ALFIN INC, 10-K405, 1996-11-13

ALFIN INC
10-K405, 1996-11-13
PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

(Mark One)

- - --- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
X SECURITIES EXCHANGE ACTO OF 1934 (FEE REQUIRED)
- - --- FOR THE FISCAL YEAR ENDED JULY 31, 1996

- - --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
- - --- FOR THE TRANSITION PERIOD FROM TO

Commission File Number:0-11434

ALFIN, INC.
(Exact name of Registrant as specified in its charter)

NEW YORK 13-3032734
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

720 Fifth Avenue, New York, New York 10019
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (212) 333-7700

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
- - ------------------- ---------------------
Common Stock, $.01 par American Stock Exchange
value per share

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

YES X NO
---- ----

Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K [X].

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the closing price on October 23, 1996, was $8,668,357.
As of October 24, 1996, the Registrant had 11,662,926 shares of Common Stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Proxy Statement for its 1996 Annual Meeting of Stockholders is
incorporated by reference into Part III of this Annual Report on Form 10-K.

<PAGE> 2
PART I

ITEM 1. BUSINESS

GENERAL

Alfin, Inc., a New York corporation (the "Company"), is engaged through its
wholly owned subsidiary, ADRIEN ARPEL, INC. ("ARPEL"), in distributing cosmetics
and other beauty products and providing facial and other beauty services.
Products and services are sold through television marketing on the Home Shopping
Network ("HSN"), in department stores and in specialty stores throughout the
United States and Canada.

PRODUCTS AND MAJOR DISTRIBUTION AGREEMENTS

CURRENT PRODUCTS

The Company develops, distributes and sells skin care and cosmetics products
under the trademark "ADRIEN ARPEL". ARPEL acts as an operator of
service-oriented skin care salons in department and specialty stores. Since
April 1994, ARPEL has also been distributing its products through television
marketing with HSN.

ARPEL'S product line consists of a line of high quality natural based skin care
products and a line of cosmetics products. Arpel products are positioned in the
better segment of the market and are competitively priced with other comparable
brands. In fiscal 1996, approximately 51.9% of ARPEL'S net sales were made to
HSN and approximately 48.1% were made to department stores. Net sales of ARPEL
products represented 99% and 96% of the Company's consolidated net sales for the
fiscal years ended July 31, 1996 and 1995, respectively.

DISCONTINUED PRODUCTS

The Company was originally engaged in the manufacturing, importation,
distribution, marketing and merchandising of fine imported fragrance products.
Beginning in 1993, the Company significantly reduced its distribution of
fragrance products. During July 1995, the Company ceased distribution of
fragrance products, due to the unprofitability of this business.

During March 1996 the Company sold its exclusive worldwide manufacturing,
distribution and licensing rights for FRACAS and BANDIT and other fragrances by
Robert Piquet to Fashion Fragrances and Cosmetics Ltd. ("FF&C") for $1.2
million. Under this purchase agreement, the Company has received $500,000 with
the remaining payments of $300,000 and $400,000 due to be paid in December 1996
and July 1997 respectively. The Company recorded a gain of $394,392 on the sale
of this asset. Until the Company receives final payment under the purchase
agreement FF&C will be a licensee of the rights to Robert Piquet. The Company is
not entitled to any royalties under this licensing agreement.

1
<PAGE> 3
SALES AND MARKETING

Net sales of ARPEL products represented 99% and 96% of consolidated net sales
for the fiscal years ended July 31, 1996 and 1995, respectively.

The Company's major domestic accounts include Burdines, Dayton/Hudson, Dillards,
Federated Department Stores, Foley's, Hechts, HSN, Kaufmanns, and Mercantile.
ARPEL also sells directly to the Canadian department store, the Bay. Sales to
department stores accounted for approximately 48.1% of sales for fiscal 1996.
The arrangement with HSN represented approximately 51.9% of sales for fiscal
1996. No other single domestic account, foreign distributor or independent sales
agent accounted for sales in an aggregate amount equal to 10% or more of the
Company's consolidated net sales.

As is common in the fragrance and cosmetic industry, the Company provides its
domestic customers with the limited right to return merchandise in order to
balance inventory and stock levels. The rate of return experienced by the
Company was approximately 6.1%, 3.0% and 4.0% for the fiscal years ended July
31, 1996, 1995 and 1994, respectively.

Sales to foreign accounts, expressed as a percentage of net sales, were 6.4%,
3.0% and 5.0% for the fiscal years ended July 31, 1996, 1995 and 1994,
respectively.

RESEARCH AND DEVELOPMENT

The Company did not spend a material amount on research and development during
the fiscal years ended July 31, 1996, 1995 and 1994.

ADVERTISING

The Company advertises through cooperative advertising programs, and catalogs.
Advertising costs as a percentage of consolidated retail store sales for the
fiscal years ended July 31, 1996, 1995 and 1994 were 9.7%, 9.4%, and 10.3%,
respectively. The Company also promotes its products through the use of
promotional materials and in-store displays.

MANUFACTURING

The Company does not maintain any manufacturing facilities. It subcontracts to
manufacture its products, in accordance with the Company's specifications and
formulas. (Note: See Trademark and Regulations paragraph). The Company believes
that other manufacturing subcontractors are available if alternative production
sources need to be obtained. The Company believes that it is in compliance with
all applicable laws and regulations pertaining to its business and to any
Federal, state or local laws and regulations designated to protect the
environment.

2
<PAGE> 4
TRADEMARKS AND REGULATIONS

The Company owns the relevant Trademarks of the products which are distributed
by the Company. The ADRIEN ARPEL and ARPEL names are registered as trademarks in
the United States and a number of foreign countries.

The Food and Drug Administration ("FDA") monitors certain aspects of the
cosmetic industry, particularly those that relate to advertising claims and
purported benefits with respect to cosmetic products and the physical
composition of cosmetics. The Company has not been notified by the FDA, nor, to
its knowledge, have any of its manufacturers been notified by the FDA, that any
of the products that the Company distributes are presently the subject of any
FDA investigation or that any claims or complaints have been made or are
threatened against the products the Company distributes. Notwithstanding the
foregoing, the Company does not believe that any FDA approvals or consents are
required with respect to any of the products the company distributes.

The Federal Trade Commission ("FTC") monitors certain other aspects of the
Company's business, particularly as they relate to product packaging and
advertising. The Company designs the packaging of all products it distributes,
and for which it owns the relevant trademark. The Company has not been notified
by the FTC that any of the Company's products or practices are presently the
subject of any FTC investigation, claims or complaints which have been made or
are threatened against the Company.

The Company believes that it is in compliance with all applicable laws and
regulations pertaining to its business and any Federal, state or local laws and
regulations designed to protect the environment.

PRODUCT LIABILITY

The Company believes that the manufacturers of its products carry product
liability insurance in an amount sufficient to cover any foreseeable product
liability claim and that the Company is protected thereunder. In addition, the
Company maintains product liability coverage in an amount which it believes is
adequate to cover any exposure it may have with respect to its products. The
Company has never been the subject of any material product liability litigation.

COMPETITION

The market for cosmetics is volatile, competitive and sensitive to changing
consumer preferences and demands. There are products which are better known than
the products distributed by the Company and there are many companies which are
substantially larger, more diversified and which have substantially greater
resources than the Company and which have the ability to develop and market
products which are similar to and competitive with those distributed by the
Company.

GENERAL ECONOMIC CONDITIONS

Retail cosmetic purchases are discretionary and are frequently made by customers
using consumer credit. The Company believes that a decline in consumer credit
purchases could adversely affect the business and financial condition of
department stores and television marketing, and therefore, the Company.

3
<PAGE> 5
EMPLOYEES

As of July 31, 1996, the Company had 109 employees. Of these, 70 were engaged in
sales and marketing activities, 30 in administrative functions and 9 in
distribution activities.

RECENT EVENTS

On October 23, 1996, Jean Farat, the Company's Chairman and Chief Executive
Officer, resigned from the Company. Mrs. Elisabeth Fayer, a Director and major
shareholder, was elected President of the Company by the Board of Directors
prior to the resignation. Since the resignation, Mrs. Fayer also serves as Chief
Executive Officer.

On October 28, 1996 the Company received notice from Adrienne Newman
terminating her Employment Agreement based on an alleged breach of the
Employment Agreement by the Company. Ms. Newman serves as the President of
Adrien Arpel, Inc. and has been the selling host under the name of Adrien
Arpel, in its sales program on the Home Shopping Network, Inc. ("HSN").

The Company believes that it has fully complied with all terms of the
employment Agreement and that the termination by Ms. Newman is itself a breach
of the Employment Agreement. The Company intends to fully enforce all of its
rights under the Employment Agreement.

On November 8, 1996 the Company and Adriene Newman reached an agreement whereby
Ms. Newman will appear as the selling host for ARPEL, the core unit of the
Company, on HSN shows scheduled for November 14-18, 1996, December 12-16, 1996
and January 23-27, 1997 (the "HSN Selling Period"). During the HSN Selling
Period, Ms. Newman will be acting as an independent contractor and not as an
employee of the Company. The Company and Ms. Newman also agreed to refrain
from initiating legal action, if any, against the other in connection with
their dispute over Ms. Newman's termination as an employee of the Company until
after the HSN Selling Period.

ITEM 2. PROPERTIES

The Company maintains its corporate headquarters in New York City and occupies
approximately 7,400 rentable square feet under a lease expiring November 30,
2001. The lease provides for annual payments of approximately $233,000.

The Company owns and occupies a 33,000 square foot distribution and
administration center in Norwood, New Jersey which is subject to a mortgage with
a principal amount of $725,000 at July 31, 1996. This mortgage is payable at the
rate of $25,000 per month.

ITEM 3. LEGAL PROCEEDINGS

The Company, in the normal course of business, is a defendant in numerous
actions/lawsuits. The Company believes the outcome of these action/lawsuits will
not have a material impact on the Company's financial position or results from
operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

4
<PAGE> 6
PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS

Since May 5, 1986, shares of the Company's $.01 par value Common Stock, have
traded on the American Stock Exchange (symbol "AFN"). The following table sets
forth, for the periods indicated and as reported by the American Stock Exchange,
the high and low sales prices for shares of the Company's Common Stock.

<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ---- ---

<S> <C> <C>
July 31, 1994 2-1/6 1-1/8
October 31, 1994 1-7/16 3/4
January 31, 1995 1-1/4 11/16
April 30, 1995 1-1/4 5/8
July 31, 1995 2-1/8 11/16
October 31, 1995 1-3/4 1-1/16
January 31, 1996 1-9/16 15/16
April 30, 1996 2-1/8 1-1/8
July 31, 1996 3-1/16 1-1/4
</TABLE>

The number of shareholders of record of the Common Stock on October 23, 1996 was
4,900. The Company believes that there is a significant number of beneficial
owners of its Common Stock whose shares are held in "Street Name".

The Company has paid no cash dividends with respect to its Common Stock since
its inception.

5
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
Consolidated Financial Statements and related notes thereto included elsewhere
in this report.
<TABLE>
<CAPTION>
(000's omitted, except Fiscal Years Ended July 31
per share amounts) 1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
0perating Data:
Net Sales $34,733 $ 32,151 $ 29,358 $ 34,764 $ 40,576

Gross Profit 23,353 22,859 21,707 21,729 27,759

Operating income (loss) 2,820 1,960 (924) (7,555) (1,806)

Other income (expense) 54 (460) (503) 832 (1,010)

Income (loss) before
provision (benefit) for
income taxes 2,874 1,500 (1,427) (6,723) (2,816)

Net income (loss) $ 2,693 $ 1,365 $ (1,427) $ (6,723) $ (2,816)
------- -------- -------- -------- --------
Net income (loss) per
Common equivalent share: $ 0.22 $ 0.12 $ (0.14) $ (0.85) $ (0.42)
======= ======== ======== ======== ========

Balance Sheet Data:

Working Capital $ 988 $ (2,629) $ (5,905) $ (6,835) $ (4,531)

Total assets 11,228 10,756 12,362 14,615 20,363

Short-term debt 1,938 2,863 5,421 7,641 10,367

Long-term debt 425 725 149 149 149

Shareholders' equity $ 4,131 $ 1,388 $ 24 $ 151 $ 3,374
======= ======== ======== ======== ========
</TABLE>

6
<PAGE> 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Results of operations -

The following table sets forth items in the Statements of Operations as a
percent of net sales:
<TABLE>
<CAPTION>
Relationship to Net Sales
for the Fiscal Years Ended July 31,
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%

Cost of goods sold 32.8 28.9 26.1

Selling, general and
administrative expenses 59.1 65.0 77.1

Operating Income (loss) 8.1 6.1 (3.2)

Other (expense) income, net 0.2 (1.4) (1.7)
Net Income (loss) before
provision for income tax 8.3 4.7 (4.9)
----- ----- -----
Net income (loss) 7.8% 4.2% (4.9%)
===== ===== =====
</TABLE>

FISCAL YEARS ENDED JULY 31, 1996 AND 1995

The Company recorded net income of $2,692,692 for the fiscal year ended July 31,
1996 as compared to $1,364,646 for the fiscal year ended July 31, 1995.

Net sales for the fiscal year ended July 31, 1996 increased to $34,733,375 from
$32,151,204 recorded in the prior fiscal year, an increase of $2,582,171 or
8.0%. Sales of cosmetic products increased to $34,428,701 from $31,073,515 as
compared to the prior year, a 10.8% increase. Sales of fragrance products
decreased to $304,674 from $1,077,689, as compared to the prior fiscal year, a
71.7% decrease. The Company decided to suspend its fragrance business during the
latter part of fiscal 1995. The fiscal 1996 fragrance sales were related to the
sale of the Company's remaining inventory of fragrance products.

7
<PAGE> 9
The cosmetic sales increase of $3,355,186 is primarily attributable to the
Company's continued success of selling cosmetic products through HSN. Sales to
HSN increased to $17,858,631 from $15,667,416 recorded in the prior fiscal year,
an increase of $2,191,215 or 14.0%. The Company commenced selling products
through HSN of Canada during January 1996 with $933,261 of sales to HSN of
Canada being recorded during the fiscal year ended July 31, 1996. Sales of
cosmetic products through department stores increased to $16,570,070 from
$15,406,099 recorded in the prior fiscal year an increase of $1,163,971 or 7.6%.

Cost of goods sold as a percentage of net sales was 32.8% for the fiscal year
ended July 31, 1996, as compared to 28.9% for the fiscal year ended July 31,
1995. Cost of goods sold for cosmetic products was 32.1% for the fiscal year
ended July 31, 1996, as compared to 28.5% for the fiscal year ended July 31,
1995. The increase in the cosmetic cost of goods sold percentage is primarily
related to sales of cosmetic products to HSN.

