UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

  

FORM 10-Q

 

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended November 30, 2014

 

¨

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

 

For the transition period from          to       

 

Commission File No. 000-54990

 

Maiden Lane Jewelry, Ltd.

(Exact name of registrant as specified in its charter)

 

 

	New York		46-0956015
	(State or Other Jurisdiction		(I.R.S. Employer
	of Incorporation or Organization)		Identification No.)

 

64 West 48th Street, Suite 1107, New York, New York 10036

(Address of Principal Executive Offices) (Zip Code)

 

(212) 840-8477

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

 

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

 

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

Smaller Reporting Company x

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

As of December 31, 2014, there were 10,476,854 shares of the registrant’s common stock outstanding.

 

  

  

 MAIDEN LANE JEWELRY, LTD.

 

INDEX

 

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	F-1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3. Quantitative and Qualitative Disclosures about Market Risk	6
Item 4. Controls and Procedures	6
PART II. OTHER INFORMATION	7
Item 1. Legal Proceedings	7
Item 1A. Risk Factors	7
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	7
Item 3. Defaults Upon Senior Securities	7
Item 4. [Removed and Reserved]	7
Item 5. Other Information	7
Item 6. Exhibits	7
Signatures	8

  

Certification of CEO Pursuant to Section 302

Certification of CFO Pursuant to Section 302

Certification of CEO Pursuant to U.S.C. Section 1350

Certification of CFO Pursuant to U.S.C. Section 1350

 

  

MAIDEN LANE JEWELRY, LTD.

CONDENSED BALANCE SHEET

 

		November 30,				May 31,
		2014				2014
		(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents		$	1,780			$	15,269
Accounts Receivable, Net			3,695,047				1,594,010
Other Receivables			464,529				—
Inventories			2,068,384				2,094,929
Prepaid Expenses			102,452				64,092
Deferred Taxes			162,840				85,840
Total Current Assets			6,495,032				3,854,140
Property and Equipment, Net			14,812				10,051
Security Deposits			2,000				2,000
Total Assets		$	6,511,844			$	3,866,191
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable		$	2,970,287			$	1,895,906
Accrued Expenses			38,100				49,474
Loans Payable - Factor			1,699,247				826,284
Loans Payable – Related Parties			534,632				359,632
Common Stock to be Issued			—				32,871
Income Taxes Payable			67,123				—
Total Current Liabilities			5,309,389				3,164,167
Long-Term Debt:
Notes Payable, net of debt discount of $180,724			249,276				—
Convertible Note Payable – Related Party			74,000				74,000
Total Liabilities			5,632,665				3,238,167
Commitments and Contingencies
Stockholders’ Equity:
Preferred Stock, $.0001 par value; 10,000,000 shares authorized, none issued and outstanding at November 30, 2014 and May 31, 2014			-				-
Common Stock, $.0001 par value; 50,000,000 shares authorized, 10,476,854 and 10,466,250 shares issued and outstanding at November 30, 2014 and May 31, 2014, respectively			1,048				1,047
Additional Paid-In Capital			1,126,982				895,555
Accumulated Deficit			(248,851	)			(268,578	)
Total Stockholders’ Equity			879,179				628,024
Total Liabilities and Stockholders’ Equity		$	6,511,844			$	3,866,191

 

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

 

   

  MAIDEN LANE JEWELRY, LTD.

CONDENSED STATEMENT OF OPERATIONS

(Unaudited) 

 

		Three Months Ended November 30,								Six Months Ended November 30,
		2014				2013				2014				2013
Sales - Net		$	2,735,248			$	1,525,577			$	4,565,032			$	3,816,315
Costs and Expenses:
Cost of Sales			2,030,018				1,192,704				3,541,894				2,817,163
Officer’s Compensation			137,151				6,001				228,521				78,556
Professional and Consulting Fees			190,593				155,530				358,595				351,167
Selling, General and Administrative Expenses			166,937				166,175				320,268				378,081
Provision for Bad Debts			2,779				—				2,779				—
Total Costs and Expenses			2,527,478				1,520,410				4,452,057				3,624,967
Income from Operations			207,770				5,167				112,975				191,348
Other Income (Expense):
Interest Expense – Related Party			(746	)			(740	)			(1,484	)			(1,480	)
Interest Expense – Notes Payable			(11,759	)			—				(12,912	)			—
Interest Expense – Accounts Receivable Financings			(37,238	)			(13,470	)			(65,519	)			(13,470	)
Amortization of Debt Discount			(16,144	)			—				(17,833	)			—
Total Other Income and (Expenses)			(65,887	)			(14,210	)			(97,748	)			(14,950	)
Income (Loss) before Income Tax Provision (Benefit)			141,883				(9,043	)			15,227				176,398
Income Tax Provision (Benefit)			37,500				3,700				(4,500	)			62,900
Net Income (Loss)		$	104,383			$	(12,743	)		$	19,727			$	113,498
Income (Loss) Per Common Share - Basic		$	0.01			$	0.00			$	0.00			$	0.01
Basic Weighted Average Shares			10,476,854				10,368,173				10,473,145				10,360,922
Income (Loss) Per Common Share – Diluted		$	0.01			$	0.00			$	0.00			$	0.01
Diluted Weighted Average Shares			10,513,854				10,368,173				10,510,145				10,397,922

 

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

 

  

MAIDEN LANE JEWELRY, LTD.

