<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A1
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 25, 1995
HANOVER DIRECT, INC.
(Exact name of registrant as specified in its charter)
1-12082
(Commission File Number)
DELAWARE 13-085326
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification Number)
1500 HARBOR BOULEVARD
WEEHAWKEN, NEW JERSEY
(Address of principal 07087
executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 863-7300
----------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
EXPLANATORY NOTE
Item 7(a)(i) is being amended to reflect the fact that the attached financial
statements are now being reported upon by Arthur Andersen LLP.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired:
(i) The Austad Company -- Financial Statements for the years
ended December 31, 1994 and 1993
Report of Arthur Andersen LLP
Balance Sheets as of December 31, 1994 and 1993
Statements of Operations for the years ended December 31, 1994
and 1993
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1994
and 1993
Notes to Financial Statements
(c) Exhibits:
(1) Consent of Arthur Andersen LLP
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<PAGE> 3
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.
HANOVER DIRECT, INC.
--------------------------
(Registrant)
April 16, 1996 By: /s/Wayne P. Garten
---------------------------
Name: Wayne P. Garten
Title: Executive Vice
President & Chief
Financial Officer
-3-
<PAGE> 4
THE AUSTAD COMPANY
Financial Statements as of
December 31, 1994 and 1993
Together With Report of
Independent Public Accountants
<PAGE> 5
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Austad Company:
We have audited the accompanying balance sheets of The Austad Company as of
December 31, 1994 and 1993, and the related statements of operations, changes in
shareholders' 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 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 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 The Austad Company as of
December 31, 1994 and 1993, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Minneapolis, Minnesota,
February 23, 1996
<PAGE> 6
THE AUSTAD COMPANY
Balance Sheets
As of December 31
(In Thousands)
<TABLE>
<CAPTION>
ASSETS 1994 1993
------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 106 $ 271
Accounts receivable, net 634 943
Inventories 9,470 12,893
Prepaid catalog costs 511 770
Deferred taxes and other current assets 50 566
------- -------
Total current assets 10,771 15,443
PROPERTY AND EQUIPMENT, net 3,708 3,658
INTANGIBLES, net 33 60
------- -------
$14,512 $19,161
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term obligations $ 333 $ 242
Revolving credit borrowings 5,070 7,050
Accounts payable 3,184 3,767
Customer returns 737 887
Accrued expenses 1,098 1,311
------- -------
Total current liabilities 10,422 13,257
LONG-TERM OBLIGATIONS 3,069 3,096
NOTES PAYABLE TO SHAREHOLDERS 768 768
------- -------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY (Note 6):
Series A preferred stock 1,142 1,142
Series B preferred stock 550 550
Series C preferred stock 1 1
Common stock 29 29
Additional paid-in capital 4 4
(Accumulated deficit) retained earnings (1,473) 314
------- -------
Total shareholders' equity 253 2,040
------- -------
$14,512 $19,161
======= =======
</TABLE>
The accompanying notes are an integral part of these balance sheets
<PAGE> 7
THE AUSTAD COMPANY
Statements of Operations
For the Years Ended December 31
(In Thousands)
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
NET SALES $39,198 $42,882
COST OF SALES 24,689 28,050
------- -------
Gross profit 14,509 14,832
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 14,365 14,239
DEPRECIATION AND AMORTIZATION EXPENSE 815 680
------- -------
Operating loss (671) (87)
OTHER EXPENSE:
Amortization of loan origination costs (61) (105)
Interest (1,048) (816)
Other, net (7) (18)
------- -------
Net loss $(1,787) $(1,026)
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
THE AUSTAD COMPANY
Statements of Changes in Shareholders' Equity
For the Years Ended December 31
(In Thousands)
<TABLE>
<CAPTION>
Preferred Stock
-------------------------------------------------------
$4.46 Cumulative $4.46 Cumulative
Redeemable Redeemable Convertible
Series A Series B Series C Common Stock
---------------- ---------------- --------------- ---------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 - $ - - $ - - $- 45 $45
Series A preferred stock issued in exchange for
common stock 10 1,142 - - - - (10) (10)
Series B preferred stock issued in exchange for
common stock - - 5 550 - - (5) (5)
Series C preferred stock issued in exchange for
common stock - - - - 1 1 (1) (1)
Net loss - - - - - - - -
-- ------ - ---- - -- --- ---
BALANCE, December 31, 1993 10 1,142 5 550 1 1 29 29
Net loss - - - - - - - -
-- ------ - ---- - -- --- ---
BALANCE, December 31, 1994 10 $1,142 5 $550 1 $1 29 $29
== ====== = ==== = == === ===
