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): December 10, 1997
STYLING TECHNOLOGY CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-21703 75-2665378
- ---------------------------- --------------------- ---------------------
(State or other jurisdiction (Commission File No.) (IRS Employer ID No.)
of incorporation)
2390 East Camelback Road, Suite 435, Phoenix, Arizona 85016
-----------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (602) 955-3353
<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 ONE TOUCH AND CLEAN AND EASY PRODUCT LINES
On December 10, 1997, Styling Technology Corporation (the "Company")
acquired certain assets and assumed certain liabilities of Inverness
Corporation, a New Jersey corporation, and Inverness (UK) Limited, a private
company limited by shares and registered in England and Wales (together
"Inverness"), pursuant to an Asset Purchase Agreement (the "Purchase Agreement")
dated October 31, 1997 among the Company and Inverness. Inverness produces
professional and consumer hair removal appliances, depilatories, and other
products under the "One Touch" and "Clean and Easy" brand names.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF INVERNESS CORPORATION AND INVERNESS (UK)
LIMITED
Independent Auditors' Report
Statement of Net Assets of Certain Product Lines as of
November 30, 1997.
Statement of Operating Revenues and Expenses For the Period
January 1, 1997 through November 30, 1997
Notes to Financial Statements
(b) PRO FORMA FINANCIAL STATEMENTS.
Introduction
Unaudited Condensed Consolidated Pro Forma Balance Sheet as of
September 30, 1997
Unaudited Condensed Consolidated Statement of Operations For
the Nine Months Ended September 30, 1997
Unaudited Condensed Consolidated Pro Forma Statement of
Operations For the Year Ended December 31, 1996
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Styling Technology Corporation:
We have audited the accompanying statement of net assets of certain product
lines of Inverness Corporation and Inverness (UK) Limited (collectively, the
Company) as of November 30, 1997, and the related statement of operating
revenues and expenses for the period from January 1, 1997 through November 30,
1997, (see Note 1 for basis of presentation). 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
The accompanying statement of net assets of certain product lines and the
related statement of operating revenues and expenses have been prepared pursuant
to the asset purchase agreement dated October 31, 1997 and effective December 1,
1997, between Styling Technology Corporation and the Company (Note 1). These
financial statements are not intended to be a complete presentation of the
Company's financial position or results of operations. The statement of net
assets of certain product lines and the related statement of operating revenues
and expenses are presented for the purposes of complying with the financial
statement requirements of the Securities Exchange Commission for acquired or to
be acquired businesses.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the statement of net assets of certain product lines of
the Company as of November 30, 1997, and the related statement of operating
revenues and expenses for the period from January 1, 1997 through November 30,
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
January 21, 1998.
3
<PAGE>
INVERNESS CORPORATION AND
INVERNESS (UK) LIMITED
STATEMENT OF NET ASSETS OF CERTAIN PRODUCT LINES
NOVEMBER 30, 1997
ASSETS
CURRENT ASSETS:
Accounts receivable, net of allowance for
uncollectible accounts of $147,993 $4,050,348
Inventory, net (Note 2) 3,378,831
Other current assets 127,446
----------
Total current assets 7,556,625
PROPERTY AND EQUIPMENT, net (Note 3) 969,018
OTHER NONCURRENT ASSETS, net (Note 2) 787,878
----------
Total assets 9,313,521
----------
LIABILITIES
CURRENT LIABILITIES:
Accounts payable 819,455
Accrued liabilities 529,076
----------
Total current liabilities 1,348,531
----------
COMMITMENTS AND CONTINGENCIES (Note 6)
NET ASSETS $7,964,990
==========
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
INVERNESS CORPORATION AND
INVERNESS (UK) LIMITED
STATEMENT OF OPERATING REVENUES AND EXPENSES
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH NOVEMBER 30, 1997
NET SALES (Note 2) $18,902,241
COST OF SALES (Note 1) 11,212,403
-----------
Gross profit 7,689,838
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 1) 7,311,470
-----------
Income from operations 378,368
-----------
OTHER INCOME AND EXPENSES:
Other income (Note 2) 358,282
Interest expense (Note 1) (229,921)
-----------
Total other income and expenses, net 128,361
-----------
EXCESS OF REVENUES OVER EXPENSES $ 506,729
===========
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
INVERNESS CORPORATION AND
INVERNESS (UK) LIMITED
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(1) ORGANIZATION AND BASIS OF PRESENTATION:
ACQUISITION AGREEMENT AND BASIS OF PRESENTATION
The accompanying financial statements represent the net assets of certain
product lines of Inverness Corporation and Inverness (UK) Limited to be acquired
(collectively, the Company). These statements are presented to comply with the
financial statement requirements of the Securities Exchange Commission for
acquired or to be acquired businesses.
