FORM 10-K/A

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)

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

         For the fiscal year ended March 31, 1999

                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE
         SECURITIES EXCHANGE ACT OF 1934

         For the transition period from..............to...................

                         Commission File Number: 0-29126

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

                    Delaware                          22-3351399
         ------------------------------- ---------------------------------------
        (State or other jurisdiction of  (I.R.S. Employer Identification Number)
         incorporation or organization)

                            1407 Broadway, Suite 2400
                            New York, New York 10018
                         ------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (212) 704-0002
                                 --------------

(Registrant's telephone number, including area code) Securities registered
pursuant to Section 12 (b) of the Act: None Securities registered pursuant to
Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE AND CLASS A COMMON STOCK
PURCHASE WARRANTS

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 (Sec. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10 K/A or any amendment to this Form 10 K/A. [X]

Aggregate market value of voting and non-voting common equity held by
non-affiliates as of June 23, 1999: $5,171,832.10 (includes all common equity,
whether or not registered under the Securities Act of 1933 as amended)

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: As of June 18, 1999 the number
of shares of common stock outstanding was 4,003,279 shares.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

<PAGE>
                           PURPOSE OF AMENDMENT FILING

     This Form 10-K Amendment for Jenna Lane, Inc. (the "Company") for the
fiscal year ending March 31, 1999, is being filed for the purpose of correcting
certain financial information and statements contained in the Company's Form
10-K which was filed on June 30, 1999. Items 6, 7 and 8 of Part II of the Form
10-K are accordingly amended as set forth below.

                                       2

<PAGE>
                                     PART II

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                                         YEAR ENDED MARCH 31,
                                                                                         --------------------
                                                                            1999                 1998                1997
                                                                            ----                 ----                ----
<S>                                                                     <C>                  <C>                 <C>
STATEMENT OF OPERATIONS DATA:
      Net sales                                                         $ 59,216,370         $ 42,561,796        $ 35,372,386
      Operating income                                                       319,313            1,241,394             804,523
      Net (loss) income                                                     (254,431)             517,157             136,260
      Net Income Per Share:
           Basic                                                               (0.06)                0.11                0.03
           Diluted
                                                                               (0.06)                0.09                0.03
      Weighted average common shares outstanding:
           Basic                                                           4,445,624            4,719,322           2,305,749
           Diluted                                                         4,445,624            5,531,859           2,333,234

<CAPTION>
                                                                                               MARCH 31,
                                                                                               --------
                                                                            1999                 1998                1997
                                                                            ----                 ----                ----
BALANCE SHEET DATA:
      Working capital                                                    $ 6,339,615          $ 7,326,297         $ 7,191,854
      Total assets                                                        14,817,296           11,537,169          10,034,842
      Long-term debt                                                         690,463                3,653              16,797
      Shareholders' equity                                                 7,668,261            8,072,553           7,461,770

</TABLE>

                                       3
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following is a discussion of the financial condition and results of
operations of the Company for the three years ended March 31, 1999.

HIGHLIGHTS

On January 31, 2000 the Company announced that it would conduct a review of
prior financial results. The Company also announced that it had retained the
services of Mahoney Cohen & Company to assist in the review. The review has been
completed and, as a result of its findings, the Company has restated its
previously issued consolidated financial statements for the fiscal year ended
March 31, 1999. It was determined that certain sales were improperly recognized
including sales recognized in the incorrect period and certain costs and
allowances were recorded in the incorrect period or improperly recorded. The
restated adjustments reflect additional charges to sales, sales allowances, and
costs of sales of $1,651,000. Accordingly, net income of $741,569 previously
reported has been restated to reflect a net loss of $254,431, net of an income
tax benefit of $655,000.

The Company designs, manufactures (through contractors) and markets high
quality, popular priced "junior", "missy", and large size basic and fashion
sportswear and other apparel for women and children. The Company primarily
serves both mass merchandise and specialty retail store chains. The Company's
products are manufactured in a variety of woven and knit fabrications.

In January 1998, the Company established the Smart Objects Sales group to sell
junior and large size moderately priced domestic knit sweaters. Full scale
operations started in Fall 1998.

In February 1998, the Company entered into a license agreement with the master
licensee of the United States Polo Association to utilize the US Polo
Association brand. The Company has not made certain payments under the agreement
because of its belief that the licensor has breached the license agreement and
has brought an action against the licensor and other parties (see Item 3 "Legal
Proceedings").

In May 1998, the Company established its children's sales group. On June 19,
1998, the Company purchased substantially all of the assets of children's wear
manufacturer T.L.C. for Girls, Inc. ("TLC"), a debtor-in-possession under
Chapter 11 of the United States Bankuptcy Code, for an aggregate purchase price
of $630,000.

In July 1998, the Company entered into a license agreement for the "Bongo"
trademark. The initial term of the agreement extends to June 2002 and requires
certain guaranteed minimum royalties. The Company has been merchandising large
size women's clothing under this license.

In July 1998, the Company formed a sales group for dresses under the name
"Impatiens" to sell petite, missy and large size moderate price dresses.

                                       4

<PAGE>
RESULTS OF OPERATIONS

The following table sets forth, for the year indicated, the Company's statements
of operations data as a percentage of net sales.

<TABLE>
<CAPTION>
                                                                         YEAR ENDED MARCH 31,
                                                            -----------------------------------------------
                                                                1999            1998            1997
                                                            --------------  --------------  --------
     <S>                                                        <C>            <C>             <C>
         Net Sales                                               100.0%        100.0%          100.0%
         Cost of Sales                                            81.0          81.1            82.2
                                                            ----------      --------       ---------
                 Gross Profit                                     19.0          18.9            17.8
         Operating Expenses                                       18.5          16.0            15.5
                                                            ----------      --------       ---------
                 Income from operations                            0.5           2.9             2.3
         Interest Expense                                          1.1           0.7             1.7
                                                            ----------      --------       ---------
                 Income Before Income Taxes                        0.6           2.2             0.6
         Provision for Income Taxes                                0.2           0.9             0.2
                                                            ----------      --------       ---------
                 Net Income                                        0.4%          1.3%            0.4%
                                                            ==========      ========       =========
</TABLE>

Year Ended March 31, 1999 Compared with Year Ended March 31, 1998

Net sales of $59.2 million in the year ended March 31, 1999 represented an
increase of $16.6 million, or 39.0% over net sales of $42.6 million in the year
ended March 31, 1998. The increase in net sales was primarily attributable to
the addition of the Company's sweater sales groups (Smart Objects) and its
children's sales group (TLC) with sales of $3.1 million and $7.1 million,
respectively. In addition, the Company's established core sales groups (Jenna
Lane and Jenna Lane Women), representing domestic and import products,
experienced strong demand.

The Company's gross profit increased $3.2 million, or 40%, to $11.2 million for
the year ended March 31, 1999 from $8.0 million for the year ended March 31,
1998. Gross profit margin remained unchanged at approximately 19% in the years
ended March 31, 1999 and 1998.

Operating expenses increased $4.1 million, or 60.6%, to $10.9 million in the
year ended March 31, 1999 from $6.8 million in the year ended March 31, 1998.
The increase was primarily due to an increase of $2.1 million in payroll and
related costs, including $772,000 in increased selling salaries, as well as
$377,000 in selling-related expenses, which resulted from increased sales
volume.

