<SUBMISSION>
<ACCESSION-NUMBER>0000910680-06-001090
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>6
<PERIOD>20060930
<FILING-DATE>20061114
<DATE-OF-FILING-DATE-CHANGE>20061114
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>JACLYN INC
<CIK>0000052969
<ASSIGNED-SIC>3100
<IRS-NUMBER>221432053
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0630
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-05863
<FILM-NUMBER>061214766
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>635 59TH STREET
<CITY>WEST NEW YORK
<STATE>NJ
<ZIP>07093
<PHONE>2018689400
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>5801 JEFFERSON STREET
<CITY>WEST NEW YORK
<STATE>NJ
<ZIP>07093
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>f10q-09302006.htm
<DESCRIPTION>SEPTEMBER 30, 2006
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" size=3>UNITED STATES <BR>SECURITIES AND
EXCHANGE COMMISSION <BR>WASHINGTON, D.C. 20549 <BR>Form 10-Q </FONT></H1>

<!-- MARKER FORMAT-SHEET="Center Rule" FSL="Default" -->
     <P ALIGN=CENTER>_________________ </P>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(Mark  One) </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><IMG SRC="ballotx.jpg" HEIGHT="15" WIDTH="15">  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange           Act of 1934</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>For  the
quarterly period ending September 30, 2006</B></FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" size=2>OR </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><IMG SRC="ballot.jpg" HEIGHT="15" WIDTH="15">  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange           Act of 1934</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>For  the
transition period from__________ to__________</B></FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Commission File Number
1-5354 <BR></B> </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Jaclyn, Inc.</B> </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><I>(Exact name of registrant as specified in its charter)</I> </FONT> </P>


<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Delaware</B></FONT></TD>
     <TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>22-1432053</B></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(State or other jurisdiction of incorporation or organization)</I></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(IRS Employer Identification Number)</I></FONT></TD></TR>
<TR>
     <TD ALIGN="CENTER"></TD>
     <TD ALIGN="CENTER"></TD></TR>
</TABLE>
<BR>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>635 59th Street, West New York, New Jersey</B></FONT></TD>
     <TD WIDTH=50% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>07093</B></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(Address of principal executive offices)</I></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(Zip code)</I></FONT></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(201) 868-9400</B><BR><I>(Registrant&#146;s
telephone number, including area code)</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Center Italic" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>NOT APPLICABLE</B><BR><I>(Former name, former
address and former fiscal year, if changed since last report)</I>   </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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, and (2) has been subject
to such filing requirements for the past 90 days. Yes &nbsp;&nbsp;&nbsp;<IMG SRC="ballotx.jpg" HEIGHT="15" WIDTH="15">
No &nbsp;&nbsp;&nbsp;<IMG SRC="ballot.jpg" HEIGHT="15" WIDTH="15">  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of &#147;accelerated filer and large accelerated filer&#148; in Rule 12b-2
of the Exchange Act. (Check one): </FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=33% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Large Accelerated Filer&nbsp;&nbsp;<IMG SRC="ballot.jpg" HEIGHT="15" WIDTH="15">  </FONT></TD>
     <TD WIDTH=33% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accelerated Filer No&nbsp;&nbsp;<IMG SRC="ballot.jpg" HEIGHT="15" WIDTH="15">  </FONT></TD>
     <TD WIDTH=34% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-Accelerated Filer&nbsp;&nbsp;<IMG SRC="ballotx.jpg" HEIGHT="15" WIDTH="15">  </FONT></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes &nbsp;&nbsp;&nbsp;<IMG SRC="ballot.jpg" HEIGHT="15" WIDTH="15">
No &nbsp;&nbsp;&nbsp;<IMG SRC="ballotx.jpg" HEIGHT="15" WIDTH="15">  </FONT></P>


<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>APPLICABLE ONLY TO
CORPORATE ISSUERS: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate the number of shares
outstanding of each of the issuer&#146;s classes of common stock as of the latest
practicable date: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Title of Class</U></FONT></TD>
     <TD WIDTH=50% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Shares Outstanding on November 1, 2006</U></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Common Stock, $1.00 par value</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,476,679</FONT></TD></TR>
</TABLE>


<!-- MARKER PAGE="sheet: 22; page: 22" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>




<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>JACLYN, INC. AND SUBSIDIARIES<BR>
CONDENSED CONSOLIDATED BALANCE SHEETS <BR>
(In Thousands) </FONT></H1>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September 30,<BR>
2006<BR>
(Unaudited)</FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>June 30,<BR>
2006<BR>
(See below)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=62% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ASSETS</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CURRENT ASSETS:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       773</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       932</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounts receivable, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,385</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,071</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventory</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,931</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,180</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Prepaid expenses and other current assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,953</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,862</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL CURRENT ASSETS</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41,042</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37,045</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROPERTY PLANT AND EQUIPMENT, NET</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,900</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,030</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GOODWILL</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,338</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,338</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OTHER ASSETS</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>428</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>289</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL ASSETS</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    48,708</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    41,702</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LIABILITIES AND STOCKHOLDERS' EQUITY</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CURRENT LIABILITIES:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notes payable &#150; bank</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    17,005</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    10,185</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounts payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,839</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,547</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,339</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,360</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL CURRENT LIABILITIES</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,183</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,092</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MORTGAGE PAYABLE</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,520</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,563</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MINORITY INTEREST</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>495</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>COMMITMENTS AND CONTINGENCIES</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>STOCKHOLDERS' EQUITY:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Common stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,369</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,369</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Additional paid-in capital</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,563</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,563</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Retained earnings</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,758</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,295</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,690</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,227</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Less:  Common shares in treasury at cost</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,180</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,180</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL STOCKHOLDERS' EQUITY</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,510</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,047</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    48,708</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    41,702</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The June 30, 2006 Balance Sheet is
derived from audited financial statements. See notes to condensed consolidated financial
statements.</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 </FONT></P>


<!-- MARKER PAGE="; page: 74" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>JACLYN, INC. AND SUBSIDIARIES <BR>
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS<BR>
(Unaudited)<BR>
(In Thousands, Except Share Amounts) </FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>

<TR VALIGN=Bottom>
     <TD COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN="5" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Three Months Ended<BR>
September 30,</FONT></TD><TD></TD></TR>
<TR>
     <TD><BR></TD></TR>

