<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
OCTOBER 3, 1997
Date of Report (Date of earliest event reported)
COMMISSION FILE NUMBER: 0-21499
SPECIALTY CATALOG CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3253301
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
21 BRISTOL DRIVE
SOUTH EASTON, MASSACHUSETTS 02375
(Address of principal executive offices)
TELEPHONE NUMBER (508) 238-0199
(Registrant's telephone number, including area code)
================================================================================
<PAGE>
This report on Form 8-K/A amends and supplements a report on Form 8-K filed
by Specialty Catalog Corp. (the "Company") on October 17, 1997 in connection
with the Acquisition of the Daxbourne Group. The disclosure required by Item 2
is included in that report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired:
The consolidated financial statements of Daxbourne Limited for the two
most recent fiscal years, the accountant's report covering such
financial statements and the interim financial statements required by
this item are filed herewith as Exhibits 99.1, 99.2 and 99.3.
(b) Pro Forma Financial Information:
Unaudited Pro Forma Condensed Consolidated Balance Sheet As of
September 27, 1997
Unaudited Pro Forma Condensed Consolidated Statement of Operations For
The Nine Months Ended September 27, 1997
Unaudited Pro Forma Condensed Consolidated Statement of Operations For
The Year Ended December 28, 1996
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
See pages F-1 through F-7.
(c) Exhibits
Exhibit No. Description
----------- -----------
2.1 Terms of Offer made by Daxbourne Limited, Postinstant
Limited and MC Hairways Limited to Daxbourne
International Limited, incorporated herein by reference
to Exhibit 2.1 to Form 8-K of Specialty Catalog Corp.
dated October 3, 1997 (Commission File No. 0-21499).
2.2 The Offer Letter from Daxbourne Limited, Postinstant
Limited and MC Hairways Limited addressed to Daxbourne
International Limited, incorporated herein by reference
to Exhibit 2.2 to Form 8-K of Specialty Catalog Corp.
dated October 3, 1997 (Commission File No. 0-21499).
2
<PAGE>
Exhibit No. Description
----------- -----------
10.1 Credit Agreement dated as of October 3, 1997 between
BankBoston, N.A. (acting through its London Branch) and
Daxbourne International Limited, a subsidiary of the
Registrant, incorporated herein by reference to Exhibit
10.5 to Form 10-Q of Specialty Catalog Corp. for the
quarter ended September 27, 1997 (Commission File No.
0-21499).
23 Consent of Independent Accountant
99.1 Historical audited financial statements and related
notes of Daxbourne Limited as of April 30, 1997 and for
the year then ended.
99.2 Historical audited financial statements and related
notes of Daxbourne Limited as of April 30, 1996 and for
the year then ended.
99.3 Historical unaudited financial statements and related
notes of Daxbourne Limited as of September 27, 1997 and
December 31, 1996 and for the nine months ended
September 27, 1997 and September 30, 1996.
3
<PAGE>
SPECIALTY CATALOG CORP.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
INTRODUCTION:
This unaudited pro forma financial information is presented to give effect to
the Company's acquisition of certain assets and liabilities (the "Acquisition")
of Daxbourne Limited and its wholly owned susidiaries (the "Daxbourne Group" or
"Daxbourne"). The Unaudited Pro Forma Condensed Consolidated Statements of
Operations reflect adjustments as if the Acquisition had occurred on December
31, 1995. The Unaudited Pro Forma Condensed Consolidated Balance Sheet reflects
adjustments as if the Acquisition had occurred on September 27, 1997.
The Acquisition has been accounted for using the purchase method of accounting.
Accordingly, assets acquired and liabilities assumed have been recorded at their
estimated fair values. Management does not expect that the final allocation of
the purchase price for the Acquisition will differ materially from the
allocations set forth in the unaudited pro forma financial information presented
herein.
The pro forma adjustments are based upon available information and assumptions
that management believes are reasonable. The Unaudited Pro Forma Condensed
Consolidated Financial Statements do not purport to present the financial
position or results of operations of the Company had the acquisition of
Daxbourne occurred on the dates specified, nor are they necessarily indicative
of the results of operations that may be achieved in the future. The Unaudited
Pro Forma Condensed Consolidated Statements of Operations do not reflect any
adjustments for synergies that management expects to realize commencing upon
consummation of the acquisition. There are no assurances as to the amount of
cost savings or revenue enhancements, if any, that actually will be realized.
The unaudited pro forma financial information is based on certain assumptions
and adjustments described in the Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements and should be read in conjunction therewith
and with the consolidated financial statements and related notes of the Company
included in its Annual Report on Form 10-K for the fiscal year ended December
28, 1996 and the consolidated financial statements and related notes of
Daxbourne included herein under exhibits 99.1 and 99.2.
F-1
<PAGE>
SPECIALTY CATALOG CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 27, 1997
<TABLE>
<CAPTION>
Historical Pro Forma
Specialty Historical Pro Forma F/N Specialty
Catalog Corp. Daxbourne Adjustments Ref. Catalog Corp.
------------- --------- ----------- ---- ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,725 $ 2,202 $ --- $ 5,927
Accounts receivable, net 1,153,744 295,035 --- 1,448,779
Inventories 5,456,495 508,874 --- 5,965,369
Prepaid expenses 2,613,256 --- (119,952) A 2,493,304
----------- ---------- ----------- ------------
Total current assets 9,227,220 806,111 (119,952) 9,913,379
----------- ---------- ----------- ------------
Property and equipment, net 1,200,298 469,441 --- 1,669,739
----------- ---------- ----------- ------------
Deferred income taxes 5,698,570 --- --- 5,698,570
----------- ---------- ----------- ------------
Intangible assets, net --- --- 3,918,119 B 3,918,119
----------- ---------- ----------- ------------
Other assets 300,367 --- 67,753 C 368,120
----------- ---------- ----------- ------------
Total assets $16,426,455 $1,275,552 $ 3,865,920 $21,567,927
=========== ========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses 1,794,532 249,544 778,778 E 2,822,854
Line of credit 2,027,760 --- 1,831,479 D 3,859,239
Liabilities to customers 882,667 --- --- 882,667
Income taxes 111,640 --- --- 111,640
Current portion of long-term debt 500,000 --- 500,000
Deferred consideration --- --- 483,900 F 483,900
----------- ---------- ----------- ------------
Total current liabilities 5,316,599 249,544 3,094,157 8,660,300
----------- ---------- ----------- ------------
Long-term debt 4,500,000 --- 1,797,771 D 6,297,771
Stockholders' equity:
Common stock 49,670 807 (807) G 49,670
Additional paid-in capital 15,696,393 --- --- 15,696,393
Deferred compensation (70,238) --- --- (70,238)
Accumulated deficit (9,065,969) 1,025,201 (1,025,201) G (9,065,969)
----------- ---------- ----------- ------------
Total stockholders' equity 6,609,856 1,026,008 (1,026,008) 6,609,856
----------- ---------- ----------- ------------
Total liabilities and stockholders'
Equity $16,426,455 $1,275,552 $ 3,865,920 $21,567,927
=========== ========== =========== ===========
</TABLE>
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-2
<PAGE>
SPECIALTY CATALOG CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1997
<TABLE>
<CAPTION>
Historical Pro Forma
Specialty Historical Pro Forma F/N Specialty
Catalog Corp. Daxbourne Adjustments Ref. Catalog Corp.
