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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-19908
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ODD'S-N-END'S, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 16-1205515
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
5000 WINNETKA AVENUE NORTH, 55428
NEW HOPE, MINNESOTA (Zip Code)
(Address of principal executive
offices)
</TABLE>
(612) 533-1169
Registrant's telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
TITLE OF EACH CLASS
COMMON STOCK, $0.07 PAR VALUE PER SHARE
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 subjected to
such filing requirements for the past 90 days. /X/ Yes / / No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's 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/
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to distribution of securities under a plan
confirmed by the Court. /X/ Yes / / No
As of March 17, 1998, 4,724,048 shares of Common Stock were outstanding of
which 2,810,809 shares were held by non-affiliates and the aggregate market
value of the shares (based upon the $.32 average bid and ask price on that date
on the NASDAQ Bulletin Board) held by non-affiliates was approximately $899,000.
DOCUMENTS INCORPORATED BY REFERENCE
1. The Registrant's Report on Form 8-K dated February 1, 1996 is incorporated
by reference in Part II, Item 9 of this Form 10-K.
2. Portions of the Registrant's definitive proxy statement to be filed pursuant
to Regulation 14A are incorporated by reference in Part III, Items 10
through 13 of this Form 10-K.
3. The Registrant's Report on Form 8-K/A dated January 8, 1998 is incorporated
by reference in Part II, Item 9 of this Form 10K.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Odd's-N-End's, Inc. (the "Company") is engaged in operating a chain of
retail stores that sell a wide assortment of "close-out" and "discount" consumer
goods. "Close-out" merchandise consists of new, often brand name products, which
typically are excess inventory, discontinued merchandise or merchandise in
discontinued packaging. "Discount" merchandise generally consists of items
bought at regular wholesale prices which are offered to consumers for less than
the prices generally charged at other full price retail stores. During 1997 the
Company owned and operated 22 retail stores located in New York state.
On May 13, 1994, the Company filed a petition for voluntary reorganization
with the United States Bankruptcy Court for the western district of New York
under Chapter 11 of the United States Bankruptcy Code. The Company's Plan of
Reorganization (the "Plan") was confirmed by the Bankruptcy Court on December
28, 1994. In connection with the Plan, Universal International, Inc.
("Universal"), a significant supplier of merchandise to the Company, acquired
40.5% of the Company's common stock through a cash investment of $953,000.
The Company was incorporated in New York in August 1983, and was
reincorporated in Delaware in August 1986. The Company's principal executive
offices are located at 5000 Winnetka Avenue North, New Hope, Minnesota 55428,
and its telephone number is (612) 533-1169.
The Company has experienced declining operating results and liquidity
constraints. In addition, Universal has experienced negative operating results
and liquidity constraints during 1997 and 1996. The Company's viability as a
going concern is dependent upon the Company returning to profitability or
obtaining additional financing. As Universal provides funding for the Company
under a demand, discretionary revolving note agreement (see Note 5), the
Company's viability as a going concern is also dependent upon Universal
continuing to provide funding to the Company for its operating cash flow needs.
The Company's continuing losses, as well as the above described conditions,
raise substantial doubt about the Company's ability to continue as a going
concern.
Subsequent to December 31, 1997, 99 CENTS Only Stores, which current owns
48% of Universal's outstanding common stock, made an offer to purchase all
issued and to-be-issued shares of the Company's common stock for approximately
$830,000. If completed as proposed, management believes that 99 CENTS Only
Stores will provide sufficient funding for the Company's operating cash flow
needs for the foreseeable future. However, this transaction is contingent upon
the approval of the stockholders and other customary closing conditions and
should not be relied upon as a source of funding for future cash flow
requirements.
PURCHASING
The Company purchases substantially all of its merchandise from Universal
under the terms of a supply agreement. This agreement permits Universal to
achieve a gross margin of approximately 15.25% on the merchandise sold to the
Company. As a result of this arrangement, the Company is highly dependent upon
Universal's ability to obtain merchandise.
SEASONALITY
The Company's business is affected by the pattern of seasonality common to
most retail businesses, in particular the Christmas selling season. Quarterly
results are affected by, among other things, the timing of holidays, new store
openings and sales performance of existing stores.
2
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COMPETITION
The Company operates in a highly competitive environment, competing with
discount stores, chain stores and other retailers. Many of these competitors
have longer established relations with suppliers and consumers, as well as
substantially greater financial resources and wider distribution capabilities
than the Company. In addition to competing in the retail sale of merchandise,
the Company, through Universal, encounters significant competition in purchasing
merchandise for its stores. The Company's ability to purchase a broad array of
merchandise at close-out prices is critical to its success. Large retailers
enjoy a competitive advantage of economies of scale in both the purchase and
sale of merchandise. These retailers are often unable to take advantage of
close-out merchandise purchases, however, due to the limited quantities of
merchandise sometimes available for purchase and the fact that these goods
cannot be reordered.
EMPLOYEES
At March 13, 1998, the Company had 66 full-time and 243 part-time employees.
None of the Company's employees are covered by a collective bargaining
agreement.
ITEM 2. PROPERTIES
The Company leases all of its retail store locations. As of December 31,
1997, the Company leased approximately 220,000 square feet of retail space for
its 22 operating stores, an average of 10,000 square feet per store. All of the
stores are located in the State of New York with the majority of the stores
located in or near the Buffalo metropolitan area. The stores are predominantly
in strip shopping centers. The store leases expire at varying times from January
1999 to January 2004. Some of these leases have renewal options.
ITEM 3. LEGAL PROCEEDINGS
The Company experiences routine litigation in the normal course of its
business. The Company does not believe that any pending litigation will have a
material adverse effect on the financial condition, results of operations or
cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the
fourth quarter ended December 31, 1997.
ITEM 4A. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------------------------- --- ------------------------------------------
<S> <C> <C>
Richard L. Ennen................................................ 45 President and Director
Robert R. Langer................................................ 42 Chief Operating Officer and Director
Dennis A. Hill.................................................. 34 Chief Financial Officer
</TABLE>
Each director is elected to hold office until the next annual meeting of
shareholders and until his successor is elected and qualified. Executive
officers are elected annually and serve at the discretion of the Board of
Directors.