<TR VALIGN=Bottom>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>2006</U> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>2005</U> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="68%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    40,624</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    29,248</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of goods sold</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32,121</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,627</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,503</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,621</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shipping, selling and administrative expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,390</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,209</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest expense</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>347</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>140</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,737</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,349</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Earnings before provision for income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>766</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>272</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Provision for income taxes</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>303</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>126</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net earnings</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       463</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       146</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net earnings per common share - basic</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       .19</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       .06</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of shares outstanding - basic</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,483,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,525,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net earnings per common share - diluted</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       .18</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       .06</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of shares outstanding - diluted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,529,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,609,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See notes to condensed consolidated
financial statements.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></P>


<!-- MARKER PAGE="; page: 75" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>JACLYN, INC. AND SUBSIDIARIES<BR>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
(Unaudited)<BR>
(In Thousands) </FONT></H1>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN="5" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Three Months Ended<BR>
September 30,</FONT></TD><TD ALIGN="CENTER"></td>
</TR>

<TR>
     <TD ALIGN="CENTER"><BR></TD></TR>

<TR VALIGN=Bottom>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>2006</U> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>2005</U> </FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=75% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cash Flows From Operating Activities:</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net Earnings</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       463</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       146</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net earnings to net cash used in</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;operating activities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>99</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>111</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Changes in assets and liabilities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in accounts receivable, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,314</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(304</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in inventory</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,751</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5,658</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase) decrease in prepaid expenses and other assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(244</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>141</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Decrease) increase in accounts payable and other current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(732</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,188</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=5><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,479</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,376</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash Flows From Investing Activities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of property and equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(55</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(42</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment in leased building</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,400</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,455</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(42</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash Flows From Financing Activities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase in loans payable - bank</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,820</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,340</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment of long-term debt</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(45</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(36</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repurchase of common stock</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(719</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=5><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Net cash provided by financing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,775</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,585</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Net decrease in Cash and Cash Equivalents</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(159</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(833</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Cash and Cash Equivalents, beginning of period</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>932</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>893</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Cash and Cash Equivalents, end of period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       773</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        60</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Supplemental Information:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest paid</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       266</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       112</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxes paid</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       411</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        17</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minority Interest</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       500</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   -</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4 </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>See notes to condensed
consolidated financial statements.</I> </FONT></P>


<!-- MARKER PAGE="; page: 76" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>JACLYN, INC. AND SUBSIDIARIES<BR><BR>
NOTES TO CONDENSED CONSOLIDATED <BR>
UNAUDITED FINANCIAL STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Basis of Presentation</U>: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
accompanying unaudited condensed consolidated balance sheet as of September 30, 2006, the
condensed consolidated statements of earnings and cash flows for the three month periods
ended September 30, 2006 and 2005, respectively, have been prepared in accordance with
accounting principles generally accepted in the United States of America for interim
financial information. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation
have been included. These condensed consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included in the
Company&#146;s 2006 Annual Report to Stockholders for the year ended June 30, 2006. The
results of operations for the period ended September 30, 2006 are not necessarily
indicative of operating results for the full fiscal year. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Consolidation
of Variable Interest Entity</I></B>&nbsp;&#150;&nbsp; On August 22, 2006, the Company entered into
a lease agreement for a new corporate office building, and plans to relocate the
Company&#146;s executive offices from West New York, NJ to Maywood, New Jersey in January
2007. The lease has a 10-year term, and grants to the Company an option to purchase the
building at any time during the term of the lease at a purchase price not to exceed
$3,075,000, plus increases based on a multiple of the consumer price index. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
lessor, 195 Spring Valley Associates, LLC, (the &#147;Lessor&#148;) purchased the
corporate office building at a closing, which also took place in August 2006. The Company
provided the Lessor with $2,200,000 in mortgage financing, secured by a first priority
mortgage in favor of the Company on the land, office building, and other customary rights
of the mortgagor. Further the Company placed a deposit with the Lessor in the amount of
$200,000 in connection with the option to purchase the property. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
accounting purposes, the Company determined that the Lessor is a variable interest entity
and the Company is its primary beneficiary as defined by FASB Interpretation No. 46(R),
&#147;Consolidation of Variable Interest Entities&#148; (&#147;FIN 46(R)&#148;).
Accordingly, during the quarter ended September 30, 2006, the financial statements of the
Lessor were consolidated with those of the Company. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
effect of the Company&#146;s consolidation of the Lessor is that the lease transaction is
treated as a financing, and the lease obligation, mortgage notes and deposits have been
eliminated in consolidation. The cost of the building, approximately $2,900,000, and the
capital of the equity owners of the Lessor (minority interest), approximately $500,000,
are reflected in </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5 </FONT></P>


<!-- MARKER PAGE="; page: 77" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the September 30, 2006 Condensed
Consolidated Balance Sheet. There was no significant impact to net earnings. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Stock-Based Compensation</U>: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company recognizes stock-based compensation in accordance with Statement of Financial
Accounting Standards No.&nbsp;123(R), Share-Based Payment, a revision of
SFAS&nbsp;No.&nbsp;123, Accounting for Stock-Based Compensation
(&#147;SFAS&nbsp;No.&nbsp;123(R)&#148;), as interpreted by SEC Staff Accounting
Bulletin&nbsp;No.&nbsp;107. All stock options granted by the Company fully vest upon
grant. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company maintains two stockholder-approved Stock Option Plans for key employees and
consultants of the Company, and has terminated, effective November 29, 2005, the 1996
Non-Employee Director Stock Option Plan (the &#147;1996 Plan&#148;). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s 2000 Stock Option Plan, as amended (the &#147;2000 Plan&#148;), provided
for the grant of options to purchase up to 300,000 shares of Common Stock. It was amended
during fiscal 2004 to increase the number of shares of Common Stock for which options may
be granted by an additional 250,000 shares, to a total of 550,000 shares. The 1990 Stock
Option Plan of the Company, as amended (the &#147;1990 Plan&#148;), provided for the grant
of an aggregate of 500,000 shares of Common Stock. Options may no longer be granted under
the 1990 Plan, although at September 30, 2006 the 1990 Plan remains in effect for options
outstanding. While no further options are being granted under the 1996 Plan, it remains in
effect for options outstanding. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
those option plans under which we may grant qualified stock options to purchase shares of
our common stock to executives, consultants, directors, or other key employees, as of
September 30, 2006, 205,000 shares were available for future grants. Stock options may not
be granted at less than the fair market value at the date of grant or 110% of the fair
market value for individuals who own or are deemed to own more than 10% of the combined
voting power of all classes of stock of the company. Stock options generally vest
immediately and expire after ten years. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company did not grant any stock options during the first quarter of fiscal 2007 or fiscal
2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Earnings Per Share</U>: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s calculation of Basic and Diluted Net Earnings Per Common Share follows (in
thousands, except share amounts): </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6 </FONT></P>