------------- --------- ----------- ---- -------------
<S> <C> <C> <C> <C> <C>
Net sales $31,531,937 $3,604,753 $ --- $35,136,690
Cost of sales (including buying,
occupancy and order fulfillment costs) 10,701,088 1,109,263 --- 11,810,351
----------- ---------- ---------- -----------
Gross profit 20,830,849 2,495,490 --- 23,326,339
Selling, general & administrative
expenses 17,863,094 1,890,759 --- 19,753,853
Amortization of intangibles --- --- 230,015 H 230,015
----------- ---------- ---------- -----------
Income from operations 2,967,755 604,731 (230,015) 3,342,471
Interest income (expense), net (598,240) 26,818 (257,677) I (829,099)
----------- ---------- ---------- -----------
Income before income taxes and
extraordinary items 2,369,515 631,549 (487,692) 2,513,372
Income tax provision (benefit) 995,196 170,409 (113,597) J 1,052,008
----------- ---------- ---------- -----------
Income before extraordinary items $ 1,374,319 $ 461,140 ($374,095) $ 1,461,364
=========== ========== ========== ===========
Per common share:
Income before extraordinary items $0.25 $0.26
=========== ===========
Weighted average shares outstanding 5,523,587 5,523,587
=========== ===========
</TABLE>
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-3
<PAGE>
SPECIALTY CATALOG CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 28, 1996
<TABLE>
<CAPTION>
Historical Pro Forma
Specialty Historical Pro Forma F/N Specialty
Catalog Corp. Daxbourne Adjustments Ref. Catalog Corp.
------------- ---------- ----------- ---- -------------
<S> <C> <C> <C> <C> <C>
Net sales $36,271,663 $5,138,492 $ $41,410,155
---
Cost of sales (including buying,
occupancy and order fulfillment costs) 12,810,921 1,679,809 --- 14,490,730
----------- ---------- ------------ -----------
Gross profit 23,460,742 3,458,683 --- 26,919,425
Selling, general & administrative
expenses 20,185,965 2,797,205 --- 22,983,170
Amortization of intangibles --- --- 306,687 H 306,687
----------- ---------- ------------ -----------
Income from operations 3,274,777 661,478 (306,687) 3,629,568
Interest income (expense), net (1,657,471) 15,193 (343,570) I (1,985,848)
----------- ---------- ------------ -----------
Income before income taxes 1,617,306 676,671 (650,257) 1,643,720
Income tax provision (benefit) 644,047 260,846 (205,837) J 699,056
----------- ---------- ------------ -----------
Net income $ 973,259 $ 415,825 ($444,420) $ 944,664
=========== ========== ============ ===========
Per common share:
Net income per share $0.25 $0.24
=========== ===========
Weighted average shares outstanding 3,946,211 3,946,211
=========== ===========
</TABLE>
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-4
<PAGE>
SPECIALTY CATALOG CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The acquisition of certain assets and liabilities of the Daxbourne Group
has been accounted for using the purchase method of accounting. Accordingly,
assets acquired and liabilities assumed have been recorded at their estimated
fair values. Management does not expect that the final allocation of the
purchase price for the acquisition of the Daxbourne Group will differ materially
from the allocations set forth in the unaudited pro forma financial information
presented herein.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
reflect adjustments as if the acquisition of the Daxbourne Group had occurred on
December 31, 1995. The Unaudited Pro Forma Condensed Consolidated Balance Sheet
reflects adjustments as if the acquisition of the Daxbourne Group had occurred
on September 27, 1997.
The Historical Daxbourne Balance Sheet as of September 27, 1997 has been
adjusted to reflect only the assets and liabilities acquired by the Company.
The translation of the Historical Daxbourne Financial Statements from pound
sterling to United States dollars has been performed using the foreign currency
exchange rate as of October 3, 1997 of $1.613 to (Pounds)1.00.
2. THE DAXBOURNE ACQUISITION
On October 3, 1997, Daxbourne International Limited, a wholly owned
subsidiary of SC Corporation, which in turn is the principal operating
subsidiary of Specialty Catalog Corp., accepted an offer to acquire the assets
of the Daxbourne Group.
The Daxbourne Group is a leading retailer of women's wigs, hairpieces and
related products in the U.K. The Daxbourne Group distributes wigs and
hairpieces under its Jacqueline Collection, Pretty Woman and Natural Image
brands, and has established a strong presence in the U.K. through catalog,
retail and wholesale distribution channels.
As part of this transaction, the Company has acquired substantially all of
the inventory, real property, physical plant and equipment, intangible assets
and other assets used in connection with Daxbournes' business.
The Company financed this acquisition through its senior facility with
BankBoston N.A., which was increased from an $11 million U.S. facility to a $15
million combined U.S. and U.K. facility.
F-5
<PAGE>
SPECIALTY CATALOG CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. DESCRIPTION OF CONSIDERATION
The aggregate consideration for the acquisition of certain assets and
liabilities of the Daxbourne Group was $4,874,776, with $3,629,250 paid at
closing and $483,900 payable without interest one year from closing, plus
acquisition costs of $761,626. The following is a summary of the allocation of
the purchase price to net assets acquired as a result of the Daxbourne
acquisition:
<TABLE>
<S> <C>
Cash $ 2,202
Accounts receivable, net 295,035
Inventory 508,874
Property and equipment 469,441
Deferred debt costs 67,753
Current liabilities (386,648)
Customer list 250,000
Covenant not to compete 806,500
Trade Names 1,100,000
Goodwill 1,761,619
----------
$4,874,776
==========
</TABLE>
The purchase price was allocated to the assets and liabilities acquired
based on their estimated respective fair values.
4. PRO FORMA ADJUSTMENTS RELATED TO THE DAXBOURNE ACQUISITION
A. To eliminate acquisition costs paid by Specialty Catalog Corp. prior
to closing which are included in the aggregate purchase price.
B. To record the adjustments for the estimated fair values of the
customer list, covenant not to compete, tradenames, and goodwill
acquired.
C. To record the deferred debt costs associated with obtaining the
borrowings under the UK Line of Credit and the UK Term Loan. These
cost are to be amortized over four years.
D. To record the $1,831,479 borrowing under the UK Line of Credit and the
$1,797,771 borrowing under the UK Term Loan.
F-6
<PAGE>
SPECIALTY CATALOG CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
E. To record accrued acquisition costs of $778,778, including certain
integration costs of Daxbourne.
F. To record the deferred purchase price consideration which is payable
one year from the closing.
G. To eliminate Daxbourne's common stock of $807 and retained earnings of
$1,025,201.
H. To record amortization expense based on amortization of the customer
list and the covenant not to compete over 5 years, and amortization of
the tradenames and goodwill over 30 years, resulting in an adjustment
of $230,015 for the nine months ended September 27, 1997 and $306,687
for the year ended December 28, 1996.
I. To record interest expense on the borrowings under the UK Line of
Credit and UK Term Loan to finance the acquisition at an interest rate
of 9% per annum and the amortization of the deferred debt costs.
J. To record income tax provision (benefit).
F-7
<PAGE>
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 hereunto duly authorized.
SPECIALTY CATALOG CORP.
Dated: December 10, 1997
/s/ Steven L. Bock
------------------------------------
Steven L. Bock
Chairman and Chief Executive Officer
Dated: December 10, 1997 /s/ J. William Heise
------------------------------------
J. William Heise
Senior Vice President, Chief Financial Officer
(Principal Accounting and Financial Officer)
<PAGE>
EXHIBIT 23
F.L.R. LININGTON FAPA, ATII
---------------------------
CONSENT OF INDEPENDENT ACCOUNTANT
We consent to the inclusion in this current report on Form 8-K/A, as
amended, of our reports dated October 22, 1997 on our audit of the financial
statements of Daxbourne Limited as of April 30, 1997 and April 30, 1996.