                                       5

<PAGE>
Factoring costs increased $171,000 as a result of higher sales volume.

As a result of the above factors, income from operations decreased 74.3% from
$1.2 million in the year ended March 31, 1998 to a loss of $0.3 million in the
year ended March 31, 1999.

Interest expense increased from $322,000 in 1998 to $667,000 in 1999. This
increase is primarily the result of additional borrowing for working capital
needs and capital lease obligations.

Year Ended March 31, 1998 Compared with Year Ended March 31, 1997

Net sales of $42.6 million in the year ended March 31, 1998 represented an
increase of $7.2 million, or 20.3% over net sales of $35.4 million in the year
ended March 31, 1997. The increase in net sales was primarily attributable to
continued expansion of the customer base and increased volume from several
existing customers.

The Company's gross profit increased $1.7 million, or 28.1%, to $8.0 million for
the year ended March 31, 1998 from $6.3 million for the year ended March 31,
1997. Gross profit margin increased to 18.9% in the year ended March 31, 1998
from 17.8% in the year ended March 31, 1997. The increase in gross profit margin
resulted primarily from higher import sales volume. Gross profit from import
sales is generally higher than gross profit from domestically produced
merchandise.

Operating expenses increased $1.3 million, or 24.1%, to $6.8 million in the year
ended March 31, 1998 from $5.5 million in the year ended March 31, 1997. The
increase was primarily due to an increase of $728,000 in payroll and related
costs, including $407,000 in increased selling salaries, as well as $220,000 in
selling-related expenses which resulted from increased sales volume. Factoring
costs decreased $45,000 as a result of lower commission rates, however, a
$156,000 credit loss was incurred during the year relating to Montgomery Ward's
bankruptcy filing.

As a result of the above factors, income from operations increased 54.3% from
$805,000 in the year ended March 31, 1997 to $1.2 million in the year ended
March 31, 1998.

Interest expense decreased from $596,000 in 1997 to $322,000 in 1998. This
decrease is primarily attributable to the repayment of promissory notes issued
in November 1995 and repaid in March 1997 from the proceeds of the Company's
initial public offering.

Liquidity and Capital Resources

Since its formation in 1995, the Company has financed its operations and met its
capital requirements primarily through funds raised from its founders, three
private placement offerings, as well as borrowings under its factoring
arrangements, vendor financing and, to a lesser extent, equipment financing. In
March 1997, the Company completed an initial public offering of investment units
resulting in proceeds, net of underwriting discounts and offering costs, of
$5,352,000. These financing activities provided net cash of $4.6 million in
fiscal 1997, $15,000 in fiscal 1998 and used $224,000 in fiscal 1999.

                                       6

<PAGE>
Operating activities used net cash of $3.9 million in fiscal 1997, $24,000 in
fiscal 1998 and provided net cash of $1.1 million in fiscal 1999. The principal
uses of operating cash are to purchase fabric and manufacture its products,
purchase import finished goods and financing accounts receivable. Inventory
levels increased as result of the corresponding increased production to support
the growth in sales, continued expansion of import product categories and the
timing of Spring '99 shipments to customers.

The Company's capital expenditures totaled $175,000, $362,000 and $1,060,000 in
fiscal 1997, 1998 1999, respectively. These capital expenditures were for
computer, material handling, design and office equipment, associated with
upgrading information technology and its core business systems as well as
improvements to its new warehouse and distribution center and administrative
offices. $933,000 of the 1999 expenditures have been financed through a leasing
company. The Company does not have any material commitments for capital
expenditures at this time. Also, included in the $818,000 of net cash used in
investing activities is $630,000 which was used in the acquisition of TLC.

Year 2000 Computer Issues

What is commonly known as the "Year 2000 Issue" arises because many computer
hardware and software systems use only two digits to represent the year. As a
result, these systems and programs may not calculate dates beyond 1999, which
may cause errors in information or system failures.

With respect to its internal systems, the Company is taking appropriate steps to
remediate the year 2000 issues and does not expect the costs of these efforts to
be material. However, the year 2000 readiness of the Company's suppliers may
vary. While the Company does not believe the year 2000 matters discussed above
will have a material impact on its business, financial condition or results of
operations, it is uncertain whether or to what extent the Company may be
affected by such matters.

RECENTLY ISSUED ACCOUNTING PRONOUCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires entities to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 is effective
for financial statements for fiscal years beginning after June 15, 1999. The
Company is not currently affected by SFAS No. 133.

                                       7

<PAGE>
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA

See pages F-1 through F-19 annexed hereto. All other schedules are omitted
because they are not required, are not applicable, or the information is
included in the financial statements or notes thereto.

                                       8

<PAGE>
                                  EXHIBIT INDEX
EXHIBIT
NUMBER             DESCRIPTION

1.1               Form of Underwriting Agreement between the Company and Walsh
                  Manning Securities, LLC (the "Underwriter") (incorporated by
                  reference to registrant's Registration Statement on Form S-1,
                  registration number 333-11979)

1.2               Form of Warrant Agreement among the Company, the Underwriter
                  and American Stock Transfer Company, as warrant agent
                  (incorporated by reference to registrant's Registration
                  Statement on Form S-1, registration number 333-11979)

3.1               Certificate of Incorporation of Registrant (incorporated by
                  reference to registrant's Registration Statement on Form S-1,
                  registration number 333-11979)

3.3               By-laws of Registrant (incorporated by reference to
                  registrant's Registration Statement on Form S-1, registration
                  number 333-11979)

4.1               Specimen common stock certificate (incorporated by reference
                  to registrant's Registration Statement on Form S-1,
                  registration number 333-11979)

4.2               Specimen preferred stock certificate (incorporated by
                  reference to registrant's Registration Statement on Form S-1,
                  registration number 333-11979)

4.3               Form of Underwriter's Warrant for the Purchase of Units
                  (incorporated by reference to registrant's Registration
                  Statement on Form S-1, registration number 333-11979)

4.4               Form of Warrant Agreement between the Company and American
                  Stock Transfer Company, as warrant agent (incorporated by
                  reference to registrant's Registration Statement on Form S-1,
                  registration number 333-11979)

10.1              Amended and Restated Employment Agreement, dated as of
                  February 1, 1997, between the Registrant and Mitchell Dobies
                  (incorporated by reference to registrant's Registration
                  Statement on Form S-1, registration number 333-11979)

10.2              Amended and Restated Employment Agreement, dated as of
                  February 1, 1997, between the Registrant and Charles Sobel
                  (incorporated by reference to registrant's Registration
                  Statement on Form S-1, registration number 333-11979)

 10.3             Employment Agreement, dated May 21, 1997, between the
                  Registrant and Eric Holtz. (incorporated by reference to
                  registrant's annual report on Form 10-K for the fiscal year
                  ended March 31, 1997)

                                       9

<PAGE>
10.4              Letter Agreement between the Registrant and Lawrence Kaplan
                  (incorporated by reference to registrant's Registration
                  Statement on Form S-1, registration number 333-11979)

10.5              Termination and Performance Shares Repurchase Agreement, dated
                  February 8, 1996, by and between the Registrant and Ernie
                  Baumgarten (incorporated by reference to registrant's
                  Registration Statement on Form S-1, registration number
                  333-11979)