<!-- MARKER PAGE="; page: 78" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN="5" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Three Months Ended<BR>
September 30,</FONT></TD><TD></TD>
</TR>
<TR VALIGN=Bottom>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>2006</U> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>2005</U> </FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD WIDTH=62% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic Net Earnings Per Common Share:</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Earnings</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       463</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       146</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic Weighted Average Shares Outstanding</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,483,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,525,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic Net Earnings Per Common Share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       .19</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       .06</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
     <TD><BR></TD></TR>


<TR VALIGN=Bottom>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN="5" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Three Months Ended<BR>
September 30,</FONT></TD><TD></TD>
</TR>


<TR VALIGN=Bottom>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>2006</U> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>2005</U> </FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted Net Earnings Per Common Share:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Earnings</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       463</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       146</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic Weighted Average Shares Outstanding</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,483,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,525,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Add: Dilutive Options</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>84,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted Weighted Average Shares Outstanding</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,529,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,609,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted Net Earnings Per Common Share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       .18</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       .06</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Options
to purchase 57,500 shares of common stock were outstanding as of September 30, 2006, but
were not included in the computation of diluted EPS for the quarter then ended because
the options were anti-dilutive. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Inventories</U>: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories
consist of the following components (in thousands): </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN="2" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September 30, 2006</FONT></TD><TD></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>June 30, 2006</FONT></TD></TR>

<TR>
     <TD><BR></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="48%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Raw materials</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="7%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="16%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   528</FONT></TD>
        <TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="16%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   692</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Work in process</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Finished Goods</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,403</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,439</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 9,931</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,180</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 </FONT></P>




<!-- MARKER PAGE="; page: 79" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5. &nbsp;&nbsp;&nbsp;&nbsp;<U>Repurchase
of Common Stock</U>: </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company previously  announced that the Board of Directors  authorized the repurchase by
the Company of up to 350,000  shares of the  Company's  Common Stock.  On September 27,
2006 the Board of Directors  authorized an increase in the Company's Common Stock
repurchase  program of an additional  125,000 shares.  Purchases may be made from time to
time in the open market and through privately negotiated  transactions,  subject to
general market and other  conditions.  The Company  generally  finances these
 repurchases  from its own funds from operations  and/or from its bank credit  facility.
 For the three-month  period ended September 30, 2006, the Company did not purchase any
shares of its Common Stock in connection  with this repurchase  program.  As of September
30, 2006, the Company has  purchased a total of 302,621  shares of its Common Stock at a
cost of  approximately  $1,462,000 in connection with the repurchase program. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6. &nbsp;&nbsp;&nbsp;&nbsp;<U>Financing
Agreements</U>: </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September  2006, the Company amended its existing bank credit  facility.  The amended
 facility,  which expires  December 1, 2008,  provides  for  short-term  loans and the
 issuance of letters of credit in an aggregate amount not to exceed  $50,000,000.  Based
on a  borrowing  formula,  the Company  may borrow up to  $30,000,000  in short-term
 loans  and up to  $50,000,000  including  letters  of  credit.  The  borrowing  formula
 allows  for an additional  amount of borrowing  during the Company's  peak  borrowing
 season from June to October.  Substantially all of the  Company's  assets are  pledged
to the bank as  collateral  (except  for the West  New York,  New Jersey facility,  which
has been  separately  mortgaged  as noted  below).  The line of credit  requires  that
the Company maintain a minimum  tangible net worth,  as defined,  and imposes  certain
debt to equity ratio  requirements.  The Company was in compliance  with all  applicable
 financial  covenants as of September 30, 2006. As of September 30, 2006,  borrowing on
the short-term line of credit was $17,005,000,  and at that date the Company had
$12,995,000 of additional  availability  (based on the borrowing  formula)  under the
credit  facility.  At September 30, 2006 the Company was  contingently  obligated  on
open  letters of credit  with an  aggregate  face amount of  approximately $15,470,000.
 Borrowing  during the quarter was at the bank's  prime rate or below,  at the option of
the  Company. The bank's prime rate at September 30, 2006 was 8.25%. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August 2002,  the Company  consummated a mortgage loan with a bank lender in the amount
of  $3,250,000. The  financing is secured by a mortgage of the  Company's  West New York,
 New Jersey  headquarters  and  warehouse facility.  The loan bears interest at a fixed
rate of 7% per annum.  The financing has a fifteen-year  term, but is callable by the
bank lender at any time after  September  1, 2007 and may be prepaid by the  Company,
 along with a prepayment  fee,  from time to time during the term of the  financing.  The
balance of the mortgage as of September 30, 2006 is approximately $2,688,000. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7. &nbsp;&nbsp;&nbsp;&nbsp;<U>Contractual
Obligations and Commercial Commitments</U>: </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company leases office  facilities under  non-cancelable  operating leases that expire in
various years through the year ended June 30, 2011. </FONT></P>



<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8 </FONT></P>


<!-- MARKER PAGE="; page: 80" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>




<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future
 minimum  payments under  non-cancelable  operating  leases with initial or remaining
 terms of one year or more are as follows: </FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="60%" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended<BR>
June 30,</FONT></TH><TH></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office and Showroom<BR>
Facilities</FONT></TH></TR>
<TR><TD><BR></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="60%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT></TD>
     <TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 749,000</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>932,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2009</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>680,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2010</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>196,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2011</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has entered into licensing arrangements with several companies. The Company is
obligated, in certain instances, to pay minimum royalties over the term of the licensing
agreements which expire in various years through 2008. Aggregate minimum commitments by
fiscal year are as follows: </FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=30%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended<BR> June 30,</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum <BR>Commitments</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TD><BR></TD></TR>

<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT></TD>
     <TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$113,000&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>119,000</FONT></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, the Company and its subsidiaries may become a party to legal proceedings,
which arise in the normal course of business. At September 30, 2006, there were no
material pending legal proceedings to which the Company was a party. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has not provided any financial guarantees as of September 30, 2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9 </FONT></P>


