SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 25, 1997
STYLING TECHNOLOGY CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-21703 75-2665378
- ------------------------------ -------------------- ---------------------
(State or other (Commission File No.) (IRS Employer ID No.)
jurisdiction of incorporation)
1146 SOUTH CEDAR RIDGE, DUNCANVILLE, TEXAS 75137
--------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (972) 296-2887
<PAGE>
STYLING TECHNOLOGY CORPORATION
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT ON
FORM 8-K
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
ACQUISITION OF ABBA PRODUCTS
On June 25, 1997, Styling Technology Corporation (the "Company")
acquired all of the issued and outstanding common stock of U.K. ABBA Products,
Inc., a California corporation ("ABBA").
ITEM 7. FINANCIAL STATEMENTS, UNAUDITED PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) FINANCIAL STATEMENTS OF U.K. ABBA PRODUCTS, INC.
Independent Auditors' Report
Balance Sheets as of December 31, 1995 and 1996, and Three Months
Ended March 31, 1997 (Unaudited)
Statements of Operations for the Years Ended December 31, 1995 and
1996, and the Three Months Ended March 31, 1996 (Unaudited) and 1997
(Unaudited)
Statements of Stockholders' Equity for the Years Ended December 31,
1994, 1995, and 1996, and the Three Months Ended March 31, 1997
(Unaudited)
Statements of Cash Flows for the Years Ended December 31, 1995 and
1996, and the Three Months Ended March 31, 1996 (Unaudited) and 1997
(Unaudited)
Notes to Financial Statements
(b) UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
Introduction to the Unaudited Condensed Consolidated Pro Forma
Financial Statements
Unaudited Condensed Consolidated Pro Forma Balance Sheet as of March
31, 1997
Unaudited Condensed Consolidated Statements of Operations For the
Three Months Ended March 31, 1997, and the Year Ended December 31,
1996
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Styling Technology Corporation:
We have audited the accompanying balance sheets of U.K. ABBA PRODUCTS, INC. (a
California corporation) as of December 31, 1995 and 1996, and the related
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of U.K. ABBA Products, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash flows
for the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
June 20, 1997.
3
<PAGE>
U.K. ABBA PRODUCTS, INC.
BALANCE SHEETS
December 31,
-------------------- March 31,
1995 1996 1997
---- ---- ----
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 308,020 $ 337,274 $ 475,037
Accounts receivable 775,858 872,602 1,063,784
Inventory 1,079,833 1,377,373 1,683,241
Other current assets 302,078 68,938 72,244
---------- ---------- ----------
Total current assets 2,465,789 2,656,187 3,294,306
PROPERTY AND EQUIPMENT, net 238,230 219,169 216,625
OTHER ASSETS 10,318 8,818 24,333
---------- ---------- ----------
$2,714,337 $2,884,174 $3,535,264
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 388,676 $ 323,840 $ 857,061
Accrued expenses 146,819 313,004 284,556
Current portion of note payable and
capital lease obligation 51,954 86,867 70,247
Income taxes payable 328,654 121,144 209,885
Line of credit 200,000 100,000 --
---------- ---------- ----------
Total current liabilities 1,116,103 944,855 1,421,749
---------- ---------- ----------
DEFERRED INCOME TAXES 6,788 16,774 25,774
---------- ---------- ----------
NOTE PAYABLE AND CAPITAL LEASE OBLIGATION,
net of current portion 86,872 -- --
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value, 200,000 shares
authorized, 118,518 issued and outstanding 360,000 360,000 360,000
Retained earnings 1,144,574 1,562,545 1,727,741
---------- ---------- ----------
Total stockholders' equity 1,504,574 1,922,545 2,087,741
---------- ---------- ----------
Total liabilities and stockholders' equity $2,714,337 $2,884,174 $3,535,264
========== ========== ==========
The accompanying notes are an integral part of these balance sheets.
4
<PAGE>
U.K. ABBA PRODUCTS, INC.