/s/ F.L.R. Liningtion
-----------------------------------
F.L.R. Linington
December 10, 1997
<PAGE>
EXHIBIT 99.1
DAXBOURNE LIMITED
FINANCIAL STATEMENTS
30/TH/ APRIL 1997
Company Registration Number 1320298
F.L.R. LININGTON FAPA, ATII
----------------------------
Registered Auditor
83 High Street
Caterham
Surrey CR3 5UF
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
FINANCIAL ACCOUNTS
FOR THE YEAR ENDED 30/TH/ APRIL 1997
CONTENTS
1. & 2. Report of the Director
Statement of Director's Responsibilities
3. Report of the Auditor to the Shareholders
4. Consolidated Profit and Loss Account
5. Consolidated Balance Sheet
6. Balance Sheet
7. Consolidated Cash Flow Statement
8. Notes to the Accounts
<PAGE>
DAXBOURNE LIMITED
DIRECTOR'S REPORT FOR THE YEAR ENDED 30/TH/ APRIL 1997
The Director has pleasure in submitting the Annual Report and Financial
Statements for the year ended 30/th/ April 1997.
RESULTS AND DIVIDEND
- --------------------
The Results of the year are stated in the Financial Statements. A dividend of
(Pounds)160 per share was paid during the year.
ACTIVITIES
- ----------
The activities of the Group are of importing and distributing a range of
products.
FIXED ASSETS
- ------------
Information relating to changes in Tangible Fixed Assets is given in Note 7 to
the Financial Statements.
CHARITABLE AND POLITICAL CONTRIBUTIONS
- --------------------------------------
During the year the Company made no political contributions (1996 -
(Pounds)nil). Donations to the U.K. Charities amounted to Nil (1996 -
(Pounds)350).
DIRECTOR
- --------
The Director of the Company during the year, together with his shareholdings,
was as follows:
30.4.97 30.4.96
------- -------
M.J. STANNARD 500 500
TAX STATUS
- ----------
The Director is of the Opinion that the Company is a close Company as defined by
the S414 Income and Corporation Taxes Act 1988.
DIRECTORS RESPONSIBILITIES
- --------------------------
Company law requires the director to prepare financial statements for each
financial year which give true and fair view of the state of affairs of the
company at the end of the year and of the profit and loss for the year ended.
In preparing those financial statements, the director is required to select
suitable accounting policies, as described on page 8, and then apply them on a
consistent basis, making judgements and estimates that are prudent and
reasonable. The director must also prepare the financial statements on the
going concern basis unless it is inappropriate to presume that the company will
continue in business.
The director is responsible for keeping proper accounting records which disclose
with reasonable accuracy at any time the financial position of the company and
enable him to ensure that the financial statements comply with the
1
<PAGE>
DAXBOURNE LIMITED
DIRECTOR'S REPORT FOR THE YEAR ENDED 30/TH/ APRIL 1997
(CONTINUED)
Companies Act 1985. The director is also responsible for safeguarding the
assets of the company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
POST BALANCE SHEET EVENT
- ------------------------
There have been significant events which have occurred since the year end and
these are covered in note 19 of the financial statements.
AUDITOR
- -------
A resolution to re-appoint F.L.R. Linnington FAPA ATII, as auditor for the
ensuing year will be proposed at the annual general meeting in accordance with
section 385 of the Companies Act 1985.
Registered Office: Signed on behalf of the Director
9 Fenning Street
London
SE1 9QR /s/ R R Searle
--------------------------
R R Searle
Company Secretary
Approved by the director on 5/th/ September 1997
2
<PAGE>
REPORT OF THE AUDITOR TO THE MEMBERS OF
DAXBOURNE LIMITED
I have audited the Financial Statements on pages 4 to 14 in accordance with
approved auditing standards.
RESPECTIVE RESPONSIBILITIES OF DIRECTOR AND AUDITOR
As described in the director's report, the director of the company is
responsible for the preparation of financial accounts. It is my responsibility
to form an independent opinion, based on my audit, on those statements and to
report my opinion to you.
BASIS OF OPINION
I conducted my audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial accounts. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial accounts, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
I planned and performed my audit so as to obtain all the information and
explanations which I considered necessary in order to provide me with sufficient
evidence to give reasonable assurance that the financial accounts are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming my opinion I also evaluated the overall adequacy of the presentation
of information in the financial statements.
In my opinion the Financial Statements, which have been prepared under the
historical cost convention, give a true and fair view of the state of affairs of
the Company and the Group at the 30/th/ April 1997 and of its Profit and Loss
results and Cash Flows for the year then ended and have been properly prepared
in accordance with the Companies Act 1985 applicable to small companies.
/s/ F.L.R. Linington
-----------------------------------------
F.L.R. LININGTON, F.A.P.A., A.T.I.I.
Registered Auditor
------------------
83 High Street
Caterham
Surry
CR3 5UF
22/nd/ October 1997
3
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE YEAR ENDED 30/TH/ APRIL 1997
<TABLE>
<CAPTION>
NOTES 1997 1996
---- ---- ----
<S> <C> <C> <C>
Turnover 2 (Pounds)3,081,397 (Pounds)3,345,291
Cost of sales (991,350) (1,191,592)
--------- -----------
Gross profit 2,090,047 2,153,699
Non-operating expenses
- ----------------------
Distribution costs (83,802) (128,156)
Administration costs (1,400,973) (1,717,677)
----------- -----------
Operating profit 3 605,272 307,866
Other operating income
- ----------------------
Interest receivable 4 12,097 10,220
------ ------
617,369 318,086
Interest payable 5 (6,259) (30,703)
------ -------
Profit on ordinary activities before taxation 611,110 287,383
Taxation 6 (182,468) (139,553)
-------- --------
428,642 147,830
Dividends (80,000) ---
-------- --------
(Pounds)348,642 (Pounds)147,830
=============== ===============
Profit in the year in -
- -----------------------
The Company (Pounds)142,607 (Pounds)50,841
Subsidiaries 206,035 96,989
------- ------
(Pounds)348,642 (Pounds)147,830
=============== ===============
</TABLE>
4
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
AS AT 30/TH/ APRIL 1997
<TABLE>
<CAPTION>
NOTES 1997 1996
----- ---- ----
<S> <C> <C> <C>
Fixed Assets
- ------------
Tangible assets 7 (Pounds)313,631 (Pounds)304,268
=============== ===============
Current Assets
- --------------
Stocks 9 393,886 399,854
Debtors 10 329,485 279,035
Cash at bank and in hand 561,122 330,995
------- -------
1,284,493 1,009,884
Current Liabilities
- -------------------
Amounts falling due within one year 11 (545,014) (608,382)
--------- ---------
Net Current Assets (Pounds)739,479 (Pounds)401,502
================ ================
Total Assets Less Liabilities 1,053,110 705,770
Creditors due after more than one year 12 (2,279) (3,581)
------- -------
(Pounds)1,050,831 (Pounds)702,189
================== ================
Capital Reserves
- ----------------
Share capital 13 500 500
Reserves 14 1,050,331 701,689
--------- -------
(Pounds)1,050,831 (Pounds)702,189
================= ===============
</TABLE>
5
<PAGE>
DAXBOURNE LIMITED
BALANCE SHEET
AS AT 30/TH/ APRIL 1997
<TABLE>
<CAPTION>
NOTES 1997 1996
----- ---- ----
<S> <C> <C> <C>
Fixed Assets
- ------------
Tangible assets 7 (Pounds)309,450 (Pounds)291,494
Investments 8 70,500 70,500
--------------- ---------------
(Pounds)379,950 (Pounds)361,994
=============== ===============
Current Assets
- --------------
Stocks 9 393,886 399,854
Debtors 10 331,594 296,727
Cash at bank and in hand 538,324 309,966
--------------- ---------------
1,263,804 1,006,547
Current Liabilities
Amounts falling due within one year 11 (1,227,927) (1,094,019)
-------------- ---------------
Net Current Assets (Pounds)35,877 (Pounds)(87,472)
============== ===============
Total Assets Less Liabilities 415,827 274,522
Creditors due after more than one year 12 (2,279) (3,581)
--------------- ---------------
(Pounds)413,548 (Pounds)270,941
=============== ===============
Capital Reserves
- ----------------
Share capital 13 500 500
Reserves 14 413,048 270,441
--------------- ---------------
(Pounds)413,548 (Pounds)270,941
=============== ===============
</TABLE>
6
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30/TH/ APRIL 1997
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES (Pounds)487,998 (Pounds)387,199
TAXATION
Corporation tax paid (130,509) (182,351)
INVESTING ACTIVITIES
Receipts from sale of fixed assets 8,200 5,585
--------------- ---------------
NET CASH INFLOW BEFORE FINANCING 365,689 210,433
FINANCING
Purchase of fixed assets (55,562) (35,083)
Dividend (80,000) ---
--------------- ---------------
NET CASH OUTFLOW FROM FINANCING (135,562) (35,083)
--------------- ---------------
INCREASE IN CASH AND CASH EQUIVALENTS (Pounds)230,127 (Pounds)175,350
=============== ===============
RECONCILIATION OF OPERATING PROFIT TO NET CASH
INFLOW FROM OPERATING ACTIVITIES:
Operating profit (Pounds)611,110 (Pounds)287,383
Depreciation 37,997 165,271
(Increase)/decrease in debtors (50,450) (31,416)
Increase/(decrease) in creditors (116,627) (87,895)
(Increase)/decrease in stocks 5,968 53,856
--------------- ---------------
NET CASH INFLOW FROM OPERATING ACTIVITIES (Pounds)487,998 (Pounds)387,199
=============== ===============
ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS
DURING THE YEAR
Balance brought forward (Pounds)330,995
Net cash inflow 230,127
---------------
Balance carried forward (Pounds)561,122
===============
</TABLE>
7
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1997
FORMING PART OF THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
-------------------
BASIS OF ACCOUNTING
The accounts have been prepared under the historical cost convention and in
accordance with applicable accounting standards.