Mr. Richard L. Ennen became President of the Company in January 1998, and
was appointed to the Board of Directors of the Company on December 19, 1996. Mr.
Ennen has been the Chief Executive Officer of Universal since January 1998, a
Director of Universal since 1997, and the President of
3
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Only Deals, Inc. (a wholly owned subsidiary of Universal) since October 1996.
Mr. Ennen joined Only Deals, Inc. in September 1996, as Executive Vice President
and General Merchandising Manager. From 1992 to September 1996, Mr. Ennen was
Director of Retail Merchandising and Retail Operations for Holiday Companies, a
large grocery, wholesale and gasoline company based in Bloomington, Minnesota.
Mr. Robert R. Langer became Chief Operating Officer of the Company in August
1996, and was appointed to the Board of Directors of the Company on March 13,
1995. Mr. Langer has been the Chief Operating Officer of Only Deals, Inc. since
September 29, 1994 and a Director of Universal since January 1998. Mr. Langer
joined Only Deals, Inc. in February 1992 as Vice President-Retail Operations.
Mr. Dennis A. Hill became Chief Financial Officer of the Company in January
1998. Mr. Hill has been Chief Financial Officer of Universal International, Inc.
since January 1998. Mr. Hill joined Universal in January 1996 as Corporate
Controller. From January 1994 to January 1996, Mr. Hill was Manager of Financial
Reporting for Damark International, Inc., a mail order retailer. From September
1986 to January 1994, Mr. Hill was employed by Touche Ross/Deloitte & Touche, an
international accounting firm, where he served as Audit Manager from September
1991.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the OTC Bulletin Board. The
following table sets forth the high and low bid price of the common stock as
reported on the OTC Bulletin Board for the periods listed.
<TABLE>
<CAPTION>
HIGH LOW
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<S> <C> <C>
Year Ended December 31, 1996
First Quarter.................................................................................. $ 0.25 $ 0.25
Second Quarter................................................................................. $ 0.25 $ 0.06
Third Quarter.................................................................................. $ 0.06 $ 0.03
Fourth Quarter................................................................................. $ 0.04 $ 0.03
Year Ended December 31, 1997
First Quarter.................................................................................. $ 0.04 $ 0.04
Second Quarter................................................................................. $ 0.08 $ 0.08
Third Quarter.................................................................................. $ 0.08 $ 0.08
Fourth Quarter................................................................................. $ 0.12 $ 0.10
</TABLE>
The quotes above reflect inter-dealer prices, without mark-up, mark-down or
commission and may not necessarily represent actual transactions.
The Company's amended Certificate of Incorporation places restrictions on
the transfer of the Company's stock by stockholders holding or acquiring 5% or
more of the Company's common stock for a two-year period.
The Company has not paid any cash dividends during the past three fiscal
years and does not expect to pay any cash dividends in the foreseeable future.
Future dividend policy will depend on the Company's earnings, capital
requirements, financial condition and other factors considered relevant by the
Board of Directors. The Company's ability to pay dividends is further prohibited
by the terms of its agreements with Universal's current lender, Coast Business
Credit.
As of March 21, 1998, there were 763 common stock shareholders of record.
4
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ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of selected financial data relating to the
Company. The Company emerged from Chapter 11 Bankruptcy on December 28, 1994.
Accordingly, the financial statements as of such date have been prepared in
conformity with AICPA Statement of Position 90-7 "Financial Reporting for
Entities in Reorganization Under the Bankruptcy Code," which established a new
basis of accounting. As a result, the financial data for prior periods, labeled
"Predecessor," are not comparable to the Company.
<TABLE>
<CAPTION>
COMPANY
------------------------------- PREDECESSOR
-------------------------
YEARS ENDED 11 MONTHS
DECEMBER 31, ENDED YEAR ENDED
------------------------------- DECEMBER 31, JANUARY 31,
1997 1996 1995 1994 1994
--------- --------- --------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales................................................ $ 23,132 $ 22,451 $ 23,528 $ 23,362 $ 32,658
Cost of goods sold................................... 15,245 14,884 15,113 15,772 20,615
--------- --------- --------- ------------ -----------
Gross margin....................................... 7,887 7,567 8,415 7,590 12,043
Operating expenses................................... 9,143 8,734 9,181 11,191 16,073
Loss from operations............................... (1,256) (1,167) (766) (3,601) (4,030)
Interest and other expense, net...................... (829) (582) (339) (283) (245)
Reorganization costs................................. -- -- -- (5,101) --
Income tax (provision) benefit....................... -- -- -- (11) 929
Extraordinary item................................... -- -- -- 4,694 --
--------- --------- --------- ------------ -----------
Net loss........................................... $ (2,085) $ (1,749) $ (1,105) $ (4,302) $ (3,346)
--------- --------- --------- ------------ -----------
--------- --------- --------- ------------ -----------
Basic and diluted net loss per share:
Loss before extraordinary item....................... $ (.44) $ (.37) $ (.23) $ (12.69)(1) $ (4.69)(1)
--------- --------- --------- ------------ -----------
Extraordinary item................................... -- -- -- 6.62(1) -- (1)
Basic and diluted net loss per share................. $ (.44) $ (.37) $ (.23) $ (6.07) $ (4.69)
--------- --------- --------- ------------ -----------
--------- --------- --------- ------------ -----------
Pro forma net loss per share (2):
Loss before extraordinary item..................... $ (1.90)
Extraordinary item................................... 0.99
------------
Pro forma net loss per share......................... $ (0.91)
------------
------------
Weighted average common shares outstanding:
Basic and diluted.................................... 4,724 4,724 4,724 709(1) 709(1)
--------- --------- --------- ------------ -----------
--------- --------- --------- ------------ -----------
Pro forma(2)......................................... 4,724
------------
------------
</TABLE>
(1) Restated for one for seven reverse stock split effective December 28, 1994.
