ Robert Chestnov                         President, Principal                            September 22, 1999
--------------------------------            Executive Officer and
ROBERT CHESTNOV                             Director


 /s/ Anthony Christon                       Chief Financial Officer,                        September 22, 1999
--------------------------------            Principal Financial and
ANTHONY CHRISTON                            Accounting Officer


 /s/ Abe Ginsburg                           Director                                        September 22, 1999
--------------------------------
ABE GINSBURG

/s/ Howard Ginsburg                         Director                                        September 22, 1999
--------------------------------
HOWARD GINSBURG

/s/ Martin Brody                            Director                                        September 22, 1999
--------------------------------
MARTIN BRODY

/s/ Richard Chestnov                        Director                                        September 22, 1999
--------------------------------
RICHARD CHESTNOV

/s/ Al Safer                                Director                                        September 22, 1999
--------------------------------
AL SAFER
</TABLE>

                                      -17-
<PAGE>

                          JACLYN, INC. AND SUBSIDIARIES
                      Consolidated Financial Statements and
                Financial Statement Schedule for the Years Ended
                        June 30, 1999, 1998 and 1997 and

                          Independent Auditors' Report
<PAGE>

JACLYN, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                    Page
<S>                                                                                              <C>
INDEPENDENT AUDITORS' REPORT                                                                         F-1

FINANCIAL STATEMENTS:

         Consolidated Balance Sheets - As of June 30, 1999 and 1998                                  F-2

         Consolidated  Statements  of  Operations - For the years ended June 30,
         1999, 1998 and 1997                                                                         F-3

         Consolidated  Statements  of Cash Flows - For the years  ended June 30,
         1999, 1998 and 1997                                                                       F-4 to 5

         Consolidated  Statements of Changes in  Stockholders'  Equity - For the
         years ended June 30, 1999, 1998 and 1997                                                    F-6

         Notes to Consolidated Financial Statements                                               F-7 to 17

FINANCIAL STATEMENT SCHEDULE:

         Valuation and Qualifying Accounts                                                          F-18
</TABLE>
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


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


We have audited the accompanying consolidated balance sheets of Jaclyn, Inc. and
subsidiaries  as of  June  30,  1999  and  1998,  and the  related  consolidated
statements of  operations,  stockholders'  equity and cash flows for each of the
three years in the period  ended June 30,  1999.  Our audits also  included  the
consolidated financial statement schedule of Jaclyn Inc. and subsidiaries listed
in item 14(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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
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, 1999 and 1998, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1999 in conformity with
generally accepted accounting principles.

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.


Deloitte & Touche, LLP
September 22, 1999
New York, New York

                                       F-1
<PAGE>

<TABLE>
<CAPTION>
                                             JACLYN, INC. AND SUBSIDIARIES

                                              CONSOLIDATED BALANCE SHEETS
                                                JUNE 30, 1999 AND 1998
==============================================================================================================================
ASSETS                                                                                    1999                   1998
<S>                                                                             <C>                      <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS                                                       $         1,051,000      $       2,176,000
SECURITIES AVAILABLE FOR SALE (COST: 1999, $1,651,000,
   1998, $2,676,000)                                                                      1,674,000              2,735,000
ACCOUNTS RECEIVABLE, LESS ALLOWANCE FOR DOUBTFUL
    ACCOUNTS: 1999, $415,000, 1998, $483,000                                              9,675,000              5,979,000
INVENTORIES                                                                               6,341,000              8,077,000
PREPAID EXPENSES AND OTHER CURRENT ASSETS                                                   925,000                533,000
DEFERRED INCOME TAXES                                                                     3,212,000              2,050,000
PREPAID AND REFUNDABLE INCOME TAXES                                                           4,000                 82,000
                                                                                -------------------      -----------------
    TOTAL CURRENT ASSETS                                                                 22,882,000             21,632,000
PROPERTY, PLANT AND EQUIPMENT - NET                                                       1,193,000              1,516,000
OTHER ASSETS                                                                              1,520,000              1,424,000
                                                                                -------------------      -----------------
                                                                                $        25,595,000      $      24,572,000
                                                                                ===================      =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE - BANK                                                            $         1,775,000      $               -
ACCOUNTS PAYABLE                                                                          4,009,000              2,676,000
COMMISSIONS PAYABLE                                                                         160,000                144,000
ACCRUED PAYROLL AND RELATED EXPENSES                                                        368,000                829,000
OTHER CURRENT LIABILITIES                                                                 1,501,000              1,288,000
                                                                                -------------------      -----------------
    TOTAL CURRENT LIABILITIES                                                             7,813,000              4,937,000
                                                                                -------------------      -----------------
GUARANTEED BANK LOAN - ESOP                                                                       -                 56,000
                                                                                -------------------      -----------------
DEFERRED INCOME TAXES                                                                     1,123,000              1,185,000
                                                                                -------------------      -----------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, PAR VALUE $1: AUTHORIZED, 1,000,000
   SHARES; ISSUED NONE                                                                            -                      -

COMMON STOCK, PAR VALUE $1: AUTHORIZED, 5,000,000
   SHARES; ISSUED 3,368,733 SHARES                                                        3,369,000              3,369,000
ADDITIONAL PAID-IN CAPITAL                                                               12,117,000             12,117,000
RETAINED EARNINGS                                                                         7,954,000              9,733,000
ACCUMULATED OTHER COMPREHENSIVE INCOME                                                       23,000                 35,000
                                                                                -------------------      -----------------
                                                                                         23,463,000             25,254,000
LESS: TREASURY STOCK AT COST (657,328 SHARES)                                             6,804,000              6,804,000
           GUARANTEED BANK LOAN - ESOP                                                            -                 56,000
                                                                                -------------------      -----------------
    TOTAL STOCKHOLDERS' EQUITY                                                           16,659,000             18,394,000
                                                                                -------------------      -----------------
                                                                                $        25,595,000      $      24,572,000
                                                                                ===================      =================
</TABLE>