Selling, general and administrative expenses decreased to $20,532,894 for the
fiscal year ended July 31, 1996 from $20,898,893 for the fiscal year ended July
31, 1995, a 1.8% decrease. The decrease is primarily attributable to decreases
in advertising and promotional expenses related to the Company's decision to
cease its fragrance business.

Interest expenses decreased to $313,100 for the fiscal year ended July 31, 1996,
from $439,743 recorded during the prior fiscal year ended July 31, 1995, a 28.8%
decrease. This decrease is primarily attributable to lower debt levels. The
Company recorded a gain of $394,392 related to the sale of its licensing and
distribution rights to Robert Piquet during March 1996.

Net income per common and common equivalent share for the fiscal year ended July
31, 1996 was $0.22 as compared to $0.12 for the fiscal year ended July 31, 1995.

The remaining NOL available to the Company for federal income tax reporting
purposes at July 31, 1996 is approximately $4,300,000. The Company has
$707,000 of the NOL carry forward available for use for the tax year ending
July 31, 1997.

FISCAL YEARS ENDED JULY 31, 1995 AND 1994

The Company recorded net income of $1,364,646 for the fiscal year ended July 31,
1995 as compared to a net loss of ($1,427,148) for the fiscal year ended July
31, 1994. This marked the first year since fiscal 1989 that the Company has
recorded profits.

Net sales for the fiscal year ended July 31, 1995 increased to $32,151,204 from
$29,357,922 recorded in the prior fiscal year, an increase of $2,793,282 or
9.5%. Sales of cosmetic products increased to $31,073,515, from $24,771,150 or
24.5%, while sales of fragrance products decreased to $1,077,689 from $4,586,772
or 76.5%, as compared to the prior fiscal year.

8
<PAGE> 10
The cosmetic sales increase of $6,302,365 was primarily attributable to the
success of selling cosmetic products through HSN. Sales to HSN amounted to
$15,667,416 for the fiscal year ended July 31, 1995. The Company commenced
marketing products through HSN during April 1994 with sales of $4,574,262 for
the final four months of the fiscal year ended July 31, 1994. Net sales of
cosmetic products through department stores decreased by $773,089 primarily due
to a net decrease of 38 unprofitable locations through which ARPEL products were
sold.

The fragrance sales decrease of $3,509,083 was primarily attributable to the
Company's decision to temporarily suspend its current fragrance business, during
the latter part of fiscal 1995.

The Company's fragrance sales have decreased during the last three fiscal years
as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31 Net Sales $ Decrease % Decrease
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
1995 $ 1,077,689 $3,509,083 76%
1994 4,586,772 6,184,468 57%
1993 10,771,240 6,242,760 36%
</TABLE>

Cost of goods sold as a percentage of net sales was 28.9% for the fiscal year
ended July 31 1995, as compared to 26.1% for the fiscal year ended July 31,
1994. Cost of goods sold for cosmetic products was 28.5% for the fiscal year
ended July 31, 1995, as compared to 22.4% for the fiscal year ended July 31,
1994. Cost of goods sold for fragrance products was 40.4% for the fiscal year
ended July 31, 1995 as compared to 46.1% for the fiscal year ended July 31,
1994. The improvement in the fragrance cost of goods sold percentage was
primarily attributable to lower margins earned during fiscal 1994 related to the
sale of discontinued product lines and inventory overstocks.

Selling, general and administrative expenses decreased 7.7% to $20,898,893 for
the fiscal year ended July 31, 1995 from $22,630,785 for the fiscal year ended
July 31, 1994. The decrease was primarily attributable to decreases in
advertising and promotional expenses related to the Company's reduction in its
fragrance business and the expenses related to ARPEL'S former relationship with
Premier. The July 31, 1995 fiscal year selling, general and administrative
expenses include a charge of $500,000 related to salon assets, which were
determined to be outdated.

Net expenses from non-operating items was $460,632 for the fiscal year ended
July 31, 1995, as compared to $503,296 for the fiscal year ended July 31, 1994.
The decrease was primarily attributable to decreased interest expenses related
to lower debt levels.

Net income per common and common equivalent share for the fiscal year ended July
31, 1995 was $0.12 as compared to a net loss of ($0.14) for the fiscal year
ended July 31, 1994.

The remaining NOL available to the Company for federal income tax reporting
purposes at July 31, 1995 was approximately $4,300,000.

9
<PAGE> 11
FISCAL YEARS ENDED JULY 31, 1994 AND 1993

Net sales for the fiscal year ended July 31, 1994 decreased to $29,357,922 from
$34,764,246 in the prior fiscal year, a $5,406,324 or 15.6% decrease. Fragrance
net sales decreased to $4,586,772 from $10,771,240 or 57.4%. Cosmetic net sales
increased to $24,771,150 from $23,993,006 or 3.2%, as compared to the prior
fiscal year.

The fragrance sales decrease of $6,184,468 was primarily attributable to
decreased sales in the amount of approximately $7,930,600 related to product
lines which were discontinued during the latter part of fiscal 1993. This
decrease was partially offset by increased sales of new product lines in the
amount of approximately $1,598,300. During the last quarter of fiscal 1993, the
Company sold its licensing and distribution rights for Ombre Rose and caused its
rights to distribute Laura Ashley fragrance products to terminate. Sales of
Laura Ashley and Ombre Rose products were approximately $8.4 million for the
fiscal year ended July 31, 1993. New fragrance lines introduced during the third
quarter of fiscal 1993 include the fragrances of PARFUM BALMAIN, PARFUM JACOMO,
PARFUM JEAN DEPREZ and PARFUM FRANKA BERGER. The distribution of PARFUM JEAN
DEPREZ was discontinued during June 1994. The distribution of BURBERRYS for men
and SOCIETY for women, by Burberrys, commenced during the second quarter of
fiscal 1994. The Company also continues to sell FRACAS and BANDIT by Robert
Piguet, for which it owns the exclusive worldwide manufacturing, distribution
and licensing rights.

Sales of specialty packaged cosmetic products through television marketing with
the HSN, commenced during the third quarter and totaled approximately $4,574,300
for fiscal 1994.

During June 1994, the Company received notice from Premier Salons International
("Premier") that they would be assuming management of all cosmetic esthetics
operations in Premier salons. ARPEL operated 53 salon departments within Premier
and distributed the ARPEL line of products to 73 Premier salon locations
throughout the United States and Canada. ARPEL discontinued managing the
operations in all Premier International Salons as of June 30, 1994.

As is common in the fragrance and cosmetic industry, the Company provides its
domestic customers with the limited right to return merchandise in order to
balance inventory and stock levels. The rate of return experienced by the
Company was approximately 4.0%, 7.0% and 10.0% for the fiscal years ended July
31, 1994, 1993 and 1992 respectively.

During the fiscal year ended July 31, 1994, the Company recorded a loss of
$1,427,148 versus losses of $6,722,737 and $2,815,992 at July 31, 1993 and 1992,
respectively. The current year loss was $5,295,589 lower than the prior year and
was primarily attributable to the effects of the Company's cost reduction
programs and the net effect on operations of the sales of cosmetic products
through HSN. The Company has been successful in reducing operating expenses and
cost of goods sold on its current fragrance brands. Further benefit of these
cost reductions will be achieved in fiscal 1995. The Company believes it is now
in the position to move towards profitability in fiscal 1995.

Cost of goods sold as a percentage of net sales was 26.1% for the fiscal year
ended July 31, 1994, as compared to 37.5% for the fiscal year ended July 31,
1993. Cost of goods sold for fragrance products was 46.1% for the fiscal year
ended July 31, 1994, as compared to 76.5% for the fiscal year ended July 31,
1993. The cost of goods percentage on cosmetic products was approximately 22.4%
for the fiscal year ended July 31, 1994, as compared to 20.0% for the fiscal
year ended July 31, 1993. The increase in the cosmetic cost of goods sold
percentage was primarily attributable to increased cost of sales on the HSN
cosmetic products.

10
<PAGE> 12
Selling, general and administrative expenses decreased 22.7% to $22,630,785 for
the fiscal year ended July 31, 1994 from $29,283,863 for the fiscal year ended
July 31, 1993. The decrease was primarily attributable to decreases in
advertising and promotional expenses related to products which were discontinued
during the fiscal year ended July 31, 1995, coupled with the effect of the
Company's cost reduction programs. Staff reductions were implemented in the
fragrance and cosmetic divisions primarily in the areas of administration and
warehouse.

Net expenses from non-operating items were $503,296 for the fiscal year ended
July 31, 1994, as compared to other net income of $831,760 for the fiscal year
ended July 31, 1993. The gain from the sale of the Ombre Rose licensing
agreement during the prior fiscal year was $1,755,243. Without the effect of
this prior year gain, expenses from non-operating items decreased by $420,187
during the fiscal year ended July 31, 1994. Interest expense decreased $215,535
during the fiscal year, ended July 31, 1994, due to reduced debt levels and
steady interest rates. The Company recorded foreign exchange gains of $21,224
during the fiscal year, ended July 31, 1994, versus foreign exchange losses of
$104,051 recorded during the prior fiscal year. Prior year foreign exchange
losses were primarily related to currency differences recognized as part of the
Ombre Rose and Ombre Bleue licensing agreement sale. Other expenses decreased
$79,377 to $63,389 as compared to $142,766.

The net operating loss carry forward ("NOL") available to the Company for
federal income tax reporting purposes at July 31, 1994 is approximately
$11,400,000. However, use of the NOL is limited annually due to the acquisition
of the Company by FFD during November 1992, and is limited to approximately
$6,600,000, the year ending July 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company had positive working capital of $986,797 at July 31, 1996, an
increase of $3,615,951 from a working capital deficit of $2,629,154 at July 31,
1995.

Total bank borrowings were reduced by $1.2 million from $3,525,000 at July 31,
1995 to $2,325,000 at July 31, 1996. At July 31, 1996 the Company had a Term
Promissory Note due to Midlantic National Bank ("Midlantic") in the amount of
$725,000. The Term Promissory Note with Midlantic bears interest at a rate of 2%
above Midlantic's prime lending rate and is collateralized by the Company's
distribution facility. Principal installments under the Term Promissory Note are
due on the first day of each month at $25,000 per month.

In addition to the Term Promissory Note with Midlantic, the Company maintains a
revolving secured line of credit of up to $1.8 million with Credit Lyonnais, New
York. This loan is secured by the domestic accounts receivable of ARPEL and
bears interest at the higher of (a) the rate per annum established by Credit
Lyonnais, New York as the reference rate for short term commercial loans (b) the
overnight cost of funds of Credit Lyonnais, New York, plus 1/4 of 1%. Under the
financing arrangement with Credit Lyonnais, New York $100,000 is due to be paid
on October 30, 1996 with the balance to be paid in full on November 29,1996. At
July 31, 1996 borrowings under this line of credit were $1.6 million versus
$2,100,000 at July 31, 1995.

At July 31, 1996, shareholder advances to the Company from Fine Fragrances
Distribution ("FFD") were $4,826 versus $34,826 at July 31, 1995.

11
<PAGE> 13
At July 31, 1996, the Company had $2,167,725 invested in marketable securities.
The Company has been investing excess cash in marketable securities since April
1996. The Company plans to use these investments to meet current and
intermediate working capital needs. The Company has also met with various
lenders to determine the type of financing arrangements which are available
should additional resources be needed. While the Company believes it can secure
additional financing, if such financing should become necessary, there can be no
assurance that such financing will be available, or if available, would be on
terms acceptable to the Company.

During the fiscal year ended July 31, 1996, the Company has been able to
maintain inventory levels which are more closely matched with manufacturing lead
times and customer demands. The Company has also been successful in reducing its
trade accounts payable to manageable levels.

In addition, as discussed, in Footnote 14, on October 28, 1996 the Company's
host for its sales programs on HSN terminated her Employment Agreement based on
an alleged breach of contract.

EFFECTS OF INFLATION-

The Company did not have any significant price increases for its products during
the fiscal years ended July 31, 1996, 1995, or 1994.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The required financial statements and supplementary financial information are
attached at the end of this report. For page of reference, see the Index to the
Consolidated Financial Statements appearing on page F-1 of this Annual Report
on Form 10-K.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

12
<PAGE> 14
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Information with respect to the directors and executive officers of the Company
will be included in the Company's Proxy Statement ("Proxy Statement") for its
annual meeting of shareholders which is expected to be filed within 120 days
from the end of the fiscal year and such information is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to the executive compensation is incorporated herein by
reference to the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

Information with respect to security ownership of certain beneficial owners and
management is incorporated herein by reference to the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to certain relationships and related transactions is
incorporated herein by reference to the Proxy Statement.

13
<PAGE> 15
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) (1) Financial Statements

The audited consolidated financial statements of the Company and its
subsidiaries and the Report of Independent Public Accountants thereon, as
required, are set forth in the Index to Consolidated Financial Statements on
page F-1 of this report.

(a) (2) Financial Statement Schedules

Except for Schedule VIII, which is included herein, all other schedules have
been omitted as not applicable or not required, or because information required
is shown in the consolidated financial statements or notes thereto.