STATEMENTS OF OPERATIONS
For the Years For the Three
Ended Months Ended
December 31, March 31,
------------------------ -----------------------
1995 1996 1996 1997
---- ---- ---- ----
(Unaudited)
NET SALES $9,056,549 $10,603,312 $2,477,101 $3,150,100
COST OF SALES 4,193,992 5,013,178 1,180,306 1,518,524
---------- ----------- ---------- ----------
Gross profit 4,862,557 5,590,134 1,296,795 1,631,576
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 4,182,192 4,880,380 979,204 1,351,127
---------- ----------- ---------- ----------
Income from
operations 680,365 709,754 317,591 280,449
INTEREST EXPENSE AND
OTHER, net 12,453 1,328 3,831 454
---------- ----------- ---------- ----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 667,912 708,426 313,760 279,995
PROVISION FOR INCOME TAXES 267,165 290,455 128,642 114,799
---------- ----------- ---------- ----------
NET INCOME $ 400,747 $ 417,971 $ 185,118 $ 165,196
========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
U.K. ABBA PRODUCTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Total
Common Stock Retained Stockholders'
Shares Amount Earnings Equity
------ ------ -------- ------
BALANCE, December 31, 1994 118,518 $360,000 $ 743,827 $1,103,827
Net income -- -- 400,747 400,747
------- -------- ---------- ----------
BALANCE, December 31, 1995 118,518 360,000 1,144,574 1,504,574
Net income -- -- 417,971 417,971
------- -------- ---------- ----------
BALANCE, December 31, 1996 118,518 360,000 1,562,545 1,922,545
Net income (unaudited) -- -- 165,196 165,196
------- -------- ---------- ----------
BALANCE, March 31, 1997
(unaudited) 118,518 $360,000 $1,727,741 $2,087,741
======= ======== ========== ==========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
U.K. ABBA PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years For the Three
Ended Months Ended
December 31, March 31,
-------------------- --------------------
1995 1996 1996 1997
---- ---- ---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net income $ 400,747 $ 417,971 $ 185,118 $ 165,196
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation 40,194 58,590 20,837 14,155
Increase in accounts receivable (36,463) (96,744) (85,595) (191,182)
Increase in inventory (239,437) (297,540) (165,829) (305,868)
(Increase) decrease in other assets (281,508) 234,640 249,492 (18,821)
(Decrease) increase in accounts payable (53,711) (64,836) (887) 533,221
Increase (decrease) in accrued expenses 143,958 166,185 (5,435) (28,448)
Increase (decrease) in income taxes payable 65,070 (207,510) 71,142 88,741
Increase in deferred income taxes 6,788 9,986 -- 9,000
--------- --------- --------- ---------
Net cash provided by operating activities 45,638 220,742 268,843 265,994
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (80,367) (39,529) (24,655) (11,611)
--------- --------- --------- ---------
Net cash used in investing activities (80,367) (39,529) (24,655) (11,611)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under line of credit 200,000 (100,000) (200,000) (100,000)
Payments of note payable and capital lease
obligation (58,458) (51,959) (16,370) (16,620)
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities 141,542 (151,959) (216,370) (116,620)
--------- --------- --------- ---------
NET INCREASE IN CASH 106,813 29,254 27,818 137,763
CASH, beginning of period 201,207 308,020 308,020 337,274
--------- --------- --------- ---------
CASH, end of period $ 308,020 $ 337,274 $ 335,838 $ 475,037
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $ 23,926 $ 13,890 $ 5,946 $ 2,914
========= ========= ========= =========
Income taxes paid $ 335,377 $ 497,965 $ 137,642 $ --
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During 1995, the Company assumed a capital lease for property and equipment
for $59,284.
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
U.K. ABBA PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
(1) ORGANIZATION AND BASIS OF PRESENTATION
Organization and Nature of Operations
U.K. ABBA Products, Inc. (the Company), was incorporated in 1988 to manufacture
pure and natural hair care products, using proprietary formulas it owns, and
distribute them exclusively through distributor relationships to professional
hair salons and supply stores. The Company is a provider of hair care products,
specializing in the cleansing, restoring, styling and finishing aspects of the
hair care process. The Company maintains its pure and natural approach by using
botanical formulas, which does not include the use of any animal ingredients.
The Company has approximately 18 different products, and distributes nationally
and internationally throughout the United States, Puerto Rico and Canada.
Acquisition Agreement
In accordance with the terms of an acquisition agreement (the Agreement) between
Styling Technology Corporation, (STC) and the Company dated June 25, 1997, STC
agreed to acquire all of the common stock of the Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventory
Inventory is stated at the lower of cost (first-in, first-out) or net realizable
value. Reserves are established against inventory for excess, slow-moving and
obsolete items and for items where the net realizable value is less than cost.