(2) Gives retroactive effect to issuance of 4,015 shares for cash and for the
discharge of prepetition obligations.
5
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<TABLE>
<CAPTION>
COMPANY
------------------------------------------
PREDECESSOR
AS OF -----------
DECEMBER 31, AS OF
------------------------------------------ JANUARY 31,
1997 1996 1995 1994 1994
--------- --------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................................... $ 6,962 $ 6,436 $ 6,830 $ 5,837 $ 12,193
Long-term debt, less current maturities.................... $ -- $ 1,276 $ 1,663 $ 2,067 $ 15
Total liabilities.......................................... $ 9,963 $ 7,352 $ 5,997 $ 3,899 $ 7,851
Working capital (deficit).................................. $ (4,738) $ (1,630) $ 628 $ 2,979 $ 727
Shareholders' equity (deficit)............................. $ (3,001) $ (916) $ 833 $ 1,938 $ 4,342
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
On May 13, 1994, the Company commenced proceedings under Chapter 11 of the
United States Bankruptcy Code. For financial reporting purposes, the Company, as
of December 31, 1994, recorded adjustments necessary to reflect the consummation
of the Plan, which became effective December 28, 1994, including the gain on
debt discharge resulting from the settlement of prepetition liabilities and the
issuance of 1,889,000 shares of common stock in satisfaction of prepetition
obligations approximating $5.3 million. In addition, Universal acquired 40.5% of
the Company's common stock through a cash investment of $953,000. As of that
date, the Company also recorded adjustments to reflect assets and liabilities at
their estimated fair values ("Fresh-Start Reporting"). The financial data of the
Company, after giving effect to these transactions, is therefore not comparable
to the prior predecessor period. The Company also adopted a calendar year end
upon confirmation of the Plan.
Concurrent with the Company's emergence from bankruptcy, the Company
reaffirmed a supply agreement with Universal, enabling the Company to obtain
merchandise from Universal. The pricing terms of the agreement allow for
Universal to earn a gross margin of approximately 15.25% on annual sales to the
Company. The agreement enables the Company to acquire merchandise in quantities,
quality, and pricing which the Company would not otherwise separately be able to
obtain. In addition, the Company has been able to eliminate its warehousing and
transportation functions since Universal delivers the merchandise directly to
the retail outlets, resulting in substantial reductions in operating costs for
the Company.
The Company has experienced declining operating results and liquidity
constraints. In addition, Universal has experienced negative operating results
and liquidity constraints during 1997 and 1996. The Company's viability as a
going concern is dependent upon the Company returning to profitability or
obtaining additional financing. As Universal provides funding for the Company
under a demand, discretionary revolving note agreement (see Note 5), the
Company's viability as a going concern is also dependent upon Universal
continuing to provide funding to the Company for its operating cash flow needs.
Subsequent to December 31, 1997, 99 CENTS Only Stores, which current owns
48% of Universal's outstanding common stock, made an offer to purchase all
issued and to-be-issued shares of the Company's common stock for approximately
$830,000. If completed as proposed, management believes that 99 CENTS Only
Stores will provide sufficient funding for the Company's operating cash flow
needs for the foreseeable future. However, this transaction is contingent upon
the approval of the stockholders and other customary closing conditions and
should not be relied upon as a source of funding for future cash flow
requirements.
6
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FORWARD LOOKING INFORMATION
Information contained in this Form 10-K contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which can be identified by the use of forward-looking terminology such
as "may", "will", "expect", "plan", "anticipate", "estimate", or "continue" or
the negative thereof or other variations thereon or comparable terminology.
There are certain important factors that could cause results to differ
materially from those anticipated by some of these forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty. The factors, among others, that could cause actual results to
differ materially include: the ability of the Company to obtain additional
financing including obtaining financing from 99 CENTS Only Stores, the Company's
ability to execute its business plan, competitive pressures on sales and
pricing, increases in other costs which cannot be recovered through improved
pricing of merchandise, and the adverse effect of weather conditions on retail
sales.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the statements of operations expressed as a percentage of sales.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Sales........................................................................... 100.0% 100.0% 100.0%
Cost of goods sold.............................................................. 65.9 66.3 64.2
--------- --------- ---------
Gross margin................................................................ 34.1 33.7 35.8
Operating expenses.............................................................. 39.5 38.9 39.0
--------- --------- ---------
Loss from operations............................................................ (5.4) (5.2) (3.2)
Interest and other expenses, net................................................ (3.6) (2.6) (1.5)
--------- --------- ---------
Net loss........................................................................ (9.0%) (7.8%) (4.7%)
--------- --------- ---------
--------- --------- ---------
</TABLE>
1997 COMPARED TO 1996
Sales for the year ended December 31, 1997 were $23.1 million, and increase
of 2.7% from sales of $22.5 million for the year ended December 31, 1996. Sales
in 1997 were negatively impacted by supply disruptions which began prior to
Universal closing its new credit facility and which continued through the
remainder of 1997. Despite these disruptions, retail net sales improved in the
second half of 1997 due to aggressive advertising and improvements in
merchandise mix and inventory levels. Management expects 1998 retail net sales
to increase significantly as a result of a more consistent flow of merchandise,
including merchandise from 99 CENTS Only Stores, and due to an effort currently
underway to re-merchandise the stores.
Gross margin for 1997 increased $320,000 or 4.2% to $7,887,000 from
$7,567,000 for the year ended December 31, 1996. Gross margin, as a percent of
sales, increased to 34.1% for the year ended December 31, 1997, compared to
33.7% for the year ended December 31, 1996. Gross margin for 1997 was negatively
impacted by the lack of higher margin import merchandise resulting from supply
disruptions. Despite the supply disruptions, gross margin increased slightly
primarily due to less markdowns of seasonal merchandise in 1997.
Operating expenses for 1997 increased by 4.7% to $9,143,000 compared to
$8,734,000 for the year ended December 31, 1996. Operating expenses, as a
percent of sales, increased to 39.5% for 1997 compared to 38.9% in 1996. The
increase resulted primarily from increased advertising costs and from higher
hourly wages in 1997. These increases were partially offset by decreases due to
the elimination of certain corporate overhead costs associated with the Buffalo,
New York office and warehouse, which was sold during the third quarter of 1996.