(a) (3) Exhibits

The following items are filed herewith or incorporated by reference:

3.1 Certificate of Incorporation of the Company, as amended (1) (Exhibit
3.1)

3.2 Certificate of Amendment to the Certificate of incorporation of the
Company, as amended, as filed with the New York State Department of
State on September 11, 1991. (2)(Exhibit 3.2)

3.3 By-laws of the Company, as amended. (2) (Exhibit 3.3)

4.1 Form of specimen of the Company's Common Stock certificate. (3)
(Exhibit 4.1)

10.1 Stock Option Plan. (4) (Exhibit 10.1)

10.2 New Jersey EA. Bond Financing Agreement, dated July 20,1983 and Note of
Company thereunder.(5) (Exhibit 10.2)

10.3 Lease Agreement, dated November 30, 1983, for 720 Fifth Avenue, New
York, New York. (6) (Exhibit 10.3)

10.4 Form of Stock Option Agreement under the Stock Option Plan. (4)
(Exhibit 10.4)

10.5 Alfin, Inc. (f/k/a/ Alfin Fragrances, Inc.) Stock Option Plan, as
amended. (3) (Exhibit 10.5)

10.6 Stock Purchase Agreement, dated April 5, 1990, among the Company,
Adrien Arpel, Inc. and the Security holders of Adrien Arpel, Inc. (1)
(Exhibit 10.6)

14
<PAGE> 16
10.7 Employment Agreement, dated as of April 4, 1990, between the Company
and Adrienne Newman. Amending the employment agreement dated as of
November 1, 1983 with Adrienne Newman and Seligman & Latz, Inc. (2)
(Exhibit 10.7)

10.8 Warrant Agreement, dated as of April 4, 1990, between the Company and
Adrienne Newman. (2) (Exhibit 10.8)

10.9 Revolving Credit and Term Loan Agreement, dated as of July 31, 1990,
among the Company, Adrien Arpel, Inc. and Midlantic National Bank. (6)
(Exhibit 10.9)

10.10 Departmental License Agreement, dated as of July 10, 1991, between
Bullock's, Inc. and Adrien Arpel, Inc.(7) (Exhibit 10.10)

10.11 First Amendment, dated January 31, 1991, to Credit and Term Loan
Agreement dated as of July 31, 1990, among the Company, Adrien Arpel,
Inc. and Midlantic Bank. (7) (Exhibit 10.11)

10.12 Second Amendment, dated June 10, 1991, to Credit and Term Loan
Agreement dated July 31, 1990, as amended, among the Company, Adrien
Arpel, Inc. and Midlantic National Bank. (7) (Exhibit 10.12)

10.13 Form of Executive Incentive Compensation Plan Agreement, dated as of
September 1991, between the Company and Adrienne Newman. (7) (Exhibit
10.13)

10.14 Amended and Restated Revolving Credit and Term Loan Agreement, dated
June 30, 1992, between Midlantic National Bank and the Company and
Adrien Arpel, Inc. (8) (Exhibit 10.14)

10.15 Continuing Letter of Credit Agreement, dated May 13, 1993, between the
Company, Adrien Arpel, Inc. and Credit Lyonnais Bank. (8) (Exhibit
10.15)

10.16 Amended and Restated Loan Agreement, dated June 24, 1993, between the
Company and Midlantic National Bank.(8) (Exhibit 10.16)

10.17 Third Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement, dated August 1994,between Midlantic National bank and the
Company and Adrien Arpel, Inc. (9) (Exhibit 10.17)

10.18 Amendment No. 2, dated November 19, 1993, to Employment Agreement dated
April 4, 1990, between the Company and Adrienne Newman. (9) (Exhibit
10.18)

10.19 Amendment No.1 to the Continuing Letter of Credit Agreement, dated
February 28, 1994, between the Company, Adrien Arpel, Inc. and Credit
Lyonnais Bank. (9) (Exhibits 10.19)

10.20 Term Promissory Note dated February 1994, between Midlantic National
Bank and the Company. (9)(Exhibit 10.20)

15
<PAGE> 17

10.21 Second Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement, dated February 1994, between Midlantic National Bank and the
Company and Adrien Arpel, Inc. (9) (Exhibit 10.21)

10.22 Warrant Agreement, dated November 19, 1993, between the Company and
Adrienne Newman. (9)(Exhibit 10.22)

10.23 The 1993 Stock Option Plan of Alfin, Inc. (9)(Exhibit 10.23)

10.24 Agreement dated August 1, 1995 between the Company and CECE SA (Exhibit
10.24)

10.25 Fourth Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement dated July 31, 1995, between the Company and Midlantic
National Bank(Exhibit 10.25)

10.26 Agreement dated March 7,1996 between the Company and Fashion Fragrances
and Cosmetics, Ltd. related to the sale of the business known as Robert
Piquet (filed herewith).

10.27 Agreement dated April, 1996 between the Company and Fashion Fragrances
and Cosmetics Ltd. Related to the licensing of Robert Piquet (filed
herewith).

10.28 Agreement dated December 11, 1995, 1996 between the Company and Lauren
Greenwald (filed herewith)

10.29 Fifth Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement dated December 11, 1995, between the Company and Midlantic
National Bank (filed herewith)

10.30 Amendment No. 5 dated as of January 31, 1996, between the Company,
Adrien Arpel, Inc. and Credit Lyonnais Bank (filed herewith)

10.31 Agreement dated November 8, 1996 between the Company and Adrienne
Newman with respect to the sale of Adrien Arpel cosmetic products and
kits on The Home Shopping Network. (filed herewith)

22 Subsidiaries of the Company - Adrien Arpel, Inc., a Delaware
corporation; Suisse Laboratories Ltd., a Delaware corporation.

(1) Incorporated by reference from the designated Exhibit of the Company's
Current Report on Form 8-K, reporting an event on April 5, 1990 (File
No. 0-11434).

(2) Incorporated by reference from the designated Exhibit to the Company's
Annual Report on Form 10-K for the year ended July 31, 1990. (File No.
0- 11434).

(3) Incorporated by reference from the designated Exhibit to the Company's
Annual Report on Form 10-K for the year ended July 31, 1989. (File
No.0-11434).

16
<PAGE> 18
(4) Incorporated by reference from the designated Exhibit to the Company's
Annual Report on Form 10-K for the year ended July 31, 1985. (File No.
0-11434).

(5) Incorporated by reference from the designated Exhibit to the Company's
Registration Statement on Form S-1. File No. 2-85600).

(6) Incorporated by reference from the designated Exhibit to the Company's
Annual Report on form 10-K for the ear ended July 31, 1984. (File No.
0-11434).

(7) Incorporated by reference from the designated Exhibit to the Company's
Annual Report on Form 10-K for the year ended July 31, 1992. (File No.
0-11434)

(8) Incorporated by reference from the designated Exhibit to the Company's
Annual Report on Form 10-K for the year ended July 31, 1993. (File No.
O-11434)

(9) Incorporated by reference from the designated Exhibits to the Company's
Annual Report on Form 10-K for the year ended July 31, 1994. (File No.
0-11434).

(10) Incorporated by reference from the designated Exhibits to the Company's
Annual report in Form 10K for the year ended July 31, 1995. (file No.
0-11434).

(b) Reports on Form 8-K.

No reports on Form 8-K were filed by the Company during the last quarter of the
period covered by this report.

17
<PAGE> 19

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated: November 6, 1996 ALFIN, INC.

By: _______________________
Elisabeth Fayer
Chief Executive Officer/
Director

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Elisabeth Fayer his true and lawful attorneys-in-fact
and agents, each acting alone, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agents, each
acting alone, full power and authority to do and perform to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, each acting alone, or his substitutes,
may lawfully due or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on October 28, 1996 on behalf of the
Registrant and in the capacities indicated.

Signature Title

<S> <C>
/S/ Elisabeth Fayer
---------------------- Chief Executive Officer/
Elisabeth Fayer Director

/S/ Michael D. Ficke
---------------------- Vice President
Michael D. Ficke Chief Financial Officer
</TABLE>

<PAGE> 20

<TABLE>
<S> <C>
---------------------- Director
Jacques Desjardins

---------------------- Director
Steven Korda

---------------------- Director
Suzanne Langlois
</TABLE>

<PAGE> 21

ALFIN, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

<S> <C>
Report of Independent Public Accountants F-2

Consolidated Balance Sheets as of July 31,
1996 and 1995 F-3

Consolidated Statements of Operations for
the Three Fiscal Years Ended July 31, 1996 F-4

Consolidated Statements of Shareholders' Equity
for the Three Fiscal Years Ended July 31, 1996 F-5

Consolidated Statements of Cash Flows for the
Three Fiscal Years Ended July 31, 1996 F-6

Notes to Consolidated Financial Statements F-7

Schedule VIII - Valuation and Qualifying Accounts
for the Three Fiscal Years Ended July 31, 1996 F-19
</TABLE>

F-1
<PAGE> 22
Report of Independent Public Accountants

To Alfin, Inc.:

We have audited the accompanying consolidated balance sheets of Alfin, Inc. (a
New York corporation) and subsidiaries as of July 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended July 31, 1996. These
financial statements and the schedule referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and the schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Alfin, Inc. and
subsidiaries as of July 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended
July 31, 1996, in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the fiscal year ended July 31, 1996 is the second
profitable year of operations in six years; however, the Company is
significantly dependent upon the Home Shopping Network ("HSN") and must satisfy
the remaining amount due under its previous line of credit facility in November
1996. It has not yet obtained replacement financing. In addition, as discussed
in Note 14, on October 28, 1996 the Company's chief spokesperson for its slaes
programs on HSN terminated her Employment Agreement based on an alleged breach
of contract. These factors raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Notes 3 and 14. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

New York, New York
November 11, 1996 ARTHUR ANDERSEN LLP

F-2
<PAGE> 23
ALFIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1996 AND 1995

<TABLE>
<CAPTION>
ASSETS 1996 1995
- - ------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash & cash equivalents $ 2,210,972 515,636

Accounts receivable, net of allowances
for doubtful accounts and chargebacks
of $998,769 and $634,593 at July 31,
1996 and 1995, respectively and sales
allowances of $256,264 and $406,264 at
July 31, 1996 and 1995, respectively 680,370 1,392,315

Inventories 3,271,126 3,326,567

Prepaid expenses & other current assets 746,513 29,288
------------ ------------

Total current assets 6,908,981 5,263,806
------------ ------------

PROPERTY & EQUIPMENT 4,998,954 7,350,970
Less-accumulated depreciation &
amortization (3,537,025) (5,621,515)
------------ ------------
Property & equipment, net 1,461,929 1,729,455
------------ ------------

OTHER ASSETS:
License agreements & trademarks, net of
accumulated amortization of $867,961
at July 31,1995
-- 866,408

Goodwill, net of accumulated amortization
of $472,957 and $394,131 at July 31,1996
and 1995, respectively 2,680,081 2,758,907

Other 177,195 137,694
------------ ------------

Total other assets 2,857,276 3,763,009
------------ ------------

Total assets $ 11,228,186 $ 10,756,270
============ ============
</TABLE>

<TABLE>
<CAPTION>
LIABILITIES &
SHAREHOLDERS' EQUITY 1996 1995
- - -------------------- ---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of mortgage,
note & other loans payable $ 1,933,499 $ 2,828,019
Due to related parties 4,826 34,826

Accounts Payable 2,177,078 3,106,090

Accrued expenses-other 1,806,781 1,924,025
------------ ------------

Total current liabilities 5,922,184 7,892,960

NOTE PAYABLE 425,000 725,000
------------ ------------

Total liabilities 6,347,184 8,617,960
------------ ------------

REDEEMABLE PREFERRED STOCK 750,000 750,000

SHAREHOLDERS' EQUITY:
Common stock, $.01 par value
17,000,000 shares authori-
zed; 11,662,926 & 11,519,311
shares issued & outstanding at
July 31,1996 & 1995, respectively 116,629 115,193

Additional paid-in capital 12,787,290 12,629,976

Accumulated deficit (8,772,917) (11,356,859)
------------ ------------

Total shareholders' equity 4,131,002 1,388,310
------------ ------------

Total liabilities and
shareholders' equity $ 11,228,186 $ 10,756,270
============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-3

<PAGE> 24
ALFIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE FISCAL YEARS ENDED JULY 31

<TABLE>
<CAPTION>
1996 1995 1994
- - --------------------------------------------------------------------------------------------

<S> <C> <C> <C>
NET SALES $ 34,733,375 $ 32,151,204 $ 29,357,922

COST OF GOODS SOLD 11,380,089 9,292,033 7,650,989
------------ ------------ ------------
Gross Profit on Sales 23,353,286 22,859,171 21,706,933

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 20,532,894 20,898,893 22,630,785
------------ ------------ ------------
Operating Income (loss) 2,820,392 1,960,278 (923,852)
------------ ------------ ------------
OTHER (EXPENSE) INCOME

Interest Expense $ (313,100) $ (439,743) $ (461,131)

GAIN on sale of
license agreement 394,392 -- --

Other Expense (27,992) (20,889) (42,165)
------------ ------------ ------------

Total other income 53,300 (460,632) (503,296)
(expense) ------------ ------------ ------------

Income (loss) before
provision for income taxes 2,873,692 1,499,646 (1,427,148)

Provision for income taxes 181,000 135,000 --
------------ ------------ ------------

NET INCOME (LOSS) $ 2,692,692 $ 1,364,646 $ (1,427,148)
============ ============ ============

NET INCOME (LOSS) PER
COMMON & COMMON
EQUIVALENT SHARE $ 0.22 $ 0.12 $($0.14)
============ ============ ============
</TABLE>

The accompanying notes are an integral
part of these consolidated statements.

F-4

<PAGE> 25
ALFIN, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE FISCAL YEARS ENDED JULY 31, 1996

Number of Additional
Common Common Paid-In Accumulated
Shares Stock Capital Deficit
------ ----- ------- -------

<S> <C> <C> <C> <C>
Balance, July 31, 1993 10,272,469 102,725 11,233,694 (11,185,607)
Sale of Common Stock
to FFD 1,130,435 11,304 1,288,696 --

Net Loss (1,427,148)
---------- -------- ---------- -----------

Balance, July 31, 1994 11,402,904 114,029 12,522,390 (12,612,755)
Stock Dividends on
Redeemable Preferred Stock 116,407 1,164 107,586 (108,750)

Net Income 1,364,646
---------- -------- ---------- -----------

Balance, July 31, 1995 11,519,311 $115,193 12,629,976 (11,356,859)

Stock Dividends on Redeemable
Preferred Stock 93,615 936 107,814 (108,750)
Stock Issued for Options 50,000 500 49,500 --
Net Income 2,692,692
---------- -------- ---------- -----------

Balance, July 31, 1996 11,662,926 116,629 12,787,290 (8,772,917)
========== ======== ========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-5

<PAGE> 26
ALFIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE FISCAL YEARS ENDED JULY 31, 1996

Cash Flows from Operating Activities 1996 1995 1994
- - ------------------------------------ ---- ---- ----

<S> <C> <C> <C>
Net Income (Loss) $ 2,692,692 $ 1,364,646 $(1,427,148)
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Provided by (Used in)
Operating Activities:

Depreciation and Amortization 749,887 1,491,472 1,136,909

Loss on Disposal of Fixed Assets 3,750 192,605 210,816

Gain on Sale of License Agreement (394,392) -- --

Change in Assets and Liabilities:

Decrease (Increase) Accounts Receivable 711,945 1,296,533 (1,245,273)
Decrease (Increase) Inventory 55,441 (773,234) 1,212,515
(Increase) Decrease Prepaid Expenses
and Other (756,726) 291,344 7,485
(Decrease) Increase Accounts Payable &
Accrued Expenses (1,046,256) (989,177) 215,265

(Decrease) Non-Current Liabilities -- -- (120,000)
----------- ----------- -----------

Total Adjustments (676,351) 1,509,543 1,417,717
----------- ----------- -----------
Net Cash Provided by (Used in)
Operating Activities 2,016,341 2,874,189 (9,431)
----------- ----------- -----------

Cash Flows from Investing Activities

Capital Expenditures (346,485) (387,616) (193,140)

Sale of License Agreement 1,200,000 -- --
----------- ----------- -----------
Net Cash Provided by (Used in)
Investing Activities 853,515 (387,616) (193,140)
----------- ----------- -----------
Cash Flows from Financing Activities

Payment of Lines of Credit,
Net (494,520) (641,233) (1,094,120)

Proceeds from Related Parties -- -- 1,036,851

Payments to Related Parties (30,000) (265,174) (1,002,618)

Payment of Debt Obligations (300,000) (1,074,974) (1,310,616)

(Payment) Proceeds from Term
Promissory Note (400,000) -- 1,450,000

Proceeds from Sale of Stock 50,000 -- --
----------- ----------- -----------
Cash (Used in),
Financing Activities (1,174,520) (1,981,381) (920,503)
----------- ----------- -----------

Net Increase(Decrease) in Cash 1,695,336 505,192 (1,123,074)

Cash at Beginning of Year 515,636 10,444 1,133,518
----------- ----------- -----------
Cash at End of Year $ 2,210,972 $ 515,636 $ 10,444
=========== =========== ===========

Cash Paid During the Year For:
Interest $ 297,432 $ 398,774 $ 457,425
Income Taxes 271,695 25,819 --
</TABLE>

The accompanying notes are an integral part
of these consolidated statements.