10.6              Factoring Agreement, dated March 17, 1995, between the
                  Registrant and Republic Factors Corp. ("Republic"), as amended
                  to date (incorporated by reference to registrant's
                  Registration Statement on Form S-1, registration number
                  333-11979)

10.7              Security Agreement, dated March 17, 1995, between the
                  Registrant and Republic (incorporated by reference to
                  registrant's Registration Statement on Form S-1, registration
                  number 333-11979)

10.8              1996 Incentive Stock Option Plan of Jenna Lane, Inc.
                  (incorporated by reference to registrant's Registration
                  Statement on Form S-1, registration number 333-11979)

10.9              Collective Bargaining Agreement by and between United
                  Production Workers Union Local 17-18 and the Company, dated
                  June 15, 1996 (incorporated by reference to registrant's
                  Registration Statement on Form S-1, registration number
                  333-11979)

10.10             Form of Letter Agreement between the Company and the
                  Underwriter regarding consulting services (incorporated by
                  reference to registrant's Registration Statement on Form S-1,
                  registration number 333-11979)

10.11             Form of Registration Rights Agreement between the Company and
                  certain warrant holders (incorporated by reference to
                  registrant's Registration Statement on Form S-1, registration
                  number 333-11979)

10.12             Form of Selected Dealer Agreement for initial public offering
                  (incorporated by reference to registrant's Registration
                  Statement on Form S-1, registration number 333-11979)

10.13             License Agreement between the Company and Quade, Inc. dated as
                  of February 5, 1998 (incorporated by reference to registrant's
                  report on Form 10-K for the period ended March 31, 1999)

                                       10

<PAGE>
10.14             Supply and Financing Agreement between the Company and T.L.C.
                  for Girls, Inc. (incorporated by reference to registrant's
                  report on Form 10-K for the period ended March 31, 1999)

10.15             Purchase Agreement between Jenna Lane Kids, Inc. (now known as
                  T.L.C. for Kidz, Inc.) and T.L.C. for Girls, Inc.
                  (incorporated by reference to registrant's report on Form 10-K
                  for the period ended March 31, 1999)

10.16             Employment Agreement, dated as of July 6, 1998, between the
                  Registrant and Andrew Miller (incorporated by reference to
                  registrant's report on Form 10-Q for the period ended June 30,
                  1998)

10.17             Amendment to Employment Agreement, dated as of July 5, 1998,
                  between the Registrant and Eric Holtz (incorporated by
                  reference to registrant's report on Form 10-Q for the period
                  ended June 30, 1998)

10.18             License Agreement dated as of July 1, 1998, between Jenna Lane
                  Licensing I, Inc. And Michael Caruso & Co. (incorporated by
                  reference to registrant's report on Form 10-Q for the period
                  ended June 30, 1998)

10.19             Factoring Agreement, dated July 14, 1998, between T.L.C. for
                  Kidz, Inc. and Republic Business Credit Corporation
                  (incorporated by reference to registrant's report on Form 10-Q
                  for the period ended June 30, 1998)

10.20             Factoring Agreement, dated July 14, 1998, between Jenna Lane
                  Polo Association and Republic Business Credit Corporation
                  (incorporated by reference to registrant's report on Form 10-Q
                  for the period ended June 30, 1998)

10.21             Separation agreement, dated April 19, 1999, between the
                  Registrant and Andrew Miller. (incorporated by reference to
                  registrant's report on Form 10-K for the period ended March
                  31, 1999, filed June 30, 1999)

10.22             Lease, dated January 5, 1999, between the Company and
                  Gettinger Associates. (incorporated by reference to
                  registrant's report on Form 10-K for the period ended March
                  31, 1999, filed June 30, 1999)

10.23             Lease, dated October 13, 1998, between the Company and Hartz
                  Mountain Associates. (incorporated by reference to
                  registrant's report on Form 10-K for the period ended March
                  31, 1999, filed June 30, 1999)

21.1              Subsidiaries (incorporated by reference to registrant's report
                  on Form 10-K for the period ended March 31, 1999, filed June
                  30, 1999)

27.1              Financial Data Schedule

                                       11

<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.

                                JENNA LANE, INC.

Date: May 25, 2000

                                                By: /s/ Gary Coffey
                                                    ---------------
                                                    Gary Coffey
                                                    Vice-President and Principal
                                                    Accounting Officer

                                       12

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                        Page

Independent Auditors' Report                                             F-2

Consolidated Balance Sheets - March 31, 1999 and 1998                    F-3

Consolidated Statements of Operations -
   Years Ended March 31, 1999, 1998 and 1997                             F-4

Consolidated Statements of Shareholders' Equity -
   Years Ended March 31, 1999, 1998 and 1997                             F-5

Consolidated Statements of Cash Flows -
   Years Ended March 31, 1999, 1998 and 1997                             F-6

   Notes to Consolidated Financial Statements                         F-7 - F-19

                                       F-1

<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Jenna Lane, Inc.

We have audited the accompanying consolidated balance sheets of Jenna Lane, Inc.
and Subsidiaries as of March 31, 1999 and 1998, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended March 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Jenna Lane, Inc. and
Subsidiaries as of March 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1999, in conformity with generally accepted accounting principles.

                                                   EDWARD ISAACS & COMPANY LLP

New York, New York
June 7, 1999, except Note 2 as to
  which the date is February 15, 2000

                                       F-2

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                  March 31,
                                                                                      --------------------------------
                                     ASSETS                                               1999                 1998
                                                                                      -----------          -----------
<S>                                                                                  <C>                  <C>
Current Assets:
    Cash                                                                             $     41,465         $      6,595
    Due from factor                                                                             -            4,359,310
    Other receivables                                                                     365,616               81,000
    Advances to suppliers and others                                                      664,704              145,389
    Inventories                                                                        10,591,842            5,888,085
    Prepaid expenses and other                                                            445,713              233,881
    Prepaid and refundable income taxes                                                   542,847                    -
    Deferred income taxes                                                                  70,000               43,000
                                                                                     ------------         ------------
        Total Current Assets                                                           12,722,187           10,757,260

Property and Equipment, net                                                             1,310,337              501,617

Other Assets                                                                              784,772              278,292
                                                                                     ------------         ------------
                                                                                     $ 14,817,296         $ 11,537,169
                                                                                     ============         ============
                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
    Due to factor                                                                    $  1,258,674         $          -
    Accounts payable                                                                    4,610,341            2,925,661
    Accrued liabilities                                                                   329,281              187,208
    Income taxes payable                                                                        -              305,645
    Current maturities of long-term debt                                                  184,276               12,449
                                                                                     ------------         ------------
        Total Current Liabilities                                                       6,382,572            3,430,963
                                                                                     ------------         ------------
Long-Term Debt                                                                            690,463                3,653
                                                                                     ------------         ------------
Deferred Income Taxes                                                                      76,000               30,000
                                                                                     ------------         ------------
Shareholders' Equity:
    Common stock, $.01 par value; 18,000,000 shares
      authorized; issued 4,414,707 and 4,728,993 shares,
      outstanding 4,339,707 and 4,728,993 shares, respectively                             44,147               47,290
    Capital in excess of par value                                                      7,980,635            7,980,635
    Retained earnings (deficit)                                                          (209,803)              44,628
    Treasury stock, at cost; 75,000 shares in 1999                                       (146,718)                   -
                                                                                     ------------         ------------

        Total Shareholders' Equity                                                      7,668,261            8,072,553
                                                                                     ------------         ------------
                                                                                     $ 14,817,296         $ 11,537,169
                                                                                     ============         ============
</TABLE>
See notes to consolidated financial statements.