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED NOVEMBER 30, 2014

(Unaudited)

 

										Additional
		Common Stock								Paid-In				Accumulated
		Shares				Amount				Capital				Deficit				Total
Balance, May 31, 2014			10,466,250			$	1,047			$	895,555			$	(268,578	)		$	628,024
Issuance of Common Stock for services			10,604				1				32,870				-				32,871
Debt Discount on Notes Payable			-				-				198,557				-				198,557
Net Income for the six months ended  November 30, 2014			-				-				-				19,727				19,727
Balance, November 30, 2014			10,476,854			$	1,048			$	1,126,982			$	(248,851	)		$	879,179

 

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

 

 

MAIDEN LANE JEWELRY, LTD.

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited)

 

		Six Months Ended				Six Months Ended
		November 30,				November 30,
		2014				2013
Cash Flows from Operating Activities:
Net Income		$	19,727			$	113,498
Adjustments to Reconcile Net Income (Loss) to Net Cash (Used) in Operating Activities:
Depreciation			2,270				1,603
Amortization of Note Discount			17,833				—
Common Stock Issued for Services			—				175,000
Deferred Taxes			(77,000	)			—
Reserve for Doubtful Accounts and Sales Returns and Allowances			106,726				1,824
Changes in Assets and Liabilities:
(Increase) in Accounts Receivable			(2,207,762	)			(1,965,228	)
(Increase) in Other Receivables			(464,529	)			—
Decrease in Inventories			26,545				239,160
(Increase) Decrease in Prepaid Expenses			(38,360	)			24,391
Increase in Accounts Payable			1,074,381				204,476
(Decrease) in Accrued Expenses			(11,374	)			(21,122	)
Increase in Income Taxes Payable			67,123				42,143
Net Cash (Used) in Operating Activities			(1,484,420	)			(1,184,255	)
Cash Flows from Investing Activities:
Capital Expenditures			(7,032	)			(1,150	)
Net Cash (Used) In Investing Activities			(7,032	)			(1,150	)
Cash Flows from Financing Activities:
Payments of Offering Costs			—				(15,000	)
Proceeds of Note Issuance			430,000				—
Proceeds of Loans Payable – Related Parties			636,000				354,632
Payments of Loans Payable – Related Parties			(461,000	)			(145,000	)
Proceeds from Loans Payable – Factor			3,316,799				978,480
Repayments to Loans Payable – Factor			(2,443,836	)			—
Net Cash Provided In Financing Activities			1,477,963				1,173,112
(Decrease) in Cash and Cash Equivalents			(13,489	)			(12,293	)
Cash and Cash Equivalents – Beginning of Period			15,269				39,086
Cash and Cash Equivalents – End of Period		$	1,780			$	26,793
Supplemental Disclosure of Cash Flow Information:
Interest Paid		$	62,256			$	7,309
Income Taxes Paid		$	—			$	25,850
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Debt Discount on Notes Payable		$	198,557			$	—
Issuance of 10,604 shares of Common Stock as consideration for payment of obligation to issue common stock		$	32,871			$	—

 

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

 

 

MAIDEN LANE JEWELERY, LTD.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

 

NOTE 1 - Summary of Significant Accounting Policies

 

Organization and Basis of Presentation

 

Maiden Lane Jewelry, Ltd., formerly Romantique Ltd., (“the Company”) was incorporated on September 6, 2012 under the laws of the State of New York.  The Company is a wholesaler and manufacturer of jewelry including pendants, bracelets and earrings.  We began operations on October 1, 2012 by selling fashion rings, pendants, earrings and bracelets to independent retailers. In December 2012, we commenced a line of bridal (engagement) rings, featuring both settings and diamonds. In February 2014 we began focusing on sales of bridal jewelry featuring uniquely cut stones which in May 2014 we branded as an Aspiri^TM cut diamond.

 

In the opinion of the Company’s management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein.  These financial statements are condensed and therefore 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.  These condensed financial statements should be read in conjunction with the Company’s May 31, 2014 audited financial statements and notes included in Form 10-K filed on September 4, 2014.

 

Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

 

Cash and Cash Equivalents

 

The Company considers all highly-liquid investments purchased with a maturity of three months or less to be cash equivalents.  As of November 30, 2014 and May 31, 2014, the Company did not have any cash equivalents.

 

Inventories

 

Raw materials are stated at the lower of cost or market, with cost determined by specific identification for unique items (such as diamond stones, each with a particular carat weight, color, clarity and cut) and using the first-in, first-out method for generic items or styles (certain semi-mounts and fashion jewelry). Finished goods which we fabricate are stated at the lower of cost or market, with cost determined by specific identification for each component making up the item plus direct labor and other fees (primarily diamond certification).

 

Property and Equipment

 

Property and equipment is carried at cost less accumulated depreciation.  Depreciation is computed by the straight-line method over the estimated useful lives of the related assets, which is generally five years.

 

Revenue Recognition

 

For revenue from product sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (SAB No. 104), which superseded Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB No. 101).  SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured.  Determination of criteria (3) and (4) are based on management’s judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts.  Provisions for discounts and rebates to customers, estimated returns and allowance, and other adjustments are provided for in the same period the related sales are recorded. Provision for sales returns and allowances that were netted against sales amounted to $43,000 and $30,000 for the six months ended November 30, 2014 and November 30, 2013, respectively. 

 

Concentration of Credit Risks

 

The Company primarily sells its products to retail jewelers focused on mid-to-high end consumers. Customers typically receive payment terms of ratable monthly payments over 90 to 120 days with exceptions based on credit quality or other terms and conditions.  As a result, the Company is exposed to credit risk on its accounts receivable. The Company generally seeks to mitigate such risk by performing credit checks through jeweler trade associations it is a members of, by attending trade shows which selectively invite retailer attendees based on their credit worthiness and by checking references with other jewelers in the industry.