F-6
<PAGE> 27

ALFIN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS:

Alfin, Inc. (the "Company") was engaged in the distribution, marketing and
merchandising of imported fragrance brands worldwide pursuant to various
distribution and licensing agreements. During the latter part of fiscal year
1995, the Company made a decision to suspend distribution of fragrance products
necessitated by limited working capital.

Adrien Arpel, Inc. ("ARPEL"), a wholly owned subsidiary, develops, distributes
and sells treatment and cosmetic products. Additionally, the Company acts as an
operator of service- oriented skin care salons in department stores. During the
third quarter of fiscal year 1994, ARPEL began selling specialty packaged
cosmetic products through television marketing.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION -

The accompanying financial statements include the accounts of Alfin, Inc., and
ADRIEN ARPEL, INC.

All significant intercompany transactions and accounts have been eliminated in
consolidation.

Certain reclassifications have been made to prior year balances to conform with
current year presentation.

INVENTORIES -

Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method.

F-7
<PAGE> 28
Inventories at July 31, 1996 and 1995 were comprised of:
<TABLE>
<CAPTION>

1996 1995
---- ----
<S> <C> <C>
Finished Goods $1,303,538 $1,424,009
Raw Material and
Components 1,967,588 1,902,558
---------- ----------
$3,271,126 $3,326,567
========== ==========
</TABLE>

CASH & CASH EQUIVALENTS

The company considers all highly liquid investments with a maturity of three
months or less, when purchased, to be cash equivalents.

PROPERTY AND EQUIPMENT -

Property and equipment are stated at cost and depreciated using the
straight-line method over their estimated useful lives ranging from 4 to 15
years. Leasehold improvements are amortized on a straight-line basis over the
remaining terms of the respective leases or estimated useful lives, whichever is
shorter. Betterments and renewals that extend the life of the related asset are
capitalized; other repairs and maintenance costs are expensed as incurred.

Property and equipment were comprised of the following at July 31, 1996 and
1995:

1996 1995
---- ----

<S> <C> <C>
Land $ 427,500 $ 427,500
Building & Improvements 1,224,687 1,224,687
Furniture & Fixtures 1,393,462 2,444,087
Machinery & Equipment 1,710,590 3,013,920
Leasehold Improvements 242,715 240,776
----------- -----------
Total Property & Equipment 4,998,954 7,350,970
Accumulated Depreciation (3,537,025) (5,621,515)
----------- -----------
Net Property & Equipment $ 1,461,929 $ 1,729,455
=========== ===========
</TABLE>

OTHER ASSETS -

During March 1996 the Company sold its exclusive worldwide manufacturing,
distribution and licensing rights for FRACAS and BANDIT and other fragrances by
Robert Piquet to Fashion Fragrances and Cosmetics Ltd. ("FF&C") for $1.2
million. Under the agreement, the Company has received $500,000 with the
remaining payments of $300,000 and $400,000 due to be paid in December 1996 and
July 1997 respectively. The Company recorded a gain of $394,392 on the sale of
this asset. Until the Company receives final payment under the purchase
agreement FF&C will be a licensee of the rights to Robert Piquet. The Company is
not entitled to any royalties under this licensing agreement.

Goodwill related to the acquisition of ARPEL is being amortized using the
straight-line method over 40 years.

F-8
<PAGE> 29
FAIR VALUE OF FINANCIAL INSTRUMENTS -

The carrying amounts of the Company's lines of credit approximate fair market
value based upon the relatively short-term nature of these financial
instruments. The carrying amounts of the Company's loans, notes payable and long
term debt approximate their fair value.

INCOME TAXES

Income taxes consist of taxes on taxable income and deferred taxes for
differences in the basis of assets and liabilities for financial statement and
income tax reporting. The differences arise primarily because of the reserve
method for bad debts, accrued expenses and the use of accelerated depreciation
methods.

FOREIGN CURRENCY TRANSLATION -

Gains and losses resulting from foreign currency transactions are included in
other (expense) income and are immaterial.

FOREIGN SALES -

Net sales to foreign accounts, located in the Americas, Europe, the Middle East,
and the Far East, were approximately $2,214,243, $949,188 and $1,359,377 for the
fiscal years ended July 31, 1996, 1995 and 1994, respectively.

NET LOSS PER SHARE -

Net loss per share was computed for the fiscal years 1996 and 1995,
respectively, and using the weighted average number of common shares
outstanding, as follows:

CONCENTRATION OF CREDIT RISK -

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. The Company's major
customers are department stores and a major television network. HSN represented
51.9% of net sales during fiscal year 1996 and approximately 24.5% of net
outstanding accounts receivable at July 31, 1996, which was subsequently paid.
Concentration of credit risk with respect to trade receivables is significant
due to the dependence of certain customers in the Company's customer base.

RECENTLY ISSUED ACCOUNTING STANDARDS -

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". This
statement establishes financial accounting and reporting standards for the
impairment of long lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets and
certain identifiable intangibles to be disposed of. This statement is effective
for financial statements for the July 31, 1997 fiscal year, although earlier
application is encouraged. The Company belives that the adoption of SFAS No. 121
will not have a material effect on its financial position or results of
operations.

F-9
<PAGE> 30
In November 1995, the Financial Accounting Standards Board ("FASB") issued FASB
Statement No. 123, "Accounting for Stock-Based Compensation". This statement
establishes a fair value based method of accounting for an employee stock option
or similar equity instrument but allows companies to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees". Companies electing to remain with the accounting under APB Opinion
No. 25, must however, make pro forma disclosures of net income and earnings per
share as if the fair value based method of accounting defined in SFAS No. 123
had been applied. These disclosure requirements are effective for financial
statements for the July 31, 1997 fiscal year.

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.
Actual results could differ from those estimates.

CONCENTRATION OF REVENUES

Approximately 81% of department store sales are derived from merchandise, 5%
from salon services and 14% from seasonal promotional items. Net sales of ARPEL
products represented 99% and 96% of the Company's consolidated net sales for the
fiscal years ended July 31, 1996 and 1995, respectively.

(3) GOING CONCERN

During the fiscal year ended July 31, 1996, the Company continued to realize the
results of its restructuring efforts. The Company has effectively reduced staff
levels, implemented cost reduction programs and renegotiated its debt facilities
into more manageable terms. These factors combined with the success of sales of
ARPEL products through the Home Shopping Network ("HSN") has resulted in the
Company's second consecutive profitable year. However, the Company still remains
significantly dependent on HSN, which was responsible for approximately 50% of
net sales and must satisfy approximately $1.6 million under its previous line of
credit facility by November 1996. Although the Company has met with various
lenders to determine the type of financing arrangements, which are available,
the Company has not yet obtained replacement financing.

Previous losses combined with the demands of reducing large debt levels limited
the Company's ability to provide inventory to its customers in adequate supply,
on a consistent basis. The current year's profitability and positive cash flow
from operations have enabled the Company to minimize its out-of-stock inventory
situation and meet customer orders. During the latter part of fiscal year 1995,
the Company also decided to suspend its distribution of fragrance products. The
Company has been concentrating its efforts and available cash flow toward
attaining inventory levels in the skin care and cosmetic products distributed by
ARPEL which are more closely matched with manufacturing lead times and customer
demands. In addition, the Company believes that replacement financing
arrangements can be made available.

In addition, as discussed in Note 14, on October 28, 1996 the Company's selling
host for its sales programs on HSN terminated her Employment Agreement based on
an alleged breach of contract. Refer to Note 14 for a further discussion.

(4) COMMON STOCK DIVIDENDS:

The Company has paid no cash dividends with respect to its common stock since
its inception. Dividends of common stock have been issued to holders of the
Company's Senior Cumulative Redeemable Preferred Stock (See Footnote 9).

F-10
<PAGE> 31

(5) WARRANTS:

The following table lists the warrant transactions that have occurred for the
period August 1, 1993 through July 31, 1996:

FISCAL YEARS ENDED
J U L Y 3 1

1996 1995 1994
- - ------------------------------------------------------------------------------

<S> <C> <C> <C>
Warrants outstanding,
beginning of period 1,000,000 1,100,000 110,000
Granted -- -- 1,000,000
Exercised -- -- --
Forfeited 125,000 100,000 10,000

Warrants outstanding,
end of period 875,000 1,000,000 1,100,000
Exercise prices per share
for shares under warrant,
end of period $ 1.25 $ 1.25 $1.25-$1.63
</TABLE>

Of the 875,000 warrants granted to Ms. Adrien Newman outstanding as of July 31,
1996, 625,000 are currently exercisable. Expiration of these warrants is in
November 1998.

(6) INCOME TAXES:

The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109 "Accounting for Income Taxes" which requires using
the asset and liability method of accounting for income taxes. Under the asset
and liability method, deferred income taxes are recognized for the tax
consequences of temporary differences between financial statement and taxable
income by applying statutory tax rates applicable to future years. Under SFAS
No. 109, the effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date of the change. If it is
more likely than not that some portion or all of a deferred tax asset will not
be realized, a valuation allowance is recognized.

<PAGE> 32
Significant components of the Company's deferred income tax assets and
liabilities at July 31, 1996 and July 31, 1995, are as follows:

<TABLE>
<CAPTION>
July 31 July 31
1996 1995
----------- -----------

<S> <C> <C>
Deferred Income Tax Assets:

Net operating loss
carry forwards $ 1,468,000 $ 2,900,000

Alternative minimum Tax
credit carry forward 114,000 --

Bad debt reserve 202,000 209,000

Inventory reserve 672,000 156,000

Other 114,000 408,000
----------- -----------

2,570,000 3,673,000

Valuation allowance (2,341,000) (3,421,000)
----------- -----------

Net deferred tax asset 229,000 252,000

Deferred Income Tax Liabilities:

Depreciation and Amortization (229,000) (252,000)

Net deferred income taxes $ 0 $ 0
=========== ===========
</TABLE>

At July 31, 1996, the amount of federal operating loss carry forwards was
$4,300,000 with expiration dates from 2005 to 2009, however, the use of
pre-acquisition operating loss carryforwards is limited by the Internal Revenue
Code. As a result the Company has $707,000 of the carry forwards available for
use for the year ended July 31, 1997.

The Provision for income taxes consists of the following:

<TABLE>
<CAPTION>
For the Fiscal Year Ended July 31,
----------------------------------

<S> <C> <C>
1996 1995
-------- --------
Current:
Federal $ 96,000 $ 60,000
State 85,000 75,000
-------- --------

Total Current 181,000 135,000
-------- --------

Deferred
Federal 0 0
State 0 0
-------- --------
Total Deferred 0 0
-------- --------

Total Provision $181,000 $135,000
======== ========
</TABLE>

F-12
<PAGE> 33
(7) LONG TERM DEBT:

Long term debt consists of the following:

<TABLE>
<CAPTION>
1996 1995
----------- -----------

<S> <C> <C>
Term Promissory Note $ 725,000 $ 1,025,000
Term loan -- 400,000
Lines of credit 1,600,000 2,100,000
Related party loans 4,826 34,826
Notes payable (construction) 33,499 28,019
----------- -----------

2,363,325 3,587,845
Less, current portion (1,938,325) (2,862,845)
----------- -----------

Long-term notes payable $ 425,000 $ 725,000
=========== ===========
</TABLE>

TERM PROMISSORY NOTE:

At July 31, 1996, the Company had a term promissory note due to Midlantic in
the amount of $725,000. The term promissory note is collateralized by a
distribution and administration facility and bears interest at a rate of 2%
above Midlantic's prime lending rate of 8.25% at July 31, 1996 and 1995.
Principal installments of $25,000 under the term promissory note are due on the
first day of each month until December 1, 1998.

TERM LOAN:

In April 1990, the Company was provided with a $5,000,000, 5 year term loan
with Midlantic in connection with its acquisition of ARPEL. The term loan bears
interest at a rate of .5% above the bank's prime lending rate of 8.25%, at July
31, 1996 and 1995, and is guaranteed by ARPEL. This term loan was paid during
Fiscal 1996.

The aggregate contractual annual principal payments of the term promissory note
are as follows:

F-13

<PAGE> 34
LINES OF CREDIT:

In addition to the above, ARPEL entered into a financing agreement with Credit
Lyonnais for a revolving secured line of credit of up to $2,100,000, expiring
on October 15, 1995, subject to renewals on a yearly basis under certain
conditions. During January 1996, the Company amended its agreement with Credit
Lyonnais to extend the expiration date of its line of credit to November 29,
1996. The loan is secured by domestic accounts receivable of ARPEL. Borrowings
under this line of credit were $1,600,000 and $2,100,000 at July 31, 1996 and
1995, respectively. This line of credit bears interest at the higher of (a) the
rate per annum established by Credit Lyonnais, New York as the reference rate
for short term commerical loans (b)the overnight cost of funds of Credit
Lyonnais, New York plus 1/4 of 1%. Under the financing arrangement with Credit
Lyonnais, New York, $100,000 is due to be paid on October 30, 1996.

RELATED PARTY LOANS:

At July 31, 1996, the Company had advances from Fine Fragrance Distribution,
Inc. ("FFD") in the amount of $4,826. These advances are due on demand and bear
interest at a rate of 1.5% above the prime lending rate of Midlantic 8.25% at
July 31, 1996 and 1995.