<!-- MARKER PAGE="; page: 81" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Retirement Plans</U>: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pension
expenses includes the following components: </FONT></P>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="90%">
<TR VALIGN=Bottom>
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fiscal Quarter Ended September 30,</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></TD>
        <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Components of Net Periodic Benefit Cost:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Service cost                        $</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  130,747</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Interest cost</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>85,800</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>81,815</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Expected return on assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(83,135</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(79,203</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Amortization of prior service cost</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Amortization of actuarial loss</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41,835</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61,629</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Net periodic cost</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   44,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  195,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company expects to contribute approximately $300,000 to its pension plan in fiscal 2007.
As of September 30, 2006, no contribution has been made. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Recently Issued
Accounting Standards: </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September&nbsp;2006, the SEC issued Staff Accounting Bulletin (&#147;SAB&#148;)
No.&nbsp;108, &#147;Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements.&#148; SAB No. 108 requires that
registrants quantify errors using both a balance sheet and income statement approach and
evaluate whether either approach results in a misstated amount that, when all relevant
quantitative and qualitative factors are considered, is material. SAB No. 108 is effective
for the Company&#146;s fourth quarter of 2007. Management is currently evaluating the
impact of adopting SAB No. 108, if any, on the Company&#146;s financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September 2006, the FASB issued SFAS No. 157, &#147;Fair Value Measurements&#148;, which
defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The statement is effective for fiscal years
beginning after November 15, 2007. The Company does not expect the adoption of SFAS No.
158 to have a material impact on the consolidated financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September 2006, the FASB issued SFAS No. 158, &#147;Employer&#146;s Accounting for Defined
Benefit Pension and Other Postretirement Plans &#150; an amendment of FASB Statements No.
87, 88, 106 and 132(R).&#148; SFAS No.158 requires an employer to recognize the
over-funded or under-funded status of defined benefit and retiree medical plans as an
asset or liability in its statement of financial position and to recognize through
comprehensive income changes in that funded status in the year in which they occur. Based
on a preliminary evaluation, the Company </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10 </FONT></P>


<!-- MARKER PAGE="; page: 82" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>




<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>does not expect the adoption of SFAS
No. 158 to have a material impact on the consolidated financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
July 2006, FASB issued Interpretation No. 48 (&#147;FIN 48&#148;), &#147;Accounting for
Uncertainty in Income Taxes,&#148; which clarifies the accounting for uncertainty in
income taxes recognized in the financial statements in accordance with FASB No. 109,
<I>Accounting for Income Taxes. </I>FIN 48 provides guidance on the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN 48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosures and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The Company is currently evaluating
the impact of this standard on the consolidated financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11 </FONT></P>


<!-- MARKER PAGE="; page: 83" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item&nbsp; 2.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF<BR>
<U>FINANCIAL CONDITION AND RESULTS OF OPERATIONS</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Overview </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company and its subsidiaries are engaged in the design, manufacture, distribution and sale
of women&#146;s and children&#146;s apparel, and fabric handbags, sport bags, backpacks,
cosmetic bags, and related products. Our apparel lines include women&#146;s loungewear,
sleepwear, dresses and sportswear, and lingerie, as well as infants&#146; and
children&#146;s clothing. Our products are, for the most part, made to order, marketed and
sold to a range of retailers; primarily national mass merchandisers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
business is subject to substantial seasonal variations. Historically, we have realized a
significant portion of net sales and net earnings for the year during the first and second
fiscal quarters during which time our customers generally increase inventory levels in
anticipation of both back-to-school and holiday sales. We expect that trend to continue
during fiscal 2007. The Company believes this seasonality is consistent with the general
pattern associated with sales to the retail industry. Consequently, the results for any
one quarter in a fiscal year are not necessarily indicative of results for the whole year.
The Company&#146;s quarterly results of operations may also fluctuate significantly as a
result of a number of other factors, including the timing of shipments to customers and
economic conditions. Accordingly, comparisons between quarters may not necessarily be
meaningful, and the results for any one quarter are not necessarily indicative of future
quarterly results or of full-year performance. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Critical Accounting
Policies and Estimates </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires the appropriate application of certain accounting
policies, many of which require us to make estimates and assumptions about future events
and their impact on amounts reported in our financial statements and related notes. We
believe the application of our accounting policies, and the estimates inherently required
therein, are reasonable. These accounting policies and estimates are periodically
evaluated for continued reasonableness, and adjustments are made when facts and
circumstances dictate a change. However, since future events and their impact cannot be
determined with certainty, actual results may differ from our estimates, and such
differences could be material to the consolidated financial statements. Historically, we
have found our application of accounting policies to be appropriate, and actual results
have not differed materially from those determined using necessary estimates. A summary of
our significant accounting policies and a description of accounting policies that we
believe are most critical may be found in the MD&amp;A included in our Annual Report on
Form 10-K for the year ended June 30, 2006 filed with the Securities and Exchange
Commission on September 28, 2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12 </FONT></P>


<!-- MARKER PAGE="; page: 84" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liquidity and Capital
Resources </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s cash and cash equivalents decreased $159,000 during the three-month period
ended September 30, 2006 to $773,000 from $932,000 at June 30, 2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash used in operating activities totaled $4,479,000, primarily from an increase in
inventory levels totaling $2,751,000 to meet anticipated second quarter shipping
requirements, an increase in accounts receivable totaling $1,314,000 resulting from higher
levels of shipping in this year&#146;s first quarter compared to the last fiscal quarter
of 2006, and a net decrease in accounts payable and other current liabilities of $732,000,
the result of commissions and incentive payments in the first quarter of fiscal 2007, not
fully offset by an increase accounts payable and other payroll related accruals. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Funds
provided by financing activities of $6,775,000 were the result of $6,820,000 in borrowing
under the Company&#146;s bank line of credit used to finance the higher level of seasonal
business activity offset somewhat by the payment of long-term debt totaling $45,000. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash used in investing activities of $2,455,000 reflects the $2,200,000 mortgage
receivable and $200,000 option deposit given with respect to the new executive office
building, and other unrelated property and equipment purchases totaled $55,000. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September 2006, the Company amended its existing bank credit facility. The amended
facility, which expires December 1, 2008, provides for short-term loans and the issuance
of letters of credit in an aggregate amount not to exceed $50,000,000. Based on a
borrowing formula, the Company may borrow up to $30,000,000 in short-term loans and up to
$50,000,000 including letters of credit. The borrowing formula allows for an additional
amount of borrowing during the Company&#146;s peak borrowing season from June to October.
Substantially all of the Company&#146;s assets are pledged to the bank as collateral
(except for the West New&nbsp;York, New&nbsp;Jersey facility, which has been separately
mortgaged as noted below). The line of credit requires that the Company maintain a minimum
tangible net worth, as defined, and imposes certain debt to equity ratio requirements. The
Company was in compliance with all applicable financial covenants as of September 30,
2006. As of September 30, 2006, borrowing on the short-term line of credit was
$17,005,000, and at that date the Company had $12,995,000 of additional availability
(based on the borrowing formula) under the credit facility. At September 30, 2006 the
Company was contingently obligated on open letters of credit with an aggregate face amount
of approximately $15,470,000. Borrowing during the quarter was at the bank&#146;s prime
rate or below, at the option of the Company. The bank&#146;s prime rate at September 30,
2006 was 8.25%. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August 2002, the Company consummated a mortgage loan with a bank lender in the amount of
$3,250,000. The financing is secured by a mortgage of the Company&#146;s West New York,
New Jersey headquarters and warehouse facility. The loan bears interest at a fixed rate of
7% per annum. The financing has a fifteen-year term, but is callable by the bank lender at
any time after September 1, 2007 and may be prepaid by the Company, along with a
prepayment fee, from time to time during the term of the financing. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13 </FONT></P>