In accordance with the terms of an asset purchase agreement (the Agreement)
dated October 31, 1997 and effective December 1, 1997, Styling Technology
Corporation agreed to acquire assets of certain product lines of Inverness
Corporation and Inverness (UK) Limited. The assets primarily consist of trade
receivables, inventories, and equipment. The terms also include a purchase price
of $20 million in cash and the assumption of certain liabilities which include
accounts payable, accrued liabilities and operating leases. The accompanying
financial statements represent the accounts of the purchased assets and assumed
liabilities pursuant to the terms of the Agreement.
The Company is a manufacturer and distributor of various personal care products
in the following product lines:
CLEAN AND EASY PROFESSIONAL SALON PRODUCTS - Roll-on waxing products
sold to professional salons.
ONE TOUCH ELECTROLYSIS, DEPILATORIES AND HOME WAXING - Battery-operated
electrolysis machines, a variety of roll-on creams and depilatories,
cream hair lighteners, strip wax and heated waxing appliances to be
used by consumers at home. These products are sold to beauty supply
stores, drug stores, discount stores, catalog mailers and showrooms,
mass volume retailers and department stores.
ALLOCATED EXPENSES
The product lines of the Company have historically been accounted for in the
consolidated financial statements of Inverness Corporation and Inverness (UK)
Limited (hereinafter referred to as Inverness). Inverness' management prepared
these financial statements by allocating certain of the total costs of
Inverness, to product lines acquired, based on the most conservative
methodologies.
Certain overhead items are allocated to cost of sales for these product lines.
Indirect labor and fringe benefit expenses are allocated based on standard
direct labor hours. Rent, real estate taxes, insurance and other common costs
are allocated based on estimated warehouse space occupied.
6
<PAGE>
Certain selling, general and administrative (S,G&A) expenses and interest
expense are allocated to each product line based on the percent of budgeted
S,G&A expense for that product line to Inverness' total S,G&A expense. Budgeted
S,G&A expenses for each product line are allocated based on Inverness' budgeted
net sales to each product line, adjusted for certain specific allocations. S,G&A
expenses consist primarily of sales salaries and commissions, travel and
entertainment, advertising, and shipping expenses.
(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.
Inventory, net, consists of the following at November 30, 1997:
Raw materials and work-in-process $1,430,441
Finished goods 1,948,390
----------
$3,378,831
==========
OTHER NONCURRENT ASSETS
Other noncurrent assets consist of trademarks and patents of $436,451 and
$351,427, respectively, net of accumulated amortization. Trademarks and patents
are amortized on a straight-line basis over a 5-year and 17-year period,
respectively. Amortization expense allocated to the product lines for the period
January 1, 1997 through November 30, 1997, for trademarks and patents was
approximately $114,000 and $23,000, respectively.
REVENUE RECOGNITION
The Company recognizes revenue from sales upon shipment of the product.
OTHER INCOME
The Company recorded a gain from the settlement of an infringement lawsuit
related to a patent for the One Touch Electrolysis and Home Waxing product line.
INCOME TAXES
Inverness does not allocate income tax expense to the product lines of the
Company. Accordingly, the accompanying statement of operating revenues and
expenses for the period January 1, 1997 through November 30, 1997 does not
include a provision for income taxes.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the product lines
acquired related to Inverness Corporation and Inverness (UK) Limited. All
material intercompany items and transactions have been eliminated in
consolidation. Financial information relating to the product lines within
Inverness (UK) Limited is reported in accordance with Statement of Financial
Accounting Standards No. 52, FOREIGN CURRENCY TRANSLATION.