(8) RELATED PARTY TRANSACTIONS -

The Company purchased inventory from vendors related to FFD. As of July 31,
1996, FFD owned 61.6% of the Company's Common Stock. For the years ended July
31, 1996 and 1995, the Company made inventory purchases from vendors related to
FFD of $0 and $211,033, respectively. Refer to footnote 7 for related party
loans.

(9) REDEEMABLE PREFERRED STOCK:

On July 6, 1993, the Company issued 30,000 shares of $25.00, 14.5% Preferred
Stock, maturing 10 years after issuance. Dividends paid in Common stock are
payable in advance. The value of the Common Stock payable as dividends is
calculated based on the average closing price of the Company's Common Stock
during the 40 trading days prior to October 22nd of each year, minus 20% of
that average price.

No additional dividend has been declared or accrued as of July 31, 1996. The
Company's Board of Directors is expected to declare a Common Stock dividend of
approximately 66,000 shares in November 1996.

F-14

<PAGE> 35
(10) EMPLOYEE BENEFIT PLANS:

401(k) PLAN

During November 1995, the Board of Directors of the Company approved the
adoption of a 401(k) Profit Sharing Plan. Under the plan eligible employees can
contribute up to a maximum of 15% or $9,500 of their annual gross compensation.
The Company has the option to make discretionary matching contributions. For
the plan year ending December 31, 1996 no Company matching contribution is
anticipated.

(11) STOCK OPTION PLANS:

During December 1992, the Board of Directors of the Company adopted the 1993
Stock Option Plan ("the 1993 Plan") pursuant to which up to 300,000 shares of
Common Stock are authorized to be subject to options.

The 1983 Stock Option Plan ("the 1983 Plan") remains in effect under which
200,000 shares of Common Stock were reserved for issuance thereunder. As of
July 31, 1993, no new grants of options may be made under the 1983 Plan.

The options available under both plans are in the form of incentive options and
non-qualified options. Incentive options are available to key employees of the
Company and non-qualified options are available to key employees, non-employee
directors and consultants of the Company at the fair market value of the Common
Stock at the date of the grant. Options are exercisable as determined by the
Board of Directors.

F-15

<PAGE> 36
Changes in outstanding options and options available for grant pursuant to the
1983 Plan, expressed in numbers of shares, are as follows:

<TABLE>
<CAPTION>
J u l y 3 1,

1996 1995 1994
----- ------ -------

<S> <C> <C> <C>
Options outstanding,
beginning of period 5,000 9,700 55,100
Granted -- -- --
Exercised -- -- --
Forfeited -- (4,700) (45,400)
Options outstanding,
end of period 5,000 5,000 9,700
Options exercisable,
end of period 5,000 5,000 6,700
Options available
for grant, end of
period -- -- --
Exercise price per
share for shares
under option, end
of period $1.00 $ 1.00 $1.00-$1.63
</TABLE>

Changes in outstanding options and options available for grant pursuant to the
1993 Plan, expressed in numbers of shares, are as follows:

<TABLE>
<CAPTION>
July 31, 1996 July 31, 1995 July 31, 1994
------------- ------------- -------------

<S> <C> <C> <C>
Options outstanding,
beginning of period 550,000 75,000 --
Granted -- 500,000 75,000
Exercised 50,000 -- --
Forfeited -- (25,000) --
Options outstanding,
end of period 500,000 550,000 75,000
Options available for grant,
end of period -- -- 225,000
Exercise price per share for
shares under option, end of
period $1.00-$1.75 $1.00-$1.75 $ 1.75
</TABLE>

During October 1994, the board of directors approved the grant of stock options
totaling 500,000 shares of the Company's Common Stock to directors of the
Company, at an exercise price of $1.00 per share.

F-16

<PAGE> 37
(12) COMMITMENTS AND CONTINGENCIES:

One officer of the Company has an employment agreement expiring April 4, 1998,
which provides for the following aggregate annual base salary, plus fringe
benefits subject to increase by the Board of Directors.

Fiscal year ending July 31:

The above agreement provides for payment in full in the event of death or
disability of the employee. The agreement also provides for certain increases
in base salary, bonus payments based on the profitability of the Company and
commission payments based on 33% of net profits attributable to television
shopping sales. In addition, certain stock options may be granted and become
effective under such agreement if certain conditions are met and the executive
is still employed as of certain dates.

The Company leases office space and other equipment under various
non-cancelable operating lease agreements. Rental expense for the fiscal years
ended 1996, 1995 and 1994 was approximately $2,008,933, $2,003,425 and
$2,778,000, respectively. Included in these amounts is rental expense
contingent upon sales volume for the fiscal years ended 1996, 1995 and 1994 of
approximately $1,436,121, $1,392,893 and $2,327,400, respectively.

Minimum annual rental commitments under non-cancelable leases in effect at July
31, 1996, excluding escalations:

Fiscal year ending July 31:
<TABLE>
<S> <C>
1997........................... 293,668
1998........................... 267,138
1999........................... 264,344
2000........................... 260,931
2001 and thereafter............ 262,431
</TABLE>

The Company, in the normal course of business is a defendant in numerous
actions/lawsuits. The Company believes the outcome of these actions/lawsuits
will not have a material impact on the Company's financial position or results
from operations.

(13) SUPPLEMENTAL INCOME STATEMENT INFORMATION:

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
JULY 31,

1996 1995 1994
---- ---- ----

<S> <C> <C> <C>
Advertising Costs $1,575,905 $1,543,927 $1,674,304
</TABLE>

F-17

<PAGE> 38
(14) SUBSEQUENT EVENTS:

On October 23, 1996 the Company's Chairman and Chief Executive Officer resigned
from the Company. Ms. Elisabeth Fayer, a director and major shareholder, was
elected President of the Company prior to this resignation. Since the
resignation, Mrs. Fayer also serves as Chief Executive Officer.

The Company has not yet determined the potential impact of the effect, if any,
of this termination on its sales revenues and operating results.

(15) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1996 QUARTER QUARTER QUARTER QUARTER
----------- ------- ------- ------- -------

<S> <C> <C> <C> <C>
Net Sales $7,673,898 $ 9,110,445 $ 8,582,452 $ 9,366,580
Gross Profit 5,502,846 5,975,188 5,712,894 6,162,358
Net Income (loss) 435,104 741,451 785,836 730,301
Net Income (loss),
per Common and Common
Equivalent Share: $ 0.04 $ 0.06 $ 0.07 $ 0.05

FISCAL 1995

Net Sales $7,261,587 $ 8,771,169 $ 8,266,118 $ 7,852,330
Gross Profit 5,215,467 5,984,667 6,229,797 5,429,240
Net Income (loss) 50,201 655,698 684,227 (25,480)
Net Income (loss),
per Common and Common
Equivalent Share: $ 0.00 $ 0.06 $ 0.06 $ 0.00

FISCAL 1994

Net Sales $8,150,697 $ 6,754,032 $ 6,638,880 $ 7,814,313
Gross Profit 5,962,331 5,224,524 5,043,445 5,477,633
Net Income(loss) 11,133 (752,741) (745,916) 60,376
Net Income (loss),
per Common and Common
Equivalent Share: $ 0.00 $ (0.07) $ (0.07) $ 0.00
</TABLE>

F-18

<PAGE> 39
ALFIN, INC. AND SUBSIDIARIES

SCHEDULE VIII

VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE FISCAL YEARS ENDED JULY 31

- - -------------------------------------------------------------------------------

A D D I T I O N S

<TABLE>
<CAPTION>
Balance at Charged to Charged Balance at
Beginning Costs and to Other Deductions End of
Description of Period Expenses Accounts (1) Period

<S> <C> <C> <C> <C> <C>
1996 Allowance for Doubtful
Accounts Receivable,
Chargebacks and Sales
Returns $1,040,857 $4,339,814 $ -- $4,125,638 $1,255,033

1995 Allowance for Doubtful
Accounts Receivable,

Chargebacks,
and Sales Returns $1,833,123 $3,525,344 $ -- $4,317,610 $1,040,857

1994 Allowance for Doubtful
Accounts Receivable
Chargebacks,
and Sales Returns $2,342,426 $4,531,355 $ -- $5,040,658 $1,833,123
</TABLE>

(1) Charges to the accounts are for the purposes for which the reserves were
created.

F-19

<PAGE> 40
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS ON FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1996

ALFIN, INC.

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
No. Exhibit Title Page
------- ------------- ----

<S> <C> <C>
10.26 Agreement dated March 7, 1996 between the Company
and Fashion Fragrances and Cosmetics, Ltd. related
to the sale of the business known as Robert Piquet. 1-4

10.27 Agreement dated April 1996, between the Company and
Fashion Fragrances and Cosmetics Ltd. related to
the licensing of Robert Piquet. 5-8

10.28 Agreement dated December 11, 1996 between the Company
and Lauren Greenwald. 9

10.29 Fifth Amendment to Amended and Restated Revolving Credit
and Term Loan Agreement dated December 11, 1995, between
the Company and Midlantic National Bank. 10-22

10.30 Amendment No. 5, dated as of January 31, 1996, between
the Company, Adrien Arpel, Inc. and Credit Lyonnais Bank. 23-27

10.31 Agreement dated November 8, 1996 between the Company and
Adrienne Newman with respect to the sale of Adrien Arpel
cosmetic products and kits on the Home Shopping Network. 28-31
</TABLE>

(b)Reports on Form 8-K.

No reports on Form 8-K were filed by the Company during the last quarter of the
period covered by this report.

<PAGE> 1
Exhibit 10.26

7 March 1996

The herein agreement entered into by Alfin Inc., 720 Fifth Ave, New York City,
Inc. a U.S. corporation (Seller) and Fashion Fragrances & Cosmetics Ltd, an
Irish corporation domiciled in Dublin, Republic of Ireland, (Purchaser) on the
above date concerns itself with the purchase of trademarks, tradenames, molds,
and certain inventory as it involves the business known as Robert Piguet.

Whereas the Purchaser desires to purchase the existing trademarks, tradenames,
molds and certain inventory as it concerns the fragrance and related fashion
business known as Robert Piguet, and

Whereas the Seller has decided to sell such trademarks, tradenames, molds and
certain inventory as it concerns the fragrances Fracas and Bandit and the
related fashion business rights of Robert Piguet, the parties hereto agree as
follows:

1. Seller represents and warrants that it is the owner of the Robert Piguet,
Fracas, and Bandit fragrance trademarks throughout the world, and

2. Seller is the owner of bottle molds and designs for the manufacture of the
fragrance bottles of Fracas and Bandit, and

3. Seller is the owner of inventory which the Purchaser can use of bottles,
caps and valves, and
<PAGE> 2
4. Seller represents that such trademarks, tradenames, molds and inventory are
free of any liens, encumbrances and are commercially capable of being used
and marketed and that clear title thereto can be passed to Purchaser by the
Seller, and

5. That Seller will deliver to the Purchaser before the second closing on March
29, 1996 Seller's documentation of the trademarks set forth above, the list
and location of the bottle molds, and a list of the inventory, and

6. Seller will give Purchaser before closing and thereafter any and all
historic memorabilia and records as it regards Robert Piguet, Fracas and
Bandit that may be in its possession or control.

7. Purchaser agrees that it will purchase the above assets as represented and
warranted for the price of $1.2 million plus inventory at Seller's cost.

8. Purchaser shall conduct its due diligence of the assets to satisfy itself as
to the representations and warrantees as set forth above, and

9. Purchaser on the signing of this agreement make payment in the amount of
$120,000 and

10. Purchaser shall make payment to the Seller on the second closing date hereof
on March 29, 1996 in the amount of $380,000 plus inventory at Seller's cost.
<PAGE> 3
11. Purchaser may at all times hereafter commence preparation and marketing of
the trademark products, and

12. Purchaser may request Seller to transfer or deliver the bottle molds and
inventory which Seller shall promptly do.

13. Purchaser on October 29, 1996 shall make payment of $300,000 on account of
the $1,200,000 purchase price which payment shall be secured to the
Seller's satisfaction.

14. Purchaser on July 29, 1997 shall make payment of $400,000 as the final
payment of the purchase price, which payment shall be secured to the
Seller's satisfaction.

15. Purchaser and Seller shall withhold any announcements of the herein
agreement until the second closing of March 29, 1996.

16. The final closing may be deferred by the parties if any material
performance as represented above materializes.

17. Seller agrees to execute all necessary documents to transfer the
registration of trademarks to the purchaser provided the Seller has been
satisfied with the security provided by the Purchaser.

<PAGE> 4
18. The above represents the agreement of the parties and the signatures set
forth below affirm that the corporations have duly approved of the herein
transaction and that Purchaser has made the first payment and the Seller has
received and accepted such payment.

For Alfin Inc. (Seller)

by /s/ Jean Farat
----------------------------
Jean Farat, Chairman

For Fashion Fragrances & Cosmetics Ltd

by /s/ John Ledes
---------------------------------
John Ledes, Director

<PAGE> 1
Exhibit 10.27

LICENSE AGREEMENT

LICENSE AGREEMENT made as of this 1st day of April, 1996, by and
between Alfin, Inc., a New York corporation with an address at 720 Fifth
Avenue, New York, NY 10019 ("Licensor") and Fashion Fragrances & Cosmetics
Ltd., a U.S. corporation with offices c/o John G. Ledes, Esq., 530 Fifth
Avenue, New York, NY 10036 ("Licensee").

The parties agree as follows:

1. Definitions. As used in this Agreement, the term:

1.1 "License Rights" shall mean the exclusive worldwide rights to
create, manufacture, package, market, promote, distribute and sell for resale
in the Territory, the Products.

1.2 "Products" shall mean all fragrance products developed or
acquired by licensee to which Licensee has affixed any of the Trademarks.

1.3 "Territory" shall mean the entire world.

1.4 "Trademarks" shall mean the registered forms of the "Robert
Piquet," "Fracas" and "Bandit" fragrance trademarks.

<PAGE> 2
2. Grants.

2.1 Subject to the terms and conditions set forth in this
Agreement, Licensor hereby grants to Licensee, and Licensee hereby accepts, the
License Rights on an exclusive basis within the Territory.

2.2 The License Rights are granted exclusively to Licensee during
the term of this Agreement. Except as provided pursuant to the terms of
agreements ("Prior Agreements") between the parties hereto dated March 7, 1996
and April 2, 1996, respectively, the Licensor is prohibited from being involved
either directly or indirectly in the use of the Trademarks.

3. Promotion, Publicity and Marketing.

3.1 Licensee hereby acknowledges that the Trademarks have acquired
established prestige and goodwill and are well recognized in the minds of the
public, and that it is of the utmost importance to each party that in the
marketing, promotion, distribution, manufacture and sale of the Products that
such prestige be maintained and that the quality of the products be maintained.