The historical cost convention has been modified to include revaluation of
land and buildings.
CONSOLIDATION
The Consolidated Financial Statements incorporate the Accounts of the
Company and all its subsidiaries being made up to 30/th/ April 1997 in
accordance with the Companies Act 1985. A separate Profit and Loss Account
for Daxbourne Limited is not presented as the result of the Company are
disclosed in the consolidated Profit and Loss Account.
The effect of events related to the year ended 30/th/ April 1997 which
occurred before 5/th/ September 1997, the date of approval of the Financial
Statements by the Board of Directors have been included in the Statements
to the extent required to show a true and fair view of the state of affairs
at 30/th/ April 1997 and the results for the year ended on that date.
TAXATION
The charge for taxation is based on the Profit for the year and takes into
account taxation deferred because of timing differences between the
treatment of certain items for taxation and accounting purposes. No
provision for deferred taxation is made if there is reasonable evidence
that such deferred taxation will not be payable in the foreseeable future.
TURNOVER
Turnover represents the net invoiced sale of goods, excluding VAT.
TANGIBLE FIXED ASSETS
No depreciation is provided on freehold property which is maintained such
that its estimated residual value is in excess of the book value in these
financial statements.
Depreciation is provided on other fixed assets at the following annual
rates in order to write off each asset over its estimated useful life:
Motor Vehicles 25% on net book value
Plant and Equipment 10% on cost
Computer Equipment 20% on cost
INTANGIBLE FIXED ASSETS
Costs have been capitalized and are amortized over the estimated life of
the asset as follows:
Goodwill: in equal installments over three years
STOCKS
Stocks are valued at the lower of cost and net realizable value after
making due allowance for obsolete and slow-moving items. There has been an
amendment during the year to the basis used for stock from FIFO to average
cost. In valuing stock the Company has continued with its policy of
applying a fixed exchange rate for the US Dollar of $1.50/(Pounds)1.
8
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1997
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
HIRE PURCHASE AGREEMENTS
Assets held under hire purchase agreements are capitalized and disclosed
under tangible fixed assets at their fair value. The capital element of
the future payments is treated as a liability and the interest is charged
to the profit and loss account.
OPERATING LEASE AGREEMENTS
Rentals applicable to operating leases where substantially all of the
benefits and risks of ownership remain with the lessor are charged against
profits as incurred.
PENSION COSTS
The Company operates a defined contribution pension scheme. Contributions
payable for the year are charged in the profit and loss account. The level
of contributions is calculated with actuarial advice. Independent
actuarial valuations of the scheme are made every three years.
2. TURNOVER
--------
The Turnover and Profit (1996 - Profit) before taxation for the year is
attributable to the principal activity of the Company which is importing
and distributing a range of products.
In the opinion of the Director's, 5% of the company's turnover is
attributable to geographical markets outside of the UK. (1996 - 5%).
3. OPERATING PROFIT
----------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Operating profits is stated after charging:
Directors Emoluments (Pounds)85,389 (Pounds)57,153
Directors Pension 26,250 17,500
Depreciation of Fixed Tangible Assets 37,993 30,271
Depreciation of Intangible Assets --- 135,000
Auditors Renumeration 36,000 24,650
</TABLE>
4. INTEREST RECEIVABLE
-------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Interest from Bank Deposits (Pounds)12,097 (Pounds)10,220
</TABLE>
9
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1997
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
5. INTEREST PAYABLE
----------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Finance Charges (Pounds)656 (Pounds)711
Other interest and similar charges 5,603 29,992
----- ------
(Pounds)6,259 (Pounds)30,703
============= ==============
</TABLE>
6. TAXATION
--------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
UK Corporation Tax on profits for the year (Pounds)192,649 (Pounds)140,700
Prior Year's Adjustment (10,181) (1,147)
------ -----
(Pounds)182,468 (Pounds)139,553
=============== ===============
</TABLE>
7. FIXED TANGIBLE ASSETS
---------------------
<TABLE>
<CAPTION>
FREEHOLD PLANT &
Group PROPERTY MACHINERY TOTAL
----- -------- --------- -----
<S> <C> <C> <C>
At 1/st/ May 1996 (Pounds)200,000 (Pounds)273,705 (Pounds)473,705
Additions --- 55,563 55,563
Disposals --- (64,108) (64,108)
--- ------ ------
At 30/th/ April 1997 (Pounds)200,000 (Pounds)265,160 (Pounds)465,160
=============== =============== ===============
Depreciation
------------
At 1/st/ May 1996 (Pounds)--- (Pounds)169,437 (Pounds)169,437
Charge for year --- 31,153 31,153
Disposals --- (49,061) (49,061)
--- ------ ------
At 30/th/ April 1997 (Pounds)--- (Pounds)151,529 (Pounds)151,529
=========== =============== ===============
Net 30/th/ April 1997 (Pounds)200,000 (Pounds)113,631 (Pounds)313,631
=============== =============== ===============
Net 30/th/ April 1996 (Pounds)200,000 (Pounds)104,268 (Pounds)304,268
=============== =============== ===============
</TABLE>
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1997
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
8. FIXED TANGIBLE ASSETS (continued)
---------------------
<TABLE>
<CAPTION>
FREEHOLD PLANT &
Company PROPERTY MACHINERY TOTAL
------- -------- --------- -----
<S> <C> <C> <C>
At 1/st/ May 1996 (Pounds)200,000 (Pounds)214,120 (Pounds)414,120
Additions --- 55,365 55,365
Disposals --- (21,113) (21,113)
--- ------ ------
At 30/th/ April 1997 (Pounds)200,000 (Pounds)248,372 (Pounds)448,372
=============== =============== ===============
Depreciation
------------
At 1/st/ May 1996 (Pounds)--- (Pounds)122,627 (Pounds)122,627
Charge for year --- 29,493 29,493
Disposals --- (13,198) (13,198)
--- ------ ------
At 30/th/ April 1997 (Pounds)--- (Pounds)138,922 (Pounds)138,922
=========== =============== ===============
Net 30/th/ April 1997 (Pounds)200,000 (Pounds)109,450 (Pounds)309,450
=============== =============== ===============
Net 30/th/ April 1996 (Pounds)200,000 (Pounds)91,494 (Pounds)291,494
=============== ============== ===============
</TABLE>
9. FIXED ASSET INVESTMENTS
-----------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Subsidiary Companies Shares at cost (Pounds) 70,500 (Pounds) 70,500
=============== ===============
</TABLE>
GROUP ACCOUNTS AND SUBSIDIARIES
The Company's subsidiaries are:
<TABLE>
<CAPTION>
Registered Number
& Country of Holding of Share Capital Profit/(Loss) for
Subsidiary Companies Incorporation Ordinary shares and Reserves the Year
-------------------- ----------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Postinstant Limited 1559076, England 100% 688,111 186,288
M.C. Hairways Limited 2758010, England 100% (82,827) 19,748
</TABLE>
Stock purchases by subsidiaries from Daxbourne Limited were conducted at an
appropriate transfer price.