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

                                       F-2
<PAGE>

<TABLE>
<CAPTION>
                                           JACLYN, INC. AND SUBSIDIARIES

                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                     YEARS ENDED JUNE 30, 1999, 1998 AND 1997
============================================================================================================================



                                                                                1999                 1998                 1997
<S>                                                                       <C>                    <C>                   <C>
Net sales                                                                 $ 58,766,000           $ 68,263,000          $ 77,156,000
Cost of goods sold                                                          44,873,000             51,401,000            56,825,000
                                                                          ------------           ------------          ------------
Gross profit                                                                13,893,000             16,862,000            20,331,000
                                                                          ------------           ------------          ------------
Shipping, selling and administrative
         expenses                                                           16,073,000             16,870,000            19,206,000
Write off of goodwill                                                        1,124,000                   --                    --
Interest expense                                                                 4,000                182,000               181,000
Interest income                                                                207,000                294,000               277,000
Other income, net                                                              324,000                   --                  10,000
                                                                          ------------           ------------          ------------
(LOSS) EARNINGS  BEFORE INCOME
TAXES                                                                       (2,777,000)               104,000             1,231,000
(BENEFIT) PROVISION FOR INCOME
TAXES                                                                         (998,000)                37,000               468,000
                                                                          ------------           ------------          ------------
NET (LOSS) EARNINGS                                                       $ (1,779,000)          $     67,000          $    763,000
Other comprehensive income, net of tax:
Unrealized holding gain (loss) on securities
arising during period                                                           12,000                  5,000               (11,000)
                                                                          ------------           ------------          ------------
Net comprehensive (loss) earnings                                         $ (1,767,000)          $     72,000          $    752,000
                                                                          ============           ============          ============
NET (LOSS) EARNINGS PER
COMMON SHARE - BASIC AND
DILUTED                                                                   $      (0.66)          $        .02          $        .28
                                                                          ============           ============          ============
Weighted average number of shares
      outstanding - diluted                                                  2,711,000              2,707,000             2,705,000
                                                                          ============           ============          ============
</TABLE>


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

                                       F-3
<PAGE>

<TABLE>
<CAPTION>
                                              JACLYN, INC. AND SUBSIDIARIES

                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           YEARS ENDED JUNE 30, 1999, 1998 AND 1997
============================================================================================================================



                                                                                     1999                 1998               1997
<S>                                                                               <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings                                                               $(1,779,000)       $    67,000        $   763,000
Adjustments  to  reconcile  net  earnings  to net
cash  provided  by  (used  in)
        operating activities:
        Depreciation and amortization                                                 322,000            362,000            316,000
        Deferred income taxes                                                      (1,224,000)          (141,000)            14,000
        Provision for doubtful accounts                                               (78,000)          (143,000)           (38,000)
        Loss (gain) on sale of fixed assets                                          (324,000)             4,000            (10,000)
        Writeoff of goodwill                                                        1,124,000               --                 --
        Amortization of goodwill                                                      118,000            155,000            155,000
Changes in assets and liabilities:
        (Increase) decrease in accounts receivable                                 (3,628,000)         5,648,000         (1,141,000)
        Decrease in inventories                                                     3,260,000          1,985,000          1,010,000
        (Increase) decrease in prepaid expenses and
            other current assets                                                     (392,000)           725,000           (837,000)
       (Increase) decrease in prepaid and refundable
            income taxes                                                               78,000            431,000           (242,000)
       (Increase) decrease in security deposits, other assets
            and non current liabilities                                                (3,000)             5,000              6,000
       Increase (decrease) in accounts payable and
            other current liabilities                                               1,101,000         (5,056,000)        (1,677,000)
                                                                                  -----------        -----------        -----------
Net cash provided by (used in) operating activities                                (1,425,000)         4,042,000         (1,681,000)
                                                                                  -----------        -----------        -----------
</TABLE>



                                       F-4
<PAGE>

<TABLE>
<CAPTION>
                                                   JACLYN, INC. AND SUBSIDIARIES

                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              YEARS ENDED JUNE 30, 1999, 1998 AND 1997
===================================================================================================================================

                                                                                   1999                1998                1997
<S>                                                                             <C>                 <C>                 <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                                             (196,000)           (304,000)           (515,000)
    Proceeds from sale of property                                                  521,000              60,000              52,000
    Purchases of securities available for sale                                          --           (1,103,000)           (184,000)
    Proceeds from sales of securities available for sale                          1,061,000           1,980,000             180,000
    Acquisition of certain assets of Banner Industries of
       New York, Inc.                                                            (2,861,000)               --                  --
                                                                                -----------         -----------         -----------
Net cash provided by (used in) investing activities                              (1,475,000)            633,000            (467,000)
                                                                                -----------         -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Increase (decrease) in notes payable - bank                                   1,775,000          (4,163,000)          3,063,000
    Proceeds from issuance of treasury stock                                           --                84,000                --
                                                                                -----------         -----------         -----------
Net cash provided by (used in) financing activities                               1,775,000          (4,079,000)          3,063,000
                                                                                -----------         -----------         -----------