3.2 Licensee agrees that Licensor shall have the right to notify
licensee of any violations of Section 3.1 and that all such violations will be
promptly remedied, but in any event will be remedied within 30 days after
receipt of written notice thereof from Licensor.

4. Duration. This Agreement shall commence on the date hereof and
shall remain in effect for a period ending on the

-2-
<PAGE> 3
earlier of July 29, 1997 or the date of any breach by the Licensee of the Prior
Agreements. If the requirements of Section 3.2 are breached by Licensee,
Licensor may terminate this Agreement upon 30 days written notice.

5. Royalties. Licensor shall not be entitled to payment of any
royalties under this Agreement.

6. Trademarks. Licensee recognizes the exclusive ownership of the
Trademarks are governed by the prior agreements and shall not, while this
Agreement is in effect, register or attempt to obtain any right in or to the
Trademarks except as provided by such prior agreements.

7. Notices. Any notice of communication given by either party to the
other under this Agreement shall be in writing and may be given personally or by
telefax, telex, cablegram, or by prepaid airmail letter to the party to be
served at the address set out at the commencement of this Agreement or at such
other address as may from time to time be notified in writing. Any notice given
by telefax, telex or cablegram shall be deemed to have been given 24 hours
after due delivery or dispatch and any notices sent by airmail as aforesaid
shall be deemed to have been served 7 days after it shall have been properly
posted.

8. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns, except that neither party hereto may assign any of its
rights or delegate any of its

-3-

<PAGE> 4
duties hereunder without the prior written consent of the other party hereto,
such consent not to be unreasonably withheld.

9. Miscellaneous. This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof and supersedes any
previous written or oral agreement in connection therewith. Any amendment
hereto must be in writing signed by both of the parties hereto. This Agreement
shall be governed by and construed in accordance with the law of New York
applicable to agreements made and to be performed in New York.

IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above mentioned.

ALFIN, INC.

By: /s/ Jean Farat
-----------------------------
Name: Jean Farat
Title: Chairman

FASHION FRAGRANCES & COSMETICS LTD.

By: /s/ John G. Ledes
-------------------------------
Name: John G. Ledes
Title: Director

-4-

<PAGE> 1

Exhibit 10.28

[ADRIEN ARPEL LETTERHEAD]

December 11, 1995

Lauren Greenwald
19 Steven Lane
Kings Point, NY 11024

Dear Ms. Greenwald:

This letter sets out our agreement with respect to your role with Home
Shopping Network Canada ("HSN Canada"). So long as you are the selling host at
HSN Canada for Adrien Arpel pursuant to this letter of agreement, Adrien Arpel
Inc. (the "Company") shall pay to you each month a 10% commission on all net
sales (i.e., after deducting returns, credits, etc.) of our products on HSN
Canada, and reimburse you for all reasonable travel and related expenses
incurred by you in the performance of your duties as the selling host provided
that the Company has approved such expenditures in advance.

This agreement shall continue so long as you are acting as the
Company's selling host for HSN Canada. It can be terminated by either you or us
at any time for any reason. Your relationship to the Company shall be that of
an independent contractor and not an employee; the Company shall not withhold
any taxes. All payments due to you for net sales made prior to such termination
shall survive termination and be paid to you by the Company in accordance with
its practices.

This letter confers no other rights, either express or implied, to you
with respect to any of the Company's assets or products. In performing your
duties under this agreement you shall do all things necessary to maintain the
goodwill and value of the Company and its products. This agreement shall be
governed by New York law.

To accept this agreement, please sign below.

ADRIEN ARPEL, INC.

/s/ Lauren Greenwald By /s/ Jean Farat
- - -------------------------- ----------------------------
Lauren Greenwald Jean Farat
Executive Vice President

<PAGE> 1

Exhibit 10.29

FIFTH AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT

THIS FIFTH AMENDMENT ("Fifth Amendment") made effective as of December
11, 1995 between ALFIN, INC., a New York corporation (the "Borrower"), having
an address at 15 Maple Street, Norwood, New Jersey 07648; ADRIEN ARPEL, INC., a
Delaware corporation having an address at 720 Fifth Avenue, New York, New York
10175 (the "Guarantor") and MIDLANTIC BANK, N.A., a national banking
association (the "Lender"), having an address at 100 Walnut Avenue, Clark, New
Jersey 07066.

Preliminary Statement

A. The Borrower, the Guarantor and the Lender are parties to a certain
Amended and Restated Revolving Credit and Term Loan Agreement dated June 30,
1992, as previously amended by (i) Letter Amendment dated May 13, 1993,
(ii) Amendment dated June 24, 1993, (iii) Second Amendment dated February 16,
1994 (iv) Letter Amendments dated May 16, 1994 and June 28, 1994, (v) a Third
Amendment dated August 22, 1994, and (vi) a Fourth Amendment dated July 31,
1995 (as so amended, the "Existing Agreement").

B. The Borrower, the Guarantor and the Lender desire to eliminate the
Revolving Loan facility in the Loan Agreement and recast the outstanding
Revolving Loan balance of $164,750.78 ("Revolving Loan Balance") into an
Amended and Restated Consolidated Term Loan No. 3 (as hereinafter defined).

C. The Borrower, the Guarantor and the Lender also desire to recast
the outstanding balance of $150,000.00 ("Term Loan Balance") due under the
Term Loan dated July 31, 1990 in the original sum of $5,000,000.00 ("Term Loan
No. 1") and the Term Note executed simultaneously therewith ("Term Note No. 1").

D. The Borrower, the Guarantor and the Lender therefore desire to
further modify and amend the terms of the Existing Agreement to recast the
Revolving Loan Balance and the Term Loan Balance into one consolidated
obligation in the amount of $314,750.78 in accordance with the terms and
conditions of an Amended and Restated Consolidated Term Loan No. 3 (as
hereinafter defined), pursuant to the terms and conditions of the amendments to
the Existing Agreement by this writing.

E. The Borrower, the Guarantor and the Lender desire to amend the
Existing Agreement as hereinafter provided.

NOW, THEREFORE, for valuable consideration (the receipt and sufficiency
of which are hereby acknowledged), the parties hereto agree as follows:

<PAGE> 2
1. DEFINITIONS

(a) All capitalized terms used but not defined in this Amendment shall have
the respective meanings ascribed to them in the Existing Agreement.

(b) As used herein, the following capitalized terms shall have the
respective meanings ascribed to them below (superseding all previous definitions
of such terms, if any, in the Existing Agreement):

"Agreement" -- the Existing Agreement, as amended by this Amendment.

"Amended and Restated Consolidated Term Loan No. 3" -- the loan
described in Subsection 2E hereof.

"Amended and Restated Consolidated Term Note No. 3" -- the Note
described in Subsection 2E and any promissory notes in renewal
thereof or substitution or replacement therefor.

"Loan Documents" -- shall mean, collectively this Amendment, the
Existing Agreement, the Mortgage Modification Agreement, the Term
Note, the Amended and Restated Consolidated Term Note No. 3, the
Replacement Note, the Guaranty, the Affirmation of Guaranty, the
Security Agreement, the Mortgage and the Trademark Collateral
Assignment.

2. MODIFICATION OF REVOLVING LOANS.

(a) The facility for Revolving Loans under the Existing Agreement is hereby
rescinded and deleted in its entirety, therefore Section 2A., Subsection 2A.1
(a) and (b) of the Loan Agreement are hereby deleted in their entirety.

3. MODIFICATION OF TERM LOAN NO. 1.

Subsection 2B is deleted in its entirety in the Loan Agreement and
Subsection 2E. is hereby added to the Loan Agreement and reads as follows:

2E. AMENDED AND RESTATED CONSOLIDATED TERM LOAN NO. 3 -- $314,750.78.

1. Subject to the terms and conditions of this Agreement, and to the
Borrower's observance and performance of, and compliance with, all terms,
conditions, warranties, representations and covenants of this Agreement, and the
timely payment of all Obligations of the Borrower to the Lender:

-2-

<PAGE> 3
(a) The Borrower acknowledges that the current outstanding principal
balance due and owing pursuant to Term Loan No. 1 and Term Note No. 1 is
$150,000.00 and Borrower wishes to recast said balance and the Revolving Loan
Balance ($164,750.78) into one consolidated loan in the principal sum of
$314,750.78 ("Amended and Restated Consolidated Term Loan No. 3"). Borrower
agrees to repay the Amended and Restated Consolidated Term Loan No. 3 as
hereinafter provided, and the Amended and Restated Consolidated Term Loan No. 3
shall be evidenced by an Amended and Restated Consolidated Term Note No. 3
executed simultaneously herewith. Neither Borrower nor Guarantor have any
defense, offset or counterclaim in respect of their liability to repay the
Amended and Restated Consolidated Term Loan No. 3.

(b) The outstanding principal amount of the Amended and Restated
Consolidated Term Loan No. 3 shall continue to bear interest at a fluctuating
interest rate per annum equal at all times to ONE-HALF OF ONE PERCENT (1/2%)
above the Lender's Prime Rate in effect from time to time, each change in such
fluctuating rate to take effect simultaneously with the corresponding change in
the Prime Rate, without notice to Borrower. Such interest shall be computed on
the basis of actual number of days elapsed, as if each year consisted of 360
days.

(c) The principal amount of the Amended and Restated Consolidated Term
Loan No. 3 shall be repaid by the Borrower in SEVEN (7) consecutive monthly
principal installments payable as follows:

(i) SIX (6) consecutive monthly principal installments of
$50,000.00 each; and

(ii) a SEVENTH (7th) and final installment of $14,750.78,
together with interest as hereinafter provided. The said installments are to be
paid commencing on the 10th day of January, 1996 and on the tenth day of each
month thereafter until July 10, 1996, when the entire unpaid principal and any
accrued interest, if any, shall be due and payable. If any payment of principal
or interest under the Amended and Restated Consolidated Term Loan No. 3 shall
be due and payable on a day other than a business day of the Lender, then such
payment shall be due and payable on the next succeeding business day of the
Lender. All payments of interest or principal or prepayments of principal,
howsoever designated by Borrower, are to be applied first on account of
interest on the unpaid balance of the principal indebtedness of the Amended and
Restated Consolidated Term Loan No. 3 and the balance, if any, on account of the
outstanding principal of Amended and Restated Consolidated Term Loan No. 3.
Lender may, at its discretion, charge any principal or interest payment due
hereunder to any checking or loan account of the Borrower, or apply any
proceeds received by Borrower against payment of same.

-3-

<PAGE> 4
(d) Interest on the Amended and Restated Consolidated Term
Loan No. 3 shall be invoiced at the end of each calendar month and is payable
on the first day of each month commencing February 1, 1996. Any failure or
delay by Lender in submitting invoices for interest payments shall not
discharge or relieve Borrower of its obligation to make such interest payments.

(e) Wherever the term Term Loan is used in the Existing
Agreement, it shall be understood to mean also the Amended and Restated
Consolidated Term Loan No. 3, and wherever the term Term Note is used it shall
be understood to mean also the Amended and Restated Consolidated Term Note No.
3.

4. AMENDED AND RESTATED CONSOLIDATED TERM NOTE NO. 3.
Simultaneously with the execution of this Amendment, Borrower shall execute and
deliver to the Lender an Amended and Restated Consolidated Term Note No. 3. The
form and execution of such instrument is to be in all respects, in form and
substance acceptable to Lender.

5. RATIFICATION OF AGREEMENT. Subject to the amendments to the
Loan Agreement as set forth herein, as of this day, the parties hereto hereby
ratify and confirm, in full, each and every term, condition, agreement,
representation, warranty and covenant set forth in the Loan Agreement.

6. SURVIVAL. All representations and warranties, whether ratified
hereby or made herein or in any instrument or certificate contemplated hereby,
shall survive any independent investigation made by Lender and the execution
and delivery of the Loan Agreement, together with this Fifth Amendment to the
Loan Agreement, and the relevant documents and said certificates or instruments
shall continue so long as any of the Borrower's obligations are outstanding and
unsatisfied, applicable Statutes of Limitations to the contrary notwithstanding.

7. AMENDMENT ONLY. This is intended as an amendment only to the Loan
Agreement and is not a new loan agreement, therefore all of the remaining terms
and conditions of the Loan Agreement (including any amendments or supplements
thereto), shall remain in full force and effect as though set forth herein at
length to the extent not inconsistent with the terms of this Fifth Amendment,
and any term in initial capitals and not otherwise defined herein shall have
the meaning ascribed thereto in the Loan Agreement.

-4-
<PAGE> 5
8. HEADINGS. The headings as used in this Fourth Amendment are
inserted solely for convenience of reference and shall not constitute a part of
this Fifth Amendment nor affect its meaning, construction or effect.

9. NO DEFENSES TO PAYMENT. Borrower and Guarantor waive and
forever release and discharge Lender, its officers, directors, agents and
employees, successors and assigns from any and all claims, actions, causes of
action, suits, counterclaims, set-offs, rights and defenses which against
Lender (its officers, directors, agents and employees, successors and assigns),
Borrower, Guarantor and their successors or assigns have or hereafter can,
shall or may have, for, upon, or by reason of any matter, cause or thing
whatsoever up to and including the date of this Fifth Amendment; and Borrower
and Guarantor represent and warrant to Lender that Borrower and Guarantor have
no defenses to the repayment of any or all of the Obligations and has no
claims, rights of set-off or causes of action against Lender.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their duly authorized agents as of this 14th day of
February, 1996.

ATTEST: ALFIN, INC.
Borrower

By: /s/ WALTER M. EPSTEIN By: /s/ MICHAEL FICKE
------------------------- -------------------------
Walter M. Epstein Michael Ficke
Asst. Secretary Chief Financial Officer

REAFFIRMATION AND ACKNOWLEDGEMENT OF GUARANTOR

On July 31, 1990 the Guarantor delivered to the Lender a certain
Continuing Guaranty of Payment, as such has been previously reaffirmed from
time to time, ("Guaranty") of the obligations of the Borrower to the Lender.
The Guarantor hereby wishes to reaffirm its Guaranty and to acknowledge that
its Guaranty extends to each and every obligation due and owing from

-5-

<PAGE> 6
the Borrower to the Lender including, without limitation, whether any advances
were heretofore or are hereafter made and as set forth herein. FURTHERMORE,
GUARANTOR HEREBY WAIVES ANY RIGHT OF SUBROGATION TO WHICH IT OTHERWISE MIGHT
BE ENTITLED.