M.C. Hairways Limited ceased to trade during the year ended 30/th/ April
1997.
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1997
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
10. STOCKS
------
<TABLE>
<CAPTION>
1997 1996
---- ----
Group Company Group Company
----- ------- ----- -------
<S> <C> <C> <C> <C>
Goods for resale (Pounds)393,886 (Pounds)393,886 (Pounds)399,854 (Pounds)399,854
=============== =============== =============== ===============
</TABLE>
11. DEBTORS
-------
<TABLE>
<CAPTION>
1997 1996
---- ----
Due within one year: Group Company Group Company
----- ------- ----- -------
<S> <C> <C> <C> <C>
Trade Debtors (Pounds)264,891 (Pounds)245,530 (Pounds)221,658 (Pounds)180,113
Prepayments & accrued income 64,594 71,889 57,377 20,100
Intergroup --- 14,175 --- 96,514
--- ------ --- ------
(Pounds)329,485 (Pounds)331,594 (Pounds)279,035 (Pounds)296,727
=============== ============== =============== ===============
</TABLE>
12. CREDITORS
---------
<TABLE>
<CAPTION>
1997 1996
---- ----
Group Company Group Company
----- ------- ----- -------
<S> <C> <C> <C> <C>
Amounts falling due within one year:
------------------------------------
Due to Subsidiaries (Pounds)--- (Pounds)847,833 (Pounds)--- (Pounds)579,787
Trade Creditors 72,224 56,930 77,594 69,185
Hire Purchases 1,302 1,302 1,342 1,342
Other Creditors 471,488 321,862 529,446 443,705
Bank Overdrafts (See note 15) --- --- --- ---
--- --- --- ---
(Pounds)545,014 (Pounds)1,227,927 (Pounds)608,382 (Pounds)1,094,019
=============== ================= =============== =================
</TABLE>
12
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1997
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
13. CREDITORS
---------
<TABLE>
<CAPTION>
1997 1996
---- ----
Group Company Group Company
----- ------- ----- -------
<S> <C> <C> <C> <C>
Amounts falling due after more than one year:
---------------------------------------------
Other Creditors (Pounds)2,279 (Pounds)2,279 (Pounds)3,581 (Pounds)3,581
` ============= ============= ============= =============
</TABLE>
14. SHARE CAPITAL
-------------
<TABLE>
<CAPTION>
Authorized 1997 1996
---------- ---- ----
<S> <C> <C>
1,000 Ordinary Shares of (Pounds)1 each (Pounds)1,000 (Pounds)1,000
============= =============
Issued
------
500 Ordinary Shares (Pounds)500 (Pounds)500
=========== ===========
</TABLE>
15. RESERVES
--------
<TABLE>
<CAPTION> Capital
Redemption
Profit & Loss Reserve Total
------------- ------- -----
Group
-----
<S> <C> <C> <C>
As at 1/st/ May 1996 (Pounds)701,189 (Pounds)500 (Pounds)701,689
Transfer from Profit & Loss A/c 348,642 --- 348,642
------- --- -------
As at 30/th/ April 1997 (Pounds)1,049,831 (Pounds)500 (Pounds)1,050,331
================= =========== ================
Company
-------
As at 1/st/ May 1996 (Pounds)269,941 (Pounds)500 (Pounds)270,441
Transfer from Profit & Loss A/c 142,607 --- 142,607
------- --- -------
As at 30/th/ April 1997 (Pounds)412,548 (Pounds)500 (Pounds)413,048
=============== =========== ===============
</TABLE>
16. CONTINGENT LIABILITY AND GUARANTEES
-----------------------------------
The Company has guaranteed the Bank by way of a fixed and floating charge
over the undertaking and assets of the Company to a maximum of
(Pounds)200,000.
13
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1997
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
17. COMMITMENTS UNDER HIRE PURCHASE AGREEMENTS
------------------------------------------
Future commitments under hire purchase agreements are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Amounts payable within 1 year (Pounds)1,998 (Pounds)1,998
Amounts payable between 2 to 5 years 3,497 5,495
----- -----
5,495 7,493
Interest and finance charges relating to
future periods (1,914) (2,570)
------- -------
(Pounds)3,581 (Pounds)4,923
============== ==============
</TABLE>
18. COMMITMENTS UNDER OPERATING LEASES
----------------------------------
At 30/th/ April 1997 the Company had annual commitments under non-
cancellable operating leases as set out below.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS OTHER THAN LAND AND BUILDINGS
Operating leases (Pounds)17,850 (Pounds)17,495
============== ==============
</TABLE>
19. POST BALANCE SHEET EVENTS
-------------------------
Several events having significant impact on an understanding of the
accounts have occurred between the year end and the date of the auditor's
signature. These are:
OFFER FOR THE COMPANY
An offer has been made for the entire share capital of the Company.
Amounts stated for provisions are calculated on the basis that neither
party will seek to restructure the Company in the short to medium term.
CHANGE IN SHARE OWNERSHIP
The majority of the issued share capital of the Company has been
transferred to a trust.
DIVIDENDS
On 19 June 1997 a dividend of (Pounds)280,000 was declared and paid.
14
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
(Unaudited)
The Historical Daxbourne Limited Financial Statements are presented using
generally accepted accounting principles of the United Kingdom. In
management's opinion, there are no material variations in the accounting
principles, practices and methods used in preparing these financial
statements from the principles, practices and methods accepted in the
United States.
15
<PAGE>
EXHIBIT 99.2
DAXBOURNE LIMITED
FINANCIAL STATEMENTS
30/TH/ APRIL 1996
Company Registration Number 1320298
F.L.R. LININGTON FAPA, ATII
----------------------------
Registered Auditor
83 High Street
Caterham
Surrey CR3 5UF
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
FINANCIAL ACCOUNTS
FOR THE YEAR ENDED 30/TH/ APRIL 1996
CONTENTS
1. & 2. Report of the Director
Statement of Director's Responsibilities
3. Report of the Auditor to the Shareholders
4. Consolidated Profit and Loss Account
5. Consolidated Balance Sheet
6. Balance Sheet
7. Consolidated Cash Flow Statement
8. Notes to the Accounts
<PAGE>
DAXBOURNE LIMITED
DIRECTOR'S REPORT FOR THE YEAR ENDED 30/TH/ APRIL 1996
The Director has pleasure in submitting the Annual Report and Financial
Statements for the year ended 30/th/ April 1996.