Inventory consists of the following:
December 31, March 31,
------------------------ -----------
1995 1996 1997
(Unaudited)
Raw materials and work-in-process $ 176,398 $ 200,915 $ 180,276
Finished goods 903,435 1,176,458 1,502,965
---------- ---------- ----------
$1,079,833 $1,377,373 $1,683,241
========== ========== ==========
8
<PAGE>
Property and Equipment
Property and equipment are recorded at cost and depreciation on property and
equipment is provided on the straight-line method over the following estimated
useful lives:
Years
-----
Furniture and fixtures 7
Office equipment 3-7
Expenditures for major renewals and betterments are capitalized, while
expenditures for maintenance and repairs, which are not significant and do not
improve assets or extend their useful lives, are charged to expense as incurred.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments and trade
receivables. The Company places its cash in high quality credit institutions.
The Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends and other
information.
Fair Value of Financial Instruments
The carrying values of cash, receivables, accounts payable, and accrued expenses
approximate fair values due to the short-term maturities of these instruments.
The carrying amounts on the note payable and line of credit are estimated to
approximate fair value as the actual interest rates are consistent with rates
estimated to be currently available for debt with similar terms and remaining
maturities.
Revenue Recognition
The Company recognizes revenue from sales upon shipment of the product.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Unaudited Interim Financial Information
In management's opinion, the financial statements for the three-month periods
ended March 31, 1996 and 1997, include all adjustments, consisting of normal
recurring adjustments, necessary to present fairly on a basis consistent with
that of the audited data presented herein the Company's financial position and
9
<PAGE>
results of operations as of and for the periods then ended in accordance with
generally accepted accounting principles. Operating results for the three-month
period ended March 31, 1997, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1997.
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31,
---------------------- March 31,
1995 1996 1997
---- ---- ----
(Unaudited)
Furniture and fixtures $ 157,170 $ 182,803 $ 187,132
Office equipment 178,580 192,476 199,758
--------- --------- ---------
335,750 375,279 386,890
Less-Accumulated depreciation (97,520) (156,110) (170,265)
--------- --------- ---------
$ 238,230 $ 219,169 $ 216,625
========= ========= =========
(4) NOTE PAYABLE AND CAPITAL LEASE OBLIGATION
The note payable and capital lease obligation consist of the following:
December 31,
------------------- March 31,
1995 1996 1997
---- ---- ----
(Unaudited)
Note payable, interest at prime plus 1.5%
(10.0% and 9.75% at December 31, 1995 and
1996, respectively, and 9.75% (unaudited)
at March 31, 1997), monthly principal and
interest payments until December 1997,
secured by substantially all assets of the
Company $ 86,808 $ 45,138 $ 31,250
Capital lease obligation, payable in
monthly installments of $1,242 until
April 2000 52,018 41,729 38,997
-------- -------- --------
138,826 86,867 70,247
Less- Current portion (51,954) (86,867) (70,247)
-------- -------- --------
$ 86,872 $ -- $ --
======== ======== ========
10
<PAGE>
The Company has classified the note payable and capital lease obligation as
current in the accompanying balance sheets at December 31, 1996 and March 31,
1997 as it is the intent of STC to pay off these instruments upon the
consummation of the Acquisition.
(5) LINE OF CREDIT
As of December 31, 1996, the Company has a $700,000 revolving line of credit
(the Old Line of Credit), which bears interest at prime plus 1.0% and matures
April 1997. In April 1997, the Company negotiated a new line of credit of up to
$1,000,000 (unaudited). As of December 31, 1995 and 1996, the Company had
$200,000, and $100,000, respectively, outstanding the Old Line of Credit. As of
March 31, 1997, the Company had not drawn on the Old Line of Credit. The Old
Line of Credit is secured by substantially all the assets of the Company.
(6) INCOME TAXES
The Company accounts for income taxes using Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109 requires the
use of an asset and liability approach in accounting for income taxes. Deferred
tax assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse. These differences result
principally from the recognition of reserve expenses for financial reporting
purposes which do not generate current tax deductions, and the use of different
depreciation and inventory capitalization methods for income tax and financial
reporting.