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains cash balances at financial institutions which exceed the current Federal Deposit Insurance Corporation (“FDIC”) limit of $250,000 at times during the year.

 

 

MAIDEN LANE JEWELERY, LTD.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

 

Sales

 

The Company’s sales are comprised of primarily three major products: Aspiri Cut Rings, Complete Rings and Fashion Jewelry. The Company may also on occasion sell loose stone inventory.

 

A breakdown of sales for the three and six months ended November 30, 2014 and November 30, 2013, respectively:

 

 

		Three Months Ended November 30,								Six Months Ended November 30,
		2014				2013				2014				2013
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
AspiriTM Cut Rings			51	%			—	%			46	%			—	%
Complete Rings (not Aspiri)			29				53				35				67
Fashion Jewelry & Other			20				47				19				33

 

The three and six months ended November 30, 2014 had returns of Complete Rings that were not Aspiri Cut Rings as some customers substituted such rings for Aspiri Cut Rings.

 

Advertising Costs

 

Advertising and show costs are charged to operations when incurred.  Advertising costs during the six months ended November 30, 2014 and November 30, 2013 were $101,000 and $39,000, respectively.  

 

Deferred Income Taxes

 

The Company accounts for deferred income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.  A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

Net Income (Loss) Per Share

 

Basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares and dilutive common share equivalents and convertible securities then outstanding.

 

The following provides a reconciliation of the shares used in calculating the per share amounts for the periods presented:

 

		Three Months Ended November 30,								Six Months Ended November 30,
		2014				2013				2014				2013
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Numerator:
Net Income (Loss)		$	104,383			$	(12,743	)		$	19,727			$	113,498
Interest on Convertible Notes			746				740				1,484				1,480
Net Income (Loss)		$	105,129			$	(12,003	)		$	21,211			$	114,978
Denominator:
Basic weighted-average shares			10,476,854				10,368,173				10,473,145				10,360,922
Effective of dilutive securities:
Warrants1			—	2			—				—	2			—
Convertible Debt3			37,000				—	4			37,000				37,000
Diluted weighted-average shares			10,513,854				10,368,173				10,510,145				10,397,922
Per Share Income (Loss):
Basic		$	0.01			$	0.00			$	0.00	)		$	0.01
Diluted		$	0.01			$	0.00			$	0.00			$	0.01

 

 

1

There are 122,550 warrants issued in connection with 430,000 of unsecured notes at an exercise price of $3.50 per warrant into one share of common stock.

 

2

Warrants for the three and six months ended November 30, 2014 are not included in the computation of diluted weighted average shares as they are not dilutive under the treasury stock method of accounting.

 

3

Convertible debt is convertible into 37,000 shares of common stock.

 

4

Convertible debt for the three months ended November 30, 2013 is not included in the computation of diluted weighted average shares as such inclusion would be anti-dilutive.

 

 

  

MAIDEN LANE JEWELERY, LTD.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

  

Accounting Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period.  Actual results could differ from those estimates.  Management uses its best judgment in valuing these estimates, and may, as warranted, solicit external professional advice and other assumptions believed to be reasonable.

 

Fair Value Measurements

 

The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.  The guidance describes a fair value hierarchy based on the levels of inputs, or which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

 

Level 1:  Quoted prices in active markets for identical assets or liabilities.

  

Level 2:  Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities.

 

Level 3:  Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities.

  

The Company's financial instruments include cash and cash equivalents, accounts receivable, accounts payable and loans and notes payable.  These items are determined to be a Level 1 fair value measurement.

 

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and loans payable approximates fair value because of the short maturity of these instruments.  The recorded value of long-term debt approximates its fair value as the terms and rates approximate market rates.

 

Recent Accounting Pronouncements

 

Management does not believe there would have been a material effect on the accompanying financial statements had any recently issued, but not yet effective, accounting standards been adopted in the current period.

 

NOTE 2 -  Inventories

 

Inventories consist of the following:

 

		November 30, 2014				May 31, 2014
		(unaudited)
Raw Materials		$	1,151,273			$	257,598
Finished Goods			917,111				1,837,331
Total Inventory		$	2,068,384			$	2,094,929

 

Inventories are pledged as security for the Company’s Accounts Receivable Financing Agreement (see Note 8).

 

  

MAIDEN LANE JEWELERY, LTD.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

 

 

NOTE 3 -  Property and Equipment

 

Property and equipment consists of the following:

 

		November 30, 2014				May 31, 2014
		(unaudited)
Office Equipment		$	15,493			$	9,271
Computers			5,617				4,808
			21,110				14,079
Less:  Accumulated Depreciation			6,298				4,028
		$	14,812			$	10,051

 

Depreciation expense was approximately $2,300 and $1,600 for the six months ended November 30, 2014 and November 30, 2013, respectively.

 

NOTE 4 -  Other Receivables

 

Other receivables represent amounts returned to our diamond vendor in order to reduce older inventory on select generic diamonds that were not conducive to our current production of Aspiri cut diamond engagement rings. The Company does not expect to realize a loss on the sale of these components.

 

NOTE 5 -  Convertible Note Payable – Related Party

 

Convertible note payable to the Company’s president is summarized as follows:

 

		November 30, 2014				May 31, 2014
		(unaudited)
Note Payable, bearing interest at 4% per annum, and due December 31, 2015. The note is Convertible into shares of the Company’s Common stock at a conversion rate of $2 per share, subject to adjustment upon the occurrence of certain events including stock dividends, stock split or combinations and reclassifications.		$	74,000			$	74,000

 

NOTE 6 -  Loans Payable – Related Parties

 

Loans payable to related parties is summarized as follows:

 

		November 30, 2014				May 31, 2014
		(unaudited)
Loans payable to the Company’s President and CEO. The loans are payable on demand and non-interest bearing, and are subordinated to the factor.		$	534,632			$	359,632

 

A portion of this loan in the amount of $210,000 is subordinated to the factor.