RESULTS AND DIVIDEND
- --------------------
The Results of the year are stated in the Financial Statements.
ACTIVITIES
- ----------
The activities of the Group are of importing and distributing a range of
products.
FIXED ASSETS
- ------------
Information relating to changes in Tangible Fixed Assets is given in Note 7 to
the Financial Statements.
CHARITABLE AND POLITICAL CONTRIBUTIONS
- --------------------------------------
During the year the Company made no political contributions (1995 -
(Pounds)nil). Donations to the U.K. Charities amounted to (Pounds)350 (1995 -
(Pounds)1,375).
DIRECTOR
- --------
The Director of the Company during the year, together with his shareholdings,
was as follows:
30.4.96 30.4.95
------- -------
M.J. STANNARD 500 500
AUDITOR
- -------
The Auditor, F.L.R. Linnington, is willing to continue in Office and a
Resolution concerning his re-appointment will be submitted to the Annual General
Meeting.
TAX STATUS
- ----------
The Director is of the Opinion that the Company is a close Company as defined by
the S414 Income and Corporation Taxes Act 1988.
BY ORDER OF THE BOARD
Secretary
---------
1
<PAGE>
DAXBOURNE LIMITED
STATEMENT OF DIRECTOR'S RESPONSIBILITIES
I am required under company law to prepare financial accounts for each financial
year which give a true and fair view of the state of the affairs of the company
and of the profit and loss of the company for that period. In preparing those
financial accounts I am required to:
- select suitable accounting policies and then apply them consistently:
- make judgements and estimates that are reasonable and prudent:
- prepare the financial accounts on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The director is responsible for keeping proper accounting records which disclose
with reasonable accuracy at any time the financial position of the company and
to enable him to ensure that the financial accounts comply with the Companies
Act 1985. He is also responsible for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
By Order of the Board
30/th/ August 1996
2
<PAGE>
REPORT OF THE AUDITOR TO THE MEMBERS OF
DAXBOURNE LIMITED
I have audited the Financial Statements on pages 4 to 13 in accordance with
approved auditing standards.
RESPECTIVE RESPONSIBILITIES OF DIRECTOR AND AUDITOR
As described in the director's report, the director of the company is
responsible for the preparation of financial accounts. It is my responsibility
to form an independent opinion, based on my audit, on those statements and to
report my opinion to you.
BASIS OF OPINION
I conducted my audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial accounts. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial accounts, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
I planned and performed my audit so as to obtain all the information and
explanations which I considered necessary in order to provide me with sufficient
evidence to give reasonable assurance that the financial accounts are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming my opinion I also evaluated the overall adequacy of the presentation
of information in the financial statements.
In my opinion the Financial Statements, which have been prepared under the
historical cost convention, give a true and fair view of the state of affairs of
the Company and the Group at the 30/th/ April 1996 and of its Profit and Loss
results and Cash Flows for the year then ended and have been properly prepared
in accordance with the Companies Act 1985 applicable to small companies.
/s/ F.L.R. Linington
-----------------------------------
F.L.R. LININGTON, F.A.P.A., A.T.I.I.
Registered Auditor
------------------
83 High Street
Caterham
Surry
CR3 5UF
22/nd/ October 1997
3
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE YEAR ENDED 30/TH/ APRIL 1996
<TABLE>
<CAPTION>
NOTES 1996 1995
----- ---- ----
<S> <C> <C> <C>
Turnover 2 (Pounds)3,345,291 (Pounds)2,706,177
Cost of sales (1,191,592) (1,535,795)
--------- ---------
Gross profit 2,153,699 1,170,382
Non-operating expenses
- ----------------------
Distribution costs (128,156) (104,769)
Administration costs (1,717,677) (580,039)
--------- -------
Operating profit 3 307,866 485,574
Other operating income
- ----------------------
Leasing --- 138
Interest receivable 4 10,220 7,517
------ -----
318,086 493,229
Interest payable 5 (30,703) (182)
------ ---
Profit on ordinary activities before taxation 287,383 493,047
Taxation 6 (139,553) (182,312)
------- -------
(Pounds)147,830 (Pounds)310,735
============== ==============
Profit in the year in -
- -----------------------
The Company 50,841 73,663
Subsidiaries 96,989 237,072
------ -------
(Pounds)147,830 (Pounds)310,735
============== ==============
</TABLE>
4
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
AS AT 30/TH/ APRIL 1996
<TABLE>
<CAPTION>
NOTES 1996 1995
----- ---- ----
<S> <C> <C> <C>
Fixed Assets
- ------------
Tangible assets 7 (Pounds)304,268 (Pounds)305,042
Intangible assets 8 --- 135,000
------- -------
304,268 440,042
------- -------
Current Assets
- --------------
Stocks 10 399,854 453,710
Debtors 11 279,035 247,619
Cash at bank and in hand 330,995 163,908
------- -------
1,009,884 865,237
Current Liabilities
- -------------------
Amounts falling due within one year 12 (608,382) (533,420)
------- -------
Net Current Assets (Pounds)401,502 (Pounds)331,817
============== ==============
Total Assets Less Liabilities 705,770 771,859
Creditors due after more than one year 13 (3,581) (217,500)
----- -------
(Pounds)702,189 (Pounds)554,359
============== ==============
Capital Reserves
- ----------------
Share capital 14 500 500
Reserves 15 701,689 553,859
------- -------
(Pounds)702,189 (Pounds)554,359
============== ==============
</TABLE>
5
<PAGE>
DAXBOURNE LIMITED
BALANCE SHEET
AS AT 30/TH/ APRIL 1996
<TABLE>
<CAPTION>
NOTES 1996 1995
----- ---- ----
<S> <C> <C> <C>
Fixed Assets
- ------------
Tangible assets 7 (Pounds)291,494 (Pounds)301,177
Intangible assets 8 --- 135,000
Investments 70,500 70,500
------ ------
(Pounds)361,994 (Pounds)506,677
============== ==============
Current Assets
- --------------
Stocks 9 399,854 453,710
Debtors 10 296,727 214,651
Cash at bank and in hand 309,966 154,677
------- -------
1,006,547 823,038
Current Liabilities
- -------------------
Amounts falling due within one year 11 (1,094,019) (825,617)
--------- -------
Net Current Assets (Pounds)(87,472) (Pounds)(2,579)
============== =============
Total Assets Less Liabilities 274,522 504,098
Creditors due after more than one year 12 (3,581) (217,500)
----- -------
(Pounds)270,941 (Pounds)286,598
============== ==============
Capital Reserves
- ----------------
Share capital 13 500 500
Reserves 14 270,441 286,098
------- -------
(Pounds)270,941 (Pounds)286,598
============== ==============
</TABLE>
6
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30/TH/ APRIL 1996
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES (Pounds)387,199 (Pounds)433,139
TAXATION
Corporation tax paid (182,351) (186,811)
Investing activities
Receipts from sale of fixed assets 5,585 21,168
Short term loan --- 17,500
--- ------
5,585 38,668
----- ------
NET CASH INFLOW BEFORE FINANCING 210,433 284,996
FINANCING
Purchase of fixed assets (35,083) (77,816)
Purchase of Trade --- (202,500)
--- -------
NET CASH OUTFLOW FROM FINANCING (35,083) (280,316)
------ -------
INCREASE IN CASH AND CASH EQUIVALENTS (Pounds)175,350 (Pounds)4,680
============== ============
RECONCILIATION OF OPERATING PROFIT TO NET CASH
INFLOW FROM OPERATING ACTIVITIES:
Operating profit (Pounds)287,383 (Pounds)493,047
Depreciation 165,271 101,324
(Increase)/decrease in debtors (31,416) (18,145)
Increase/(decrease) in creditors (87,895) 27,823
(Increase)/decrease in stocks 53,856 (170,910)
------ -------
NET CASH INFLOW FROM OPERATING ACTIVITIES (Pounds)387,199 (Pounds)433,139
============== ==============
ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS
DURING THE YEAR
Balance brought forward (Pounds)155,645
Net cash inflow 175,350
-------
Balance carried forward (Pounds)330,995
==============
</TABLE>
7
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1996
FORMING PART OF THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
-------------------
BASIS OF ACCOUNTING
The accounts have been prepared under the historical cost convention as
modified to incorporate the revaluation of certain fixed assets.