The components of the income tax provision (benefit) consist of the following:
December 31, March 31,
---------------------- -----------------------
1995 1996 1996 1997
(Unaudited)
Current:
Federal $ 259,138 $ 255,450 $ 113,138 $ 106,686
State 45,731 45,079 19,966 11,613
--------- --------- --------- ---------
304,869 300,529 133,104 118,299
Deferred (37,704) (10,074) (4,462) (3,500)
--------- --------- --------- ---------
Provision for income taxes $ 267,165 $ 290,455 $ 128,642 $ 114,799
========= ========= ========= =========
11
<PAGE>
The components of deferred taxes are as follows:
December 31,
---------------- March 31,
1995 1996 1997
---- ---- ----
(Unaudited)
Deferred tax assets:
Uniform inventory cost capitalization $32,000 $54,000 $59,500
Other 15,878 13,938 13,938
------- ------- -------
Total gross deferred tax assets 47,878 67,938 73,438
------- ------- -------
Deferred tax liabilities:
Depreciation 6,788 16,774 25,774
------- ------- -------
Total gross deferred tax liabilities 6,788 16,774 25,774
------- ------- -------
Net deferred tax asset $41,090 $51,164 $47,664
======= ======= =======
The total gross deferred tax assets are included in other current assets in the
accompanying balance sheets.
The following is a reconciliation of income taxes provided at the federal
statutory rate with income taxes recorded by the Company:
December 31, March 31,
------------ ------------
1995 1996 1996 1997
---- ---- ---- ----
(Unaudited)
Tax provision at statutory rate 34% 34% 34% 34%
Expense of permanent
differences resulting from
the corporate owned life
insurance and travel and
entertainment expenses,
and the effect of
state taxes 6% 7% 7% 7%
-- -- -- --
Income tax provision 40% 41% 41% 41%
== == == ==
(7) RELATED PARTY TRANSACTIONS
The Company utilizes third party warehouses for its storage, production and
distribution of its inventory. The Company's minority shareholder is a
shareholder of one of these third party warehouses. In the ordinary course of
business, the Company contracts for the manufacturing of various products with
this warehouse. Management believes these transactions were under terms no less
favorable to the Company than those arranged with other parties. During the
years ended December 31, 1995 and 1996 , and the three months ended March 31,
1996 and 1997, the Company paid approximately $2,799,532, $2,741,167, $511,020,
(unaudited) and $674,977 (unaudited) respectively, for storage, production and
distribution services to this third party. The following inventory amounts with
this third party as of December 31, 1995 and 1996, and March 31, 1997, were
$171,539, $189,592, $168,106 (unaudited), respectively.
12
<PAGE>
(8) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is named as a defendant in various
litigation matters. In management's opinion, the ultimate resolution of these
matters will not have a material impact on the Company's financial statements.
Lease commitments relate primarily to the rental of office equipment and the
office building lease. Minimum payments under these noncancelable lease
obligations are as follows for the year ended December 31:
1997 $126,120
1998 33,000
1999 25,800
2000 21,600
--------
$206,520
========
13
<PAGE>
STYLING TECHNOLOGY CORPORATION AND ACQUIRED BUSINESS
INTRODUCTION TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements include the unaudited
condensed consolidated pro forma balance sheet of the Styling Technology
Corporation (the Company or STC), as of March 31, 1997, and the unaudited
condensed consolidated pro forma statements of operations for the three months
ended March 31, 1997 and the year ended December 31, 1996.
Simultaneously with the consummation of the acquisition of U.K. ABBA Products,
Inc. (ABBA) and the related subsequent financing transaction, the Company
acquired all the issued and outstanding common stock of ABBA in exchange for
cash and the assumption of certain indebtedness (the Transactions).
The unaudited condensed consolidated pro forma balance sheet as of March 31,
1997 gives effect to the Transactions as if they had occurred on March 31, 1997.
The unaudited condensed consolidated pro forma statement of operations for the
three months ended March 31, 1997 assumes the Transactions occurred on January
1, 1997 and the unaudited condensed consolidated pro forma statement of
operations for the year ended December 31, 1996 assumes the Transactions
occurred on January 1, 1996.