 

NOTE 7 -  Unsecured Notes Payable

 

On August 18, 2014 and August 25, 2014 the Company issued $250,000 and $150,000, respectively, of unsecured, subordinated notes bearing 11% interest with 285 detachable and freely transferable warrants per $1,000 face value Note.  The notes are due on the second anniversary of their issue date with warrants exercisable within ten years from their issue date at an exercise price of $3.50. The notes issued on August 25, 2014 are to an entity controlled by the brother of the Company’s president.

 

On September 15, 2014 the Company issued $30,000, of unsecured, subordinated notes bearing 11% interest with 285 detachable and freely transferable warrants per $1,000 face value Note.  The notes are due on the second anniversary of their issue date with warrants exercisable within ten years from their issue date at an exercise price of $3.50.

 

Pursuant to ASC 470-20, the Company recorded the value of the warrants using the Black-Scholes method, which was determined to be approximately $369,000. A portion of the debt proceeds was allocated to the warrants as debt discount using the relative fair value method, which approximated $199,000. As the warrants contain fixed settlement provisions and the exercise price cannot be adjusted, the Company recorded the fair value of the warrants as additional paid in capital with a corresponding debt discount which will be amortized over the two-year term of the notes using the interest method. For the three and six months ended November 30, 2014, the Company recognized respectively $16,144 and $17,833 in amortization expense relating to these warrants.

 

  

MAIDEN LANE JEWELERY, LTD.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

 

		November 30, 2014				May 31, 2014
		(unaudited)
Notes Payable, Par		$	430,000			$	—
Initial Debt Discount			(198,557	)			—
Accumulated Amortization			17,833				—
Notes Payable, Net		$	249,276			$	—

 

The fair value of the warrants on the issuance date was calculated using the Black Scholes method with the following weighted average assumptions:

 

Dividend yield			0.00	%
Volatility			310.78	%
Risk-free interest rate			2.40	%
Expected life (months)			120
Grant date price per share		$	3.01
Warrants issued			122,550
Aggregate grant date fair value		$	369,000

 

NOTE 8 -  Financing Agreement

 

On September 30, 2013 the Company entered into an Account Receivable Financing Agreement with Rosenthal & Rosenthal, Inc. (“Rosenthal”) pursuant to which Rosenthal shall provide the Company with a line of credit up to $1,000,000.  On October 6, 2014, this Accounts Receivable Financing Agreement was amended to increase the line of credit up to a maximum of $2,000,000. Loans made under the Accounts Receivable Financing Agreement bear interest at prime rate plus 3.5% (for an effective average rate of 7.5% for the three and six months ended November 30, 2014) and are subject to certain financial covenants.  As security for these loans, Rosenthal has placed liens on the Company’s accounts receivable, inventories, and all other assets.  In addition, the loans have been personally guaranteed by Yitzchok Gurary, and his parents, Mordechai Gurary and Leah Gurary. In addition, the Company has granted Rosenthal a Landlord Subordination agreement.

 

The Accounts Receivable Financing Agreement calls for the subordination of certain of the Company’s debt as follows:

 

Accounts Payable – Classique Creations, LLC		$	500,000
Demand Loans Payable – Yitzchok Gurary		$	210,000

 

In connection with the Accounts Receivable Finance Agreement, the Company has borrowed approximately $1.7 million net as of November 30, 2014.  Total draws and repayments for the six and three months ended November 30, 2014 totaled approximately $3.3 million and $1.6 million, respectively. The Accounts Receivable Financing Agreement expires September 30, 2015.

 

NOTE 9 -  Commitments and Contingencies

 

None. 

 

NOTE 10 -  Related Party Transactions

 

On October 1, 2012 and revised on March 1, 2014 the Company entered into a one-year consulting agreement with Isaac Gurary, under which he was to provide certain business and corporate marketing services to the Company for an annual consulting fee of 3% of certain net sales during the term of the agreement.  The agreement automatically renews quarterly. As of November 30, 2014 the amount owed to Mr. Gurary was approximately $172,000.  In December 2014, such amounts were paid in full to Mr. Gurary. As of May 31, 2014, the Company had recorded accrued compensation to Mr. Gurary in the amount of approximately $104,000.  These amounts are included in accounts payable and accrued expenses respectively at November 30, 2014 and May 31, 2014, respectively.  Mr. Gurary serves as the Company’s President and is a significant stockholder of the Company.

 

  

MAIDEN LANE JEWELERY, LTD.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

 

During the six months ended November 30, 2014 and November 30, 2013, the Company purchased approximately 26% and 59%, respectively, of its merchandise from Classique Creations LLC (“Classique”), a company that is owned by the mother of the Company’s President.

 

Included in accounts payable at November 30, 2014 and May 31, 2014 are amounts owed to Classique totaling approximately $1.9 million and $1.5 million, respectively. Payment terms to Classique are one to twelve months and the manner of settlement is cash payment. Pursuant to the Accounts Receivable Financing Agreement (See Note 8), accounts payable to Classique totaling $500,000 are subordinated to the finance company.