CONSOLIDATION
The Consolidated Financial Statements incorporate the Accounts of the
Company and all its subsidiaries being made up to 30/th/ April 1996 in
accordance with the Companies Act 1985. A separate Profit and Loss Account
for Daxbourne Limited is not presented as the result of the Company are
disclosed in the consolidated Profit and Loss Account.
The effect of events related to the year ended 30/th/ April 1996 which
occurred before 30/th/ August 1996, the date of approval of the Financial
Statements by the Board of Directors have been included in the Statements
to the extent required to show a true and fair view of the state of affairs
at 30/th/ April 1996 and the results for the year ended on that date.
TAXATION
The charge for taxation is based on the Profit for the year and takes into
account taxation deferred because of timing differences between the
treatment of certain items for taxation and accounting purposes. No
provision for deferred taxation is made if there is reasonable evidence
that such deferred taxation will not be payable in the foreseeable future.
TURNOVER
Turnover represents the net invoiced sale of goods, excluding VAT.
TANGIBLE FIXED ASSETS
No depreciation is provided on freehold property which is maintained such
that its estimated residual value is in excess of the book value in these
financial statements.
Depreciation is provided on other fixed assets at the following annual
rates in order to write off each asset over its estimated useful life:
Motor Vehicles 25% on net book value
Plant and Equipment 10% on cost
Computer Equipment 20% on cost
INTANGIBLE FIXED ASSETS
Costs have been capitalized and are amortized over the estimated life of
the asset as follows:
Goodwill: in equal installments over three years
STOCKS
Stocks and work in progress are valued at the lower of cost and net
realizable value after making due allowance for obsolete and slow-moving
items. Cost includes all direct expenditures and an appropriate proportion
of fixed and variable overheads.
8
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1996
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
PENSION COSTS
The Company operates a defined contribution pension scheme. Contributions
payable for the year are charged in the profit and loss account. The level
of contributions is calculated with actuarial advice. Independent
actuarial valuations of the scheme are made every three years.
2. TURNOVER
--------
The Turnover and Profit (1995 - Profit) before taxation for the year is
attributable to the principal activity of the Company which is importing
and distributing a range of products.
In the opinion of the Director's, 5% of the company's turnover is
attributable to geographical markets outside of the UK. (1995 - 5%).
3. OPERATING PROFIT
----------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Operating profits is stated after charging:
Directors Emoluments (Pounds)57,153 (Pounds)56,687
Directors Pension 17,500 17,500
Depreciation of Fixed Tangible Assets 30,271 33,823
Depreciation of Intangible Assets 135,000 67,500
Auditors Renumeration 24,650 23,250
</TABLE>
4. INTEREST RECEIVABLE
-------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest from Bank Deposits (Pounds)10,220 (Pounds)7,517
============== =============
</TABLE>
5. INTEREST PAYABLE
----------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Finance Charges (Pounds)711 (Pounds)---
Other interest and similar charges 29,992 182
------ ---
(Pounds)30,703 (Pounds)182
============== ===========
</TABLE>
9
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1996
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
6. TAXATION
--------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
UK Corporation Tax on profits for the (Pounds)140,700 (Pounds)183,500
year
Prior Year's Adjustment (1,147) (1,188)
----- -----
(Pounds)139,553 (Pounds)182,312
=============== ===============
</TABLE>
7. FIXED TANGIBLE ASSETS
---------------------
<TABLE>
<CAPTION>
FREEHOLD PLANT &
Group PROPERTY MACHINERY TOTAL
----- --------- --------- -----
<S> <C> <C> <C>
At 1/st/ May 1995 (Pounds)200,000 (Pounds)250,019 (Pounds)450,019
Additions --- 35,083 35,083
Disposals --- (11,397) (11,397)
--- ------- -------
At 30/th/ April 1996 (Pounds)200,000 (Pounds)273,705 (Pounds)473,705
=============== =============== ===============
Depreciation
------------
At 1/st/ May 1995 --- (Pounds)144,977 (Pounds)144,977
Charge for year --- 29,738 29,738
Disposals --- (5,278) (5,278)
--- ----- -----
At 30/th/ April 1996 --- (Pounds)169,437 (Pounds)169,437
=== =============== ===============
Net 30/th/ April 1996 (Pounds)200,000 (Pounds)104,268 (Pounds)304,268
=============== =============== ===============
Net 30/th/ April 1995 (Pounds)200,000 (Pounds)105,042 (Pounds)305,042
=============== =============== ===============
</TABLE>
10
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1996
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
8. FIXED TANGIBLE ASSETS(continued)
--------------------------------
<TABLE>
<CAPTION>
FREEHOLD PLANT &
Company PROPERTY MACHINERY TOTAL
------- -------- --------- -----
<S> <C> <C> <C>
At 1/st/ May 1995 (Pounds)200,000 (Pounds)202,169 (Pounds)402,169
Additions --- 23,348 23,348
Disposals --- (11,397) (11,397)
--- ------ ------
At 30/th/ April 1996 (Pounds)200,000 (Pounds)214,120 (Pounds)414,120
=============== =============== ===============
Depreciation
------------
At 1/st/ May 1995 --- (Pounds)100,992 (Pounds)100,992
Charge for year --- 26,913 26,913
Disposals --- (5,278) (5,278)
--- ----- -----
At 30/th/ April 1996 --- (Pounds)122,627 (Pounds)122,627
=== =============== ===============
Net 30/th/ April 1996 (Pounds)200,000 (Pounds)91,494 (Pounds)291,494
=============== =============== ===============
Net 30/th/ April 1995 (Pounds)200,000 (Pounds)101,177 (Pounds)301,177
=============== =============== ===============
</TABLE>
9. FIXED INTANGIBLE ASSETS
-----------------------
<TABLE>
<CAPTION>
Group 1996 1995
----- ---- ----
<S> <C> <C>
Goodwill (Pounds)--- (Pounds)135,000
=========== ===============
Company
-------
Goodwill (Pounds)--- (Pounds)135,000
=========== ===============
</TABLE>
10. FIXED ASSET INVESTMENTS
-----------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Subsidiary Companies Shares at cost (Pounds)70,500 (Pounds)70,500
============== ==============
The Companies in which the Company's interest is more than
10% are as follows:
Class and Percentage of
Subsidiary Companies Country of Incorporation Shares Held by Company
-------------------- ------------------------ -----------------------
Postinstant Limited England Ordinary 100%
M.C. Hairways Limited England Ordinary 100%
</TABLE>
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1996
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
11. STOCKS
------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C> <C>
Group Company Group Company
----- ------- ----- -------
Goods for resale (Pounds)399,854 (Pounds)399,854 (Pounds)453,710 (Pounds)453,710
=============== =============== =============== ===============
</TABLE>
12. DEBTORS
-------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C> <C>
Due within one year: Group Company Group Company
----- ------- ----- -------
Trade Debtors (Pounds)221,658 (Pounds)180,113 (Pounds)211,560 (Pounds)174,039
Prepayments & accrued income 57,377 20,100 36,059 16,807
Intergroup --- 96,514 --- 23,805
--- ------ --- ------
(Pounds)279,035 (Pounds)296,727 (Pounds)247,619 (Pounds)214,651