7
<PAGE>
USE OF ESTIMATES
The preparation of financial information in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also effect the reported amounts of revenues and expenses during the
reported periods. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS.
The Company's Financial Instruments, as defined by SFAS No. 107, include
accounts receivable, accounts payable and accrued liabilities. The estimated
fair value amounts have been determined by the Company at November 30, 1997,
using available market information.
The carrying value of accounts receivable, accounts payable and accrued
liabilities approximates fair value due to the short-term maturities of these
instruments.
(3) PROPERTY AND EQUIPMENT:
Property and equipment consist of the following at November 30, 1997:
Furniture and fixtures $ 169,887
Machinery and equipment 3,036,530
-----------
3,206,417
Less-accumulated depreciation (2,237,399)
-----------
$ 969,018
===========
Property and equipment are recorded at cost and depreciation is provided on the
straight-line method over the following estimated useful lives:
Years
-----
Furniture and fixtures 4-7
Machinery and equipment 3-20
Accumulated depreciation has been recorded utilizing an allocation methodology
based on the relative cost of these product lines' property and equipment in
relation to Inverness' balance of property and equipment. Depreciation expense
allocated to the product lines for the period January 1, 1997 through November
30, 1997, was approximately $283,000.
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.
Repairs and maintenance expense for the period January 1, 1997 through November
30, 1997, was approximately $59,000.
8
<PAGE>
(4) RELATED PARTY TRANSACTIONS:
Inverness leases its primary facility from its majority shareholder under a
noncancelable operating lease expiring in July 1998. Rent expense allocated to
the product lines for the period January 1, 1997 through November 30, 1997, was
approximately $248,000.
In addition, the product lines acquired are part of Inverness Corporation and
Inverness UK Limited, which are both 100% owned by the same shareholder. The
inventory within the Inverness UK Limited product lines is supplied primarily
by Inverness Corporation. For the period from January 1, 1997 through November
30, 1997, sales from Inverness Corporation to Inverness UK Limited were
approximately $1,290,000, all of which were eliminated during consolidation.
(5) CONCENTRATION OF CREDIT RISK:
SALES TO MAJOR CUSTOMERS
During the period January 1, 1997 through November 30, 1997, sales to a major
customer comprised approximately 11% of the Company's revenues. At November 30,
1997, the amount due from this customer included in accounts receivable was
approximately $1,079,000.
VENDOR CONCENTRATION
The Company purchased approximately 26% of its inventory from two vendors during
period January 1, 1997 through November 30, 1997. At November 30, 1997, the
amounts due to these vendors included in accounts payable was approximately
$13,000.
(6) COMMITMENTS AND CONTINGENCIES:
LEASES
The Company has several noncancelable operating leases for facilities and
equipment. The U.S. facility's lease expires in July 1998. The UK facility lease
runs through January 2003. Future minimum payments under these noncancelable
operating leases with terms are as follows:
Year Ending
November 30,
------------
1998 $281,532
1999 123,954
2000 107,865
2001 96,233
2002 95,310
Thereafter 23,827
--------
$728,721
========
Rental expense allocated to the product lines for the period January 1, 1997
through November 30, 1997, was approximately $538,000.
9
<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 September 30, 1997, and unaudited
condensed consolidated pro forma statements of operations for the nine months
ended September 30, 1997 and the year ended December 31, 1996.
On December 10, 1997, STC acquired certain product lines of Inverness
Corporation and Inverness (UK) Limited (collectively, Inverness) for $20.0
million in cash ($3.5 million will be held in escrow pending the successful
transition of the manufacturing of certain products to an offshore
manufacturer). In connection with the Inverness acquisition, the Company entered
into a credit facility with Credit Agricole Indosuez for $75.0 million, of which
$50.0 million was issued to pay for the Inverness acquisition, certain related
Inverness acquisition fees and the payoff of the existing credit facility. The
Inverness acquisition and the credit facility with Credit Argricole Indosuez are
herein referred to the Transactions.