 

The Company rents office space from a Company affiliated with the Company’s president on a month to month basis.  The agreement calls for rent at $2,060 per month.  Rent expense was approximately $13,000 and $14,000 for the six months ended November 30, 2014 and November 30, 2013, respectively.

  

NOTE 11 -  Stockholders’ Equity

 

On August 4, 2014 the Company issued 10,604 shares of common stock at a price per share of $3.10 for marketing services rendered during the year ended May 31, 2014.

 

In connection with the issuance of $430,000 principal notes payable (see Note 7), the Company issued 122,550 common stock purchase warrants. Such warrants have an exercise price of $3.50 per share and expire between August and September 2024. As of November 30, 2014, all common stock purchase warrants remained outstanding and exercisable with a weighted average exercise price of $3.50 per share and a remaining contractual life of 9.7 years.

 

NOTE 12 -  Major Suppliers and Customers

 

During the six months ended November 30, 2014 and November 30, 2013, the Company purchased approximately $1.3 million (approximately 26%) and $1.6 million (approximately 59%), respectively, of its merchandise from one manufacturer that is a related party (see Note 10).

 

In addition, the Company purchased merchandise from one vendor which amounted to approximately 56% of total purchases during the six months ended November 30, 2014.

 

Our three largest customers frequently vary from period to period. For the three and six months ended November 30, 2014, our three largest customers accounted for approximately 15% and 19% of our total revenues, respectively. For the three and six months ended November 30, 2013, our three largest customers accounted for approximately 25% and 13% of our total revenues, respectively.

 

NOTE 13 -  Income Taxes

 

Our effective tax rates were approximately (30%) and 36% for the six months ended November 30, 2014 and 2013, respectively.

 

 

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Note About References To Maiden Lane Jewelry, Ltd. ^TM

 

In this Form 10-Q the “Company”, “Maiden Lane”, “we”, “us” and “our” refer to Maiden Lane Jewelry, Ltd.TM unless the context otherwise requires.

 

Note About Trademarks

 

Maiden Lane Jewelry, Ltd.TM , our logo and other trademarks of Maiden Lane Jewelry, Ltd. (including “Aspiri”^TM) are the property of Maiden Lane Jewelry, Ltd. All other trademarks or trade names referred to in this Annual Report are the property of their respective owners.

 

Forward-Looking Statements

 

You should read the following discussion in conjunction with our financial statements and related notes thereto. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Our actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of certain factors.

 

This quarterly report contains forward-looking statements as that term is defined in the Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  These statements relate to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.  In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars.  All references to “common stock” refer to our shares of common stock.

 

Emerging Growth Company

 

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. In addition, Section 107 of the Jumpstart Our Business Startups Act (“JOBS Act”) also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.

 

Overview

 

We are a wholesaler and manufacturer of jewelry with sales to independent retailers. Our primary sales are complete engagement rings with a focus on bridal jewelry featuring uniquely cut stones and settings. Other jewelry sales include pendants, bracelets and earrings.  In connection with recent branding efforts, on May 27, 2014, we amended our certificate of incorporation to change our name from Romantique Jewelry Ltd. to Maiden Lane Jewelry, Ltd.

 

Beginning in December 2013, we began focusing production on bridal jewelry featuring uniquely cut diamonds that utilize an advanced cutting technique that visually and physically increases the crown size (the top and most visible part of the diamond) of a similarly weighted diamond by at least 25%. Given production lead times for this new design, our first sales of this line of bridal jewelry began in the last two weeks of February 2014. Because this unique cutting technique significantly increases the crown size of the diamond while decreasing the pavilion (bottom end below the crown) of the stone which is usually not seen, our diamonds appear to be much larger than typically cut diamonds of the same weight. In addition, because our company creates each ring based on a specific diamond, as each stone’s measurements and appearance is unique, we are able to design rings which accentuate a diamond’s brilliance and other positive attributes.

 

  

As part of a major sales roll-out for this new product, we branded and began marketing such uniquely cut diamonds as the Aspiri^TM (“Aspiri”) cut diamond in May 2014. In addition, in June 2014, we began to broaden the collection of Aspiri products to include pendants and earrings. We believe that there are competitive barriers to entry for the Aspiri product, including the sourcing of rough diamonds, cutting technique and limitations on mass production (as each stone is unique as well as the engagement ring mountings). The creation of an Aspiri cut diamond does not lend itself to mass production whereby approximately 92% of diamonds are cut and polished by lower cost, high volume Asian and Russian crafters which rely primarily on the manufacture of similar and common cuts rather than the careful evaluation and cutting tailored to the unique attributes of each stone. Instead, the rough for each diamond is carefully evaluated and uniquely cut whereby the dimensions, faceting and other factors are taken into consideration to maximize the face coverage of the diamond while maintaining its brilliance.

 

Our Aspiri cut engagement rings, including both stone and setting, show the center Aspiri diamond to its best advantage, i.e. accentuating its brilliance and hiding its imperfections. To maintain high quality standards, our manufacturing of the ring mountings and setting of stones, to date, is done in the United States. We believe that our new line of bridal jewelry featuring uniquely cut stones will appeal to both retailers and customers due to their perceived size, quality, cost and value.

 

Our website is located at www.maidenlaneltd.com.

 

Critical Accounting Policies and Estimates

 

The condensed financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.

 

Revenue Recognition

 

For revenue from product sales, we recognize revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (SAB No. 104), which superseded Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB No. 101).  SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured.  Determination of criteria (3) and (4) are based on management’s judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts.  Provisions for discounts and rebates to customers, estimated returns and allowance, and other adjustments are provided for in the same period the related sales are recorded.