7
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The Company's net interest expense for 1997 was $838,000, a $248,000
increase from interest expense of $590,000 in 1996. This increase reflects the
effects of increases in the Company's borrowings under the discretionary
revolving credit facility with Universal to fund continuing operating losses.
There was no income tax benefit from the losses generated during 1997, 1996
and 1995, since there is no remaining net operating loss carryback available,
and the net benefit attributed to the net operating losses being carried forward
has been fully offset by a valuation allowance. To the extent that the Company
realizes benefits from pre-reorganization net deferred tax assets, such benefit
amounts will be credited to additional paid-in capital. As a result, $6.8
million of federal net operating loss carryforwards and $9.9 million of state
net operating loss carryforwards generated prior to the reorganization are
available to reduce future income taxes payable, but are not available to offset
future income tax expense for financial reporting purposes.
1996 COMPARED TO 1995
Sales for the year ended December 31, 1996 were $22.5 million, a 4.6%
decrease from sales of $23.5 million for the year ended December 31, 1995. This
decrease was due to the closing of one store in early 1996 in addition to a
slight decline in comparable store sales.
Gross margin for the year ended December 31, 1996 was $7,567,000, a 10.1%
decrease from gross margin of $8,415,000 for the year ended December 31, 1995.
Gross margin, as a percentage of sales, decreased to 33.7% for 1996 compared to
35.8% for 1995 due primarily to higher than planned markdowns of seasonal
merchandise in the first quarter of 1996 and increased promotional pricing
during the fourth quarter of 1996.
Operating expenses for the year ended December 31, 1996 were $8,734,000, a
4.9% decrease from operating expenses of $9,181,000 for the year ended December
31, 1995. Operating expenses, as a percent of sales, were comparable from 1995
to 1996. The decrease in operating expense dollars resulted from the elimination
of certain corporate overhead costs associated with the Buffalo, New York
corporate office and warehouse, which was sold during the third quarter of 1996
for a nominal gain. This decrease was offset by increased depreciation costs
from remodeling stores and upgrading point-of-sale cash register systems.
Interest expense for the year ended December 31, 1996 was $590,000 compared
to $356,000 for the year ended December 31, 1995. This increase reflects the
significant increase in borrowings from Universal to fund the Company's store
remodeling and operating losses during 1995 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
In February 1995, the Company entered into a demand discretionary revolving
credit facility with Universal which, as amended, provides for borrowings of up
to $10 million with interest payable at prime plus 2.5% (11.0% at December 31,
1997 and 10.75% at December 31, 1996). Borrowings are collateralized by
substantially all of the Company's assets. There were borrowings outstanding of
$8,664,000 and $3,602,000 under Universal's credit facility at December 31, 1997
and 1996, respectively.
The Company has experienced declining operating results and liquidity
constraints. In addition, Universal has experienced negative operating results
and liquidity constraints during 1997 and 1996. The Company's viability as a
going concern is dependent upon the Company returning to profitability or
obtaining additional financing. As Universal provides funding for the Company
under a demand, discretionary revolving note agreement (see Note 5), the
Company's viability as a going concern is also dependent upon Universal
continuing to provide funding to the Company for its operating cash flow needs.
The Company's continuing losses as well as the above described conditions,
raise substantial doubt about the Company's ability to continue as a going
concern.
8
<PAGE>
Subsequent to December 31, 1997, 99c Only Stores, which current owns 48% of
Universal's outstanding common stock, made an offer to purchase all issued and
to-be-issued shares of the Company's common stock for approximately $830,000. If
completed as proposed, management believes that 99c Only Stores will provide
sufficient funding for the COmpany's operating cash flow needs for the
foreseeable future. However, this transaction is contingent upon the approval of
the stockholders and other customary closing conditions and should not be relied
upon as a source of funding for future cash flow requirements.
The Company used $3.5 million for operating activities during the year ended
December 31, 1997, primarily as a result of a $2.1 million net loss and a $1.3
million increase in inventories. The use of cash for operating activities and
the repayment of $1.7 million of long-term debt were funded principally by a
$5.1 million increase in the demand note payable to Universal. The Company
expects 1998 property and equipment additions to be insignificant.
The Company used $1.2 million for operating activities during the year ended
December 31, 1996, primarily as a result of a $1.7 million net loss. The use of
cash for operating activities, the $463,000 used for purchasing equipment and
improvements and the repayment of $387,000 of long-term debt were funded
principally by a $1.4 million increase in the demand note payable to Universal
and by a $616,000 decrease in cash.
Since the filing of its bankruptcy petition in May 1994, the Company has
closed 31 of its retail outlets, including one in January 1996, and is presently
operating a total of 22 retail outlets. At the present time, management has not
initiated any plan to close specific locations but will continue to evaluate the
performance of each of the remaining stores. The Company does not plan to open
any additional stores in the foreseeable future.
EFFECTS OF INFLATION AND ECONOMIC TRENDS
Since inflation generally will affect overall price levels similarly in the
types of merchandise which the Company purchases, the impact of inflation is not
expected to have a significant impact on the Company's overall buying or selling
opportunities.
The Company is in the process of assessing its systems and equipment with
respect to Year 2000 compliance. The Year 2000 issues will either be addressed
with scheduled system upgrades or through the Company's internal systems
development staff. The incremental costs will be charged to expense as incurred
and are not expected to have a material impact on the financial position or
results of operations of the Company. However, the Company could be adversely
impacted if the Year 2000 modifications are not properly completed by either the
Company or its vendors, banks or any other entity with whom the Company conducts
business. Accordingly, the Company plans to devote the necessary resources to
resolve all significant Year 2000 issues in a timely manner.