The unaudited condensed consolidated pro forma balance sheet as of September 30,
1997 gives effect to the Transactions as if they had occurred on September 30,
1997. The unaudited condensed consolidated pro forma statement of operations for
the nine months ended September 30, 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 September 30,
1997 of the Company has been derived from: (i) the unaudited historical
financial statements of the Company, and (ii) the audited historical statement
of net assets of certain product lines of Inverness as of November 30, 1997. The
unaudited condensed consolidated pro forma statement of operations for the nine
months ended September 30, 1997 of the Company has been derived from the
unaudited historical financial statements of the Company for the nine months
ended September 30, 1997; the unaudited historical financial statements of U.K.
ABBA Products, Inc. (ABBA) for the period from January 1, 1997 to June 25, 1997;
and the unaudited historical statement of operating revenues and expenses of
Inverness for the period from January 1, 1997 to September 30, 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; the audited historical financial statements for ABBA for the
year ended December 31, 1996, (iv) the unaudited statement of operating revenues
and expenses of Inverness for the period from January 1, 1996 to 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 certain adjustments that are directly
attributable to the Transactions.
The unaudited condensed consolidated pro forma statements of operations above do
not include any adjustments related to potential selling, general and
administrative expense synergies as a result of the acquisition of Inverness and
ABBA.
10
<PAGE>
Unaudited Condensed Consolidated Pro Forma Balance Sheet
As of September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
September November
30, 1997 30, 1997 Pro Forma Pro Forma
STC Inverness Combined Adjustments Combined
-------- --------- -------- ----------- --------
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and Cash Equivalents $ 1,389 $ -- $ 1,389 $ 50,000 [2] $ 4,912
(25,727)[2]
(20,750)[1]
Accounts Receivable, net 8,596 4,050 12,646 12,646
Inventory, net 4,601 3,379 7,980 7,980
Other Current Assets 1,308 128 1,436 1,436
------- ------ ------- -------- -------
Total Current Assets 15,894 7,557 23,451 3,523 26,974
Property and Equipment, net 1,559 969 2,528 2,528
Goodwill and Other 43,880 788 44,668 (2,430)[2] 57,860
13,695 [1]
1,927 [2]
------- ------ ------- -------- -------
TOTAL ASSETS $61,333 $9,314 $70,647 16,715 $87,362
======= ====== ======= ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
(OR NET ASSETS OF INVERNESS)
Accounts Payable and Accrued Liabilities $ 5,800 $1,349 $ 7,149 300 [2] $ 8,359
910 [1]
Current Portion of Long-Term Debt 3,100 -- 3,100 (3,100)[2] 3,300
3,300 [2]
------- ------ ------- -------- -------
Total Current Liabilities 8,900 1,349 10,249 1,410 11,659
Long-Term Debt, net of current portion 23,792 -- 23,792 (21,000)[2] 49,492
46,700 [2]
------- ------ ------- -------- -------
TOTAL LIABILITIES 32,692 1,349 34,041 27,110 61,151
------- ------ ------- -------- -------
Net Assets of Inverness -- 7,965 7,965 (7,965)[1] --
Common Stock 1 -- 1 1
Additional Paid-in Capital 27,866 -- 27,866 27,866
Retained Earnings 2,574 -- 2,574 (2,430)[2] 144
Treasury Stock (1,800) -- (1,800) (1,800)
------- ------ ------- -------- -------
Total Stockholders' Equity
(or Net Assets of Inverness) 28,641 7,965 36,606 (10,395) 26,211
------- ------ ------- -------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(OR NET ASSETS OF INVERNESS) $61,333 $9,314 $70,647 $ 16,715 $87,362
======= ====== ======= ======== =======
</TABLE>
- ----------
[1] Reflects purchase of Inverness including the recordation and payment of
certain acquisition expenses and the allocation of the preliminary
purchase price to the net assets of Inverness
[2] Reflects the issuance of $50 million of debt in the financing transaction
and the recordation of all new financing costs. Also included is the
payoff of the existing credit facility and the write off of the costs
associated with that credit facility.