</TABLE>
<TABLE>
<CAPTION>
Retained
Additional Earnings Total
Paid-In (Accumulated Shareholders'
Capital Deficit) Equity
---------- ------------ -------------
<S> <C> <C> <C>
BALANCE, December 31, 1992 $4 $ 3,017 $ 3,066
Series A preferred stock issued in exchange for
common stock - (1,132) -
Series B preferred stock issued in exchange for
common stock - (545) -
Series C preferred stock issued in exchange for
common stock - - -
Net loss - (1,026) (1,026)
-- ------- -------
BALANCE, December 31, 1993 4 314 2,040
Net loss - (1,787) (1,787)
-- ------- -------
BALANCE, December 31, 1994 $4 $(1,473) $ 253
== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 9
THE AUSTAD COMPANY
Statements of Cash Flows
For the Years Ended December 31
(In Thousands)
<TABLE>
<CAPTION>
1994 1993
------- -------
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(1,787) $(1,026)
Adjustments to reconcile net loss to net cash from operating activities-
Depreciation and amortization 876 785
Other (8) 3
Change in operating assets and liabilities:
Accounts receivable 309 (214)
Inventories 3,423 (2,599)
Prepaid catalog costs 259 16
Deferred taxes and other current assets 516 (446)
Accounts payable (809) 44
Customer returns (150) (110)
Accrued expenses (213) 257
------- -------
Net cash provided by (used in) operating activities 2,416 (3,290)
------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment, net (477) (483)
------- -------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term obligations 5,070 9,323
Payments on long-term obligations (7,400) (7,092)
Increase in cash overdraft 226 422
------- -------
Net cash (used in) provided by financing activities (2,104) 2,653
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (165) (1,120)
CASH AND CASH EQUIVALENTS:
Beginning of year 271 1,391
------- -------
End of year $ 106 $ 271
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 10
THE AUSTAD COMPANY
Notes to Financial Statements
December 31, 1994 and 1993
1. BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING PRINCIPLES:
BUSINESS DESCRIPTION
The operations of The Austad Company (the Company) consist principally of the
worldwide mail order distribution of sports and leisure equipment, and related
apparel and accessories, specializing in golf. In addition, the Company
maintains retail stores in Blaine and Edina, Minnesota; Oak Brook, Illinois; and
Sioux Falls, South Dakota. Sales to customers are primarily by cash, credit card
or credit terms that the Company establishes for individual customers.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable is comprised primarily of amounts due from worldwide
distributors of the Company's products and amounts due from lessees of the
Company's mailing lists, net of an allowance for doubtful accounts of $31,000
and $42,000 in 1994 and 1993, respectively.
Four distributors and one lessee comprised approximately 47% of the December 31,
1994 accounts receivable balance, approximately one-half of which was comprised
of foreign distributors. Four distributors and one lessee comprised
approximately 61% of the December 31, 1993 accounts receivable balance,
approximately one-third of which was comprised of foreign distributors.
The Company performs ongoing credit evaluations of its customers, generally does
not require collateral and maintains an allowance for potential credit losses.
INVENTORIES
Inventories are stated at the lower of cost or market with cost determined on
the weighted average method.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, less accumulated depreciation and
amortization. Depreciation and amortization of property and equipment are
computed on the straight-line method over estimated useful asset lives (shorter
of asset life or lease term for leasehold improvements).
Expenditures for maintenance and repairs and minor renewals and betterments
which do not improve or extend the lives or the respective assets are expensed.
All other expenditures for
<PAGE> 11
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renewals and betterments are capitalized. The assets and related depreciation
accounts are adjusted for property retirements and disposals with the resulting
gain or loss included in operations.
REVENUE RECOGNITION AND MERCHANDISE RETURNS
The Company recognizes revenue upon shipment of inventory. Prepaid customer
orders are recorded as a liability until the goods are shipped. The Company
accepts returns of merchandise throughout the product's life with normal use and
will accept trade-in of used golf clubs for in-store credit. The Company records
a liability in connection with sales activity for projected merchandise returns
based on historical return experience.
PREPAID CATALOG COSTS
The Company defers catalog preparation and distribution costs and amortizes such
costs over the projected sales demand of the catalogs, which is primarily three
to six months from the date catalogs are mailed.