9
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Company are included under this
item:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants................................................................... 11
Report of Independent Accountants.......................................................................... 12
Balance Sheets, December 31, 1997 and 1996................................................................. 13
Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995.............................. 14
Statements of Shareholders' Equity (Deficit) for the Years Ended December 31, 1997, 1996 and 1995.......... 15
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995.............................. 16
Notes to Financial Statements.............................................................................. 17
Report of Independent Accountants on Financial Statement Schedule.......................................... 21
Financial Statement Schedule............................................................................... 22
</TABLE>
10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Odd's-N-End's, Inc.
We have audited the accompanying consolidated balance sheet of
Odd's-N-End's, Inc. and subsidiaries (a Delaware corporation) as of December 31,
1997, and the related statements of operations, shareholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Odd's-N-End's, Inc. as of
December 31, 1997, and the results of its operations and their cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2, the Company has experienced negative operating results and liquidity
constraints that 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 Note 2. The financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule for the year ended December
31, 1997 listed in the index of financial statements is presented for purposes
of complying with the Securities and Exchange Commissions rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit 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.
Minneapolis, Minnesota ARTHUR ANDERSEN LLP
March 6, 1998
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Odd's-N-End's, Inc.:
We have audited the accompanying balance sheet of Odd's-N-End's, Inc. as of
December 31, 1996, and the related statements of operations, shareholders'
equity (deficit) and cash flows for the years ended December 31, 1996 and 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Odd's-N-End's, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
years ended December 31, 1996 and 1995, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
Odd's-N-End's, Inc. will continue as a going concern. A significant shareholder
of the Company was in default on several provisions of its then existing
revolving credit agreement and had not obtained new financing to replace this
revolving credit agreement. Since this shareholder provides funding for the
Company under a demand, discretionary revolving note agreement, this condition,
as well as the Company's net loss of $1.7 million in 1996, raises substantial
doubt about the Company's ability to continue as a going concern. Management's
plans are described in Note 2. The 1996 financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Minneapolis, Minnesota COOPERS & LYBRAND L.L.P.
April 15, 1997
12
<PAGE>
ODD'S-N-END'S, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash....................................................................................... $ -- $ 144
Inventories................................................................................ 5,054 4,096
Other current assets....................................................................... 171 206
--------- ---------
Total current assets..................................................................... 5,225 4,446
Equipment and improvements, net.............................................................. 1,727 1,979
Other assets................................................................................. 10 11
--------- ---------
Total assets............................................................................. $ 6,962 $ 6,436
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
Current liabilities:
Current maturities of long-term debt....................................................... $ -- $ 387
Demand note payable--shareholder........................................................... 8,664 3,602
Accounts payable........................................................................... 664 688
Accrued expenses........................................................................... 635 1,399
--------- ---------
Total current liabilities................................................................ 9,963 6,076
Long-term debt, net of current maturities.................................................... -- 1,276
--------- ---------
Total liabilities........................................................................ 9,963 7,352
--------- ---------
Commitments and contingencies (Notes 7 and 9)
Shareholders' equity (deficit):
Common stock, $.07 par value, 20,000 shares authorized, 4,724 shares issued and
outstanding................................................................................ 331 331
Additional paid-in capital................................................................. 1,607 1,607
Accumulated deficit........................................................................ (4,939) (2,854)
--------- ---------
Total shareholders' equity (deficit)..................................................... (3,001) (916)
--------- ---------
Total liabilities and shareholders' equity (deficit)..................................... $ 6,962 $ 6,436
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
13
<PAGE>
ODD'S-N-END'S, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPANY
-------------------------------
YEARS ENDED
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Sales............................................................................ $ 23,132 $ 22,451 $ 23,528
Cost of goods sold............................................................... 15,245 14,884 15,113
--------- --------- ---------
Gross margin................................................................... 7,887 7,567 8,415
Operating expenses............................................................... 9,143 8,734 9,181
--------- --------- ---------
Loss from operations........................................................... (1,256) (1,167) (766)
Interest and other expense, net.................................................. 838 590 356
Other income, net................................................................ (9) (8) (17)
--------- --------- ---------
Net loss....................................................................... $ (2,085) $ (1,749) $ (1,105)
--------- --------- ---------
--------- --------- ---------
Basic and diluted net loss per share:............................................ $ (.44) $ (.37) $ (.23)
Weighted average common shares outstanding....................................... 4,724 4,724 4,724
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
ODD'S-N-END'S, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------ ADDITIONAL TOTAL
PAR PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance--December 31, 1994............................ 4,724 $ 331 $ 1,607 $ -- $ 1,938
Net loss.............................................. -- -- -- (1,105) (1,105)
----- ----- ----------- ------------ -------------
Balance--December 31, 1995............................ 4,724 331 1,607 (1,105) 833
Net loss.............................................. -- -- -- (1,749) (1,749)
----- ----- ----------- ------------ -------------
Balance--December 31, 1996............................ 4,724 331 1,607 (2,854) (916)
Net loss.............................................. -- -- -- (2,085) (2,085)
----- ----- ----------- ------------ -------------
Balance--December 31, 1997............................ 4,724 $ 331 $ 1,607 $ (4,939) $ (3,001)
----- ----- ----------- ------------ -------------
----- ----- ----------- ------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
ODD'S-N-END'S, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................................................ $ (2,085) $ (1,749) $ (1,105)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization................................................. 266 235 103
Provision for inventory shrinkage............................................. 343 514 592
Changes in operating assets and liabilities:
Inventories................................................................. (1,301) (807) (1,782)
Other current assets........................................................ 35 193 29
Other assets................................................................ 1 6 309
Accounts payable............................................................ (24) (90) 70
Accrued expenses............................................................ (764) 458 (60)
--------- --------- ---------
Net cash used for operating activities........................................ (3,529) (1,240) (1,844)
--------- --------- ---------
Cash flows from investing activities:
Acquisition of equipment and improvements....................................... (14) (463) (1,254)
Proceeds on sale of property.................................................... -- 100 --
--------- --------- ---------
Net cash used for investing activities...................................... (14) (363) (1,254)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from demand notes payable.............................................. 5,062 1,374 2,228
Repayments of long-term debt.................................................... (1,663) (387) (98)
Repayments of capital lease obligations......................................... -- -- (42)
--------- --------- ---------
Net cash provided by financing activities................................... 3,399 987 2,088
--------- --------- ---------
Decrease in cash.................................................................. (144) (616) (1,010)
Cash--beginning of year........................................................... 144 760 1,770
--------- --------- ---------
Cash--end of year................................................................. $ -- $ 144 $ 760
--------- --------- ---------
--------- --------- ---------
Cash paid during the period for:
Interest........................................................................ $ 1,137 $ 336 $ 322
--------- --------- ---------
--------- --------- ---------
Income taxes.................................................................... -- -- 9
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
ODD'S-N-END'S, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1.--BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION:
Odd's-N-End's, Inc. (the "Company") operates a chain of 22 retail stores in
New York state which offer a wide variety of close-out and discount consumer
products.
SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION -- The Company recognizes revenue upon sale of
merchandise.
INVENTORIES -- Inventories, consisting of finished goods merchandise held
for sale, are valued at the lower of cost (determined under the retail inventory
method) or market value.
EQUIPMENT AND IMPROVEMENTS -- Equipment and improvements acquisitions are
stated at cost. Depreciation is computed using the straight-line method over the
respective assets' economic useful lives. The cost of improvements to leased
property is amortized over the shorter of the lease term or the life of the
improvement. Maintenance and repairs are charged to expense as incurred. The
cost and related accumulated depreciation or amortization of assets sold or
disposed of are removed from the accounts, and the resulting gain or loss is
included in the results of operations.
NET LOSS PER SHARE -- Basic loss per share is computed by dividing net loss
by the weighted average number of shares outstanding during each period. Diluted
loss per share is computed on the same basis as basic loss per share, since the
Company has no outstanding stock options or warrants.
INCOME TAXES -- The Company accounts for income taxes using the liability
method. This method requires the recognition of future tax benefits, measured by
enacted tax rates, attributed to deductible temporary differences, net operating
loss carryforwards, and tax credits to the extent that realization of such
benefits is more likely than not. Due to the Company's recurring operating
losses, valuation allowances have been provided for all deferred tax assets.
ADVERTISING COSTS -- Advertising costs are expensed as incurred. Advertising
expense totaled $1,184, $771, and $749 for the years ended December 31, 1997,
1996 and 1995, respectively.
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.
The most significant areas which require the use of management's estimates
relate to the determination of inventory shrink reserves, as well as the
assessment of impairment related to long-lived assets.
NOTE 2.--GOING CONCERN
The Company has experienced declining operating results and liquidity
constraints. In addition, Universal has experienced negative operating results
and liquidity constraints during 1997 and 1996. The Company's viability as a
going concern is dependent upon the Company returning to profitability or
17
<PAGE>
ODD'S-N-END'S, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 2.--GOING CONCERN (CONTINUED)
obtaining additional financing. As Universal provides funding for the Company
under a demand, discretionary revolving note agreement (see Note 5), the
Company's viability as a going concern is also dependent upon Universal
continuing to provide funding to the Company for its operating cash flow needs.
Subsequent to December 31, 1997 99 CENTS Only Stores, which currently owns
48% of Universal's Common Stock, made an offer to the Company's Board of
Directors to purchase all outstanding shares of the Company's common stock for
$0.30 per share. If completed as proposed, management believes that 99 CENTS
Only Stores will provide sufficient funding for the Company's operating cash
flow needs for the foreseeable future.
Management's plans to return operations to profitability include planned
increases in sales from remerchandising the retail stores and from providing an
uninterrupted supply of merchandise and from reduction of store operating costs,
such as advertising, freight and supplies. There can be no assurance that
management's plans to return operations to profitability will be successful or
that Universal will be able to obtain additional financing or that 99 CENTS Only
Stores will provide additional financing for the Company.
NOTE 3.--EQUIPMENT AND IMPROVEMENTS
Equipment and improvements were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
------- -------
<S> <C> <C>
Leasehold improvements $ 1,173 $ 1,146
Store fixtures and equipment 1,152 1,165
------ ------
2,325 2,311
Less: Accumulated depreciation and amortization 598 332
------ ------
Equipment and improvements, net $ 1,727 $ 1,979
------ ------
------ ------
</TABLE>
NOTE 4.--ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Accrued payroll and payroll taxes $ 125 $ 128
Accrued sales tax 38 186
Due to Universal -- 687
Other 472 398
----- -----------
$ 635 $ 1,399
----- -----------
----- -----------
</TABLE>
18
<PAGE>
ODD'S-N-END'S, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 5.--DEBT
<TABLE>
<CAPTION>
<S> <C>
Long-term debt consisted of the following at December 31, 1996:
Note payable -- bank, paid June 1997........................................................... $ 566
Note payable -- bank, paid June 1997........................................................... 1,097
---------
1,663
Less current maturities...................................................................... 387
---------
$ 1,276
---------
---------
</TABLE>
The Company entered into a demand discretionary revolving note agreement
with Universal in February 1995. The agreement, as amended, allows for
borrowings up to $10,000 with interest payable at prime plus 2.5%. Outstanding
borrowings under this agreement were $8,664 at December 31, 1997 and $3,602 at
December 31, 1996. Borrowings are collateralized by a second security interest
in substantially all assets of the Company. Total interest charged by Universal
pursuant to the note agreement was $765, $393 and $114 during the years ended
December 31, 1997, 1996 and 1995, respectively.
NOTE 6.--INCOME TAXES
At December 31, 1997, the Company has approximately $12.3 million in federal
net operating loss carryforwards which begin to expire in 2008 and $15.4 million
of losses available for state carry-forward purposes. The net deferred tax
asset, representing the future tax benefit attributed to these operating loss
carryforwards and deductible and taxable temporary differences has been fully
offset by a valuation allowance due to the uncertainty surrounding the
realization of these tax attributes. Temporary differences relate primarily to
depreciation and are not significant at December 31, 1997 or 1996.