NET (DECREASE) INCREASE IN CASH AND CASH
    EQUIVALENTS                                                                  (1,125,000)            596,000             915,000
                                                                                -----------         -----------         -----------
CASH AND CASH EQUIVALENTS,
    BEGINNING OF PERIOD                                                           2,176,000           1,580,000             665,000
                                                                                -----------         -----------         -----------
CASH AND CASH EQUIVALENTS,
    END OF PERIOD                                                               $ 1,051,000         $ 2,176,000         $ 1,580,000
                                                                                -----------         -----------         -----------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
    Interest                                                                    $     4,000         $   182,000         $   181,000
                                                                                -----------         -----------         -----------
    Income taxes                                                                $   202,000         $   872,000         $   863,000
                                                                                -----------         -----------         -----------
NON-CASH ITEMS:
    Unrealized gain on securities available for sale                            $    23,000         $    35,000         $    30,000
                                                                                -----------         -----------         -----------
</TABLE>

    The accompanying notes are an integral part of these financial statements
                                   (Concluded)

                                       F-5
<PAGE>

JACLYN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1999, 1998, AND 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                COMMON STOCK          Additional    Accumulated
                                          -------------------------    Paid-in     Comprehensive     Retained
                                             Shares       Amount       Capital        Income         Earnings
                                          -----------   -----------   -----------   -----------    -----------
<S>                                       <C>           <C>           <C>           <C>            <C>
BALANCE, JUNE 30, 1996                      3,368,733   $ 3,369,000   $12,117,000   $    41,000    $ 9,026,000
Unrealized gain on securities available
for sale  at July 1, 1996                        --            --            --         (11,000)          --
Net earnings, year ended June 30, 1997           --            --            --            --          763,000
ESOP loan repayment                              --            --            --            --             --
                                          -----------   -----------   -----------   -----------    -----------
BALANCE, JUNE 30, 1997                      3,368,733     3,369,000    12,117,000        30,000      9,789,000
Unrealized loss on securities available
for sale  at July 1, 1997                        --            --            --           5,000           --
Net earnings, year ended June 30, 1998           --            --            --            --           67,000
Issuance of treasury shares                      --            --            --            --         (123,000)
ESOP loan repayment                              --            --            --            --             --
                                          -----------   -----------   -----------   -----------    -----------
BALANCE, JUNE 30, 1998                      3,368,733     3,369,000    12,117,000        35,000      9,733,000
Unrealized loss on securities available
for sale at July 1, 1998                         --            --            --         (12,000)          --
Net loss, year ended June 30, 1999               --            --            --            --       (1,779,000)
ESOP loan repayment                              --            --            --            --             --
                                          -----------   -----------   -----------   -----------    -----------
BALANCE, JUNE 30, 1999                      3,368,733    $3,369,000   $12,117,000   $    23,000    $ 7,954,000
                                          ===========   ===========   ===========   ===========    ===========
</TABLE>

<TABLE>
<CAPTION>
                                                TREASURY STOCK           Guaranteed
                                          --------------------------     Bank Loan -
                                             Shares         Amount          ESOP
                                          -----------    -----------    -----------
<S>                                       <C>            <C>            <C>
BALANCE, JUNE 30, 1996                        677,328    $ 7,011,000    $   704,000
Unrealized gain on securities available
for sale  at July 1, 1996                        --             --             --
Net earnings, year ended June 30, 1997           --             --             --
ESOP loan repayment                              --             --         (195,000)
                                          -----------    -----------    -----------
BALANCE, JUNE 30, 1997                        677,328      7,011,000        509,000
Unrealized loss on securities available
for sale  at July 1, 1997                        --             --             --
Net earnings, year ended June 30,1998            --             --             --
1997 1996
Issuance of treasury shares                   (20,000       (207,000)          --
ESOP loan repayment                              --             --         (453,000)
                                          -----------    -----------    -----------
BALANCE, JUNE 30, 1998                        657,328      6,804,000         56,000
Unrealized loss on securities available
for sale at July 1, 1998                         --             --             --
Net loss, year ended June 30,1999                --             --             --
ESOP loan repayment                              --             --          (56,000)
                                          -----------    -----------    -----------
BALANCE, JUNE 30, 1999                        657,328    $ 6,804,000    $      --
                                          ===========    ===========    ===========
</TABLE>

   The accompanying notes are an integral part of these 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 handbags,  accessories,  apparel 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.

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

Inventories
Inventories  are  stated at the lower of cost  (first-in,  first-out  method) or
market.

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 life of the asset or life of the lease

Automobiles and trucks        3 to 5 years


Intangible Assets
Goodwill and  trademarks  arising  from  acquisitions  are being  amortized on a
straight-line  basis over periods not exceeding 20 years. The Company  regularly
reviews the individual  components of the balances by evaluating the future cash
flows of the  businesses  to  determine  the  recoverability  of the  assets and
recognizes, on a current basis, any diminution in value.

                                       F-7
<PAGE>

In January 1999 the Company closed one its unprofitable divisions. An impairment
charge of  approximately  $1.1 million was recognized  when future cash flows of
the goodwill was determined to be insufficient to recover its carrying value.

Revenue Recognition
Revenue  is  recognized  at the time  merchandise  is  shipped.  Sales  returns,
discounts and  allowances  are recorded as components of net sales in the period
in which the related revenue is recorded.