<!-- MARKER PAGE="; page: 85" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>





<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company believes that funds provided by operations, existing working capital, and the
Company&#146;s bank line of credit and mortgage financing will be sufficient to meet
anticipated working capital needs. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
were no material commitments for capital expenditures at September 30, 2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company previously announced that the Board of Directors authorized the repurchase by the
Company of up to 350,000 shares of the Company&#146;s Common Stock. On September 27, 2006
the Board of Directors authorized an increase in the Company&#146;s Common Stock
repurchase program of an additional 125,000 shares. Purchases may be made from time to
time in the open market and through privately negotiated transactions, subject to general
market and other conditions. The Company intends to finance these repurchases from its own
funds from operations and/or from its bank credit facility. For the three-month period
ended September 30, 2006, the Company did not purchase any shares of its Common Stock
under this repurchase program. As of September 30, 2006, the Company purchased a total of
302,621 shares of its Common Stock at a cost of approximately $1,462,000 in connection
with the repurchase program. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Contractual Obligations
and Commercial Commitments </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
facilitate an understanding of our contractual obligations and commercial commitments, the
following data is provided as of September 30, 2006: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=15><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* * * * Payments Due by Period * * * *</FONT></TH></TR>
<TR>
     <TD><BR></TD></TR>
<TR VALIGN=Bottom>
     <TD COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Contractual Obligations</B> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Total</B> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Less than 1 Year</B> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1-3 Years</B> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3-5 Years</B> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>More than<BR>
5 Years</B> </FONT></Td></TR>
<TR>
     <TD><BR></TD></TR>

<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="23%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notes Payable</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 17,005,000</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 17,005,000</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> -</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> -</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> -</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD><BR></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mortgage Payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,688,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>167,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>323,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>366,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,832,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD><BR></TD></TR>

<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Royalties</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>232,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>113,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>119,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD><BR></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating Leases</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,599,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>749,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,612,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>238,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN="2"></TD><td></td>
     <TD COLSPAN="14" ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=1></TD><td></td>
</TR>

<TR VALIGN=Bottom BGCOLOR="#CCEEFF">
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Contractual</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Obligations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>22,524,000</U> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>18,034,000</U> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>2,054,000</U> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>604,000</U> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>1,832,000</U> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN="2"></TD><td></td>
     <TD COLSPAN="14" ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=1></TD><td></td>
</TR>
</TABLE>







<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14 </FONT></P>


<!-- MARKER PAGE="; page: 86" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TD COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Other Commercial Commitments</B> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Total<BR>
Commitments</B> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Less than<BR>
1 Year</B> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1-3<BR>
Years</B> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3-5 Years</B> </FONT></TD>
     <TD COLSPAN="3" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>More than<BR>
5 Years</B> </FONT></TD></TR>
<TR>
     <TD><BR></TD></TR>

<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="28%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letters of Credit</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>15,470,000</U> </FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>15,470,000</U> </FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD WIDTH="3%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD WIDTH="3%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD WIDTH="2%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Commercial Commitments</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>15,470,000</U> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>15,470,000</U> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-</FONT></TD>
        <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Off-Balance Sheet
Arrangements </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as described below, the Company has not created, and is not a party to, any
special-purpose or off-balance sheet entities for the purpose of raising capital,
incurring debt or operating the Company&#146;s business. The Company does not have any
arrangements or relationships with entities that are not consolidated into the financial
statements that are reasonably likely to materially affect the Company&#146;s liquidity
or the availability of capital resources.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
August 22, 2006, the Company entered into a lease agreement for a new corporate office
building, and plans to relocate the Company&#146;s executive offices from West New York,
NJ to Maywood, New Jersey in January 2007.&nbsp; The lease has a 10-year term, and grants
to the Company an option to purchase the building at any time during the term of the lease
at a purchase price not to exceed $3,075,000, plus increases based on a multiple of the
consumer price index.&nbsp; The lessor, 195 Spring Valley Associates, LLC (the
&#147;Lessor&#148;), purchased the corporate office building at a closing, which also took
place in August 2006. The Company provided the Lessor with $2,200,000 in mortgage
financing, secured by a first priority mortgage in favor of the Company on the land,
office building, and other customary rights of the mortgagor.&nbsp; Further the Company
placed a deposit with the Lessor in the amount of $200,000 in connection with the option
to purchase the property.&nbsp; For accounting purposes, the Company determined that the
Lessor is a variable interest entity and the Company is its primary beneficiary as defined
by FASB Interpretation No. 46(R), &#147;Consolidation of Variable Interest Entities&#148;
(&#147;FIN 46(R)&#148;).&nbsp; Accordingly, during the quarter ended September 30, 2006,
the financial statements of the Lessor were consolidated with those of the Company.&nbsp; </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RESULTS OF OPERATIONS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
sales were $40,624,000 during the three-month period ended September 30, 2006, compared to
$29,248,000 in the prior fiscal three-month comparable period. Sales by category were as
follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
sales for the Apparel category were $23,773,000, or $5,726,000 higher than the prior
fiscal year. This 31.7% increase was primarily due to a 79.3% increase in our
children&#146;s apparel division due to expanded programs with one customer, from recent
strong retail performance, as well as additional business from our &#147;Messages from the
Heart&#148; license. The sales increase in our children&#146;s apparel division was
offset, in part, by a 14.9% reduction in net sales in the women&#146;s sleepwear division
due to the elimination of several private label programs from one of its customers, and a
63% reduction in net sales in our catalogue division, which was being phased out during
the first quarter of fiscal 2007 since it was not providing a meaningful return and was no
longer a material part of our overall business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
sales totaling $16,851,000 for the Handbags category in the first quarter of fiscal 2007
represented a 50.4% increase compared to $11,201,000 in net sales for the same quarter of
the prior fiscal year. The sales increase primarily reflected higher sales in the premium
incentive business due to expanded programs for one of its significant customers. In
addition, net sales were 93.1% higher in the handbag business for the first quarter versus
last year&#146;s first quarter due to additional floor space given to our product line by
a significant customer which resulted from a good prior season sell-through, in addition
to a promotional item sold to that customer. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
margins were 20.9% in the first quarter of fiscal 2007 compared to 22.6% in the first
quarter of 2006. Gross margins by category were as follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
margin for the Apparel category decreased slightly to 26.2% in the first three months of
fiscal 2007 from 26.5% in the first quarter of fiscal 2006. The .3% decrease was primarily
the result of lower margins in the children&#146;s apparel business due to an increase in </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15 </FONT></P>