The Company's net operating loss carryforwards at December 31, 1997 expire
as follows:
<TABLE>
<CAPTION>
YEARS FEDERAL STATE
- ------------------------------------------------------------- --------- ---------
<S> <C> <C> <C>
2008......................................................... $ 400 $ 3,500
2009......................................................... 6,400 6,400
2010......................................................... 1,300 1,300
2011......................................................... 1,900 1,900
2012......................................................... 2,300 2,300
--------- ---------
$ 12,300 $ 15,400
--------- ---------
--------- ---------
</TABLE>
To the extent that the Company realizes benefits from pre-reorganization net
deferred tax assets, such benefit amounts will be credited to additional paid-in
capital. As a result, $6.8 million of federal net operating loss carryforwards
and $9.9 million of state net operating loss carryforwards generated prior to
the reorganization are available to reduce future income taxes payable, but are
not available to offset future income tax expense for financial reporting
purposes.
NOTE 7.--LEASE OBLIGATIONS
The Company leases its retail store locations under operating leases which
provide for minimum monthly rental payments, and in some instances, contingent
rentals based on sales volume. Certain locations are leased on a month-to-month
basis. The lease terms for some stores include renewal options.
19
<PAGE>
ODD'S-N-END'S, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 7.--LEASE OBLIGATIONS (CONTINUED)
Rental expense, which includes month-to-month rentals, was $1,836, $1,787 and
$1,739, for the years ended December 31, 1997, 1996 and 1995, respectively.
Future minimum annual lease payments under non-cancelable operating leases
at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- -----------------------------------------------------------------------------------
<S> <C>
1998............................................................................... 1,299
1999............................................................................... 1,293
2000............................................................................... 1,165
2001............................................................................... 1,029
2002............................................................................... 929
Thereafter......................................................................... 581
---------
Total minimum lease payments....................................................... $ 6,296
---------
---------
</TABLE>
NOTE 8.--RELATED PARTY TRANSACTIONS
During the years ended December 31, 1997, 1996 and 1995, the Company
purchased a total of $14,984, $14,372 and $15,897, respectively, of merchandise
from Universal pursuant to a supply agreement between the parties. Universal
owns 40.5% of the outstanding Common Stock of the Company. The supply agreement
allows for, among other things, Universal to achieve an annual gross profit
margin of approximately 15.25% on the merchandise sold to the Company.
Universal also provides accounting, operational and administrative functions
for the Company. Total charges for these services were $156, $156 and $167
during the years ended December 31, 1997, 1996 and 1995, respectively. At
December 31, 1997 and 1996, respectively, $0 and $687 was payable to Universal
for these charges, for other payments made on the Company's behalf by Universal,
and for accrued interest on the demand note payable to Universal (see Note 5).
NOTE 9. CONTINGENCIES
The Company is a defendant in various claims and disputes arising in the
ordinary course of business. While the outcome of these matters cannot be
predicted with certainty, management presently believes the disposition of these
matters will not have a material effect on the results of operations, financial
position or cash flows of the Company.
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Odd's-N-End's, Inc.
Our report on the financial statements of Odd's-N-End's, Inc. as of December
31, 1996 and for the years ended December 31, 1996 and 1995 is included on page
12 of this Form 10-K. In connection with our audits of such financial
statements, we have also audited the related financial statement schedule for
the years ended December 31, 1996 and 1995 listed in the index on page 10 of
this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
The accompanying financial statements have been prepared assuming that
Odd's-N-End's, Inc. will continue as a going concern. A significant shareholder
of the Company was in default on several provisions of its then existing
revolving credit agreement and had not obtained new financing to replace this
revolving credit agreement. Since this shareholder provides funding for the
Company under a demand, discretionary revolving note agreement, this condition,
as well as the Company's net loss of $1.7 million in 1996, raises substantial
doubt about the Company's ability to continue as a going concern. Management's
plans are described in Note 2. The 1996 financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Minneapolis, Minnesota COOPERS & LYBRAND L.L.P.
April 15, 1997
21
<PAGE>
ODD'S-N-END'S, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND FROM AT END
DESCRIPTION OF PERIOD EXPENSES ALLOWANCE OF PERIOD
- ------------------------------------------------------------------ ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
For the year ended December 31, 1997:
Reserve for inventory obsolescence and shrinkage reserve........ $ 310 $ 343 $ (435) $ 218
For the year ended December 31, 1996:
Allowance for uncollectible preference payments................. $ 300 $ -- $ (300) $ --
Inventory obsolescence and shrink reserve....................... $ 158 $ 514 $ (362) $ 310
For the year ended December 31, 1995:
Allowance for uncollectible preference payments................. $ 300 $ -- $ -- $ 300
Inventory obsolescence and shrink reserve....................... $ -- $ 592 $ (434) $ 158
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Reference is hereby made to the Company's Report on Form 8-K, dated February
1, 1996, which is incorporated herein by reference.
Reference is hereby made to the Company's Report on Form 8-K/A, dated
January 8, 1998, which is incorporated herein by reference.
There were no disagreements with accountants on financial reporting or
disclosure matters.
22
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the Company's directors required by Item 10 is
incorporated herein by reference to the section entitled, "Item 1--Election of
Directors," in the Company's proxy statement for its 1998 Annual Meeting of
Shareholders which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days of the Company's fiscal year ended
December 31, 1997. Information regarding the Company's executive officers
required by Item 10 is included in Part I of this Annual Report on Form 10-K as
permitted by General Instruction G(3) to Form 10-K. Information required by this
Item concerning compliance with Section 16(a) of the Securities Act of 1934 is
included in the proxy statement under the section entitled "Security Ownership
of Certain Beneficial Owners and Management," and such information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to
the section entitled "Compensation of Executive Officers and Directors" in the
Company's proxy statement for its 1998 Annual Meeting of Shareholders which will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days of the Company's fiscal year ended December 31, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by reference to
the section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Company's proxy statement for its 1998 Annual Meeting of
Shareholders which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days of the Company's fiscal year ended
December 31, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference to
the section entitled "Certain Transactions" in the Company's proxy statement for
its 1998 Annual Meeting of Shareholders which will be filed with the Securities
and Exchange Commission pursuant to Regulation 14A within 120 days of the
Company's fiscal year ended December 31, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this Report:
1. FINANCIAL STATEMENTS and 2. SCHEDULES
The response to this portion of Item 14 is set forth beginning on page 10
of this report.
