PART III NARRATIVE
State below in reasonable detail why Form 10
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K, 20
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F, 11
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K, 10
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Q, 10
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D, N
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SAR, N
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CSR, or the transition report
or
portion thereof,
could not be filed within the prescribed time period. (Attach extra Sheets if
Needed.)
On March 18, 2009, the Audit Committee (the Committee) of the
registrant concluded that, upon the advice of management, and in consultation
with Ernst & Young LLP, (Ernst & Young), the registrants independent
registered public accounting firm, its previously issued financial statements
for each of the three quarters ended February 29, 2008, May 31, 2008 and August
31, 2008, respectively, will require restatement. The registrants decision to
restate was made in connection with the review of the registrants Form 10-K
for the fiscal year ended November 30, 2007 and the Registration Statement on
Form S-3 filed on October 15, 2008 by the Corporation Finance Division of the
U.S. Securities and Exchange Commission (SEC). The issues raised by the SEC
included the registrants method for (i) valuing of the assets acquired in
connection with the merger of JD Holdings, Inc. (JD Holdings) and the allocation
of the purchase price to those assets; and (ii) accounting for the contingent
consideration payment to Mr. Joseph Dahan, the sole stockholder of JD Holdings,
as an adjustment to the purchase price rather than as compensation expense.
On February 6, 2007, the registrant entered into a Merger Agreement,
which it amended on June 25, 2007, with JD Holdings to acquire its business,
which included all right, title and interest in its intellectual property,
which included the Joes®, Joes Jeans and JD related brand and marks. The
merger was completed on October 25, 2007. The merger was accounted for as a
business combination under U.S. generally accepted accounting principles.
Accordingly, management allocated the purchase price to the assets and
liabilities of JD Holdings in its financial statements as of the completion of
the merger as determined by the registrants valuations. The valuations of
intangible assets, income taxes and certain other items were completed during
the second quarter of fiscal 2008. In addition, under the merger agreement, Mr.
Dahan was entitled, for a period of 120 months following October 25, 2007, a
certain percentage of the gross profit earned by the registrant in any
applicable fiscal year. The contingent consideration has been recorded as
additions to goodwill as the amounts have become known.
Based upon the issues raised by the SEC, the Committee has concluded
that the registrant should (i) perform a new valuation pursuant to Statement of
Financial Accounting Standards No. 141 of the assets acquired in connection
with the merger with JD Holdings and allocate the purchase price according to
such valuation; and (ii) account for the contingent consideration payments to
Mr. Dahan as compensation expense, rather than as additional purchase price.
These matters have been discussed with Ernst & Young who are expected to
review the registrants quarterly financial statements after the restatement.
In light of the pending restatement, the previously issued financial statements
and other financial information contained in the registrants Forms 10-Q for
the periods ending February 29, 2008, May 31, 2008 and August 31, 2008 should
no longer be relied upon. The registrant expects to amend and restate its
quarterly periods in its Annual Report on Form 10-K for the fiscal year ended
November 30, 2008 (Annual Report) in lieu of amending the aforementioned
Forms 10-Q. Upon completion of the restatement process, the registrant will
file its Annual Report as soon as practicable thereafter.
Accordingly, the registrant has delayed the filing of its Quarterly
Report on Form 10-Q for the fiscal quarter ended February 28, 2009 (Quarterly
Report) while it reviews and evaluates certain financial and other information
necessary to complete its Annual Report, as discussed above. Once the registrant has completed its review
and evaluation of such financial and other information and has filed its Annual
Report, it will finalize the disclosure required in its Quarterly Report and
file it as soon thereafter as practicable.
The registrant anticipates filing its Form 10-Q within the timeframe
allowed by Rule 12b-25.
Forward-Looking Statements
Statements in this form regarding the timing of the completion of the
registrants filing of its Quarterly Report are forward-looking statements that
involve risks and uncertainties. All
forward-looking statements included in this form are based upon information
available as of the date of this form, which may change, and the registrant
assumes no obligation to update any such forward-looking statements. These statements are not guarantees of future
performance and actual events could differ materially from the registrants
current expectations.
PART IV OTHER INFORMATION
(1)
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Name and
telephone number of person to contact in regard to this notification
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Lori Nembirkow
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(323)
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837-3700
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(Name)
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(Area Code)
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(Telephone Number)
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(2)
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Have all other
periodic reports required under Section 13 or 15(d) of the Securities
Exchange Act of 1934 or Section 30 of the Investment Company Act of 1940
during the preceding 12 months or for such shorter period that the registrant
was required to file such report(s) been filed? If the answer is no, identify
report(s).
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Yes
x
No
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2
The
Registrant has not filed its Annual Report on Form 10-K for the fiscal year
ended November 30, 2008
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(3)
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Is it
anticipated that any significant change in results of operations from the
corresponding period for the last fiscal year will be reflected by the
earnings statements to be included in the subject report or portion thereof?
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x
Yes
o
No
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If so: attach an
explanation of the anticipated change, both narratively and quantitatively,
and, if appropriate, state the reasons why a reasonable estimate of the
results cannot be made. Please see narrative in Part III above.
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The adjustments made to our financial statements will
include reallocating the purchase price based upon a new valuation, which has
not yet been finalized. The accounting for the contingent consideration
payments as compensation expense rather than as additional purchase price are
expected to result in a charge to expense of $522,000 for the quarter ended
February 29, 2008, $404,000 for the quarter ended May 31, 2008 and $410,000 for
the quarter ended August 31, 2008 with a corresponding reduction to
stockholders equity. We do not expect
any tax effect related to the compensation expense as we have a valuation
allowance with respect to our net operating loss carryforwards.
Joes Jeans Inc.
(Name of Registrant as
Specified in Charter)
has caused this
notification to be signed on its behalf by the undersigned hereunto duly
authorized.
Date:
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April
15, 2009
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By:
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/s/
Marc B. Crossman
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Name: Marc B.
Crossman
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Title: President
& CEO
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INSTRUCTION: The
form may be signed by an executive officer of the registrant or by any other
duly authorized representative. The name and title of the person signing the
form shall be typed or printed beneath the signature. If the statement is
signed on behalf of the registrant by an authorized representative (other than
an executive officer), evidence of the representatives authority to sign on behalf
of the registrant shall be filed with the form.
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ATTENTION
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Intentional misstatements or
omissions of fact constitute Federal Criminal Violations (See 18 U.S.C.
1001).
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