The unaudited condensed consolidated pro forma balance sheet as of March 31,
1997 and the unaudited condensed consolidated statement of operations of the
Company for the three months ended March 31, 1997 have been derived from: (i)
the unaudited historical financial statements for the Company and ABBA as of and
for the three months ended March 31, 1997. The unaudited condensed consolidated
pro forma statement of operations for the year ended December 31, 1996 has been
derived from: (i) the audited historical financial statements from January 1,
1996 to November 25, 1996 for Body Drench and Kotchammer Investments, Inc (KII);
the audited historical financial statements from March 1, 1996 to November 25,
1996 for Gena Laboratories, Inc. (Gena); the audited historical financial
statements from October 1, 1996 to November 25, 1996 for JDS Manufacturing Co.,
Inc. (JDS), (ii) the unaudited historical financial statements for the period
from January 1, 1996 to February 28, 1996 for Gena, and the unaudited historical
financial statements for the period from January 1, 1996 to September 30, 1996
for JDS, (iii) the audited historical financial statements for the Company from
November 26, 1996 to December 31, 1996, (iv) the audited historical financial
statements for ABBA for the year ended December 31, 1996. The unaudited
condensed consolidated pro forma statements of operations referred to above may
not be indicative of actual results that would have been achieved if the
Transactions had occurred on the dates indicated or the results that may be
realized in the future. The unaudited condensed consolidated pro forma financial
statements contain adjustments which are directly attributable to the
Transactions.
The unaudited condensed consolidated pro forma statements of operations above do
not include any adjustments related to decreased manufacturing costs which have
been negotiated for production subsequent to the acquisition of ABBA, or other
potential selling, general and administrative expense synergies exclusive to the
ABBA acquisition.
14
<PAGE>
Unaudited Condensed Consolidated Pro Forma Balance Sheet
As of March 31, 1997
<TABLE>
<CAPTION>
Proforma Proforma
STC ABBA Combined Adjustments Combined
----------- ---------- ----------- ------------ -----------
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and Cash Equivalents $ 2,294,000 $ 475,000 $ 2,769,000 $ 21,490,000 [2]
(20,905,000)[1] $ 3,354,000
Accounts Receivable, net 4,171,000 1,064,000 5,235,000 5,235,000
Inventory 3,378,000 1,683,000 5,061,000 5,061,000
Other Current Assets 435,000 72,000 507,000 507,000
----------- ---------- ----------- ------------ -----------
Total Current Assets 10,278,000 3,294,000 13,572,000 585,000 14,157,000
Property and Equipment, net 1,196,000 217,000 1,413,000 1,413,000
Other Assets -- 24,000 24,000 2,170,000 [2] 2,194,000
Goodwill 22,214,000 -- 22,214,000 19,662,000 [1] 41,876,000
----------- ---------- ----------- ------------ -----------
TOTAL ASSETS 33,688,000 3,535,000 37,223,000 22,417,000 59,640,000
----------- ---------- ----------- ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses 4,906,000 1,045,000 5,951,000 240,000 [2]
620,000 [1] 6,811,000
Income Taxes Payable -- 306,000 306,000 -- 306,000
Current Portion Debt 130,000 70,000 200,000 1,600,000 [2] 1,800,000
----------- ---------- ----------- ------------ -----------
Total Current Liabilities 5,036,000 1,421,000 6,457,000 2,460,000 8,917,000
Long Term Debt 2,290,000 -- 2,290,000 21,400,000 [2]
(475,000)[1] 23,215,000
Other LongTerm Liabilites -- -- -- 700,000 [1] 700,000
Deferred Income Taxes Payable -- 26,000 26,000 -- 26,000
----------- ---------- ----------- ------------ -----------
TOTAL LIABILITIES 7,326,000 1,447,000 8,773,000 24,085,000 32,858,000
----------- ---------- ----------- ------------ -----------
Common Stock 1,000 360,000 361,000 (360,000)[1] 1,000
Additional Paid in Capital 27,446,000 -- 27,446,000 420,000 [2] 27,866,000
Retained Earnings 715,000 1,728,000 2,443,000 (1,728,000)[1] 715,000
Treasury Stock (1,800,000) -- (1,800,000) -- (1,800,000)
----------- ---------- ----------- ------------ -----------
Total Stockholders' Equity 26,362,000 2,088,000 28,450,000 (1,668,000) 26,782,000
----------- ---------- ----------- ------------ -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $33,688,000 $3,535,000 $37,223,000 $ 22,417,000 $59,640,000
=========== ========== =========== ============ ===========
</TABLE>
[1] Reflects purchase of ABBA including the recordation and payment of
acquisition related expenses, the payoff of certain obligations of STC, and
the allocation of the preliminary purchase price to the net assets of ABBA.