Recently Issued Accounting Standards
Segment Reporting - In June 1999, the Company adopted the provisions of SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 is effective for fiscal years  beginning  after  December 15, 1997,  and
establishes  standards for  reporting  information  about a company's  operating
segments.  It also establishes  standards for related disclosures about products
and services,  geographic areas and major  customers.  The Company operates in a
single  operating  segment -- the  manufacture of women's  handbag,  apparel 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:


                                    Year ended June 30,

Product Category            1999           1998           1997
----------------            ----           ----           ----

Handbags                      66%            65%            68%

Women's apparel               34%            35%            32%
                             ---            ---            ---

Total                        100%           100%           100%
                            ----           ----           ----

During the year ended June 30, 1999, 1998 and 1997,  revenues derived from sales
to one customer were 16%, 15% and 13%, respectively.  Sales to a second customer
were 11%, 12% and 12%, respectively, and to a third customer were 5%, 10% and 9%
respectively.

The Company  relies on  suppliers  to purchase a variety of raw  materials.  The
Company had one supplier who in the  aggregate  constituted  4% of the Company's
purchases for the year ended June 30, 1999.

Comprehensive  Income - Effective July 1, 1998, the Company adopted SFAS No. 130
"Reporting  Comprehensive  Income."  This  statement  established  standards for
reporting types of income and its components in financial statements.

In June 1998 the  Financial  Accounting  Standards  Board  issued  SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging Activities." This statement,
which  is  effective  for the  Company  for  the  year  ending  June  30,  2001,
establishes  accounting and reporting  standards for derivative  instruments and
hedging  activities.  The Company has not yet determined whether the application
of SFAS No. 133 will have a material impact on its financial position or results
of operations.

                                       F-8
<PAGE>

Cash and Cash Equivalents
Cash in excess of daily requirements is invested in certificates of deposits and
money market funds with maturities of three months or less. Such investments are
deemed to be 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 long-term bank loan, which bears interest
at a variable  rate,  approximates  fair value.  Securities are recorded at fair
value, which is based principally on quoted market prices.

Net Earnings per Common Share
The Company records Net  Earnings per Common Share in accordance with  Statement
of Financial Accounting Standards No. 128, "Earnings per Share."

Reclassifications
Certain items in prior years have been reclassified for comparative purposes.

NOTE B - INVENTORIES

Inventories consist of the following:


<TABLE>
<CAPTION>
                                                                                               June 30,
                                                                                     1999                    1998
<S>                                                                           <C>                     <C>
                                        Raw material                          $         3,466,000     $        2,937,000
                                        Work in process                                 1,057,000                835,000
                                        Finished goods                                  1,818,000              4,305,000
                                                                              -------------------     ------------------
                                                                              $         6,341,000     $        8,077,000
                                                                              ===================     ==================
</TABLE>

NOTE C - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is summarized as follows:


<TABLE>
<CAPTION>
                                                                                               June 30,
                                                                                     1999                    1998
<S>                                                                           <C>                     <C>
                                      Land                                               $162,000               $182,000
                                      Buildings                                         1,181,000              1,311,000
                                      Machinery and equipment                           1,572,000              1,697,000
                                      Furniture and fixtures                              395,000                394,000
                                      Leasehold improvements                              784,000                722,000
                                      Automobiles and trucks                               95,000                 99,000
                                                                              -------------------     ------------------
                                                                                        4,189,000              4,405,000
                                      Less accumulated
                                      depreciation and amortization                     2,996,000              2,889,000
                                                                              -------------------     ------------------
                                                                                       $1,193,000             $1,516,000
                                                                              ===================     ==================
</TABLE>

                                       F-9
<PAGE>

                                     F-10
<PAGE>

NOTE D - COMMITMENTS

The Company leases office facilities under non-cancelable  leases that expire in
various years through the year 2006.

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


                Year Ended                Office and Showroom
                 June 30,                     Facilities

                   2000                    $   373,500

                   2001                        359,500

                   2002                        322,600

                   2003                        214,900

                   2004                        127,200

                After 2004                     174,400

Rental expense,  including real estate taxes, for all operating leases,  totaled
$481,000, $634,000, and $683,000 for 1999, 1998 and 1997, respectively.

NOTE E - CREDIT FACILITIES

The Company has a line of credit with a bank for  short-term  loans,  letters of
credit and bankers  acceptances  amounting to $23,000,000.  At June 30, 1999 and
1998,  the  Company was  contingently  obligated  on open  letters of credit for
approximately $ 7,483,000 and $ 3,257,000  respectively.  The Company can borrow
up to $13,000,000 with the Company's  inventory and accounts  receivable pledged
to the  bank  as  collateral,  provided  it  maintains  a  minimum  quick  ratio
requirement  of 1 to  1,  and a  minimum  tangible  net  worth  of  $14,000,000.
Borrowing on the short-term  line of credit was $ 1,775,000 and $ -0- as of June
30,  1999  and  1998,  respectively.  There  was no  borrowing  on  the  bankers
acceptance line as of June 30, 1999 and 1998.  Borrowing during the year were at
the bank's prime rate or below (LIBOR) at the option of the Company.  The bank's
prime rate at June 30, 1999 was 7.75%.  During fiscal 1999,  the average  amount
outstanding  under the  short-term  line was  $115,000  with a weighted  average
interest rate of 8.0%.  During 1998,  the average amount  outstanding  under the
short-term  line was $2,569,000 with a weighted  average  interest rate of 7.3%.
The maximum amount outstanding during fiscal 1999 and fiscal 1998 was $2,270,000
and $9,130,000, respectively.