 

Description of Revenues

 

Prior to December 2012, most of our revenues were generated through the sale of rings, pendants, necklaces and earrings with stones such as diamonds, rubies and emeralds (“Fashion Jewelry”). In December 2012, we launched our line of bridal engagement rings inclusive of its diamond center stone (“Complete Rings”) and in February 2014, we began to sell our Aspiri cut diamond engagement ring.

 

Beginning in December 2013, we began focusing on bridal jewelry featuring uniquely cut stones which we subsequently branded in May 2014 as an Aspiri^TM diamond. These stones utilize an advanced cutting technique that visually and physically increases the crown size (the top and most visible part of the stone) of similarly weighted stones by 25% to 50%. Because this unique cutting technique significantly increases the crown size of the stone while decreasing the pavilion (bottom end below the crown) of the stone which is usually not seen, our diamonds appear to be much larger than typically cut diamonds of the same weight. In addition, because our company creates each ring based on a specific stone, as each stone’s measurements and appearance is unique, we are able to design rings which accentuate a diamond’s brilliance and other positive attributes. We believe that our new line of bridal jewelry featuring uniquely cut stones will appeal to both retailers and customers due to their perceived size, quality, cost and value.

Our plan is to expand our bridal ring sales, predominately in the new style of uniquely cut stones, which we believe are less seasonal and less subject to economic downturn.

 

Our sales are comprised of primarily three major products: Aspiri Cut Rings, Complete Rings and Fashion Jewelry. We may also on occasion sell loose stone inventory.

 

A breakdown of sales for the three and six months ended November 30, 2014 and November 30, 2013, respectively:

 

		Three Months Ended November 30,								Six Months Ended November 30,
		2014				2013				2014				2013
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Aspiri Cut Rings			51	%			—	%			46	%			—	%
Complete Rings (not Aspiri)			29				53				35				67
Fashion Jewelry & Other			20				47				19				33

 

  

The three and six months ended November 30, 2014 had returns of Complete Rings that were not Aspiri Cut Rings as some customers substituted such rings for Aspiri Cut Rings.

 

 Employees

 

As of November 30, 2014, we had 7 full-time employees. Generally, our sales representatives are paid on a commission basis.

 

Results of Operations

 

The principal measure of our financial performance are sales revenues from the sale of our products to independent retailers, the related cost of sales related to such inventory and the resultant net sales. Net income is also a key measure of financial performance which further adjusts net sales by administrative expenses, professional fees, interest expense and income taxes.

 

Set forth below is a discussion of our results of operations for the three and six months ended November 30, 2014 and ended November 30, 2013.

 

Sales Revenues

 

Quarter Ended November 30, 2014 and 2013. For the three months ended November 30, 2014, we had gross sales revenues of approximately $3.1 million, a 94% increase from $1.6 million of gross sales for the three months ended November 30, 2013. These revenues arose from the sale of jewelry to various retailers. For the three months ended November 30, 2014, we had net sales revenues of approximately $2.7 million an increase from $1.5 million of net sales for the three months ended November 30, 2013. For the three months ended November 30, 2014, net sales increased to approximately 149% relative to the prior quarter. This increase is attributable primarily to increased sales of our new Aspiri cut diamond engagement ring.

 

The primary difference between gross and net sales for each period relate to sales credits, returns and allowances adjustment which totaled approximately ($147,000) and $32,000 for the three months ended November 30, 2014 and 2013, respectively. The current amount for sales credits, returns and allowances are primarily related to previous and current non-Aspiri product sales. Although customers are generally not granted rights to return products after the purchase has been made, in certain circumstances, we accepted returns and issued credits although we were not contractually obligated to do so. On a quarterly basis, we estimate sales returns based on historical experience and record a provision for sales returns which are included in net sales. Our sales return reserve balance was approximately $188,000 and $65,000, respectively, at November 30, 2014 and May 31, 2014.

 

Our three largest customers frequently vary from period to period. For the three months ended November 30, 2014 and 2013, our three largest customers accounted for approximately 15% and 25% of our total revenues, respectively.

 

Six Months Ended November 30, 2014 and 2013. For the six months ended November 30, 2014, we had gross sales revenues of approximately $5.4 million, a 38% increase from $3.9 million of gross sales for the six months ended November 30, 2013. These revenues arose from the sale of jewelry to various retailers. For the six months ended November 30, 2014, we had net sales revenues of approximately $4.6 million an increase from $3.8 million of net sales for the six months ended November 30, 2013. The primary difference between gross and net sales for each period relate to sales credits, returns and allowances which totaled approximately $43,000 and $94,000 for the six months ended November 30, 2014 and 2013, respectively. The current amount for sales credits, returns and allowances are primarily related to previous and current non-Aspiri product sales.

 

Our three largest customers frequently vary from period to period. For the six months ended November 30, 2014 and 2013, our three largest customers accounted for approximately 19% and 13% of our total revenues, respectively.

 

Cost of Sales

 

Quarter Ended November 30, 2014 and 2013. Cost of Sales increased to approximately $2.0 million for the three months ended November 30, 2014 from $1.5 million for the three months ended November 30, 2013. Gross profit for the three months ended November 30, 2014 increased to approximately $705,000 from approximately $332,000 for the three months ended November 30, 2013. Gross margins on net sales for the three months ended November 30, 2014 and 2013 were approximately 25.8% and 21.8%, respectively. Before taking into account sales credits, returns and allowances, gross margins on gross sales for the three months ended November 30, 2014 and 2013 were approximately 34.8% and 23.5%, respectively. As previously noted, the current amount for sales credits, returns and allowances are primarily related to previous and current non-Aspiri product sales.