                                       F-3

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                             Year Ended March 31,
                                                       ------------------------------------------------------------------
                                                               1999                   1998                    1997
                                                       --------------------   --------------------    -------------------
<S>                                                            <C>                    <C>                     <C>
Net Sales                                                      $59,216,370            $42,561,796           $ 35,372,386

Cost of Sales                                                   47,966,745             34,514,628             29,087,860
                                                               -----------            -----------           ------------
      Gross Profit                                              11,249,625              8,047,168              6,284,526

Operating Expenses                                              10,930,312              6,805,774              5,480,003
                                                               -----------            -----------           ------------
      Operating Income                                             319,313              1,241,394                804,523

Interest Expense                                                   666,676                322,072                595,592
                                                               -----------            -----------           ------------
      (Loss) Income Before Income Taxes                           (347,363)               919,322                208,931

Provision for Income Taxes                                         (92,932)               402,165                 72,671
                                                               -----------            -----------           ------------
      Net (Loss) Income                                        $  (254,431)           $   517,157           $    136,260
                                                               ===========            ===========           ============
Net (Loss) Income Per Share:
      Basic                                                    $     (0.06)           $      0.11                 $ 0.03
                                                               ===========            ===========           ============
      Diluted                                                  $     (0.06)           $      0.09                 $ 0.03
                                                               ===========            ===========           ============
</TABLE>

See notes to consolidated financial statements.

                                      F- 4
<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                    COMMON STOCK            CAPITAL IN                        TREASURY
                             ---------------------------    EXCESS OF         UNEARNED         STOCK,        RETAINED
                                SHARES        AMOUNT       PAR VALUE       COMPENSATION        AT COST       EARNINGS      TOTAL
                             -------------- -----------  --------------- ------------------ ------------- -------------- ----------
<S>                              <C>           <C>            <C>                <C>                 <C>     <C>         <C>
Balance at March 31, 1996        1,979,048     $19,790        $ 804,850          $ (44,000)          $ -     $ 457,503   $1,238,143

Issuance of common stock
     and warrants                1,290,000      12,900        5,339,143                  -             -             -    5,352,043
Issuance of performance
     shares                        125,714       1,257           75,963            (77,220)            -             -            -
Conversion of preferred stock      952,381       9,524          818,506                  -             -             -      828,030
Repurchase of performance
     shares                        (57,143)       (571)             271                  -             -             -         (300)
Amortization of unearned
     compensation                        -           -                -             57,594             -             -       57,594
Issuance of warrants                     -           -           25,000                  -             -             -       25,000
Net income                               -           -                -                  -             -       136,260      136,260
Dividends paid on preferred
     stock                               -           -                -                  -             -      (175,000)    (175,000)
                             -------------- -----------  ---------------  -----------------  ------------  -----------   ----------
Balance at March 31, 1997        4,290,000      42,900        7,063,733            (63,626)            -       418,763    7,461,770

Amortization of unearned
     compensation                        -           -                -             63,626             -             -       63,626
Common stock dividend              428,993       4,290          887,002                  -             -      (891,292)           -
Exercise of stock options           10,000         100           29,900                  -             -              -      30,000
Net income                               -           -                -                  -             -       517,157      517,157
                             --------------  ----------  ---------------  -----------------  ------------  ------------  ----------
Balance at March 31, 1998        4,728,993      47,290        7,980,635                  -             -        44,628    8,072,553

Repurchase of stock                (75,000)          -                -                  -      (146,718)            -     (146,718)
Repurchase of performance
     shares                       (314,286)     (3,143)               -                  -             -             -       (3,143)
Net loss                                 -           -                -                  -             -      (254,431)    (254,431)
                             --------------  ----------  ---------------  -----------------  ------------  ------------  ----------
Balance at March 31, 1999         4,339,707     $44,147       $7,980,635                $ -     $(146,718)    $(209,803) $7,668,261
                             ==============  ==========  ===============  =================  ============  ============= ==========

</TABLE>
See notes to consolidated financial statements.

                                       F-5
<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                Year Ended March 31,
                                                                                --------------------------------------------------
                                                                                      1999              1998             1997
                                                                                ----------------   --------------   --------------
<S>                                                                                   <C>               <C>              <C>
Operating Activities:
   Net income (loss)                                                                  $ (254,431)       $ 517,157        $ 136,260
   Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
       Depreciation and amortization                                                     251,404          168,292          166,436
       Deferred income taxes                                                              19,000          (37,000)          24,000
       Amortization of debt discount                                                           -                -          104,167
       Write-off of note receivable                                                       35,760                -                -
       Changes in assets and liabilities:
        Receivables                                                                    4,440,310          514,152       (2,853,753)
        Inventories                                                                   (4,703,757)      (2,255,172)        (850,778)
        Advances to suppliers and others                                                (371,072)         (27,051)         (87,338)
        Prepaid expenses and other                                                      (211,832)         (13,789)        (127,723)
        Income taxes                                                                    (848,492)         488,634         (339,989)
        Due to factor                                                                    893,058                -                -
        Accounts payable and accrued liabilities                                       1,826,753          620,491          (37,594)
                                                                                ----------------   --------------   --------------
       Net Cash Provided by (Used in) Operating Activities                             1,076,701          (24,286)      (3,866,312)
                                                                                ----------------   --------------   --------------
Investing Activities:
   Acquisition of business                                                              (630,209)               -                -
   Capital expenditures                                                                 (127,085)        (361,514)        (143,374)
   Security deposits and other                                                           (37,689)         (18,515)         (54,488)
   Issuance of notes receivable                                                         (135,754)        (304,900)               -
   Repayment of notes receivable                                                         113,169          152,083                -
                                                                                ----------------   --------------   --------------
       Net Cash Used in Investing Activities                                            (817,568)        (532,846)        (197,862)
                                                                                ----------------   --------------   --------------
Financing Activities:
   Issuance of common stock, net of offering costs                                             -                -        5,352,043
   Exercise of stock options                                                                   -           30,000                -
   Repayment of notes payable                                                                  -                -       (1,000,000)
   Proceeds from issuance of units                                                             -                -          500,000
   Principal payments on equipment notes payable                                         (74,402)         (14,592)          (8,203)
   Repurchase of stock                                                                  (146,718)               -                -
   Repurchase of performance shares                                                       (3,143)               -             (300)
   Offering costs (preferred stock and units)                                                  -                -          (57,297)
   Dividends paid                                                                              -                -         (175,000)
                                                                                ----------------   --------------   --------------
       Net Cash (Used in) Provided by Financing Activities                              (224,263)          15,408        4,611,243
                                                                                ----------------   --------------   --------------
       Net Increase (Decrease) in Cash                                                    34,870         (541,724)         547,069

Cash at beginning                                                                          6,595          548,319            1,250
                                                                                ----------------   --------------   ---------------
       Cash at end                                                                    $   41,465        $   6,595        $ 548,319
                                                                                ================   ==============   ==============
Supplemental Disclosures of Cash Flow Information:
   Interest paid                                                                      $  666,676        $ 322,072        $ 595,592
                                                                                ================   ==============   ==============
   Income taxes paid                                                                  $  726,942        $  50,335        $ 391,018
                                                                                ================   ==============   ==============
Noncash Transactions:
   Capital lease obligations for the acquisition of equipment                         $  933,039        $       -        $  32,325
                                                                                ================   ==============   ==============
   Issuance of performance shares                                                     $        -        $       -        $  77,220
                                                                                ================   ==============   ==============
   Conversion of Series A Convertible Preferred Stock to
       Common Stock                                                                   $        -        $       -        $ 828,030
                                                                                ================   ==============   ==============

</TABLE>
See notes to consolidated financial statements.