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires
recognition of deferred income tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income tax assets and
liabilities are determined based on the differences between the financial
statement and tax bases of assets and liabilities using currently enacted tax
rates in effect for the years in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
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 and 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.
Ultimate results could differ from those estimates.
<PAGE> 12
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2. OTHER FINANCIAL STATEMENT DATA:
The following provides additional information concerning selected balance sheet
accounts at December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Property and equipment:
Land $ 42 $ 42
Buildings and improvements 2,205 2,161
Equipment, furniture and leasehold improvements 4,385 4,509
Capitalized lease property 1,556 1,176
------- -------
8,188 7,888
Less- Accumulated depreciation and amortization,
including $257 in 1994 and $44 in 1993 related to
capitalized lease property (4,480) (4,230)
------- -------
$ 3,708 $ 3,658
======= =======
Accrued expenses:
Payroll and accrued vacation $ 326 $ 442
Payroll, property and sales taxes 161 157
Advance payments on orders 437 388
Accrued promotions 15 164
Accrued commissions 71 63
Other 88 97
------- -------
$ 1,098 $ 1,311
======= =======
</TABLE>
Accounts payable included a cash overdraft of $648,000 and $422,000 at December
31, 1994 and 1993, respectively, in connection with the Company's controlled
disbursements account.
Selling, general and administrative expenses are net of revenues from shipping
and handling, list rentals, package inserts and fulfillment of $3,808,000 and
$4,403,000 for the years ended December 31, 1994 and 1993, respectively.
The following provides supplemental disclosures of cash flow activity for the
years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Cash paid (received) during the year for:
Interest $1,033 $ 809
Income taxes (427) 429
Noncash investing and financing activities:
Property and equipment acquired through capital lease
obligations 380 1,176
</TABLE>
<PAGE> 13
-4-
3. FINANCING ARRANGEMENTS:
The Company's short-term and long-term debt consists of the following at
December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Revolving loan $ 5,070 $ 7,050
Mortgage loan 2,189 2,241
------- -------
Total short- and long-term debt 7,259 9,291
Less- Current portion (5,121) (7,098)
------- -------
Long-term portion $ 2,138 $ 2,193
======= =======
</TABLE>
During 1993, the Company entered into a revolving loan agreement with a bank
which allowed for borrowings of up to $8,500,000 as of December 31, 1993 at an
interest rate equal to the prime rate plus 2%. The prime rate at December 31,
1994 and 1993, was 8.5% and 6%, respectively. In January 1994, the revolving
loan agreement commitment was increased to allow borrowings of up to $9,500,000,
less outstanding letters of credit, based on adequacy of underlying collateral,
and effective June 1, 1994, had been amended to extend through December 21,
1994. At December 21, 1994, the revolving credit agreement was decreased to
$6,500,000 and was amended to extend through March 31, 1995. At March 31, 1995,
the revolving loan agreement was amended to extend through May 31, 1995 (see
Note 8).
The loan is collateralized by accounts receivable, inventories, property and
equipment, and intangible assets of the Company. The president of the Company
has signed as a guarantor. In addition, the agreement contains provisions for
the bank to provide letters of credit to the Company. As of December 31, 1994,
the Company had outstanding letters of credit totaling $13,000. As of December
31, 1993, the Company did not have any outstanding letters of credit.
The Company was required to maintain a specified tangible net worth ratio, but
did not meet this covenant in 1993 and through June 1, 1994. Under the June 1,
1994 amended agreement, this covenant was deleted. Under the June 1, 1994
amended agreement, the Company was required to attain prescribed minimum
year-to-date net profits before taxes, but did not meet this covenant in 1994.
Under the December 21, 1994 amended agreement, the Company was required to
attain prescribed pretax net profits as of January 31, 1995, February 28, 1995
and March 31, 1995, which it also did not meet. In addition, the revolving loan
agreement contains covenants including limitations on incurrence of debt,
granting of liens, payment of dividends, investments, capital expenditures,
merger or consolidation, loans or advances to related parties, and capital stock
transactions.
During 1993, the Company entered into a mortgage loan agreement with the bank
for $2,273,000, which bears interest at a rate of 8.75%. Monthly principal and
interest payments are $20,000 with a final payment of $1,600,000 due in March
2003.