 

  

Six Months Ended November 30, 2014 and 2013. Cost of Sales increased to $3.5 million for the six months ended November 30, 2014 from $2.8 million for the six months ended November 30, 2013. Gross profit for the six months ended November 30, 2014 increased to approximately $1.0 million from approximately $999,000 for the six months ended November 30, 2013. Gross margins on net sales for the six months ended November 30, 2014 and 2013 were approximately 22.4% and 26.2%, respectively. Before taking into account sales credits, returns and allowances, gross margins on gross sales for the six months ended November 30, 2014 and 2013 were approximately 32.9% and 28.3%, respectively. As previously noted, the current amount for sales credits, returns and allowances are primarily related to previous and current non-Aspiri product sales.

 

Operating Expenses

 

General, Selling and Administrative

 

Quarter Ended November 30, 2014 and 2013. General, Selling and Administrative expenses were approximately $167,000 and approximately $165,000 for the three months ended November 30, 2014 and 2013, respectively. This increase is primarily attributed to an increase in website design for creating a custom retailer portal ($33,000), increased advertising and promotion costs ($9,000), increased insurance premiums for new director and officer’s insurance and healthcare policies ($19,000), offset by a $52,000 decrease in sales commissions (of which $41,000 is currently reclassified as officer’s compensation).

 

Six Months Ended November 30, 2014 and 2013. General, Selling and Administrative expenses were approximately $320,000 and approximately $379,000 for the six months ended November 30, 2014 and 2013, respectively. This decrease is primarily attributed to a $139,000 decrease in sales commissions (of which $68,000 is currently reclassified as officer’s compensation) offset by increases in website design for creating a custom retailer portal ($33,000), increased advertising and promotion costs ($22,000), increased insurance premiums for new director and officer’s insurance and healthcare policies ($39,000).

 

Officers’ Compensation

 

Quarter Ended November 30, 2014 and 2013. For the three months ended November 30, 2014, officers’ compensation was approximately $137,000 as compared to approximately $6,000 for the three months ended November 30, 2013. The increase in such expense is related to the hiring of in-house and full-time Chief Executive Officer and a Chief Operating Officer since the prior year. Prior to the internal hiring of such officers, the management of the company at the executive level was out-sourced and expensed in professional fees.

 

Six Months Ended November 30, 2014 and 2013. For the six months ended November 30, 2014, officers’ compensation was approximately $229,000 as compared to approximately $79,000 for the six months ended November 30, 2013. The increase in such expense is related to the hiring of in-house and full-time Chief Executive Officer and a Chief Operating Officer since the prior year. Prior to the internal hiring of such officers, the management of the company at the executive level was out-sourced and expensed in professional fees.

 

Professional and Consulting Fees

 

Quarter Ended November 30, 2014 and 2013. Professional and Consulting fees were approximately $191,000 for the three months ended November 30, 2014, an increase of $36,000 from approximately $155,000 for the three months ended November 30, 2013. The increase is primarily attributable to an increase in marketing expenses by $131,000 offset by a $91,000 decrease in outsourced executive management consulting fees.

 

Six Months Ended November 30, 2014 and 2013. Professional and Consulting fees were approximately $359,000 for the six months ended November 30, 2014 an increase of $8,000 from approximately $351,000 for the six months ended November 30, 2013. The increase is primarily attributable to an increase in marketing expenses by $202,000 and an increase of $14,000 in accounting and legal services offset by a $219,000 decrease in outsourced executive management consulting fees.

 

Other Income (Expenses)

 

Quarter Ended November 30, 2014 and 2013. For the three months ended November 30, 2014 and 2013, we had other expenses of approximately $66,000 and $14,000, respectively.  These expenses were primarily related to interest expense on accounts receivable financings of $1.7 million as of November 30, 2014 as compared to $978,000 at November 30, 2013. The amount of interest expense is dependent primarily on the interest rate charged and the average outstanding balance. For the three months ended November 30, 2014, the average outstanding balances on accounts receivable financings were $1.7 million and the average interest rate was 7.5%. In addition, for the three months ended November 30, 2014 includes approximately $16,000 for the amortization of debt discount on $430,000 of face amount unsecured notes with detachable warrants. Prior to November 30, 2013, there were no such notes.

 

Six Months Ended November 30, 2014 and 2013. For the six months ended November 30, 2014 and 2013, we had other expenses of approximately $98,000 and $15,000, respectively.  These expenses were primarily related to interest expense on accounts receivable financings of $1.7 million as of November 30, 2014 as compared to $978,000 at November 30, 2013. The amount of interest expense is dependent primarily on the interest rate charged and the average outstanding balance. For the six months ended November 30, 2014, the average outstanding balances on accounts receivable financings were $1.6 million and the average interest rate was 7.5%. In addition, for the six months ended November 30, 2014 includes approximately $18,000 for the amortization of debt discount on $430,000 of face amount unsecured notes with detachable warrants. Prior to November 30, 2013, there were no such notes.

 

  

Net Income (Loss)

 

Quarter Ended November 30, 2014 and 2013. As a result of the above, for the three months ended November 30, 2014, we had net income of $142,000 and net income after tax from operations of $104,000.  Net income per share was $0.01. For the three months ended November 30, 2013, we had a net loss from operations of $9,000 and net loss after tax of $13,000 after provision for income taxes of $4,000.  Net income per share was $0.00.

 

Six Months Ended November 30, 2014 and 2013. As a result of the above, for the six months ended November 30, 2014, we had net income of $15,000 and net income after tax from operations of $20,000.  Net income per share was $0.00. For the six months ended November 30, 2013, we had net income from operations of $176,000 and net income of $113,000 after provision for income taxes of $63,000.  Net income per share was $0.01.

