A statement said the company “has been unable to resolve a material uncertainty concerning (a) the collectability and recovery of certain assets, and (b) the Company’s potential obligations under certain lines of credit and a guaranty.”
It added it is “therefore unable to assess the potential effect the ultimate resolution of these matters will have on the financial position and results of operation of the company, and therefore it has been unable to finalize” its financial reports.
The filing said that “net sales of approximately $28.9 million and $126.1 million for the three and nine months ended February 28, 2010 as compared to net sales of $42.2 million and $161.7 million for the comparative prior year periods.”
It added, “Although there are early signs of improving trends, current adverse conditions continue to impact the sectors of the diamond and jewelry industry … Uncertainties regarding future economic prospects and a decline in consumer confidence during Fiscal 2009 and continuing in the current fiscal year translated into lower purchases and sales by diamond retailers, wholesalers and producers and adversely impacted the Company’s operations. During fiscal 2010, the Company continued to focus its efforts on cash flow while reducing operating costs and manufacturing overhead. Gross margins remained under significant pressure as a result of price competition, overhead absorption and inventory valuation considerations.”
The LKI filing said it “is working expeditiously to resolve the Material Uncertainties and believes that once they are resolved, it will be in a position to finalize its financial statements for Fiscal 2009.”