                                       F-6

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.      THE COMPANY AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES

        Business:

        The Company designs, manufactures (through contractors) and imports
        women's and children's sportswear and other apparel for the domestic
        retail market.

        Principles of Consolidation:

        The consolidated financial statements include the accounts of Jenna
        Lane, Inc. and its wholly-owned subsidiaries (collectively, the
        "Company"). All significant intercompany accounts and transactions have
        been eliminated.

        Inventories:

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

        Income Taxes:

        Deferred income taxes reflect the net tax effects of temporary
        differences between the carrying amounts of assets and liabilities for
        financial reporting purposes and amounts used for income tax purposes,
        primarily depreciation, inventory costs capitalized and, in 1998 and
        1997, deferred compensation.

        Property and Equipment:

        Property and equipment are stated at cost. Furniture and equipment are
        depreciated using the straight-line method over their estimated useful
        lives of five years. Leasehold improvements are amortized over their
        respective lives or the terms of the applicable leases, whichever is
        shorter.

        Goodwill:

        The excess of the cost over the fair value of net assets of purchased
        businesses is recorded as goodwill (included in other assets) and is
        amortized on a straight-line basis over the estimated future periods to
        be benefited (not exceeding 40 years). The Company continually evaluates
        the recoverability of this goodwill.

        Stock-Based Compensation Plans:

        Effective April 1, 1996, the Company adopted Statement of Financial
        Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
        ("SFAS No. 123"). SFAS No. 123 permits either the recognition of
        compensation cost for the estimated fair value of employee stock-based
        compensation arrangements on the date of grant, or disclosure in the
        notes to the financial statements of the pro forma effects on net income
        and earnings per share, determined as if the fair value-based method had
        been applied in measuring compensation cost. The Company has adopted the
        disclosure option and continues to apply APB Opinion No. 25, "Accounting
        for Stock Issued to Employees" ("APB 25") in accounting for its plans.
        Accordingly, no compensation cost has been recognized for the Company's
        stock incentive plan.

                                       F-7

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.      THE COMPANY AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)

        Earnings Per Share:

        The Company computes basic and diluted earnings per share in accordance
        with Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
        128"), which the Company adopted as of December 31, 1997. Basic earnings
        per share is computed based upon the weighted average number of
        outstanding common shares. Diluted earnings per share include the
        weighted average effect of dilutive options, warrants and convertible
        preferred stock. In 1999, the warrants were anti-dilutive. In 1997, the
        convertible preferred shares were anti-dilutive. In conjunction with the
        issuance of SFAS 128, the Company adopted Securities and Exchange
        Commission Staff Accounting Bulleting No. 98 ("SAB 98"). As a result,
        certain securities which had previously been classified as and included
        in common shares outstanding, pursuant to SAB 83, are no longer required
        to be included as common shares outstanding. Accordingly, the 1997
        earnings per share computations have been restated.

 <TABLE>
<CAPTION>
                                                                               YEAR ENDED MARCH 31
                                                                -------------------------------------------------------
                                                                     1999               1998                1997
                                                                -------------      --------------     -----------------
<S>                                                             <C>                <C>                <C>
       BASIC EARNINGS PER SHARE COMPUTATION
       Numerator:
           Net (loss) income                                    $    (254,431)     $      517,157     $       136,260
           Preferred dividends                                              -                   -              75,000
                                                                -------------      --------------     ---------------
           Net (loss) income applicable to common
             shares                                             $    (254,431)     $      517,157     $        61,260
                                                                =============      ==============     ===============
       Denominator:
           Average common shares outstanding                        4,445,624           4,719,322           2,305,749
                                                                =============      ==============     ===============

       BASIC (LOSS) EARNINGS PER SHARE                          $       (0.06)     $         0.11     $          0.03
                                                                =============      ==============     ===============
       DILUTED EARNINGS PER SHARE COMPUTATION
       Numerator:
           Net (loss) income applicable to common
             shares                                             $    (254,431)     $      517,157     $        61,260
                                                                =============      ==============     ===============
       Denominator:
           Average common shares outstanding                        4,445,624           4,719,322           2,305,749

           Dilutive effect of:
               Options                                                      -             185,125              27,485
               Warrants                                                     -             627,412                   -
                                                                -------------      --------------     ---------------

           Total average common shares outstanding                  4,445,624           5,531,859           2,333,234
                                                                -------------      --------------     ---------------

       DILUTED (LOSS) EARNINGS PER SHARE                        $       (0.06)     $         0.09     $          0.03
                                                                =============      ==============     ===============
</TABLE>

        Computation of diluted earnings per share is not reflected for the year
        ended March 31, 1999 because including potential common shares will
        result in an antidilutive per-share amount due to the net loss in the
        period. Stock Dividends: On February 17, 1998, the Company declared a
        10% stock dividend paid March 13, 1998 to shareholders of record as of
        March 6, 1998. The stock price on the date of declaration was $9.625.

                                       F-8

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.      THE COMPANY AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)

        The fair value of the dividend has been charged against retained
        earnings only to the extent of retained earnings and current income as
        of the date of distribution.

        In July 1996, the Company declared a 1.9047619 for one stock split of
        the Common Stock to be effected in the form of a stock dividend. All
        share and per share data have been restated in these financial
        statements for all periods presented to reflect the stock dividend and
        stock split.

        Advertising costs:

        The Company expenses advertising costs as incurred which amounted to
        approximately $118,000, $68,000 and $15,000 for the years ended March
        31, 1999, 1998 and 1997, respectively.

        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 amounts reported in the financial statements
        and accompanying notes. Although these estimates are based on
        management's knowledge of current events and actions it may undertake in
        the future, they may ultimately differ from actual results.

        Segment Information:

        Effective April 1, 1998, the Company adopted Statement of Financial
        Accounting Standards No. 131, "Disclosures about Segments of an
        Enterprise and Related Information" ("SFAS 131"). SFAS 131 superseded
        FASB Statement No. 14, "Financial Reporting for Segments of a Business
        Enterprise". SFAS 131 establishes standards for the way that public
        business enterprises report information about operating segments in
        annual financial statements and requires that those enterprises report
        selected information about operating segments in interim financial
        reports. SFAS 131 also establishes standards for related disclosures
        about products and services, geographic areas, and major customers.

        The Company has organized its business in one operating segment, since
        the Company's only business is in the sale of apparel to the domestic
        retail market.