 

Liquidity and Capital Resources

 

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments and other general business needs. We recognize the need to have funds available to purchase inventory and for operating our business. We seek to have adequate liquidity at all times to cover normal cyclical swings in funding availability and to allow us to meet irregular and unexpected funding requirements. We plan to satisfy our liquidity needs through normal operations with the goal of avoiding unplanned sales of assets or emergency borrowing of funds.

 

Since our inception, in addition to internally generated funds, we have been dependent on investment capital and loans as a primary source of liquidity.

 

At November 30, 2014, we had long term liabilities of $323,000, which represents a note payable to a related party for $74,000 and $430,000 of par notes payable less unamortized discount of $181,000.

 

On September 30, 2013 the Company entered into an Account Receivable Financing Agreement with Rosenthal & Rosenthal, Inc. (“Rosenthal”) pursuant to which Rosenthal shall provide the Company with a line of credit up to $1,000,000.  On October 6, 2014, this Accounts Receivable Financing Agreement was amended to increase the line of credit up to a maximum of $2,000,000. Loans made under the Accounts Receivable Financing Agreement bear interest at prime rate plus 3.5% (for an effective average rate of 7.5% for the three and six months ended November 30, 2014) and are subject to certain financial covenants.  As security for these loans, Rosenthal has placed liens on the Company’s accounts receivable, inventories, and all other assets.  In addition, the loans have been personally guaranteed by Yitzchok Gurary, and his parents, Mordechai Gurary and Leah Gurary. In addition, the Company has granted Rosenthal a Landlord Subordination agreement.

 

The Accounts Receivable Financing Agreement calls for the subordination of certain of the Company’s debt as follows:

 

Accounts Payable – Classique Creations, LLC		$	500,000
Demand Loans Payable – Related Party		$	210,000

 

In addition, the Company has granted Rosenthal a Landlord Subordination agreement.

 

In connection with the Accounts Receivable Financing Agreement, the Company has borrowed approximately $1.7 million as of November 30, 2014.  The Accounts Receivable Financing Agreement expires September 30, 2015.

 

At November 30, 2014 we had working capital of $1.2 million. As of November 30, 2014 we had $2,000 in cash and cash equivalents.

 

Cash Requirements

 

We believe that we will need additional funds to continue operations over the next twelve months and for the implementation of our plan of operation.

 

Off Balance Sheet Arrangements

 

Maiden Lane has no off balance sheet arrangements.

 

  

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

 

We are subject to market risk associated with changes in interest rates and commodity prices. Managing these risks is essential to our business. We consider our principal market risk to be fluctuations in the diamond and metal components of our inventory.

 

Commodity Price Risk

 

We are subject to market risk associated with changes in the price of precious metals. We do not enter into any hedging or other derivative contracts (such as forward contracts for the purchase of raw materials) to mitigate commodity price risk as we generally scale our production to near-term demand rather than longer-term demand projections whereby large amounts of raw material are warehoused.

 

Raw materials are stated at the lower of cost or market, with cost determined by specific identification for unique items (such as diamond stones, each with a particular carat weight, color, clarity and cut) and using the first-in, first-out method for generic items or styles (certain semi-mounts and fashion jewelry). Finished goods which we fabricate are stated at the lower of cost or market, with cost determined by specific identification for each component making up the item plus direct labor and other fees (primarily diamond certification).

 

Our manufacture of jewelry is typically for completed inventory with raw materials (individual inventory components of stones and metals) generally held to a minimum. Generally, significant increases or decreases in the market value of diamond and metal components of our inventory result in revised pricing to our customers.

 

Given that we do not hedge or enter into derivate contracts to address commodity price risks, we believe that such risk is immaterial as of November 30, 2014 and 2013.

 

Interest Rate Risk

 

Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net income as a result of interest expense incurred on outstanding debt.

 

We are subject to market risk associated with changes in the prime rate in connection with the Account Receivable Financing Agreement. If short-term interest rates or the prime rate averaged 10% more or less, interest expense would have changed by less than approximately $10,000 for the six months ended November 30, 2014.

 

We did not hold any derivative financial instruments for hedging purposes as of November 30, 2014 or 2013.

 

 Item 4.    Controls and Procedures

 

Management is required by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 to evaluate, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures.

 

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Based on their evaluation, as of the end of the period covered by this Form 10-Q, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

Part II — OTHER INFORMATION

 

Item 1.    Legal Proceedings

 

There are no material legal proceedings to which we are a party, other than ordinary routine litigation incidental to our business.

 

Item 1A. Risk Factors

 

None.

 

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3.    Defaults Upon Senior Securities

 

None.

 

Item 4.    [Removed and Reserved]

 

Item 5.    Other Information

 

None.

  

Item 6.    Exhibits

 

The following exhibits are filed as a part of this Form 10-Q (a) Exhibits required by Item 601 of Regulation S-K.

 

Number		Description
(31)		Section 302 Certification
31.1		Certification of Principal Executive Officer Rule 13a-14(a) pursuant to Rule13a- 14(a) of the Securities Exchange Act of 1934.
31.1		Certification of Principal Financial Officer Rule 13a-14(a) pursuant to Rule13a- 14(a) of the Securities Exchange Act of 1934.
(32)		Section 906 Certification
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, required by Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	MAIDEN LANE JEWELRY, LTD.
	(Registrant)
Date: January 6, 2015	By:	/s/ Michael Wirth
		Michael Wirth
		Chief Executive Officer,