=============== =============== =============== ===============
</TABLE>
13. CREDITORS
---------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C> <C>
Group Company Group Company
----- ------- ----- -------
Amounts falling due within one year:
------------------------------------
Due to Subsidiaries (Pounds)--- (Pounds)579,787 (Pounds)--- (Pounds)495,523
Trade Creditors 77,594 69,185 18,567 35,169
Hire Purchases 1,342 1,342 --- ---
Other Creditors 529,446 443,705 514,853 286,778
Bank Overdrafts (See note 16) --- --- --- 8,147
--- --- --- -----
(Pounds)608,382 (Pounds)1,094,019 (Pounds)533,420 (Pounds)825,617
=============== ================= =============== ===============
</TABLE>
14. CREDITORS
---------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C> <C>
Group Company Group Company
Amounts falling due after more than one year:
---------------------------------------------
Directors Loan Account (Pounds)--- (Pounds)--- (Pounds)200,000 (Pounds)200,000
Other Creditors 3,581 3,581 17,500 17,500
----- ----- ------ ------
(Pounds)3,581 (Pounds)3,581 (Pounds)217,500 (Pounds)217,500
============= ============= =============== ===============
</TABLE>
12
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO ACCOUNTS FOR THE YEAR ENDED 30/TH/ APRIL 1996
FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
15. SHARE CAPITAL
<TABLE>
<CAPTION>
Authorized 1996 1995
---------- ---- ----
<S> <C> <C>
1,000 Ordinary Shares of (Pounds)1 each (Pounds)1,000 (Pounds)1,000
============= =============
Issued
------
500 Ordinary Shares (Pounds)500 (Pounds)500
=========== ===========
</TABLE>
16. RESERVES
--------
<TABLE>
<CAPTION>
Capital
Redemption
Profit & Loss Reserve Total
------------- ------- -----
<S> <C> <C> <C>
Group
-----
As at 1/st/ May 1995 (Pounds)553,359 (Pounds)500 (Pounds)553,859
Transfer from Profit & Loss A/c 147,830 --- 147,830
------- --- -------
As at 30/th/ April 1996 (Pounds)701,189 (Pounds)500 (Pounds)701,689
=============== =========== ===============
Company
-------
As at 1/st/ May 1995 (Pounds)285,598 (Pounds)500 (Pounds)286,098
Transfer from Profit & Loss A/c (15,657) --- (15,657)
-------- --- --------
As at 30/th/ April 1996 (Pounds)269,941 (Pounds)500 (Pounds)270,441
================ =========== ===============
</TABLE>
17. CONTINGENT LIABILITY AND GUARANTEES
-----------------------------------
The Company has guaranteed the Bank by way of a fixed and floating charge
over the undertaking and assets of the Company to a maximum of
(Pounds)200,000.
13
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
(Unaudited)
The Historical Daxbourne Limited Financial Statements are presented using
generally accepted accounting principles of the United Kingdom. In
management's opinion, there are no material variations in the accounting
principles, practices and methods used in preparing these financial
statements from the principles, practices and methods accepted in the
United States.
14
<PAGE>
EXHIBIT 99.3
DAXBOURNE LIMITED
FINANCIAL STATEMENTS
NINE MONTHS ENDED 27/TH/ SEPTEMBER 1997 AND
30/TH/ SEPTEMBER 1996
(UNAUDITED)
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED 27/TH/ SEPTEMBER 1997 AND 30/TH/ SEPTEMBER 1996
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED 27/TH/ ENDED 30/TH/
SEPTEMBER 1997 SEPTEMBER 1996
-------------- --------------
<S> <C> <C>
Turnover (Pounds)2,234,813 (Pounds)2,440,716
Cost of sales 687,702 829,362
------- -------
Gross profit 1,547,111 1,611,354
Selling, general and administrative
expenses 1,132,200 1,338,175
--------- ---------
Operating profit 414,911 273,179
Interest income (expense), net 16,626 (24,663)
------ -------
Profit on ordinary activities before
taxation 431,537 248,516
Taxation 116,440 109,877
------- -------
315,097 138,639
Dividends (360,000) ---
-------- ---
((Pounds)44,903) (Pounds)138,639
=============== ===============
</TABLE>
1
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF 27/TH/ SEPTEMBER 1997 AND 31/ST/ DECEMBER 1996
<TABLE>
<CAPTION>
27/th/ SEPTEMBER, 31/st/ DECEMBER,
1997 1996
---- ----
<S> <C> <C>
Fixed Assets
- ------------
Tangible assets (Pounds)310,144 (Pounds)308,141
=============== ===============
Current assets
- --------------
Stocks 345,483 609,935
Debtors 262,911 304,154
Cash and cash equivalents 471,674 476,428
------- -------
1,080,068 1,390,517
--------- ---------
Current liabilities
- -------------------
Amounts falling due within one year 315,003 578,546
------- -------
Net Current Assets 765,065 811,971
------- -------
Total Assets Less Liabilities (Pounds)1,075,209 (Pounds)1,120,112
================= =================
Capital Reserves
- ----------------
Share capital 500 500
Reserves 1,074,709 1,119,612
--------- ---------
(Pounds)1,075,209 (Pounds)1,120,112
================= =================
</TABLE>
2
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
FOR THE NINE MONTHS ENDED 27/TH/ SEPTEMBER 1997 AND 30/TH/ SEPTEMBER 1996
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED 27/TH/ ENDED 30/TH/
SEPTEMBER 1997 SEPTEMBER 1996
-------------- --------------
<S> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES (Pounds)533,259 (Pounds)400,515
TAXATION
Corporation tax paid (151,586) (182,141)
------- -------
NET CASH INFLOW BEFORE FINANCING 381,673 218,374
FINANCING
Purchase of fixed assets (26,427) (44,478)
Dividend (360,000) ---
------- ---
NET CASH OUTFLOW FROM FINANCING (386,427) (44,478)
------- ------
INCREASE IN CASH AND CASH EQUIVALENTS ((Pounds) 4,754) (Pounds)173,896
=============== ===============
RECONCILIATION OF OPERATING PROFIT TO NET CASH
INFLOW FROM OPERATING ACTIVITIES:
Operating profit (Pounds)431,537 (Pounds)248,516
Depreciation and amortization 17,580 156,318
Loss on disposal of fixed assets 6,844 7,319
(Increase)/decrease in debtors 20,847 (61,101)
Increase/(decrease) in creditors (208,001) (114,520)
(Increase)/decrease in stocks 264,452 163,983
------- -------
Net cash inflow from operating activities (Pounds)533,259 (Pounds)400,515
=============== ===============
ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS
DURING THE YEAR
Balance brought forward (Pounds)476,428 (Pounds)300,601
Net cash inflow / (outflow) (4,754) 173,896
----- -------
Balance carried forward (Pounds)471,674 (Pounds)474,497
=============== ===============
</TABLE>
3
<PAGE>
DAXBOURNE LIMITED
AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
These unaudited condensed consolidated financial statements should be read
in conjunction with the Annual Report for the fiscal year ended April 30,
1997. Certain information and footnote disclosures normally included in
consolidated financial statements have been condensed or omitted.
The financial statements for the nine months ended September 27, 1997 and
September 30, 1996 are unaudited but include, in the Company's opinion, all
adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of the results for the periods presented.
2. Accounting Policies
The accounting policies underlying the financial statements are those set
forth in Note 1 of the financial statements included in the Company's
Annual Report for the year ended April 30, 1997.
3. The Historical Daxbourne Limited Financial Statements are presented using
generally accepted accounting principles of the United Kingdom. In
management's opinion, there are no material variations in the accounting
principles, practices and methods used in preparing these financial
statements from the principles, practices and methods accepted in the
United States.
4