[2] Reflects issuance of $23 million of debt in the financing transaction, net
of related debt issuance costs.
15
<PAGE>
Unaudited Condensed Consolidated Pro Forma Statement of Operations
For the Three Months Ended March 31, 1997
<TABLE>
<CAPTION>
Proforma Proforma
STC ABBA Combined Adjustments Combined
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales $7,479,000 $3,150,000 $10,629,000 $10,629,000
Cost of Sales 3,234,000 1,519,000 4,753,000 4,753,000
---------- ---------- ----------- --------- -----------
Gross Profit 4,245,000 1,631,000 5,876,000 5,876,000
Selling, General & Administrative
Expenses 2,398,000 1,351,000 3,749,000 196,000 [1]
(200,000)[3] 3,745,000
---------- ---------- ----------- --------- ----------
Income (loss) from Operations 1,847,000 280,000 2,127,000 4,000 2,131,000
Interest Expense and Other, net 60,000 -- 60,000 680,000 [2] 740,000
---------- ---------- ----------- --------- ----------
Income (loss) before Income Taxes 1,787,000 280,000 2,067,000 (676,000) 1,391,000
Provision for Income Taxes 733,000 115,000 848,000 (213,000)[4] 635,000
---------- ---------- ----------- --------- ----------
NET INCOME $1,054,000 $ 165,000 $ 1,219,000 (463,000) $ 756,000
========== ========== =========== ========= ==========
PRO FORMA EARNINGS PER SHARE $ 0.18
==========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 4,116,536
==========
</TABLE>
[1] Reflects amortization of goodwill over 25 years.
[2] Reflects interest expense incurred related to the financing transaction.
[3] Reflects the elimination of compensation paid to former shareholders not
continuing with the combined companies.
[4] Reflects the the provision for income taxes based on applying the statutory
income tax rates of each company, adjusted for goodwill amortization from
the ABBA acquisition which is not deductible for income tax reporting
purposes.
16
<PAGE>
Unaudited Condensed Consoldiated Pro Forma Statement of Operations
for the Twelve Months Ended December 31, 1996
<TABLE>
<CAPTION>
Body
Gena JDS Drench KII STC Combined
----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $8,059,000 $2,948,000 $9,643,000 $1,248,000 $1,084,000 $22,982,000
Cost of Sales 4,796,000 1,259,000 5,867,000 586,000 570,000 13,078,000
---------- ---------- ---------- ---------- ---------- -----------
Gross Profit 3,263,000 1,689,000 3,776,000 662,000 514,000 9,904,000
Selling, General & Administrative Expenses 2,577,000 1,495,000 4,005,000 591,000 737,000 9,405,000
---------- ---------- ---------- ---------- ---------- -----------
Income from Operations 686,000 194,000 (229,000) 71,000 (223,000) 499,000
Interest Expense and Other, net 21,000 1,000 -- 74,000 1,000 97,000
---------- ---------- ---------- ---------- ---------- -----------
Income Before Provision for Income Taxes 665,000 193,000 (229,000) (3,000) (224,000) 402,000
Provision (Benefit) for Income Taxes -- -- (92,000) -- (72,000) (164,000)
---------- ---------- ---------- ---------- ---------- -----------
NET INCOME $ 665,000 $ 193,000 $ (137,000) $ (3,000) $ (152,000) $ 566,000
========== ========== ========== ========== ========== ===========
PRO FORMA EARNINGS PER SHARE
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
STC STC and STC and ABBA
Proforma Proforma ABBA Proforma Proforma
Adjustments Combined ABBA Combined Adjustments Combined
----------- ----------- ----------- ----------- ----------- -----------
Net Sales $22,982,000 $10,603,000 $33,585,000 $33,585,000
Cost of Sales 13,078,000 5,013,000 18,091,000 18,091,000
----------- ----------- ----------- ----------- ---------- -----------
Gross Profit 9,904,000 5,590,000 15,494,000 15,494,000
Selling, General & Administrative Expenses (1,490,000)[1]
876,000 [2] 8,791,000 4,880,000 13,671,000 (1,131,000)[5]
786,000 [2] 13,326,000
---------- ---------- ----------- ----------- ---------- -----------
Income from Operations 614,000 1,113,000 710,000 1,823,000 345,000 2,168,000
Interest Expense and Other, net (11,000)[4] 86,000 1,000 87,000 2,809,000 [3] 2,896,000
---------- ---------- ----------- ----------- ---------- -----------
Income Before Provision for Income Taxes 625,000 1,027,000 709,000 1,736,000 (2,464,000) (728,000)
Provision (Benefit) for Income Taxes 585,000 [6] 421,000 291,000 712,000 (689,000)[7] 23,000
---------- ---------- ----------- ----------- ---------- -----------
NET INCOME 40,000 $ 606,000 $ 418,000 $ 1,024,000 (1,775,000) $ (751,000)
========== ========== =========== =========== ========== ===========
PRO FORMA EARNINGS PER SHARE $ (0.20)
===========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 3,769,854
===========
</TABLE>
[1] Reflects the elimination of salaries and benefits of specific individuals
not continuing with the combined companies.