<!-- MARKER PAGE="; page: 87" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>




<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>direct shipments which have lower
associated margins, not fully offset by a small improvement in the women&#146;s sleepwear
division margins attributable to product mix, as well a lower margins in the catalogue
division the result of phasing out that business, as mentioned above. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
margin for the Handbags category in the first quarter of fiscal 2007 decreased to 13.6 %
from 16.4% in the first quarter of fiscal 2006. This decrease was mainly due to lower
premium incentive business margins attributable to market place competition on several
programs, causing this business to reduce its gross margins to an acceptable level without
losing the customer. Lower handbag margins were the result of product mix as well as lower
margins on a promotion item sold to a significant customer. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a percentage of net sales, shipping, selling and administrative expenses decreased to
18.2% from 21.2%. However, shipping, selling and administrative expenses increased by
$1,181,000 in the first quarter of fiscal 2007 compared to the prior year comparable
period, mainly due to higher shipping and warehousing expense totaling $208,000 relating
to higher sales volume, higher selling and sales commission costs totaling $404,000, and
higher royalty expense totaling $198,000 related to an increase in licensed product sales
in this fiscal quarter compared to the same fiscal quarter last year, as well as certain
minimum royalty commitments which were not met and had to be expensed. In addition, the
Company experienced higher product development costs of $243,000 for both the
children&#146;s apparel and premium business relating to potential additional future
business and a $128,000 increase in general and administrative costs. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense in the first quarter of fiscal 2007 increased to $347,000, or $207,000 above the
last year&#146;s first quarter of $140,000, primarily the result of a higher level of
average borrowing to finance higher sales volume and higher interest rates. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
increase of $494,000 in earnings before income taxes for the three month period ended
September 30, 2006 to $766,000 from earnings before income taxes of $272,000 in the prior
fiscal comparable period was primarily due to much higher net sales and gross profit
dollars, not fully offset by higher shipping, selling and administrative expenses, and
interest expense, as discussed above. For the three-month period ended September 30, 2006,
the Company had an effective tax rate of 39.6 % compared to 46.3 % in the first three
month period of the prior year, primarily the result of a higher state and local tax rate
during the first quarter of fiscal 2006. Net earnings increased $317,000 to $463,000 for
the three-month period ended September 30, 2006 from $146,000 in the prior comparable
period. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RECENTLY ISSUED
ACCOUNTING STANDARDS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September&nbsp;2006, the SEC issued Staff Accounting Bulletin (&#147;SAB&#148;)
No.&nbsp;108, &#147;Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements.&#148; SAB No. 108 requires that
registrants quantify errors using both a balance sheet and income statement approach and
evaluate whether either approach results in a misstated amount that, when all relevant
quantitative and qualitative factors are considered, is material. SAB No. 108 is effective
for the Company&#146;s fourth quarter of 2007. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16 </FONT></P>


<!-- MARKER PAGE="; page: 88" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management is currently evaluating
the impact of adopting SAB No. 108, if any, on the Company&#146;s financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September
2006, the FASB issued SFAS No. 157, &#147;Fair Value Measurements&#148;, which defines
fair value, establishes a framework for measuring fair value and expands disclosures about
fair value measurements. The statement is effective for fiscal years beginning after
November 15, 2007. The Company does not expect the adoption of SFAS No. 158 to have a
material impact on the consolidated financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September 2006, the FASB issued SFAS No. 158, &#147;Employer&#146;s Accounting for Defined
Benefit Pension and Other Postretirement Plans &#150; an amendment of FASB Statements No.
87, 88, 106 and 132(R).&#148; SFAS No.158 requires an employer to recognize the
over-funded or under-funded status of defined benefit and retiree medical plans as an
asset or liability in its statement of financial position and to recognize through
comprehensive income changes in that funded status in the year in which they occur. Based
on a preliminary evaluation, the Company does not expect the adoption of SFAS No. 158 to
have a material impact on the consolidated financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July 13, 2006, FASB issued Interpretation No. 48 (&#147;FIN 48&#148;), &#147;Accounting
for Uncertainty in Income Taxes,&#148; which clarifies the accounting for uncertainty in
income taxes recognized in the financial statements in accordance with FASB No. 109,
<I>Accounting for Income Taxes. </I>FIN 48 provides guidance on the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN 48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosures and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006. We are currently evaluating the impact
of this standard on our consolidated financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SEASONALITY </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s business is subject to substantial seasonal variations. In that regard, our
net sales and net earnings generally have been higher during the period from June to
November (which includes our first fiscal quarter and a portion of our second and fourth
fiscal quarters) coinciding with sales to our customers for back-to-school and holiday
shopping, while net sales and net earnings for the other months of our fiscal year are
typically lower due, in part, to the traditional slowdown by our customers immediately
following the winter holiday season. Accordingly, any significant decrease in
back-to-school and winter holiday shopping could have a material adverse effect on our
financial condition and results of operations. The Company&#146;s quarterly results of
operations may also fluctuate significantly as a result of a variety of other factors,
including, among other things, the timing of shipments to customers and economic
conditions. The Company believes this is the general pattern associated with its sales to
the retail industry and expects this pattern will continue in the future. Consequently,
comparisons between quarters are not necessarily meaningful and the results for any
quarter are not necessarily indicative of future results. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17 </FONT></P>


<!-- MARKER PAGE="; page: 89" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORWARD-LOOKING
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Form 10-Q may contain forward-looking statements that are being made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
Company&#146;s actual performance and results may vary as a result of a number of risks,
uncertainties and other factors, both foreseen and unforeseen, including general economic
and business conditions, competition in the accessories and apparel markets, continuing
favorable sales patterns, pricing and consumer buying trends. Additional uncertainty
exists for the potential negative impact that Severe Acute Respiratory Syndrome (SARS) may
have on our business, as it relates to our production in the Far East and other countries
in which we operate. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18 </FONT></P>