        Recent Accounting Pronouncements:

        In June 1998, the Financial Accounting Standards Board issued the
        Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
        "Accounting for Derivative Instruments and Hedging Activities", which
        will be effective for the Company's fiscal year 2000. This statement
        establishes accounting and reporting standards requiring that every
        derivative instrument be recorded in the balance sheet as either an
        asset or liability measured at its fair value. The statement also
        requires that changes in the derivative's fair value be recognized in
        earnings unless specific hedge accounting criteria are met. The Company
        is not currently affected by SFAS 133.

        Reclassification:

        Certain prior year amounts have been reclassified to conform with the
        current year's presentation.

                                       F-9
<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.       RESTATEMENT OF FINANCIAL RESULTS

         On January 31, 2000 the Company announced that it would conduct a
         review of prior financial results. The Company also announced that it
         had retained the services of Mahoney Cohen & Company to assist in the
         review. The review has been completed and, as a result of its findings,
         the Company has restated its consolidated financial statements for
         1999. It was determined that certain sales were improperly recognized
         including sales recognized in the incorrect period and certain costs
         and allowances were recorded in the incorrect period or improperly
         recorded. The restatement adjustments reflect additional charges to
         sales, sales allowances, and costs of sales of $1,651,000. Accordingly,
         net income of $741,569 previously reported has been restated to reflect
         a net loss of $254,431, net of an income tax benefit of $655,000. The
         following consolidated balance sheet and statement of operations
         compare the previously reported and restated financial information:

                                      F-10

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.       RESTATEMENT OF FINANCIAL RESULTS (CONTINUED)

<TABLE>
<CAPTION>
                                                           AT MARCH 31, 1999
                                                             AS PREVIOUSLY                     AS
                                                                REPORTED                    RESTATED
                                                         -----------------------       --------------------
                                                         -----------------------       --------------------
<S>                                                       <C>                        <C>
BALANCE SHEET
     Current Assets:
              Cash                                                     $ 41,465                   $ 41,465
              Receivables                                               282,942                    365,616
              Advances to suppliers                                     664,704                    664,704
              Inventories                                            10,464,842                 10,591,842
              Prepaid expense and other                                 445,713                    445,713
              Refundable income taxes                                         -                    542,847
              Deferred income taxes                                      70,000                     70,000
                                                         -----------------------       --------------------
              Total Current Assets                                   11,969,666                 12,722,187

     Property and Equipment, Net                                      1,310,337                  1,310,337
     Other Assets                                                       784,772                    784,772
                                                         -----------------------       --------------------
                                                                   $ 14,064,775               $ 14,817,296
                                                         =======================       ====================
     Current Liabilities:
              Acounts payable                                       $ 4,008,341                $ 4,610,341
              Due to factor                                                   -                  1,258,674
              Accrued liabilities                                       329,281                    329,281
              Income taxes payable                                      112,153                          -
              Current maturities of debt                                184,276                    184,276
                                                         -----------------------       --------------------
              Total current liabilities                               4,634,051                  6,382,572
     Long-Term Debt                                                     690,463                    690,463
     Deferred Income Taxes                                               76,000                     76,000
     Shareholders' Equity:
              Common stock                                               44,147                     44,147
              Capital in excess of par value                          7,980,635                  7,980,635
              Retained earnings                                         786,197                   (209,803)
              Treasury stock                                           (146,718)                  (146,718)
                                                         -----------------------       --------------------
              Total Shareholders' Equity                              8,664,261                  7,668,261
                                                         -----------------------       --------------------
                                                                   $ 14,064,775               $ 14,817,296
                                                         =======================       ====================

INCOME STATEMENT                                                 FOR THE YEAR ENDED MARCH 31, 1999

Net Sales                                                          $ 60,392,370               $ 59,216,370
Cost of Sales                                                        47,491,745                 47,966,745
                                                         -----------------------       --------------------
              Gross Profit                                           12,900,625                 11,249,925
Operating Expenses                                                   10,930,312                 10,930,312
                                                         -----------------------       --------------------
              Operatins (Loss) Income                                 1,970,313                    319,313

Interest Expense                                                        666,676                    666,676
                                                         -----------------------       --------------------
              (Loss) Income Before Income Taxes                       1,303,637                   (347,363)

(Credit) Provision for Income Taxes                                     562,068                    (92,932)
                                                         -----------------------       --------------------
              Net (Loss) Income                                       $ 741,569                 $ (254,431)
                                                         =======================       ====================
Net (Loss) Income Per Share
              Basic                                                      $ 0.17                    $ (0.06)
                                                         =======================       ====================
              Diluted                                                    $ 0.16                    $ (0.06)
                                                         =======================       ====================
</TABLE>

                                      F-11

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.      DUE FROM (TO) FACTOR

        Due From (To) Factor consists of the following:

                                                             MARCH 31,
                                                      ------------------------
                                                         1999          1998
                                                      -----------  -----------
            Due from factors                          $   202,326  $  4,919,310
            Less: allowance for customers' claims      (1,461,000)     (560,000)
                                                      -----------  ------------
                                                      $(1,258,674) $  4,359,310
                                                      ===========  ============

        The Company has agreements with two commercial factors which provide for
        the factoring of substantially all its trade accounts receivable on a
        pre-approved non-recourse basis (except as to customer claims). The
        factoring charge ranges from 0.65% to 0.85% of the receivables assigned.
        Factor charges for the years ended March 31, 1999, 1998 and 1997 were
        approximately $598,000, $427,000 and $472,000, respectively. The
        uncollected balance of receivables held by the factors amounted to
        approximately $15,704,000 and $9,489,000 at March 31, 1999 and 1998,
        respectively.

        The Company receives advances and loans under the agreement with its
        primary factor, which bear interest at 1.0% below the prime rate. The
        factor also guarantees the Company's letters of credit. The aggregate
        amounts of such advances and guarantees are limited by formula and any
        overadvance permitted is at the lender's discretion. Substantially all
        the Company's assets are pledged as collateral under the agreements.

4.      INVENTORIES

        Inventories consist of the following:

                                                             MARCH 31,
                                                      ------------------------
                                                         1999          1998
                                                      -----------  -----------
                  Raw materials                       $ 2,921,489  $2,308,517
                  Work-in-process                       1,612,193     368,954
                  Finished goods                        6,058,160   3,210,614
                                                      -----------  ----------
                                                      $10,591,842  $5,888,085
                                                      ===========  ==========

5.      PROPERTY AND EQUIPMENT

        Property and equipment consist of:

                                                             MARCH 31,
                                                      ------------------------
                                                         1999          1998
                                                      -----------  -----------
       Furniture and equipment                        $ 1,346,085  $   543,387
       Leasehold improvements                             378,288      120,862
                                                      -----------  -----------
                                                        1,724,373      664,249
       Less: Accumulated depreciation and amortization    414,036      162,632
                                                      -----------  -----------
                                                      $ 1,310,337  $   501,617
                                                      ===========  ===========

                                      F-12
<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.      LONG-TERM DEBT

        Long-term debt consists of capital lease obligations for equipment
        payable in monthly installments, with interest ranging from 9.96% to
        11.6%, maturing through fiscal year 2004. Annual maturities of long-term
        debt at March 31, 1999 are as follows:

                      YEAR ENDING MARCH 31,
                      ---------------------
                                 2001                   $ 200,148
                                 2002                     157,178
                                 2003                     173,862
                                 2004                     159,275
                                                        ---------
                                                        $ 690,463
                                                        =========
7.      INCOME TAXES

        The provision for income taxes consists of the following:

                                                 MARCH 31,
                               -------------------------------------------
                                   1999            1998           1997
                               ------------    ------------   ------------
        Current:
            Federal             $  (83,405)    $   337,335    $    22,970
            State                  (28,527)        101,830         25,701
        Deferred                    19,000         (37,000)        24,000
                                ----------     -----------    -----------
                                $  (92,932)    $   402,165    $    72,671
                                ==========     ===========    ===========

        Reconciliation of the statutory Federal income tax rate to the Company's
        effective tax rate on pre-tax income (loss) is as follows:

<TABLE>
<CAPTION>
                                                                          MARCH 31,
                                                        -------------------------------------------
                                                            1999            1998           1997
                                                        ------------    ------------   ------------
<S>                                                       <C>               <C>         <C>
        Statutory Federal income tax rate                 (34.0)%           34.0%       34.0%
        State income taxes, net of Federal benefit         (5.5)             7.3         8.1
        Non - deductible items and other                   12.7              2.5        (7.3)
                                                          -------           -----       -----
        Effective income tax rate                         (26.8)%           43.8%       34.8%
                                                          =======           =====       =====
</TABLE>

        Significant components of the Company's deferred tax assets and
        liabilities as of March 31, 1999 and 1998 are summarized as follows:

                                                                MARCH 31,
                                                         -----------------------
                                                            1999        1998
                                                         ----------  -----------

       Current deferred tax asset - inventory            $  70,000   $   43,000
                                                         =========   ==========

       Noncurrent deferred tax liability - depreciation  $  76,000   $   30,000
                                                         =========   ==========


                                      F-13

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.      SHAREHOLDERS' EQUITY

        Initial Public Offering:

        In March 1997, the Company completed an initial public offering of
        690,000 units, at a public offering price of $10.125 per unit. Each unit
        consisted of two shares of common stock and one warrant. Each warrant
        entitles the holder to purchase one share of common stock at an exercise
        price of $6.36, subject to adjustment, at any time until March 2000. The
        net proceeds from the offering of approximately $5,352,000 were used to
        repay debt, acquire equipment and for general corporate purposes.

        Series A Convertible Preferred Stock:

        The Series A Convertible Preferred Stock was converted in March 1997
        into common shares effective with the completion of the Company's
        initial public offering of common stock.

        In April 1996, the Company declared and paid an annual dividend of $.20
        per share ($100,000) to the shareholders of preferred stock. In June
        1996, October 1996 and January 1997, the Company declared and paid a
        quarterly dividend of $25,000 to the shareholders of preferred stock.

        Issuance of Notes and Warrants:

        In August, 1996, the Company completed a bridge financing by issuing
        $500,000 (principal amount) 10% notes and 1,100,000 warrants. The Bridge
        Notes were repaid in March 1997 from the proceeds of the Company's
        initial public offering. The warrants to purchase 1,100,000 shares of
        common stock at an exercise price of $6.36 per share, subject to
        adjustment, are exercisable for a period of three years. The warrants
        contain various redemption and other provisions.

        Stock Repurchase:

        In September 1998, the Company adopted a share repurchase program to buy
        back up to 500,000 shares of the Company's stock over an eighteen month
        period. As of March 31, 1999, the Company has repurchased 75,000 shares
        at an aggregate cost of $146,718.

        Performance Shares:

        Performance shares represent common shares issued as compensation to
        certain key executives and a director. Unearned compensation was
        recorded based on the fair value of the shares issued and has been fully
        amortized through March 1998. Amortization of unearned compensation was
        $64,000 and $58,000 for the years ended March 31, 1998 and 1997,
        respectively.

        The shares are to be repurchased by the Company at par value ($.01 per
        share) because the Company did not achieve certain annual pre-tax
        earnings in fiscal 1998 and 1999. 314,286 shares were repurchased in
        1999, and an additional 314,286 shares are to be repurchased subsequent
        to March 31, 1999.

                                      F-14

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.      COMMITMENTS AND CONTINGENCIES

        Leases:

        The Company leases warehouse, office and showroom space and equipment
        under capital and operating leases extending to 2006. The leases provide
        for payment by the Company of taxes and other expenses. Rent expense was
        approximately $862,000, $461,000 and $358,000 for the years ended March
        31, 1999, 1998 and 1997, respectively.

        Minimum rental payments under noncancellable leases are as follows:

<TABLE>
<CAPTION>

                           YEAR ENDING MARCH 31,                          OPERATING              CAPITAL
                           ---------------------                          ---------              -------
    <S>                                                                   <C>                   <C>
                                    2000                                  $1,244,000            $  264,000
                                    2001                                   1,225,000               261,000
                                    2002                                   1,017,000               233,000
                                    2003                                     983,000               196,000
                                    2004                                     928,000               129,000
                                    Thereafter                             1,463,000                     -
                                                                          ----------            ----------
                                                                          $6,860,000             1,083,000
                                                                          ==========

                                    Less: Amount representing interest                             208,000
                                                                                                ----------
                                                                                                $  875,000
                                                                                                ==========
</TABLE>

        Net book value of equipment under capital leases included in the balance
        sheet amounted to approximately $863,000 and $29,000 at March 31, 1999
        and 1998, respectively.

        Employment Agreements:

        The Company has executed employment agreements with several of its
        executives and employees which, among other things, provide for
        aggregate annual base compensation of approximately $1.6 million for
        fiscal 2000 and minimum bonuses plus profit participation, as defined.

        Letters of Credit:

        At March 31, 1999, the Company was contingently liable for open letters
        of credit aggregating approximately $2,285,000.

                                      F-15
<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.      COMMITMENTS AND CONTINGENCIES (Continued)

        Licensing Agreements:

        The Company has entered into licensing agreements that provide for
        royalty payments ranging from 5% to 7% of net sales of licensed
        products. Based on minimum sales requirements, future minimum royalty
        payments required under these agreements are:

                   YEAR ENDING MARCH 31,
                   ---------------------
                              2000                   $   275,000
                              2001                       672,000
                              2002                       956,000
                              2003                       228,000
                                                     -----------
                                                     $ 2,131,000

        The Company incurred royalty expense of $79,000 for the year ended March
        31, 1999. As a result of pending litigation with one licensor, minimum
        guaranteed royalties of $120,000 due in January 1999 are in dispute and
        remain unpaid. Future minimum guaranteed royalties of $450,000 that are
        also in dispute are included above (see litigation note below).

        Litigation:

        The Company is a party to litigation with one of its licensors and
        certain other parties. The Company initiated an action alleging breach
        of license and related tort claims. The licensor has moved to compel
        arbitration and is seeking $1,000,000 in damages, including unpaid
        minimum guaranteed royalties. The Company is vigorously defending the
        claim and believes it has meritorious defenses. However, it is not
        possible at this time to predict the outcome of this matter.

10.     SALES TO MAJOR CUSTOMERS

        For the year ended March 31, 1999, one customer accounted for
        approximately 23% and another accounted for 11% of sales compared to one
        customer that accounted for approximately 18% for the year ended March
        31, 1998.