                                     F-11
<PAGE>

NOTE F - STOCK OPTIONS

The Company  has an  Incentive  Stock  Option Plan  permitting  the  granting of
options to purchase up to 500,000  shares of common stock.  Under the Plan,  the
option  price  cannot be less than the fair market  value of the stock as of the
date of the granting of the option and 110% of the fair market value for certain
management  employees.  Options,  which may be granted  to  December  2000,  are
exercisable as determined by the Board of Directors.

Statement of Financial  Accounting  Standards No. 123,  "Accounting  Stock-Based
Compensation" (SFAS 123) was effective for the Company for fiscal 1998. SFAS No.
123 encourages (but does not require)  compensation expense to be measured based
on the fair value of the equity instrument  awarded.  In accordance with APB No.
25, no compensation  cost has been recognized in the Consolidated  Statements of
Operations for the Company's stock option plans.  If  compensation  cost for the
Company's  stock option plans had been  determined in  accordance  with the fair
value method prescribed by SFAS No. 123, the Company's net (loss) earnings would
have been  ($1,819,000),  $43,000 and $739,000 for 1999 and 1998,  and 1997,  or
($.67) and $.02 and $.26 per share, respectively. This pro forma information may
not be  representative of the amounts to be expected in future years as the fair
value method of  accounting  prescribed  by SFAS No. 123 has not been applied to
options granted prior to 1997.

Stock option transactions are summarized below:

<TABLE>
<CAPTION>
                                               1999                           1998                           1997

                                                     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                    267,045 $          9.35        270,817  $          9.33        133,168 $         11.85

Granted                              150,000            2.35              -                -        159,000            4.29
Exercised                                  -               -              -                -         (6,739)           9.18
Forfeited                            (77,384)          10.61         (3,772)            8.58        (14,612)          10.62
                              -------------- ---------------  -------------  --------------- -------------- ---------------
Outstanding - end of
year                                 339,661 $          5.86        267,045  $          9.35       270,817  $          9.33
                              ============== =============== ==============  =============== ============== ===============
Exercisable - end of
year                                 339,661 $          5.86        267,045  $          9.35        117,817 $         11.96
Weighted-average
fair value of options
granted during the
year                                         $          1.66                 $             -                $          2.41
</TABLE>

                                     F-12
<PAGE>

The following table summarizes  information  about stock options  outstanding at
June 30, 1999:


<TABLE>
<CAPTION>
                             Options Outstanding                                             Option Exercisable
------------------------------------------------------------------------------    -----------------------------------------
                                          Weighted-
                       Number              Average                                      Number
   Range of         Outstanding           Remaining            Weighted               Exercisable           Weighted
   Exercise         at June 30,          Contractual            Average               at June 30,            Average
    Prices              1999             Life (Yrs)         Exercise Price               1999            Exercise Price
------------------------------------------------------------------------------    -----------------------------------------
<S>             <C>                  <C>                 <C>                      <C>                 <C>
$2 1/4-$5 1/4           339,661             5.60                 $4.13                339,661                 $4.13
------------------------------------------------------------------------------    -----------------------------------------
</TABLE>

The fair value of each option grant is estimated on the date of each grant using
the  Black-Scholes   option-pricing   model.  The  following   weighted  average
assumptions  were used for grants in 1999 and 1997:  risk-free  interest rate of
5.5% and 6.43%,  expected life of 5 to 10 years;  expected  volatility of 55.10%
and 36.37%; dividend yield of 0%. The fair values generated by the Black-Scholes
model may not be indicative of the future benefit,  if any, that may be received
by the option holder.



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.


NOTE H - INCOME TAXES

The  components of the  Company's tax (benefit)  provision for each of the three
years ended June 30, follow:

<TABLE>
<CAPTION>
                                                                           June 30,
                                                      1999                    1998                   1997
<S>                                            <C>                      <C>                    <C>
Current:
    Federal                                          $           -                ($9,000)              ($6,000)
    State and Local                                          7,000                 17,000                90,000
    Foreign                                                219,000                170,000               370,000
                                               -------------------      -----------------      ----------------
                                                           226,000                178,000               454,000
Deferred:
    Federal and State                                  (1,224,000)              (141,000)                14,000
                                               -------------------      -----------------      ----------------
Provision (benefit)                                     ($998,000)                $37,000              $468,000
                                               ===================      =================      ================
</TABLE>

                                     F-13
<PAGE>

A 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,                                                                 1999               1998                1997
=================================================================  ================    ===============    =================
<S>                                                                <C>                 <C>                <C>
(Benefit) provision for income taxes at statutory rate                        (34.0)%             34.0%                34.0%

State and local income taxes net of federal tax benefit                        (5.2)               5.0                  7.4

Tax exempt interest                                                             2.2               (2.0)                (1.4)

Other                                                                           1.0                1.4                 (2.0)
                                                                    ---------------    ---------------    -----------------
Effective tax rate %                                                          (36.0)%             35.6%                38.0%
                                                                    ===============    ===============    =================
</TABLE>

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. The income tax effects of
significant   items  comprising  the  Company's  net  deferred  tax  assets  and
liabilities as of June 30, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
=============================      ==========================================       ==========================================
June 30,                                              1999                                             1998
=============================      ==========================================       ==========================================
                                               Assets             Liabilities                   Assets             Liabilities
<S>                                       <C>                     <C>                       <C>                     <C>
Depreciation
and amortization                                 -                   $818,000                     -                   $852,000

Leases                                           -                    155,000                     -                    169,000

Foreign taxes                                  73,000                    -                        -                    140,000

Inventory                                     549,000                    -                     628,000                    -

Bad debt, sales
allowances and
other reserves                                407,000                    -                     566,000                    -

NOL and tax credit
carryforwards
                                            1,407,000                    -                     518,000                    -
Other                                         776,000                 150,000                  338,000                  24,000
                                   ------------------       -----------------       ------------------       -----------------
                                           $3,212,000              $1,123,000               $2,050,000              $1,185,000
                                   ==================       =================       ==================       =================
</TABLE>

                                     F-14
<PAGE>

NOTE I - EMPLOYEE'S BENEFIT PLANS

The Company and its  subsidiaries  have a trusteed  defined benefit pension plan
for certain of their salaried and hourly  personnel.  The plan provides  pension
benefits that are 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.  The  Company's  funding  policy is to make annual
contributions required by the Employee Retirement Security Act of 1974.