<!-- MARKER PAGE="; page: 90" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item&nbsp; 3.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
Quantitative and Qualitative Disclosures About Market Risk.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
have been no material changes in the information set forth under the caption &#147;Item
7A-Quantitative and Qualitative Disclosures About Market Risk&#148; in the Company&#146;s
Annual Report on Form 10-K for the fiscal year ended June 30, 2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item&nbsp; 4.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
Controls and Procedures.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the end of the period covered by this report, the Company carried out an evaluation, with
the participation of management of the Company, including the Company&#146;s Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Company&#146;s disclosure controls and procedures. Based on the
Company&#146;s evaluation, the Company&#146;s Chief Executive Officer and Chief Financial
Officer concluded that the Company&#146;s disclosure controls and procedures were
effective. There was no change in the Company&#146;s internal control over financial
reporting during the quarter ended September 30, 2006 that has materially affected, or is
reasonably likely to materially affect, the Company&#146;s internal control over financial
reporting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>PART II. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>OTHER INFORMATION </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item&nbsp; 6.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Exhibits.</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit No.</B></U> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT> </TD>
<TD WIDTH=95%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Description</B></U> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31(a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Rule
13a-14(a) Certification of Robert Chestnov, President and Chief Executive
               Officer of the Company.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31(b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Rule
13a-14(a) Certification of Anthony Christon, Principal Financial Officer of
               the Company.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification
 Pursuant to 18 U.S.C.  Section 1850,  as Adopted  Pursuant to Section 906
                           of the Sarbanes-Oxley Act of 2002. </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19 </FONT></P>


<!-- MARKER PAGE="; page: 91" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>SIGNATURES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>JACLYN,
INC. </U> <BR><I>(Registrant)</I></FONT></TD>
</TR>
</TABLE>
<BR><BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 14, 2006 </FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>/s/ Allan Ginsburg</U><BR>Allan Ginsburg<BR>Chairman of the Board  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 14, 2006 </FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>/s/ Anthony Christon</U><BR>Anthony Christon<BR>Vice President<BR>
Chief Financial Officer  </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20 </FONT></P>


<!-- MARKER PAGE="; page: 92" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>EXHIBIT INDEX</U> </FONT> </H1>



<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit No.</B></U> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT> </TD>
<TD WIDTH=95%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Description</B></U> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31(a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="ex31a-09302006.htm">Rule
13a-14(a) Certification of Robert Chestnov, President and Chief Executive
               Officer of the Company. </A> </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31(b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="ex31b-09302006.htm">Rule
13a-14(a) Certification of Anthony Christon, Principal Financial Officer of
               the Company.  </A></FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A HREF="ex32-09302006.htm">Certification
 Pursuant to 18 U.S.C.  Section 1850,  as Adopted  Pursuant to Section 906
                           of the Sarbanes-Oxley Act of 2002. </A></FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21 </FONT></P>









</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>2
<FILENAME>ballot.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 ballot.jpg
M_]C_X``02D9)1@`!`0$!+`$L``#_VP!#``@&!@<&!0@'!P<)"0@*#!0-#`L+
M#!D2$P\4'1H?'AT:'!P@)"XG("(L(QP<*#<I+#`Q-#0T'R<Y/3@R/"XS-#+_
MVP!#`0D)"0P+#!@-#1@R(1PA,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C(R
M,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C+_P``1"``,``L#`2(``A$!`Q$!_\0`
M'P```04!`0$!`0$```````````$"`P0%!@<("0H+_\0`M1```@$#`P($`P4%
M!`0```%]`0(#``01!1(A,4$&$U%A!R)Q%#*!D:$((T*QP152T?`D,V)R@@D*
M%A<8&1HE)B<H*2HT-38W.#DZ0T1%1D=(24I35%565UA96F-D969G:&EJ<W1U
M=G=X>7J#A(6&AXB)BI*3E)66EYB9FJ*CI*6FIZBIJK*SM+6VM[BYNL+#Q,7&
MQ\C)RM+3U-76U]C9VN'BX^3EYN?HZ>KQ\O/T]?;W^/GZ_\0`'P$``P$!`0$!
M`0$!`0````````$"`P0%!@<("0H+_\0`M1$``@$"!`0#!`<%!`0``0)W``$"
M`Q$$!2$Q!A)!40=A<1,B,H$(%$*1H;'!"2,S4O`58G+1"A8D-.$E\1<8&1HF
M)R@I*C4V-S@Y.D-$149'2$E*4U155E=865IC9&5F9VAI:G-T=79W>'EZ@H.$
MA8:'B(F*DI.4E9:7F)F:HJ.DI::GJ*FJLK.TM;:WN+FZPL/$Q<;'R,G*TM/4
MU=;7V-G:XN/DY>;GZ.GJ\O/T]?;W^/GZ_]H`#`,!``(1`Q$`/P#U."#5-9UW
M7U'B/4K&"SO4MX8+6*V*A3;0R$DR0LQ):1N_I6KX5OKC4_!^B7]W()+FZL()
MI7``W.T:EC@<#DGI3+GPKI=S>W5V6U"&:Z=9)C;:G<P*[!50';'(`#M11D#M
?6G8V5OINGVUC:1^5;6T2PPQ@D[44`*,GG@`=:`/_V3\_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>3
<FILENAME>ballotx.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 ballotx.jpg
M_]C_X``02D9)1@`!`0$!+`$L``#_VP!#``@&!@<&!0@'!P<)"0@*#!0-#`L+
M#!D2$P\4'1H?'AT:'!P@)"XG("(L(QP<*#<I+#`Q-#0T'R<Y/3@R/"XS-#+_
MVP!#`0D)"0P+#!@-#1@R(1PA,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C(R
M,C(R,C(R,C(R,C(R,C(R,C(R,C(R,C+_P``1"``,``L#`2(``A$!`Q$!_\0`
M'P```04!`0$!`0$```````````$"`P0%!@<("0H+_\0`M1```@$#`P($`P4%
M!`0```%]`0(#``01!1(A,4$&$U%A!R)Q%#*!D:$((T*QP152T?`D,V)R@@D*
M%A<8&1HE)B<H*2HT-38W.#DZ0T1%1D=(24I35%565UA96F-D969G:&EJ<W1U
M=G=X>7J#A(6&AXB)BI*3E)66EYB9FJ*CI*6FIZBIJK*SM+6VM[BYNL+#Q,7&
MQ\C)RM+3U-76U]C9VN'BX^3EYN?HZ>KQ\O/T]?;W^/GZ_\0`'P$``P$!`0$!
M`0$!`0````````$"`P0%!@<("0H+_\0`M1$``@$"!`0#!`<%!`0``0)W``$"
M`Q$$!2$Q!A)!40=A<1,B,H$(%$*1H;'!"2,S4O`58G+1"A8D-.$E\1<8&1HF
M)R@I*C4V-S@Y.D-$149'2$E*4U155E=865IC9&5F9VAI:G-T=79W>'EZ@H.$
MA8:'B(F*DI.4E9:7F)F:HJ.DI::GJ*FJLK.TM;:WN+FZPL/$Q<;'R,G*TM/4
MU=;7V-G:XN/DY>;GZ.GJ\O/T]?;W^/GZ_]H`#`,!``(1`Q$`/P#<\6>.]4TK
MQOJ>F+JEW'"MQ%%"MO/;1QVJE+7,EP9+>1HXBT[8DR<D;=HQFO2_"=]<:GX-
MT._O)/,NKK3[>:9]H&YVC4L<#@9)/2H[GPEI5UJ%S?,VI0SW3AYC:ZI<P*[!
J%0$K'(JYVJHSCL*U+"QM],TZVL+./R[6UB2&%-Q.U%`"C)Y.`!UH`__9
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>4
<FILENAME>ex31a-09302006.htm
<DESCRIPTION>EXHIBIT 31(A)
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>