11
<PAGE>
Unaudited Condensed Consolidated Pro Forma Statement of Operations
For the Nine Months Ended September 30, 1997
(in thousands, except per share amount)
<TABLE>
<CAPTION>
STC and ABBA
ProForma Pro Forma
STC ABBA Combined Adjustments Combined
------- ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Net Sales $25,585 $ 5,742 $31,327 $ 31,327
Cost of Sales 11,347 2,780 14,127 14,127
------- ------- ------- -------- -------
Gross Profit 14,238 2,962 17,200 17,200
Selling, General & Administrative Expenses 8,305 2,358 10,663 400 [1] 10,663
(400)[3]
------- ------- ------- -------- -------
Income (loss) from Operations 5,933 604 6,537 -- 6,537
Interest Expense and Other, net 951 (50) 901 1,494 [2] 2,395
------- ------- ------- -------- -------
Income (loss) before Income Taxes 4,982 654 5,636 (1,494) 4,142
Provision for Income Taxes 2,069 185 2,254 (368)[4] 1,886
------- ------- ------- -------- -------
NET INCOME $ 2,913 $ 469 $ 3,382 $ (1,126) $ 2,256
======= ======= ======= ======== =======
PRO FORMA FULLY DILUTED EARNINGS PER SHARE
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
STC, ABBA and
STC, ABBA and Inverness
Inverness Pro Forma Pro Forma
Inverness Combined Adjustments Combined
--------- -------- ----------- --------
Net Sales $15,654 $46,981 $46,981
Cost of Sales 9,216 23,343 (2,485)[5] 20,858
------- ------- -------- -------
Gross Profit 6,438 23,638 2,485 26,123
Selling, General & Administrative Expenses 4,950 15,613 410 [1] 16,023
------- ------- -------- -------
Income (loss) from Operations 1,488 8,025 2,075 10,100
Interest Expense and Other, net 179 2,574 1,703 [2] 4,277
------- ------- -------- -------
Income (loss) before Income Taxes 1,309 5,451 372 5,823
Provision for Income Taxes -- 1,886 560 [4] 2,446
------- ------- -------- -------
NET INCOME $ 1,309 $ 3,565 $ (188) $ 3,377
======= ======= ======== =======
PRO FORMA FULLY DILUTED EARNINGS PER SHARE $ 0.80
=======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 4,209
=======
</TABLE>
- ----------
[1] Reflects the amortization of goodwill over 25 years
[2] Reflects interest expense incurred in the financing transaction.
[3] Reflects the elimination of compensation paid to former shareholders not
continuing with the combined companies
[4] Reflects 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.
[5] Reflects the adjustment to cost of sales related to a reduction of costs
under the off shore manufacturing agreement negotiated in connection
with the Inverness acquisition.
12
<PAGE>
Unaudited Condensed Consolidated Pro Forma Statement of Operations
For the Year Ended December 31, 1996
(in thousands, except per share amount)
<TABLE>
<CAPTION>
Body
Gena JDS Drench KII STC Combined
------ ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $8,059 $ 2,948 $ 9,643 $ 1,248 $ 1,084 $ 22,982
Cost of Sales 4,796 1,259 5,867 586 570 13,078
------ ------- ------- ------- ------- --------
Gross Profit 3,263 1,689 3,776 662 514 9,904
Selling, General &
Administrative Expenses 2,577 1,495 4,005 591 737 9,405
------ ------- ------- ------- ------- --------
Income (loss) from Operations 686 194 (229) 71 (223) 499
Interest Expense and Other, net 21 1 -- 74 1 97
------ ------- ------- ------- ------- --------
Income (loss) before Income Taxes 665 193 (229) (3) (224) 402
Provision (Benefit) for Income Taxes -- (92) (72) (164)
------ ------- ------- ------- ------- --------
NET INCOME (LOSS) $ 665 $ 193 $ (137) $ (3) $ (152) $ 566
====== ======= ======= ======= ======= ========
PRO FORMA FULLY DILUTED EARNINGS
PER SHARE
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
STC and
STC STC and ABBA
Pro Forma Pro Forma ABBA Pro Forma Pro Forma
Adjustments Combined ABBA Combined Adjustments Combined
----------- -------- ------- -------- ----------- --------