3. EXHIBITS. See Exhibit Index included as part of this report, which
is incorporated herein by reference.
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K during the quarter ended December 31,
1997.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, Odd's-N-End's, Inc. has duly caused this Annual Report to be signed on its
behalf by the undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
ODD'S-N-END'S, INC.
By: /s/ DENNIS A. HILL
-----------------------------------------
Dennis A. Hill
Date: March 30, 1998 CHIEF FINANCIAL OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
Odd's-N-End's, Inc. and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ RICHARD L. ENNEN
- ------------------------------ President and Director March 30, 1998
Richard L. Ennen
/s/ DENNIS A. HILL Chief Financial Officer
- ------------------------------ (principal financial and March 30, 1998
Dennis A. Hill accounting officer)
/s/ ROBERT R. LANGER
- ------------------------------ Chief Operating Officer March 30, 1998
Robert R. Langer and Director
24
<PAGE>
ODD'S-N-END'S, INC.
(THE "REGISTRANT")
EXHIBIT INDEX TO 1997 ANNUAL REPORT ON FORM 10-K
All exhibits have already been filed with the Commission and are
incorporated herein by reference.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
2.1 Debtor's Second Amended Plan of Reorganization
3.1 Certificate of Incorporation of Registrant
3.2 Certificate of Amendment of Certificate of Incorporation of Registrant
3.2A Certificate of Amendment of Certificate of Incorporation of Registrant
filed on 12/28/94
3.3 Certificate of Ownership and Merger merging Odd's-N-End's, Inc. (New York)
into Odd's-N-End's, Inc. (Delaware)
3.4 By-Laws of Registrant
4.1 Specimen Common Stock Certificate ($0.07 par value)
10.9 Stipulation and Forbearance Agreement dated as of April 29, 1994 between
the Company and the Chase Manhattan Bank, N.A.
10.10 Supplemental Agreement made as of April 29, 1994 and between the Company
and the Chase Manhattan Bank, N.A.
10.11 Order of Confirmation of Bankruptcy
10.12 Amendment to Supply Agreement
10.13 Loan Agreement with Chase Manhattan Bank N.A. dated December 28, 1994
10.14 Loan and Security Agreement with Universal International dated February
28, 1995
10.14.1 Alonge to Revolving Note with Universal International
10.14.2 Alonge dated July 30, 1996 to Revolving Note with Universal International
22.1 Subsidiaries of Registrant
</TABLE>
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 5,054
<CURRENT-ASSETS> 5,225
<PP&E> 1,727
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,962
<CURRENT-LIABILITIES> 9,963
<BONDS> 1,276
0
0
<COMMON> 331
<OTHER-SE> (3,332)
<TOTAL-LIABILITY-AND-EQUITY> 6,962
<SALES> 23,132
<TOTAL-REVENUES> 23,132
<CGS> 15,245
<TOTAL-COSTS> 15,245
<OTHER-EXPENSES> 9,134
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 838
<INCOME-PRETAX> (2,085)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,085)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,085)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 462 379 279 144
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 0 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 3,536 3,815 3,863 4,096
<CURRENT-ASSETS> 4,373 4,480 4,345 4,446
<PP&E> 1,858 1,862 2,073 1,979
<DEPRECIATION> 0 0 0 0
<TOTAL-ASSETS> 6,248 6,357 6,433 6,436
<CURRENT-LIABILITIES> 4,835 5,632 6,172 6,076
<BONDS> 1,306 1,296 1,286 1,276
0 0 0 0
0 0 0 0
<COMMON> 331 331 331 331
<OTHER-SE> (224) (902) (1,356) (1,247)
<TOTAL-LIABILITY-AND-EQUITY> 6,248 6,357 6,433 6,436
<SALES> 4,669 9,526 14,402 22,451
<TOTAL-REVENUES> 4,669 9,526 14,402 22,451
<CGS> 3,166 6,351 9,527 14,884
<TOTAL-COSTS> 3,166 6,351 9,527 14,884
<OTHER-EXPENSES> 2,103 4,315 6,317 8,726
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 126 264 416 590
<INCOME-PRETAX> (726) (1,404) (1,858) (1,749)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (726) (1,404) (1,858) (1,749)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (726) (1,404) (1,858) (1,749)
<EPS-PRIMARY> (.15) (.30) (.39) (.37)
<EPS-DILUTED> (.15) (.30) (.39) (.37)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1995
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1995
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1995
<CASH> 271 222 251 760
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 0 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 4,121 3,929 5,087 3,803
<CURRENT-ASSETS> 4,598 4,378 5,523 4,962
<PP&E> 1,922 1,858 1,793 1,851
<DEPRECIATION> 0 0 0 0
<TOTAL-ASSETS> 6,531 6,247 7,316 6,830
<CURRENT-LIABILITIES> 7,933 8,175 10,200 4,334
<BONDS> 1,306 0 0 1,663
0 0 0 0
0 0 0 0
<COMMON> 331 331 331 331
<OTHER-SE> (1,733) (2,259) (3,215) 502
<TOTAL-LIABILITY-AND-EQUITY> 6,531 6,247 7,316 6,830
<SALES> 4,604 9,357 14,594 23,528
<TOTAL-REVENUES> 4,604 9,357 14,594 23,528
<CGS> 2,904 5,891 9,431 15,113
<TOTAL-COSTS> 2,904 5,891 9,431 15,113
<OTHER-EXPENSES> 2,020 4,119 6,559 9,164
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 166 359 572 356
<INCOME-PRETAX> (486) (1,012) (1,968) (1,105)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (486) (1,012) (1,968) (1,105)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (486) (1,012) (1,968) (1,105)
<EPS-PRIMARY> (.10) (.21) (.42) (.23)
<EPS-DILUTED> (.10) (.21) (.42) (.23)
</TABLE>