<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Exhibit 31(a)</U></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" size=2><U>CERTIFICATION</U> </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Robert Chestnov,
certify that: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          I have reviewed this Quarterly Report on Form 10-Q of Jaclyn, Inc.; </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Based on my knowledge, this report does not contain any untrue statement of a
          material fact or omit to state a material fact necessary to make the statements
          made, in light of the circumstances under which such statements were made, not
          misleading with respect to the period covered by this report; </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Based on my knowledge, the financial statements, and other financial information
          included in this report, fairly present in all material respects the financial
          condition, results of operations and cash flows of the registrant as of, and
          for, the periods presented in this report; </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The registrant&#146;s other certifying officer(s) and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Designed such disclosure controls and procedures, or caused such disclosure
          controls and procedures to be designed under our supervision, to ensure that
          material information relating to the registrant, including its consolidated
          subsidiaries, is made known to us by others within those entities, particularly
          during the period in which this report is being prepared; </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Evaluated the effectiveness of the registrant&#146;s disclosure controls and
          procedures and presented in this report our conclusions about the effectiveness
          of the disclosure controls and procedures, as of the end of the period covered
          by this report based on such evaluation; and </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Disclosed in this report any change in the registrant&#146;s internal control
          over financial reporting that occurred during the registrant&#146;s most recent
          fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of an
          annual report) that has materially affected, or is reasonably likely to
          materially affect, the registrant&#146;s internal control over financial
          reporting; and </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The registrant&#146;s other certifying officer(s) and I have disclosed, based on
          our most recent evaluation of internal control over financial reporting, to the
          registrant&#146;s auditors and the audit committee of the registrant&#146;s
          board of directors (or persons performing the equivalent functions): </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          All significant deficiencies and material weaknesses in the design or operation
          of internal control over financial reporting which are reasonably likely to
          adversely affect the registrant&#146;s ability to record, process, summarize and
          report financial information; and </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrant&#146;s internal control over
          financial reporting. </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:&nbsp;&nbsp; November 14, 2006 </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>/s/ Robert Chestnov</U><BR>Robert Chestnov,
President and Principal<BR>Executive Officer </FONT></P>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>5
<FILENAME>ex31b-09302006.htm
<DESCRIPTION>EXHIBIT 31(B)
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>

<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Exhibit 31(b)</U></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" size=2><U>CERTIFICATION</U> </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Anthony Christon,
certify that: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          I have reviewed this Quarterly Report on Form 10-Q of Jaclyn, Inc.; </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Based on my knowledge, this report does not contain any untrue statement of a
          material fact or omit to state a material fact necessary to make the statements
          made, in light of the circumstances under which such statements were made, not
          misleading with respect to the period covered by this report; </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Based on my knowledge, the financial statements, and other financial information
          included in this report, fairly present in all material respects the financial
          condition, results of operations and cash flows of the registrant as of, and
          for, the periods presented in this report; </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The registrant&#146;s other certifying officer(s) and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Designed such disclosure controls and procedures, or caused such disclosure
          controls and procedures to be designed under our supervision, to ensure that
          material information relating to the registrant, including its consolidated
          subsidiaries, is made known to us by others within those entities, particularly
          during the period in which this report is being prepared; </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Evaluated the effectiveness of the registrant&#146;s disclosure controls and
          procedures and presented in this report our conclusions about the effectiveness
          of the disclosure controls and procedures, as of the end of the period covered
          by this report based on such evaluation; and </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Disclosed in this report any change in the registrant&#146;s internal control
          over financial reporting that occurred during the registrant&#146;s most recent
          fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of an
          annual report) that has materially affected, or is reasonably likely to
          materially affect, the registrant&#146;s internal control over financial
          reporting; and </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The registrant&#146;s other certifying officer(s) and I have disclosed, based on
          our most recent evaluation of internal control over financial reporting, to the
          registrant&#146;s auditors and the audit committee of the registrant&#146;s
          board of directors (or persons performing the equivalent functions): </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          All significant deficiencies and material weaknesses in the design or operation
          of internal control over financial reporting which are reasonably likely to
          adversely affect the registrant&#146;s ability to record, process, summarize and
          report financial information; and </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang " FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
          <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrant&#146;s internal control over
          financial reporting. </FONT></P></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:&nbsp;&nbsp; November 14, 2006 </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>/s/ Anthony Christon</U><BR>Anthony Christon,
Principal Financial Officer </FONT></P>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>6
<FILENAME>ex32-09302006.htm
<DESCRIPTION>EXHIBIT 32
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>

<!-- MARKER FORMAT-SHEET="Head Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Exhibit 32 </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" size=2>CERTIFICATION PURSUANT
TO 18 U.S.C. SECTION 1350, <BR>AS ADOPTED PURSUANT TO SECTION
906 OF THE <BR>SARBANES-OXLEY ACT OF
2002 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the Quarterly Report on Form 10-Q of Jaclyn, Inc. (the
&#147;<U>Company</U>&#148;) for the fiscal quarter ended September 30, 2006 (the
&#147;<U>Report</U>&#148;), the undersigned each hereby certifies that: (1) the Report
fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended; and (2) the information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the
Company. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated:&nbsp;&nbsp; November 14, 2006 &nbsp; </FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>/s/ Robert Chestnov</U><BR> Robert Chestnov, President (Chief Executive Officer) </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated:&nbsp;&nbsp; November 14, 2006 </FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>/s/ Anthony Christon</U><BR> Anthony Christon, Chief Financial Officer </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A signed original of this written
statement required by Section 906 has been provided to Jaclyn, Inc. and will be retained
by Jaclyn, Inc. and forwarded to the Securities and Exchange Commission or its staff upon
request. </FONT></P>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SUBMISSION>