<PAGE> 14
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Aggregate maturities of bank debt are as follows (in thousands):
<TABLE>
<S> <C>
1995 $5,121
1996 58
1997 64
1998 70
1999 76
Thereafter 1,870
------
$7,259
======
</TABLE>
The Company has notes payable to shareholders of $768,000 as of December 31,
1994 and 1993. Interest expense paid to shareholders was $69,000 and $80,000 in
1994 and 1993, respectively. The notes are payable at the Company's option,
accrue interest at 9%, payable quarterly, and are subordinated to the bank debt
discussed above.
4. INCOME TAXES:
In years prior to 1993, the shareholders of the Company had elected to be taxed
as an S corporation under the Internal Revenue Code. In March 1993, the
shareholders terminated the Company's S corporation election, effective January
1, 1993.
Effective January 1, 1993, the Company adopted the provisions of SFAS No. 109,
Accounting for Income Taxes." This change in accounting for income taxes had no
effect on the Company's financial position, results of operations and cash
flows.
As of December 31, 1994 and 1993, the Company has net deferred income tax assets
of approximately $2,488,000 and $889,000, respectively, which are offset by a
valuation allowance based on the uncertainty associated with ultimate
realization of these deferred income tax assets. The principal sources of
temporary differences include net operating loss (NOL) carryforwards, allowance
for sales returns, deferred catalog costs, allowance for inventory write-downs,
and other accrued expenses such as accrued vacation and accrued gift
certificates.
As of December 31, 1994, the net deferred income tax asset includes asset
amounts arising from NOL carryforwards of approximately $1,586,000, $157,000 and
$125,000 available for federal, Minnesota and Illinois income tax purposes,
respectively. These carryforwards expire in 2008 and 2009.
Under the Internal Revenue Code, certain corporate stock transactions which the
Company has entered into limit the amount of NOL carryforwards which may be
utilized and the timing of the NOL utilization. Ultimate realization of the NOL
carryforwards has been limited because of the changes in control which have
occurred (see Note 8).
5. RETIREMENT PLANS:
The Company has a profit-sharing plan which includes a 401(k) component that
covers substantially all employees. Contributions to the profit-sharing
component of the plan are at the discretion of the board of directors and the
Company matches employee contributions to the 401(k) component of the plan, up
to a maximum of $200 per employee. The Company contributed $21,000 and $17,000
to the plan for the years ended December 31, 1994 and 1993, respectively.
<PAGE> 15
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6. SHAREHOLDERS' EQUITY:
The Company has 250,000 authorized shares of $1 par value common stock of which
29,000 shares were issued and outstanding at December 31, 1994. The Company also
has 250,000 authorized $1 par value preferred shares.
During 1993, the Company approved agreements with four shareholders for the
exchange of 16,000 shares of their common stock for preferred stock. The
preferred stock was recorded at its estimated fair value on the effective date
of the transaction. The Company issued 10,000 shares of Series A cumulative,
redeemable preferred stock and 5,000 shares of Series B cumulative, redeemable
preferred stock which accumulate dividends at a rate of $4.46 per share per
year, commencing January 1, 1995. The Company also issued 1,000 shares of Series
C noncumulative, convertible preferred stock.
The Company did not pay or accrue any dividends during 1994 and 1993. The
Company is restricted from paying dividends on its common stock if Series A or
Series B preferred is outstanding. As of December 31, 1994, the number of
preferred shares issued in 1993 as mentioned above represents the total
quantities of shares authorized, issued and outstanding.
Series A cumulative, redeemable and Series B cumulative, redeemable preferred
stock have a liquidation preference over the common stock and the Series C
preferred stock equal to $111.56 per share plus unpaid dividends. Payments to
Series A and Series B preferred shareholders are to be made on a pro rata basis.
Series A and Series B preferred stock are redeemable at the discretion of the
board of directors between January 1, 1996 and June 30, 1996, at a value for the
Series A preferred stock of $1,142,000 plus cumulative dividends and plus an
amount based on 22.83% times the difference, if positive, between (a) five times
fiscal 1995 earnings before interest, tax, depreciation, amortization, and
extraordinary and nonrecurring amounts less capital expenditures and outstanding
debt; and (b) $5,000,000, and at a value of $111.56 per share plus cumulative
dividends for the Series B preferred stock.
Series C preferred stock has liquidation preference over the common stock equal
to $111.56 per share. The Series C preferred stock may be converted to common
stock on a share-for-share basis at the shareholder's discretion within 15 days
after notice by the Company of its intention to conduct an initial public
offering of its common stock, subject to certain limitations.