Net Sales $22,982 $10,603 $33,585 $33,585
Cost of Sales 13,078 5,013 18,091 18,091
------- ------- ------- ------- ------- -------
Gross Profit 9,904 5,590 15,494 15,494
Selling, General &
Administrative Expenses (1,490)[1] 8,791 4,880 13,671 (1,131)[5] 13,326
876 [2] 786 [2]
------- ------- ------- ------- ------- -------
Income (loss) from Operations 614 1,113 710 1,823 345 2,168
Interest Expense and Other, net (11)[4] 86 1 87 2,809 [3] 2,896
------- ------- ------- ------- ------- -------
Income (loss) before Income Taxes 625 1,027 709 1,736 (2,464) (728)
Provision (Benefit) for Income Taxes 585 [6] 421 291 712 (689)[6] 23
------- ------- ------- ------- ------- -------
NET INCOME (LOSS) $ 40 $ 606 $ 418 $ 1,024 $(1,775) $ (751)
======= ======= ======= ======= ======= =======
PRO FORMA FULLY DILUTED EARNINGS
PER SHARE
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
STC, STC, ABBA
ABBA and and Inverness
Inverness Pro Forma Pro Forma
Inverness Combined Adjustments Combined
--------- -------- ----------- --------
Net Sales $17,789 $51,374 $51,374
Cost of Sales 10,007 28,098 (2,358)[7] 25,740
------- ------- ------- -------
Gross Profit 7,782 23,276 2,358 25,634
Selling, General &
Administrative Expenses 7,450 20,776 548 [2] 21,324
------- ------- ------- -------
Income (loss) from Operations 332 2,500 1,810 4,310
Interest Expense and Other, net 602 3,498 2,451 [3] 5,949
------- ------- ------- -------
Income (loss) before Income Taxes (270) (1,021) (641) (1,639)
Provision (Benefit) for Income Taxes -- 23 (23)[6] --
------- ------- ------- -------
NET INCOME (LOSS) $ (270) $(1,021) $ (618) $(1,639)
======= ======= ======= =======
PRO FORMA FULLY DILUTED EARNINGS
PER SHARE $ (0.43)
=======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 3,770
=======
</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 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.
[7] Reflects the adjustment to cost of sales related to a reduction of costs
under the off shore manufacturing agreement negotiated in connection
with the Inverness acquisition.
13
<PAGE>
EXHIBITS.
Exhibit No. Description Of Exhibit
- ----------- ----------------------
10.20 Asset Purchase Agreement dated as of October 31, 1997 among
Styling Technology Corporation, Inverness Corporation, and
Inverness (UK) Limited. (1)
10.21 Transition and Manufacturing Agreement dated as of December 10, 1997
between Styling Technology Corporation and Inverness Corporation. (1)
10.22 Credit Agreement dated as of December 10, 1997 among Styling
Technology Corporation and Credit Agricole Indosuez, New York
branch, as agent and the lending institutions listed therein.(1)
23.1 Consent of Arthur Andersen LLP.
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(1) Incorporated by reference to the Registrant's Report on Form 8-K as filed on
December 24, 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.
February , 1998 STYLING TECHNOLOGY CORPORATION
By: /s/ Richard R. Ross
-------------------------------------
Richard R. Ross
Vice President, Chief Financial Officer,
Treasurer and Secretary
14
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUTANTS
As independent public accountants, we hereby consent to the inclusion in this
Current Report on Form 8-K/A of our report dated January 21, 1998 covering the
financial statements of Inverness Corporation and Inverness (UK) Limited
(collectively, Inverness) and the incorporation by reference of this report in
the previously filed Registration Statement on Form S-8 No. 333-43599, filed
December 31, 1997. It should be noted that we have not audited any financial
statements of Inverness subsequent to November 30, 1997 or performed any audit
procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
December 19, 1998.