ATTEST: ADRIEN ARPEL, INC.
Guarantor

By: /s/ Walter M. Epstein By: /s/ Michael Ficke
----------------------------- ----------------------------
Walter M. Epstein Michael Ficke
Asst. Secretary Chief Financial Officer

MIDLANTIC BANK, N.A.

By: /s/ Alfred J. Joseph
----------------------------
Alfred J. Joseph
Vice President

-6-

<PAGE> 7
AMENDED AND RESTATED CONSOLIDATED
TERM NOTE NO. 3

$314,750.78 Effective as of Dec. 11, 1995
Clark, New Jersey

FOR VALUE RECEIVED, ALFIN, INC., a New Jersey corporation (the
"Maker"), and ADRIEN ARPEL, INC., a Delaware corporation, (the "Guarantor")
hereby promise to pay to the order of MIDLANTIC BANK, N.A., formerly known as
Midlantic National Bank, a national banking association (the "Bank"), the
principal amount of THREE HUNDRED FOURTEEN THOUSAND SEVEN HUNDRED FIFTY AND
78/100 ($314,750.78) DOLLARS plus interest on the outstanding balance thereof
at the rate of ONE-HALF OF ONE PERCENT (1/2%) per annum in excess of the Bank's
Prime Rate (as hereinafter defined) from time to time until this Note is paid
in full. Such interest shall be computed on the basis of actual number of days
elapsed, as if each year consisted of 360 days.

The principal amount hereof shall be payable in SEVEN (7) consecutive
principal installments payable as follows:

(a) SIX (6) consecutive monthly principal installments of $50,000.00
each; and

(b) a SEVENTH (7th) and final installment of $14,750.78, together with
interest as hereinafter provided. The said installments are to be paid
commencing on the 10th day of January 1996 and on the tenth day of each month
thereafter until July 10, 1996, when the entire unpaid principal and any
accrued interest, if any, shall be due and payable. Interest on the unpaid
principal amount outstanding on this Note shall be due and payable on the first
day of each month commencing on February 1, 1996 and continuing thereafter
until the outstanding principal balance has been paid in full. If any payment
of principal or interest under this Note shall be due and payable on a day
other than a business day of the Bank, then such payment shall be due and
payable on the next succeeding business day of the Bank. All payments of
interest or principal or prepayments of principal, howsoever designated by
Borrower, are to be applied first on account of interest on the unpaid balance
of the principal indebtedness of this Note and the balance, if any, on account
of the outstanding principal of this Note. Bank may, at its discretion, charge
any principal or interest payment due hereunder to any checking or loan account
of the Maker, or apply any proceeds received by Borrower against payment of
same.

The "Bank's Prime Rate" is the rate of interest announced from time to
time by the Bank as its "prime rate" or "prime lending rate". Such rate of
interest is determined from time to time by the Bank as a means of pricing some
loans to its customers and is neither tied to any external rate of interest or
index nor does it necessarily reflect the lowest rate of interest

<PAGE> 8
actually charged by the Bank to any particular class or category of customers
of the Bank. Each change in the Bank's Prime Rate shall effect a change in the
interest rate on this Note as of the day of such change in the Bank's Prime
Rate.

Any amount of principal hereof which is not paid when due, whether at
maturity, by acceleration or otherwise, shall bear interest from the date when
due until said principal amount is paid in full at a rate of two percent (2%)
per annum in excess of the rate stated above in effect from time to time.

All payments hereunder shall be made in lawful money of the United
States of America to the Bank, at the Bank's offices at 100 Walnut Avenue,
Clark, New Jersey 07066, in immediately available funds. All such payments
shall be applied to accrued and unpaid interest and the balance to the
outstanding principal.

This Note is the Amended and Restated Consolidated Term Note No. 3
referred to in the Fifth Amendment executed simultaneously herewith to the
Amended and Restated Revolving Credit and Term Loan Agreement dated June 30,
1992, as such has been previously amended from time to time (the "Agreement")
between the Maker, Guarantor, and the Bank. Such Agreement describes certain
events of default, upon the happening of any of which the entire principal
balance of this Note, plus all accrued and unpaid interest hereon, shall at the
option of the holder hereof become immediately due and payable.

The Maker hereby waives diligence, presentment of any instrument,
demand for payment, protest and notice of nonpayment or protest and any and all
other notices and demands whatsoever in connection with the delivery,
acceptance, performance, default or enforcement of this Note. The provisions of
this Note are binding on the heirs, executors, administrators, assigns and
successors of the Maker and shall inure to the benefit of the Bank, its
successors and assigns. If this Note is placed in the hands of an attorney for
collection, the undersigned shall pay all costs and disbursements of such
attorney. This Note shall be governed by and construed in accordance with the
laws of the United States of America and the internal laws of the State of New
Jersey (without giving effect to principles of conflicts of law).

No provision of this Note may be changed or waived orally, but only by
an instrument in writing signed by the party to be charged by such change or
waiver.

-2-

<PAGE> 9
IN WITNESS WHEREOF, the Maker has executed this Note the day and year
first above set forth.

(CORPORATE SEAL) ALFIN, INC.
Maker

By: /s/ MICHAEL FICKE
---------------------------------
ATTEST: Michael Ficke,
Chief Financial Officer
By: /s/ WALTER M. EPSTEIN
---------------------------------
Walter M. Epstein
Asst. Secretary

(CORPORATE SEAL) ADRIEN ARPEL, INC.
Guarantor

By: /s/ MICHAEL FICKE
---------------------------------
ATTEST: Michael Ficke,
Chief Financial Officer
By: /s/ WALTER M. EPSTEIN
---------------------------------
Walter M. Epstein
Asst. Secretary

-3-

<PAGE> 10
ADRIEN ARPEL, INC.
ASSISTANT SECRETARY'S CERTIFICATE

The undersigned, Assistant Secretary of ADRIEN ARPEL, INC., a Delaware
corporation (the "Company"), pursuant to the Fifth Amendment to Amended and
Restated Revolving Credit and Term Loan Agreement dated the date hereof (the
"Amendment") by and between the Company and MIDLANTIC BANK, N.A., f/k/a
Midlantic National Bank DOES HEREBY CERTIFY THAT:

(a) The Certificate of Incorporation of the Company has not been
amended since June 30, 1992 and remains in full force and effect.

(b) The By-Laws of the Company have not been amended since June 30,
1992 and remain in full force and effect.

(c) Attached hereto as Exhibit A is a true and correct copy of
resolutions duly adopted by the Board of Directors of the Company
approving the transactions contemplated by the Amendment, and such
resolutions are still in full force and effect as of the date
hereof.

(d) The following are the duly elected, qualified and acting officers
of the Company and that the signatures set forth opposite their
respective names below are the true signatures of said officers.

Name Office Signature
- - ---- ------ ---------

Michael Ficke Chief Financial /s/ MICHAEL FICKE
Officer ------------------------

Walter M. Epstein Asst. Secretary /s/ WALTER M. EPSTEIN
------------------------

IN WITNESS WHEREOF, the undersigned has executed this Certificate and
affixed the corporate seal hereto this 14th day of February, 1996.

/s/ WALTER M. EPSTEIN
------------------------
Walter M. Epstein
Asst. Secretary

(SEAL)

I, Michael Ficke, Chief Financial Officer of ADRIEN ARPEL, INC., hereby
certify that appearing above is the true and correct signature of Walter M.
Epstein, Assistant Secretary of the Company.

/s/ MICHAEL FICKE
------------------------
Michael Ficke
Chief Financial Officer

<PAGE> 11
EXHIBIT A

RESOLUTIONS OF THE BOARD OF
DIRECTORS OF ADRIEN ARPEL, INC.

BE IT RESOLVED, that ADRIEN ARPEL, INC. (the "Company") be, and it
hereby is, authorized and directed to enter into a Fifth Amendment to Amended
and Restated Revolving Credit and Term Loan Agreement modifying the Amended and
Restated Revolving Credit and Term Loan Agreement dated as of June 30, 1992
(the "Agreement") with MIDLANTIC BANK, N.A., f/k/a Midlantic National Bank (the
"Lender"), pursuant to which the Company, the Lender and the other parties
named therein modified and amended a certain term loan of ALFIN, INC.
(guaranteed by the Company) to the Lender; and be it further

RESOLVED, that the Chief Financial Officer and Assistant Secretary of
the Company be, and hereby is, authorized and directed, by, for, on behalf of
and in the name of the Company to execute, acknowledge and deliver the aforesaid
Amendment and all promissory notes and modifications thereto, guarantees,
pledges, warrants, assignments, mortgages, agreements and all other instruments
and documents which the officer so acting shall deem necessary, appropriate,
convenient or proper to effectuate the transactions described in the above
resolutions and contemplated in the Amendment to the Agreement, his signature
thereon being conclusive evidence of his approval thereof; and be it further

RESOLVED, that the Chief Financial Officer and Assistant Secretary of
the Company be, and each hereby is, authorized and directed, by, for, on behalf
of and in the name of the Company to do all such other acts and things, to
make, negotiate, execute and deliver, file and/or record and receive all such
other instruments, documents and agreements and to do all other acts or things
as may be, in the opinion of the officer so acting, necessary, appropriate,
convenient or proper to carry out the intent of the foregoing resolutions, to
discharge the liabilities and obligations of the Company to the Lender, to
exercise the rights of the Company, and to carry out and consummate the
transactions contemplated by the Amendment to the Agreement, the signature of
such officer so acting shall be conclusive evidence of his approval thereof.

-2-

<PAGE> 12
ALFIN, INC.
ASSISTANT SECRETARY'S CERTIFICATE

The undersigned, Assistant Secretary of ALFIN, INC., a New York
corporation (the "Company"), pursuant to the Fifth Amendment to Amended and
Restated Revolving Credit and Term Loan Agreement dated the date hereof (the
"Amendment") by and between the Company and MIDLANTIC BANK, N.A., f/k/a
Midlantic National Bank DOES HEREBY CERTIFY THAT:

(a) The Certificate of Incorporation of the Company has not been
amended since January 16, 1992 and remains in full force
and effect.

(b) The By-Laws of the Company have not been amended since June 30,
1992 and remain in full force and effect.

(c) Attached hereto as Exhibit A is a true and correct copy of
resolutions duly adopted by the Board of Directors of the
Company approving the transactions contemplated by the
Amendment, and such resolutions are still in full force and
effect as of the date hereof.

(d) The following are the duly elected, qualified and acting
officers and directors of the Company, and that the signatures
set forth opposite their respective names below are the true
signatures of said officers.

Name Office Signature

Michael Ficke Chief Financial Officer /s/ MICHAEL FICKE
---------------------
Walter M. Epstein Asst. Secretary /s/ WALTER M. EPSTEIN
---------------------

IN WITNESS WHEREOF, the undersigned has executed this Certificate and
affixed the corporate seal hereto this 14th day of February, 1996.

/s/ WALTER M. EPSTEIN
-------------------------
Walter M. Epstein
Asst. Secretary

I, Chief Financial Officer of ALFIN, INC., hereby certify that
appearing above is the true and correct signature of Walter M. Epstein,
Assistant Secretary of the Company.

/s/ MICHAEL FICKE
-------------------------
Michael Ficke
Chief Financial Officer

<PAGE> 13
Exhibit A

RESOLUTIONS OF THE BOARD OF
DIRECTORS OF ALFIN, INC.

BE IT RESOLVED, that ALFIN, INC. (the "Company") be, and it is hereby
is, authorized and directed to enter into a Fifth Amendment to Amended and
Restated Revolving Credit and Term Loan Agreement modifying the Amended and
Restated Revolving Credit and Term Loan Agreement dated as of June 30, 1992
(the "Agreement") with MIDLANTIC BANK, N.A., f/k/a Midlantic National Bank (the
"Lender"), pursuant to which the Company, the Lender and the other parties
named therein modified and amended a certain term loan to the Lender; and be
it further

RESOLVED, that the Chief Financial Officer and Assistant Secretary of
the Company be, and hereby is, authorized and directed, by, for, on behalf of
and in the name of the Company to execute, acknowledge and deliver the
aforesaid Amendment and all promissory notes and modifications thereto,
guarantees, pledges, warrants, assignments, mortgages, agreements and all other
instruments and documents which the Officer so acting shall deem necessary,
appropriate, convenient or proper to effectuate the transactions described in
the above resolutions and contemplated in the Amendment to the Agreement, his
signature thereon being conclusive evidence of his approval thereof; and be it
further

RESOLVED, that the Chief Financial Officer and Assistant Secretary of
the Company be, hereby is, authorized and directed, by, for, on behalf of and in
the name of the Company to do all such other acts and things, to make,
negotiate, execute and deliver, file and/or record and receive all such other
instruments, documents and agreements and to do all other acts or things as may
be, in the opinion of the officer so acting, necessary, appropriate, convenient
or proper to carry out the intent of the foregoing resolutions, to discharge the
liabilities and obligations of the Company to the Lender, to exercise the rights
of the Company, and to carry out and consummate the transactions contemplated by
the Amendment to the Agreement, the signature of the officer so acting shall be
conclusive evidence of his approval thereof.

-2-

<PAGE> 1
Exhibit 10.30

AMENDMENT NO. 5
DATED AS OF JANUARY 31, 1996
TO AGREEMENT
DATED AS OF MAY 13, 1993

Amendment No. 5, dated as of January 31, 1996 (this "Amendment" or
"Amendment No. 5"), to the Agreement, dated as of May 13, 1993 (the "Agreement"
or the "Letter Agreement"), among ALFIN, INC. and ADRIEN ARPEL, INC.
(individually and collectively, the "Company") and CREDIT LYONNAIS NEW YORK
BRANCH and CREDIT LYONNAIS CAYMAN ISLAND BRANCH (individually and
collectively, the "Bank").

WHEREAS, the Lender has requested the Bank to extend the Expiration
Date until November 30, 1996; and

WHEREAS, the Bank is willing to agree to such extension on and subject
to the terms and conditions hereof.