11.     STOCK INCENTIVE PLAN

        In August 1996, the Company adopted an Incentive Stock Option Plan for
        employees (the Plan). The Plan permits the issuance of stock options to
        selected employees (and consultants) of the Company. The Company
        reserved 660,000 shares of common stock for grant. Options granted may
        be either nonqualified or incentive stock options and will expire not
        later than 10 years from the date of grant.

                                      F-16

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.     STOCK INCENTIVE PLAN (Continued)

        The following table summarizes stock option activity for the three years
        ended March 31, 1999 (including 450,582 stock options issued outside the
        Plan):
<TABLE>
<CAPTION>
                                                        NUMBER OF                WEIGHTED
                                                     SHARES SUBJECT         AVERAGE EXERCISE
           STOCK OPTION ACTIVITY                    TO OPTIONS            PRICE PER SHARE
           ---------------------                      --------------         -----------------
<S>                                                   <C>                    <C>
       Outstanding, April 1, 1996                           -                $       -
           Granted                                       327,241                    3.94
           Exercised                                        -                        -
                                                      ----------
       Outstanding, March 31, 1997                       327,241                    3.94
           Granted                                          -                        -
           Exercised                                     (10,000)                   3.00
                                                      ----------
       Outstanding, March 31, 1998                       317,241                    3.98
            Granted                                      686,500                    3.06
            Cancelled                                    (34,240)                   4.03
            Exercised                                       -                        -
                                                      ----------
       Outstanding, March 31, 1999                       969,501                    3.33
                                                      ==========
</TABLE>

        The following table summarizes information about stock options
outstanding and exercisable at March 31, 1999:

<TABLE>
<CAPTION>

                                            OPTIONS OUTSTANDING                              OPTIONS EXERCISABLE
                             -------------------------------------------------          ----------------------------
                                               WEIGHTED             WEIGHTED                                WEIGHTED
           RANGE OF                             AVERAGE             AVERAGE                                  AVERAGE
           EXERCISE                            REMAINING            EXERCISE                                EXERCISE
             PRICE           NUMBER OF        CONTRACTUAL            PRICE              NUMBER OF             PRICE
           PER SHARE           SHARES        LIFE (YEARS)            PER SHARE            SHARES            PER SHARE
           ---------         ---------       ------------            ---------          ---------           ---------
<S>                          <C>                 <C>                   <C>                <C>                 <C>
         $1.82 - 2.73          517,750           9.1                   2.13               100,000             $2.73
         $4.00 - 4.55          376,751           8.4                   4.30               138,418              4.55
         $6.00 - 8.00           75,000           9.3                   6.67                  -                  -
                             ---------         -----                  -----               -------             -----
                               969,501           8.8                  $3.33               238,418             $3.79
                             =========         =====                  =====               =======             =====
</TABLE>
                                      F-17

<PAGE>

                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.     STOCK INCENTIVE PLAN (Continued)

        The following table reflects pro forma net income and earnings per share
        had compensation cost been determined based on the fair value at the
        grant date for awards granted in fiscal 1999, 1998, and 1997 consistent
        with the requirements of Statement of Financial Accounting Standards No.
        123, "Accounting for Stock-Based Compensation":

<TABLE>
<CAPTION>

       YEAR ENDED MARCH 31,                              1999                   1998                   1997
       --------------------                          -------------          -------------          --------
<S>                                                  <C>                    <C>                    <C>
       NET (LOSS) INCOME:
            Actual                                   $ (254,431)            $ 517,157              $ 136,260
            Pro forma                                $ (378,897)            $ 436,561              $ 121,738

       BASIC (LOSS) EARNINGS PER SHARE:
            Actual                                   $    (0.06)            $    0.11              $    0.03
            Pro forma                                $    (0.09)            $    0.09              $    0.02

       DILUTED (LOSS) EARNINGS PER SHARE:
            Actual                                   $    (0.06)            $    0.09              $    0.03
            Pro forma                                $    (0.09)            $    0.08              $    0.02

</TABLE>

        These pro forma amounts may not be representative of future disclosures
        since the estimated fair value of stock options is amortized to expense
        over the vesting period, and additional options may be granted in future
        years.

        The estimated fair value of each option granted included in the pro
        forma results is calculated using the minimum value calculation for the
        options issued prior to the Company going public, and the Black-Scholes
        option-pricing model with the following weighted-average assumptions
        used for grants in 1999 and 1997, respectively: no common stock
        dividends paid for all years; expected volatility of 65.0% and 23.5%;
        risk-free interest rates of 5.11% and 6.12%; and expected lives of 5.0
        and 3.5 years. The weighted average fair values of options at their
        grant date during 1999 and 1997, were $0.95 and $1.01, respectively.

12.     401(K) PLAN

        Effective August 1996, the Company established a qualified Salary
        Reduction Profit Sharing Plan ("The Plan") for eligible employees under
        Section 401(k) of the Internal Revenue Code. The Plan provides for
        voluntary employee contributions through salary reduction and voluntary
        employer contributions at the discretion of the Company. There were no
        Company contributions for the years ended March 31, 1999, 1998 and 1997.

13.     ACQUISITION

        On June 19, 1998, the Company acquired substantially all the assets of
        T.L.C. for Girls, Inc., a manufacturer of children's wear, for a total
        consideration of approximately $630,000 which has been accounted for as
        a purchase and consisted substantially of goodwill. The pro forma
        results for 1999 assuming the acquisition had been made at the beginning
        of the year, would not be materially different from reported results.

                                      F-18

<PAGE>
                        JENNA LANE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.           QUARTERLY FINANCIAL DATA (UNAUDITED)

        The following table presents summarized quarterly results:

<TABLE>
<CAPTION>
                                             FIRST             SECOND           THIRD            FOURTH
                                            QUARTER           QUARTER          QUARTER           QUARTER
                                            -------           -------          -------           -------
     MARCH 31, 1999
<S>                                     <C>               <C>               <C>              <C>
     Net Sales                          $13,826,800       $17,120,399       $9,253,459       $19,015,712
     Gross Profit                         2,728,127         3,617,024        1,896,864         3,007,610
     Operating Income (Loss)                713,504           806,038         (566,998)         (633,231)
     Net  Income (Loss)                     368,809           348,468         (394,837)         (576,871)
     Earnings Per Share:
         Basic                                 0.08              0.08            (0.09)            (0.13)
         Diluted                               0.08              0.08            (0.09)            (0.13)
     Market Price Per Share:
         High                                  8.50              2.94             2.25              2.69
         Low                                   1.75              1.53             1.03              1.88

     MARCH 31, 1998

     Net Sales                          $11,734,842       $11,295,038       $7,723,861       $11,808,055
     Gross Profit                         2,303,059         2,119,719        1,249,749         2,374,641
     Operating Income (Loss)                412,048           638,870         (387,434)          577,910
     Net  Income (Loss)                     213,493           322,268         (286,374)          267,770
     Earnings Per Share:
         Basic                                 0.05              0.07            (0.09)             0.06
         Diluted                               0.04              0.06            (0.09)             0.05
     Market Price Per Share:
         High                                  9.43              9.77            12.39             11.25
         Low                                   7.73              8.75             9.66              8.69

</TABLE>
                                      F-19