[2] Reflects the amortization of goodwill over 25 years.
[3] Reflects interest expense incurred related to the financing transaction.
[4] Reflects the interest cost from the seller carryback financing, net of
interest expense eliminated from Body Drench.
[5] Reflects the elimination of compensation paid to former shareholders not
continuing with the combined companies.
[6] Reflects the the provision for income taxes based on applying the statutory
income tax rates of each company.
[7] Reflects the the provision for income taxes based on applying the statutory
income tax rates of each company, adjusted for goodwill amortization from
the ABBA acquisition which is not deductible for income tax reporting
purposes.
17
<PAGE>
(c) EXHIBITS.
Exhibit No. Description Of Exhibit
----------- ----------------------
10.18 Stock Purchase Agreement dated as of June 25, 1997 among
Styling Technology Corporation; James Markham; Daniel
Genis and Arline Genis, Co-Trustees of the 1992 Genis
Family Revocable Trust dated February 28, 1992; Arthur
Benfield Bush, Arthur Benfield Bush and Gina L. Bush,
Trustees of the Alan and Gina Bush Charitable Remainder
Unitrust #1, dated June 1, 1997; Arthur Benfield Bush and
Gina L. Bush, Trustees of the Alan and Gina Bush
Remainder Unitrust #2, dated June 1, 1997; Yoram Fishman,
Trustee of the Yoram Fishman Living Trust, dated May 18,
1987, and Yuri Levi, Trustee of the Yoram Fishman
Charitable Remainder Trust dated May 30, 1997. (1)
10.19 Credit Agreement dated as of June 25, 1997 among Styling
Technology Corporation and Credit Agricole Indosuez, New
York branch, as agent and the lending institutions listed
therein.
(1)
(1) Incorporated by reference to the Registrant's Report on Form 8-K
as filed on July 10, 1997.
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.
July 29, 1997 STYLING TECHNOLOGY CORPORATION
By: /s/ Richard R. Ross
-----------------------------
Richard R. Ross
Chief Financial Officer, Secretary,
and Treasurer
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF U.K. ABBA PRODUCTS, THE ACQUIREE OF STYLING TECHNOLOGY
CORPORATION FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996
<EXCHANGE-RATE> 1 1
<CASH> 308,020 337,274
<SECURITIES> 0 0
<RECEIVABLES> 775,858 872,602
<ALLOWANCES> 0 0
<INVENTORY> 1,079,833 1,377,373
<CURRENT-ASSETS> 2,465,789 2,656,187
<PP&E> 335,750 375,279
<DEPRECIATION> 97,520 156,110
<TOTAL-ASSETS> 2,714,337 2,884,174
<CURRENT-LIABILITIES> 1,116,103 944,855
<BONDS> 0 0
0 0
0 0
<COMMON> 360,000 360,000
<OTHER-SE> 1,144,574 1,562,545
<TOTAL-LIABILITY-AND-EQUITY> 2,714,337 2,884,174
<SALES> 9,056,549 10,603,312
<TOTAL-REVENUES> 9,056,549 10,603,312
<CGS> 4,193,992 5,013,178
<TOTAL-COSTS> 4,193,992 5,013,178
<OTHER-EXPENSES> 4,182,192 4,880,380
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,453 1,329
<INCOME-PRETAX> 667,912 708,426
<INCOME-TAX> 267,165 290,455
<INCOME-CONTINUING> 400,747 417,971
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 400,747 417,971
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