<TABLE>
<CAPTION>
Fiscal Year Ended June 30,                                            1999               1998               1997

<S>                                                           <C>                 <C>                <C>
CHANGE IN BENEFIT OBLIGATION:
   Net benefit obligation at beginning of year                $         2,872,000 $        2,640,000 $        2,556,000
   Service cost                                                           166,000            194,000            214,000
   Interest cost                                                          195,000            176,000            164,000
   Plan participants' contributions                                             -                  -                  -
   Actuarial (gain) loss                                                  194,000             65,000          (132,000)
   Gross benefits paid                                                  (335,000)          (203,000)          (162,000)
                                                              ------------------- ------------------ ------------------
   Net benefit obligation at end of year                      $         3,092,000 $        2,872,000 $        2,640,000
                                                              =================== ================== ==================

CHANGE IN PLAN ASSETS:
   Fair value of plan assets at beginning of year             $         2,383,000 $        2,423,000 $        2,142,000
   Employer contributions                                                 761,000                  -            300,000
   Plan participants' contributions                                             -                  -                  -
   Gross benefits paid                                                  (335,000)          (203,000)          (162,000)
   Actual return on plan assets                                            59,000            163,000            143,000
                                                              ------------------- ------------------ ------------------
   Fair value of plan assets at end of year                             2,868,000          2,383,000          2,423,000
                                                              =================== ================== ==================
   Funded status at end of year                                         (224,000)          (489,000)          (217,000)
   Unrecognized net actuarial loss                                        826,000            555,000            530,000
   Unrecognized transition amount                                       (204,000)          (243,000)          (282,000)
   Unrecognized prior service cost                                          3,000              4,000              5,000
                                                              ------------------- ------------------ ------------------
   Prepaid (accrued) benefit costs                            $           401,000 $        (173,000) $           36,000
                                                              =================== ================== ==================
</TABLE>

                                     F-15
<PAGE>

Pension expenses includes the following components:

<TABLE>
<CAPTION>
Fiscal Year Ended June 30,                                                    1999             1998            1997
<S>                                                                     <C>              <C>              <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
   Service cost                                                         $        166,000 $       194,000  $       214,000
   Interest cost                                                                 195,000         176,000          164,000
   Expected return on assets                                                   (169,000)       (145,000)        (138,000)
   Amortization of prior service cost                                              1,000           1,000            1,000
   Amortization of transition (assets)                                          (39,000)        (39,000)         (39,000)
   Amortization of actuarial loss                                                 32,000          23,000           22,000
                                                                        ---------------- ---------------  ---------------
   Net periodic benefit cost                                            $        186,000 $       210,000  $       224,000
                                                                        ================ ===============  ===============
</TABLE>

<TABLE>
<CAPTION>
Assumptions used in determining the net pension charges were:
  June 30,                                                       1999             1998              1997
                                                             ------------    ---------------   ---------------
<S>                                                          <C>              <C>               <C>
        Discount rates                                           6.75%            6.75%            7.00%

        Rates of increase in compensation levels                 3.00%            3.00%            4.00%

        Expected long-term rate of return on assets              6.50%            6.25%            6.25%
</TABLE>

The Company  maintains a  non-contributory  Employee  Stock  Ownership Plan (the
"ESOP")  and  Trust,  for its  employees  who are not  covered  by a  collective
bargaining agreement.

On February 15, 1994, the ESOP authorized the Trust to borrow  $1,150,000 from a
bank,  which loan is guaranteed by the Company.  The debt bears  interest at the
prime rate and is payable  in a minimum of ten annual  installments.  As of June
30, 1999, the guaranteed ESOP bank loan had been completely paid.

Contributions  to the  ESOP  are at the  discretion  of the  Company's  Board of
Directors.  ESOP  expense was  approximately  $56,000 and $250,000 for the years
ended June  30,1999 and June 30, 1998,  which  includes $ 54,000 and $211,000 of
compensation  expense and $2,000 and $39,000 of interest expense,  respectively.
Compensation  expense  related  to the plan is based  upon the  number of shares
allocated to participants in the current year.

Vesting  occurs  after five  years of  service.  However,  if the ESOP is deemed
"top-heavy", vesting will occur at the rate of 20% per year after the completion
of the second year of service.


NOTE J - RECENT ACQUISITION

On January 11, 1999, the Company  completed the acquisition of certain assets of
Banner  Industries of New York,  Inc.,  which  manufactures  and distributes its
women's  apparel to catalog  companies.  The  Company  paid  approximately  $2.9
million for certain inventory,  fixed assets and goodwill.  The Company recorded
$1,300,000 of goodwill which is being amortized over 15 years.