The Company has an agreement with its common stock shareholders that allows the
Company to have the first option of purchasing the stock of a selling
shareholder. If the Company does not purchase the stock, the other shareholders
have the second option to purchase the stock based on their proportionate
ownership of stock. The purchase price per share is the lower of the price per
share from a bona fide third-party offer or the book value of the shares on the
last day of the fiscal year ending on or before the date of the offer to sell.
7. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company is committed under operating lease agreements covering its retail
stores. The operating leases expire in varying terms through March 2005, with
certain leases including escalation provisions. The Company is generally
required to pay additional rent based on a percentage of sales. In addition to
rental payments, the Company is required to reimburse the
<PAGE> 16
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lessors for various operating expenses including a pro rata share of real estate
taxes and common area expenses.
Total rent expense includes the following (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Minimum rent $301 $309
Percentage rent based on sales 65 71
Real estate taxes and other expenses 67 25
---- ----
$433 $405
==== ====
</TABLE>
FUTURE MINIMUM LEASE PAYMENTS
As of December 31, 1994, future minimum lease payments (excluding percentage
rents based on sales) due under capital lease and existing noncancelable
operating leases with remaining terms of greater than one year are as follows
(in thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
1995 $ 395 $ 305
1996 402 292
1997 391 293
1998 284 296
1999 - 263
Thereafter - 613
------ ------
Total minimum lease payments 1,472 $2,062
======
Less- Amounts representing interest 259
------
Capital lease obligations, including current
maturities of $282 with interest ranging from
5.35% to 17.4% $1,213
======
</TABLE>
EMPLOYEE AGREEMENTS
During 1993, the Company entered into a two-year noncompete agreement with a
shareholder and former employee. Under the terms of the agreement, the Company
is required to make monthly payments of $6,000 from August 1, 1993 through July
31, 1995, in addition to paying medical and health insurance premiums and
certain membership fees. Expenses under this agreement were $79,000 and $36,000
in 1994 and 1993, respectively, and are included in selling, general and
administrative expenses.
During 1993, the Company entered into a noncompete agreement with another
shareholder and former employee. Under the terms of the agreement, the Company
made payments of $133,000 during 1993. The agreement was amended effective
December 31, 1993, whereby the Company is required to make quarterly payments of
$10,000 from March 31, 1994 through
<PAGE> 17
-8-
December 1998. Expenses under this agreement were $40,000 and $133,000 in 1994
and 1993, respectively, and are included in selling, general and administrative
expenses.
PHANTOM STOCK PLAN
In November 1993, the board of directors approved an unfunded Phantom Stock Plan
(the Plan) to provide incentive-deferred compensation for certain key employees
of the Company. The value of the incentive-deferred compensation is measured
based on performance units awarded to eligible employees by the board.
Performance units vest at a rate of 20% per year on the anniversary of the grant
date, provided the participant remains an employee of the Company. If a
participant is terminated, the participant is entitled to receive his or her
vested portion. Payments are to be made either in a lump sum or, at the board's
sole discretion, in equal annual installments of principal and interest over
five years.
Participants become fully vested upon termination of employment with the Company
due to death, disability or retirement or upon termination of the Plan.
The value of a performance unit is equal to the net book value of an outstanding
share of the Company's common stock as of the end of the fiscal year immediately
preceding the date of grant. The Plan has not awarded any performance units as
of December 31, 1994.
8. SUBSEQUENT EVENTS:
SALE OF MAJORITY OWNERSHIP
On May 25, 1995, the Company's sole shareholder contributed 100% of the common
shares of the Company for a minority interest in Austad Holdings, Inc. (the
Parent). The majority shareholder simultaneously provided the Company $2,600,000
in loans. Also simultaneously with the transaction, the Company redeemed all of
its outstanding preferred stock for $724,134, redeemed 14,394 shares of common
stock for $475,866, declared a dividend on common stock of $600,000 and repaid
the $768,000 of notes payable to shareholders.
On February 16, 1996, the majority shareholder of the Parent spun off the
Company's retail activities to the minority shareholder in exchange for his
minority interest in the Parent.
<PAGE> 18
EXHIBIT INDEX
Exhibit 1 - Consent of Arthur Andersen LLP
<PAGE> 1
Exhibit (1)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this Current
Report on Form 8-K.
/s/ ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
April 16, 1996