NOW, THEREFORE, IT IS AGREED:

1. All terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Agreement.

2. The Agreement is hereby amended by deleting the first paragraph
thereof in its entirety and substituting in lieu thereof the following new
paragraph:

"Credit Lyonnais New York Branch ("CLNY") and Credit Lyonnais Cayman
Island Branch ("CLCI") (CLNY and CLCI sometimes referred to herein as
the "Lender") are pleased to make available to Alfin, Inc. (the
"Borrower") on a committed basis loans up to a maximum aggregate
principal amount of United States ("U.S.") $2,000,000 (as such amount
shall be reduced in accordance with the terms hereof, the "Commitment")
to be used by the Borrower for working capital purposes subject to the
terms and conditions hereof and of the following documents annexed
hereto as Exhibits A through F and hereby made a part hereof (each such
document, together with this Letter Agreement, being a "Credit
Document"):

Exhibit A - Promissory Note
Exhibit B - [intentionally left blank]
Exhibit C - [intentionally left blank]
Exhibit D - [intentionally left blank]
Exhibit E - Security Agreement
Exhibit F - Borrowing Base Certificate

Upon the effectiveness of Amendment No. 5, the Commitment will remain in
effect until November 30, 1996 unless earlier terminated by the Lenders
pursuant to the terms and conditions hereof (the "Expiration Date"). Any
obligations of the Borrower incurred
<PAGE> 2
-3-

determined by CLNY on a daily basis, the higher of (a) the rate per
annum established by CLNY from time to time as the reference rate for
short-term commercial loans in U.S. Dollars to domestic corporate
borrowers (which the Borrower acknowledges is not necessarily CLNY's
lowest rate) or (b) the overnight cost of funds of CLNY as determined
solely by CLNY plus 1/4 of 1% per annum. Accrued and unpaid interest on
the loans hereunder shall be due and payable on the last day of each
calendar month on each Due Date and upon any prepayment to the extent
accrued on the amount prepaid.

The Borrower may prepay the loans hereunder at any time without premium
or penalty upon written notice received by CLNY no later than 11:00 a.m.
(New York time) on the date of such prepayment; provided, however, that
partial prepayments of the loans hereunder shall be in an integral
principal multiple of $50,000."

6. The Agreement is hereby amended by deleting the heading Terms of
Commercial and Standby Letters of Credit and the two paragraphs thereunder in
their entirety.

7. The Agreement is hereby amended by deleting the heading Mandatory
Prepayments and Cash Collateralizations and the first sentence thereunder in
their entirety and substituting, in lieu thereof, the following new heading and
sentence:

"Mandatory Prepayments:

If at any time the aggregate outstanding principal amount of loans under
the applicable Credit Documents exceeds the Borrowing Base, the Borrower
shall immediately prepay such loans to the extent of the difference
between such aggregate outstanding principal amount and the Borrowing
Base."

8. The Agreement is hereby amended by deleting the following clause
from the first sentence under the heading Increased Costs:

"or commercial or standby letters of credit".

9. The Agreement is hereby amended by deleting the second paragraph
under the heading Increased Costs in its entirety and substituting in lieu
thereof the following sentence:

"If the Borrower becomes liable for the payment of any additional
amounts by reason of the foregoing paragraph, it may avoid further
liability for such additional amounts by giving to CLNY or CLCI, as the
case may be, prior written notice of its intention to prepay, and by
prepaying forthwith, outstanding loans under the applicable Credit
Documents in full only together with all interest,
<PAGE> 3
-4-

fees, and other amounts or charges incurred thereon and due thereunder
including such additional amounts for the period prior to prepayment
pursuant to the preceding paragraph".

10. The Agreement is hereby amended by deleting (i) the phrase "or
commercial or standby letter of credit issued" from the preamble under the
heading Representations and Warranties and (ii) the phrase "or the issuance of
any letter of credit pursuant to" from clause (x) under the heading
Representations and Warranties.

11. The Agreement is hereby amended by deleting clause (iii) in its
entirety from the first sentence under the heading Covenants and substituting,
in lieu thereof, the following new clause:

"(iii) to provide the Lenders with a Borrowing Base Certificate
accompanied by an aging schedule of all accounts receivable of Adrien
Arpel, Inc., which schedule shall set forth an aging of such accounts
receivable by customer (specifying the amount, date, billing number,
customer name and customer address in respect of each account
receivable) according to the terms of the relevant receivable and not
according to the date of shipment of the goods with respect to the sale
of which such account receivable arose, no later than (i) for the period
from and including the first calendar day of each month to and including
the fifteenth calendar day of such month, the second Business Day
following the fifteenth calendar day of such month and (ii) for the
period from and including the sixteenth calendar day of each month to
and including the last calender day of such month, the second Business
Day following the last calendar day of such month".

12. The Agreement is hereby amended by deleting the phrase "or to
reimburse the amount of any draw under a commercial or standby letter of
credit" from clause (i)(a) under the caption Events of Default.

13. The Agreement is hereby amended by deleting clause (viii) under
the heading Events of Default in its entirety and substituting, in lieu thereof,
the following new clause:

"(viii) [intentionally left blank]".

14. The Agreement is hereby amended by deleting clause (xii) under the
heading Events of Default in its entirety and substituting, in lieu thereof, the
following new clause:

"(xii) if at any time the aggregate outstanding principal amount of
loans under the applicable Credit Documents shall exceed the Borrowing
Base".

15. The Agreement is hereby amended by deleting from the penultimate
paragraph under the heading Events of Default (i) the parenthetical phrase in
the first sentence thereof and (ii) the second sentence thereof in its entirety,
<PAGE> 4
-5-

16. The Agreement is hereby amended by deleting clauses (i), (ii),
(iii) and (iv) under the heading Requirements for Utilization in their entirety
and renumbering clauses (v), (vi) and (vii) as clauses (i), (ii) and (iii),
respectively.

17. The Agreement is hereby amended by deleting the following clauses
from the last paragraph under the heading Requirements of Utilization: (i) "and
the issuance of each commercial or standby letter of credit"; (ii) "or
commercial or standby letter of credit is issued"; and (iii) "or issuance of
such letter of credit".

18. Except as expressly modified hereby, the Credit Documents shall
remain in full force and effect. All references in the Credit Documents or in
any document, instrument or agreement executed and delivered in connection
therewith to the "Credit Documents", "hereof", "herein" and words of similar
effect shall mean and refer to the Credit Documents as amended and modified by
this Amendment.

19. As of the date of the effectiveness of this Amendment, each of
Alfin, Inc. and Adrien Arpel, Inc. (i) renews the representations and
warranties made by it in each Credit Document to which it is party with the
same effect as if such representations and warranties were made on and as of
the date hereof and (ii) further represents and warrants that no Event of
Default has occurred and is continuing under the Credit Documents or will occur
upon the effectiveness of this Amendment and (iii) further represents and
warrants that the consolidated balance sheet of the Borrower and its
subsidiaries dated as July 31, 1995 and the related consolidated statements of
income and retained earnings and changes in cash flows for the fiscal year
ended July 31, 1995, reported on by Arthur Andersen & Co., copies of which have
heretofore been furnshed to the Lender, fairly present the consolidated
finanacial position of the Borrower and its subsidiaries as of July 31, 1995
and the results of their operations for the fiscal year ended July 31, 1995,
all in conformity with United States generally accepted accounting principals
applied on a consistent basis.

20. This Amendment shall be effective as of the date first above
written upon:

(i) the due execution and delivery hereof by the parties hereto,

(ii) the receipt by CLNY from Alfin, Inc. of a duly executed promissory
note in the form of Exhibit A attached hereto in replacement and
substitution of, and not in payment for, that certain promissory note,
dated February 28, 1995, made by Alfin, Inc. to CLNY in the principal
amount of $2,100,000 and issued pursuant to the Letter Agreement as in
effect immediately prior to the effectiveness of this Amendment (the
"Prior Note"),

(iii) evidence that the Guaranty has been modified to reflect the new
Expiration Date and reductions in the Commitment and

(iv) receipt by CLNY of any amounts due and outstanding in respect of
the Agreement.

21. As used in the Agreement (including all Exhibits thereto) and all
other instruments and documents executed in connection therewith, the term
"Agreement" shall mean the Agreement as amended hereby.

22. This Amendment shall be governed by, and construed in accordance
with the laws of the State of New York without regards to its principles of
conflicts of law.

<PAGE> 5
-6-

23. This Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any party hereto may execute this Amendment by signing any such counterpart.

IN WITNESS WHEREOF, the parties hereto through their duly authorized
representatives have set their hand as of the date first written above.

ALFIN, INC.

By:_________________________

Title:______________________

ADRIEN ARPEL, INC.

By:_________________________

Title:______________________

CREDIT LYONNAIS
NEW YORK BRANCH

By:_________________________

Title:______________________

CREDIT LYONNAIS
CAYMAN ISLAND BRANCH

By:_________________________

Title:______________________

MV:lk

<PAGE> 1
Exhibit 10.31

ALFIN, INC.
720 FIFTH AVENUE
NEW YORK, NY 10019

November 8, 1996

Ms. Adrienne Newman
2 East End Avenue
Penthouse C
New York, NY 10021

Dear Ms. Newman:

This letter sets forth our agreement with respect to the sale of Adrien
Arpel cosmetic products and kits on The Home Shopping Network ("HSN") solely
in connection with the HSN shows scheduled for November 14-18, 1996, December
12-16, 1996 and January 23-27, 1997 (collectively, the "HSN Shows") as follows:

1. Adrienne Newman ("Newman") will appear as the selling host on the
HSN Shows for Adrien Arpel, Inc. ("Arpel") and will take all steps necessary to
prepare for and put on such HSN Shows consistent with her past practice for
Arpel. Newman will keep Alfin, Inc. (the "Company") and Arpel informed on a
regular basis with respect to the preparations and status of the HSN Shows.

2. As compensation for her services described in paragraph 1 above,
Newman (or her designee) will be paid by the Company in accordance with
paragraph 7(d) of that certain Employment Agreement dated April 4, 1990 between
Newman and the Company, as amended (the "Employment Agreement"); provided,
however, that instead of the Company paying Newman directly for product sales
related to the HSN shows, the Company will instruct HSN to divide whatever
payment HSN owes to the Company in connection with such HSN Shows between the
Company and Newman in accordance with paragraph 7(d) of the Employment
Agreement. In no event will any such payments due Newman by the Company be
delayed or withheld in the event of any litigation between the parties arising
from the Employment Agreement.
<PAGE> 2
3. Within two (2) business days of the date hereof, the Company will
deliver a check to Parson & Brown (which Parson and Brown will deposit
in its trust account) in the amount of $101,855.66 in recognition of
past net sales payments due Newman by the Company under the Employment
Agreement for the month of October 1996 only, which amount shall be net
of the amount of $96,195 as Newman's payment for a certain diamond ring
pursuant to an agreement between Newman and Arpel (as successor to the
interests of Seligman and Latz, Inc.) dated July 25, 1985. On the first
business day following Newman's appearances on the November 14-18 HSN
Shows, Parson & Brown will deliver to Newman a check for $101,855.66
for the reasons set forth in the previous sentence.

4. In order to support Newman's efforts with respect to the HSN Shows, the
Company will provide Newman with the following:

a. Reimbursement in an amount not to exceed $22,500 for separate
office space for the period from the date hereof through and
including the January 27, 1997 HSN Show (the "Selling Period").

b. Each of the Arpel staff listed below will be offered the
opportunity to terminate his or her employment with Arpel or the
Company, as the case may be, and to work for Newman or a
corporation controlled by her. Any employee who remains at the
Company or Arpel will be made available to Newman for the
conduct of the HSN Shows during the Selling Period. During the
Selling Period, the Company and/or Arpel will pay one-half of
the payroll cost of each such employee who leaves the Company
and/or Arpel as above described.

(i) Ann Johnson (iv) Susanne Dodd
(ii) Alan Isaacson (v) Rits Marlow
(iii) Lucy Peck

Nothing in this agreement will be deemed to obligate the Company
or Arpel to continue the employment of such staff after the
Selling Period.

c. Warehouse and computer support consistent with past practice
during the Selling Period.

- 2 -
<PAGE> 3
5. The parties hereby acknowledge that Newman is acting as an independent
contractor and not an employee in the rendering of the services set
forth herein.

6. Except as specifically set forth herein, this agreement confers no other
rights, express or implied, to Newman with respect to any of the
Company's or Arpel's assets, income, trademarks or products.

7. In performing her duties hereunder, Newman shall do all things necessary
to maintain the goodwill and value of the Company, Arpel and its
products.

8. This agreement will terminate automatically without notice by either
party at the end of the Selling Period. Newman's right to receive any
payments specifically due hereunder, however, will survive the
termination of this agreement.

9. Notwithstanding anything to the contrary set forth herein, the parties
each expressly reserve any rights and remedies available to them at law
or in equity arising in connection with the termination of the
Employment Agreement as set forth in Mark Kaplan's letter (on behalf of
Newman) to the Company and Arpel dated October 25, 1996 and Albert
Byer's response (on behalf of the Company and Arpel) to Mark Kaplan
dated November 1, 1996 and expressly agree not to take any action to
exercise such rights and remedies (by way of litigation against the
other or otherwise) until after the Selling Period.

10. The Company has and will hold in abeyance any written notice terminating
Newman for "good cause" under the Employment Agreement which would have
otherwise been delivered to Newman until after the Selling Period, and
notwithstanding anything to the contrary set forth herein, the Company
reserves its right to deliver such written notice to Newman after the
Selling Period.

11. During the Selling Period, neither party will communicate, orally or in
writing, with the public, HSN, customers, retail stores selling Arpel
products, employees of the Company or Arpel or the press any statements
which could injure or disparage the other party's name or reputation.
During the Selling Period, all material inquiries regarding Arpel
products and the HSN Shows should be directed to the Company or Arpel.

- 3 -
<PAGE> 4
12. The parties agree that the terms of this agreement are
confidential and shall not be disclosed except as required by
applicable law or court order.

13. This agreement shall be governed by New York law.

If the foregoing correctly states our agreement, please so indicate by
signing below and returning an executed counterpart of this agreement to our
attention.

Very truly yours,

ALFIN, INC.

By: /s/ Elizabeth Payer
----------------------------
Elizabeth Payer, President

ACCEPTED AND AGREED
this 8th day of November, 1996

/s/ Adrienne Newman
- - ---------------------------------
Adrienne Newman

- 4 -

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) ALFIN,
INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH (B) FORM 10K.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,210,972
<SECURITIES> 0
<RECEIVABLES> 680,370
<ALLOWANCES> 1,255,033
<INVENTORY> 3,271,126
<CURRENT-ASSETS> 6,908,981
<PP&E> 4,998,954
<DEPRECIATION> 3,537,025
<TOTAL-ASSETS> 11,228,186
<CURRENT-LIABILITIES> 5,922,184
<BONDS> 1,938,325
750,000
0
<COMMON> 116,629
<OTHER-SE> 4,131,002
<TOTAL-LIABILITY-AND-EQUITY> 11,228,186
<SALES> 34,733,375
<TOTAL-REVENUES> 34,733,375
<CGS> 11,380,089
<TOTAL-COSTS> 20,532,894
<OTHER-EXPENSES> (53300)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 313,100
<INCOME-PRETAX> 2,873,692
<INCOME-TAX> 181,000
<INCOME-CONTINUING> 2,692,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,692,692
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22

</TABLE>