                                     F-16
<PAGE>

NOTE K - NET EARNINGS PER SHARE

The Company's calculation of Basic and Diluted Net (Loss) Earnings Per Share are
as follows (in thousands, except per share amounts) :


<TABLE>
<CAPTION>
                                                                                   Year Ended June 30,
                                                                     1999                1998                  1997
<S>                                                            <C>                  <C>                 <C>
Basic Net Earnings Per Share:
----------------------------
Net (Loss) Earnings                                            $         (1,779)    $            67     $              763
                                                               -----------------    ---------------     ------------------
Basic Weighted Average Shares Outstanding                                  2,711              2,701                  2,691
                                                               -----------------    ---------------     ------------------
Basic Net (Loss) Earnings Per Common Share                                ($.66)               $.02                   $.28
                                                               -----------------    ---------------     ------------------

Diluted Net Earnings Per Share:
------------------------------
Net (Loss) Earnings                                            $         (1,779)    $            67     $              763
                                                               -----------------    ---------------  -- ------------------
Basic Weighted Average Shares Outstanding                                  2,711              2,701                  2,691

Add: Dilutive Options                                                        (a)                  6                     14
                                                               -----------------    ---------------     ------------------
Diluted Weighted Average Shares Outstanding                                2,711              2,707                  2,705
                                                               -----------------    ---------------     ------------------
Diluted Net (Loss) Earnings Per Common Share                              ($.66)               $.02                   $.28
                                                               -----------------    ---------------     ------------------
</TABLE>

Options to purchase  180, 89, and 92 common shares were  outstanding  as of June
30, 1999, 1998, and 1997, respectively, but were not included in the computation
of diluted  earnings per share because the exercise price of the options exceeds
the average market price and would have been anti-dilutive.

(a)  Options  are not  considered  part of the diluted  weighted  average  share
calculation  where  there  is a  loss  for  the  period,  since  they  would  be
anti-dilutive.

                                     F-17
<PAGE>

NOTE L - UNAUDITED QUARTERLY FINANCIAL DATA

Summarized  quarterly  financial  data,  in thousands of dollars  except for per
share  amounts,  for the  fiscal  years  ended  June 30,  1999 and 1998,  are as
follows:

<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                  -------------------------------------------------------------------------------------------
                                          June 30,             March 31,               December 31,             September 30,
                                            1999                 1999                      1998                      1998
<S>                                      <C>                  <C>                       <C>                      <C>
Net sales                                 $17,732               $12,255                  $13,134                   $15,645
Gross profit                               $4,017                $2,660                   $2,944                    $4,272
Net earnings (loss)                           $30              ($1,458)                   ($434)                       $83
Net earnings (loss) per
common share  - basic
and diluted                                  $.01                ($.54)                   ($.16)                      $.03
</TABLE>

<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                  -------------------------------------------------------------------------------------------
                                         June 30,              March 31,               December 31,             September 30,
                                          1998                   1998                     1997                      1997
<S>                                     <C>                   <C>                      <C>                       <C>
Net sales                                $13,565                $13,999                  $21,369                   $19,330
Gross profit                              $3,474                 $3,060                   $5,472                    $4,856
Net (loss) earnings                       ($394)                    $25                     $147                      $289
Net (loss) earnings per
common share - basic
and diluted                               ($.15)                   $.01                       $.06                       $.10
</TABLE>

                                     F-18
<PAGE>

JACLYN, INC. AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                     Column A                    Column C                              Column D            Column E

                                                                Additions
                                                 ----------------------------------------
                                                      (Credited)             Charged
                                Balance at            Charged to                to                                    Balance at
                                beginning             costs and              accounts            Deductions             end of
Description                     of period              expenses                (1)                  (2)                 period

<S>                          <C>                 <C>                     <C>                 <C>                   <C>
Year ended June
30, 1999                             $483,000               ($78,000)             $10,000                  - 0-            $415,000
                             ----------------    --------------------    ----------------    ------------------    ----------------
Year ended June
30, 1998                             $724,000              ($143,000)              $1,000               $99,000            $483,000
                             ----------------    --------------------    ----------------    ------------------    ----------------
Year ended June                      $760,000               ($38,000)              $8,000                $6,000            $724,000
30, 1997
                             ----------------    --------------------    ----------------    ------------------    ----------------
</TABLE>

(1) Collection of amounts previously written off.
(2) Doubtful accounts written off.

                                     F-19
<PAGE>

      ====================================================================




                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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






                                    EXHIBITS
                                       to
                           ANNUAL REPORT ON FORM 10-K
                               FOR THE FISCAL YEAR
                               ENDED JUNE 30, 1999






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




                                  JACLYN, INC.






      ====================================================================
<PAGE>

<TABLE>
<CAPTION>
                                               EXHIBIT INDEX
                                               -------------

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


<S>                        <C>                                                                         <C>
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, 1994).

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).

10(a)                    Lease dated as of  February  11, 1993 with 33 East 33rd
                         Street   Realty   Associates   relating  to   showroom,
                         warehouse and distribution facilities of the Registrant
                         located in New York, New York  (incorporated  herein by
                         reference to Exhibit 10(d) to the  Registrant's  Annual
                         Report on Form 10-K,  File No.  1-5863,  for the fiscal
                         year ended June 30, 1993).

10(b)                    Lease  dated  January 27, 1999 with Ruth R. Abrams LLC,
                         Rosalie  Abrams Katz,  First Half Realty Co.,  Inc. and
                         Second  Half Realty  Co.,  Inc.  relating to office and
                         showroom facilities located in New York, New York.

10(c)                    Lease   dated   October   14,   1998  with   Statecourt
                         Enterprises,  Inc.  relating  to  office  and  showroom
                         facilities located in New York, New York.

10(d)                    Incentive   Stock   Option   Plan  of  the   Registrant
                         (incorporated  herein by reference to Exhibit  10(f) to
                         the  Registrant's  Annual Report on Form 10-K, File No.
                         1-5863, for the fiscal year ended June 30, 1988).*

10(e)                    1984  Employee  Stock  Option  Plan  of the  Registrant
                         (incorporated  herein by reference to Exhibit  10(f) to
                         the  Registrant's  Annual Report on Form 10-K, File No.
                         1-5863, for the fiscal year ended June 30, 1989).*

10(f)                    1990 Stock  Option Plan of the  Registrant,  as amended
                         (incorporated  herein by reference to Exhibit  10(g) to
                         the  Registrant's  Annual Report on Form 10-K, File No.
                         1-5863, for the fiscal year ended June 30, 1991).*

10(g)                    Amended  and  Restated  Stockholders'  Agreement  dated
                         July 30,  1996  among the  Registrant  and the  persons
                         listed on  Schedule A thereto  (incorporated  herein by
                         reference to Exhibit 10(j) to the
</TABLE>
<PAGE>

                         Registrant's Annual Report on Form 10K, file number
                         1-5863, for the fiscal year ended June 30, 1996).

10(h)                    Key  Executive   Disability   Plan  of  the  Registrant
                         (incorporated  herein by reference to Exhibit  10(m) to
                         the  Registrant's  Annual Report on Form 10-K, File No.
                         1-5863, for the fiscal year ended June 30, 1988).*

10(i)                    Non-Qualified  Stock Option  Contract dated December 2,
                         1998 between the Registrant and Martin Brody.

10(j)                    Non-Qualified  Stock Option  Contract dated December 2,
                         1998 between the Registrant and Richard  Chestnov

10(k)                    Non-Qualified  Stock Option  Contract dated December 2,
                         1998 between the Registrant and Albert Safer.

10(l)                    Split-Dollar  Insurance Agreement dated August 15, 1987
                         between   the    Registrant    and   Robert    Chestnov
                         (incorporated  herein by reference to Exhibit  10(m) to
                         the  Registrant's  Annual Report on Form 10-K, File No.
                         1-5863, for the fiscal year ended June 30, 1990).*

10(m)                    Split-Dollar  Insurance Agreement dated August 15, 1987
                         between   the    Registrant    and   Howard    Ginsburg
                         (incorporated  herein by reference to Exhibit  10(n) to
                         the  Registrant's  Annual Report on Form 10-K, File No.
                         1-5863, for the fiscal year ended June 30, 1990).*

10(n)                    Split-Dollar  Insurance Agreement dated August 15, 1987
                         between the Registrant and Allan Ginsburg (incorporated
                         herein   by   reference   to   Exhibit   10(o)  to  the
                         Registrant's  Annual  Report  on Form  10-K,  File  No.
                         1-5863, for the fiscal year ended June 30, 1990).*

10(o)                    1996   Non-Employee    Director   Stock   Option   Plan
                         (incorporated  by  reference  to  Exhibit  10(o) to the
                         Registrant's  Annual  Report  on Form  10-K,  File  No.
                         1-5863, for the fiscal year ended June 30, 1998).*

10(p)                    Non-Qualified  Stock  Option  Contract  dated  December
                         3,1996   between  the   Registrant   and  Martin  Brody
                         (incorporated  by  reference  to  Exhibit  10(p) to the
                         Registrant's  Annual  Report  on Form  10-K,  File  No.
                         1-5863, for the fiscal year ended June 30, 1997).

10(q)                    Non-Qualified  Stock Option  Contract dated December 3,
                         1996  between  the  Registrant  and  Richard   Chestnov
                         (incorporated  by  reference  to  Exhibit  10(q) to the
                         Registrant's Annual Report on
<PAGE>

                         Form 10-K, File No. 1-5863, for the fiscal year ended
                         June 30, 1997).

10(r)                    Non-Qualified  Stock Option  Contract  dated August 19,
                         1997 between the Registrant and Al Safer  (incorporated
                         by  reference  to  Exhibit  10(r)  to the  Registrant's
                         Annual Report on Form 10-K,  File No.  1-5863,  for the
                         fiscal year ended June 30, 1997).

10(s)                    Non-Qualified Stock Option Contract dated December 3,
                         1997 between the Registrant and Martin Brody.
                         (incorporated by reference to Exhibit 10(s) to the
                         Registrant's Annual Report on Form 10-K, File No. 1-
                         5863, for the fiscal year ended June 30, 1998).

10(t)                    Non-Qualified Stock Option Contract dated December 3,
                         1997 between the Registrant and Richard Chestnov.
                         (incorporated by reference to Exhibit 10(t) to the
                         Registrant's Annual Report on Form 10-K, File No. 1-
                         5863, for the fiscal year ended June 30, 1998).

10(u)                    Non-Qualified Stock Option Contract dated December 3,
                         1997 between the Registrant and Albert Safer.
                         (incorporated by reference to Exhibit 10(u) to the
                         Registrant's Annual Report on Form 10-K, File No.
                         1-5863, for the fiscal year ended June 30, 1998).

10(v)                    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(w)                    Purchase and Sale Agreement dated January 11, 1999
                         between Banner Industries of New York, Inc. and Jaclyn,
                         Inc. (incorporated herein by reference to Exhibit 2.1
                         to the Registrant's Current Report on Form 8-K, file
                         No. 1-5863, dated January 26, 1999).

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, 1995).

27                       Financial Data Schedule.

--------------------
*Management contract or compensatory plan or arrangement