<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 1998
INTERIORS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-6395 13-3590047
- -------------------------- ----------- ---------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File Number) Identification No.)
320 Washington Street, Mt. Vernon New York 10553
- -------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 665-5400
-------------
Not Applicable
------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
The Registrant hereby amends its Current Report on Form 8-K as filed with the
Commission on August 10, 1998 to include the financial statements and pro forma
financial information set forth below which was omitted from the filing
pursuant to Items 7(a)(4) and 7(b)(2).
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 7, 1998, the Registrant entered into a Stock Purchase Agreement
(the "Agreement"), with Bentley International, Inc., a Missouri corporation
("Bentley"). On July 30, 1998 (the "Closing"), the Registrant consummated the
transactions contemplated by the Agreement. Pursuant to the Agreement the
Registrant purchased all the issued and outstanding shares (the "Shares") of
Windsor Art, Inc., a Missouri corporation and a wholly-owned subsidiary of
Bentley ("Windsor"). As a result of the Purchase of the Shares, Windsor is now
a wholly-owned subsidiary of the Registrant. Windsor manufactures and
distributes decorative mirrors and framed prints to furniture stores, mass
merchants, hotels and designers throughout the United States. The acquisition
of Windsor provides Registrant with an expanded breadth of product offerings.
The purchase price paid to Bentley for the Shares consisted of a cash
payment of $1,706,992 and the delivery of two secured, subordinated promissory
notes in the aggregate principal amount of $5,300,000 (the "Notes"). As a
condition precedent to the Agreement, the Registrant and Bentley entered into
and consummated a pledge agreement on July 30, 1998 (the "Pledge Agreement").
The aggregate purchase price was determined in arms-length negotiations between
the Registrant and Bentley. Pursuant to the Pledge Agreement, the Registrant
pledged the Shares as collateral for the Notes and as security for the
indemnification obligations of the Registrant under the Agreement.
Pursuant to the Agreement and upon the Closing, the Registrant, Bentley,
Lloyd R. Abrams ("Abrams"), and Max Munn ("Munn") entered into and consummated
the Windsor Art, Inc. Voting Trust Agreement No. 1 (the "Windsor Voting
Trust"). The Windsor Voting Trust will remain in effect until the Notes are
paid in full or until the occurrence of certain other events. Abrams and Munn
will act as the voting trustees of the Windsor Voting Trust.
Concurrently with the Closing, the Registrant entered into and
consummated, the Securities Purchase and Registration Rights Agreement (the
"Securities Purchase Agreement") by and between the Registrant and Bentley.
Pursuant to the Securities Purchase Agreement, the Registrant purchased 150,000
shares of
-2-
<PAGE>
common stock of Bentley and a warrant to purchase 300,000 shares of common
stock of Bentley (collectively, the "Bentley Shares"). The purchase price paid
to Bentley for the Bentley shares consisted of 1,500,000 shares of the
Registrant's Class A Common Stock (the "Interiors Shares") issued by the
Registrant. The Bentley Shares have also been pledged as collateral under the
Pledge Agreement. The aggregate purchase price was determined in arms-length
negotiations between the Registrant and Bentley.
Pursuant to the Agreement, on July 30, 1998, the Registrant, Bentley,
and Abrams entered into and consummated the Bentley International, Inc. Voting
Trust Agreement No. 1 (the "Bentley Voting Trust"), which requires that the
Bentley Shares be held by the Bentley Voting Trust until the Bentley Shares are
transferred or the parties consent to the termination of the voting trust.
Abrams agreed to act as the sole voting trustee of the Bentley Voting Trust.
Pursuant to an escrow agreement, the execution of which was a condition
precedent to the Agreement, executed by Registrant, Bentley, and an escrow
agent on July 30, 1998 (the "Escrow Agreement"), all of the Interiors Shares
will be held by the escrow agent for one year from the Closing as security for
the indemnification obligations of Bentley to the Registrant pursuant to the
Agreement.
The Registrant, Bentley and Munn agreed that upon the termination of the
Escrow Agreement, the parties will execute and consummate the Interiors, Inc.
Voting Trust Agreement No. 1 (the "Interiors Voting Trust"), which requires
that the Interiors Shares be held by the Interiors Voting Trust until the
Interiors shares are transferred or the parties consent to the termination of
the voting trust. Munn agreed to act as the sole voting trustee of the Windsor
Voting Trust.
Pursuant to the Agreement, on July 30, 1998, the Registrant, Windsor,
and Abrams entered into and consummated a Consulting Agreement (the "Consulting
Agreement"). In consideration for Abrams' consulting services, the Registrant
agreed to pay Abrams $200,000 per year for the first three years of the
Consulting Agreement and $50,000 during the fourth year of the Consulting
Agreement and reimburse Abrams for a minimum of $33,600 each year for certain
expenses. The Registrant further agreed to grant Abrams a warrant to purchase
50,000 shares of the Registrant's Class A Common Stock (the "Warrant") and to
grant warrants to purchase 40,000 shares of the Registrant's Class A Common
Stock to employees of the Registrant designated by Abrams.
-3-
<PAGE>
The cash portion of the purchase price for the Shares was financed by by
the private placement to accredited investors of the Registrant's unregistered
Subordinated Convertible Promissory Notes in the aggregate principal amount of
$2,250,000.
The assets acquired pursuant to the Agreement included, among other
things, (i) fixed assets owned, leased or used by Windsor, including equipment,
(ii) accounts receivable, (iii) inventory and (iv) contracts, agreements, and
leases of real and personal property. For the foreseeable future, the
Registrant intends to utilize such assets in connection with the operation of
the business of Windsor.
Copies of the Agreement, the Notes, the Consulting Agreement and the
Securities Purchase Agreement were appended as Exhibits to the Report on this
transaction filed on Form 8-K with the Commission on August 10, 1998.
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
- -----------------------------------------------
(1) Financial Statements of Windsor for the years ended December 31,
1997 and December 31, 1996 are appended as an Exhibit to this
Report.
(2) Interim Financial Statements (unaudited) of Troy for the three
months ended March 31, 1998 are appended as an Exhibit to this
Report.
(b) Pro Forma Financial Information
- -----------------------------------
(3) Pro Forma Financial Information with respect to the acquisition
of Windsor by the Registrant is appended as an Exhibit to this
Report.
-4-
<PAGE>
(c) Exhibits
- ------------
<TABLE>
<CAPTION>
Document Description Exhibit No.
- -------------------- -----------
<S> <C>
Financial Statements of Windsor for the years ended December 31, 1997 and
December 31, 1996 are appended
as an Exhibit to this Report. 99.5
Interim Financial Statements (unaudited) of Troy for the three months
ended March 31, 1998 are appended as an Exhibit to this Report. 99.6
Pro Forma Financial Information with respect to the acquisition
of Windsor by the Registrant is appended as an Exhibit to this Report. 99.7
</TABLE>
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
October 9, 1998 INTERIORS, INC.
a Delaware corporation
By: /s/ Max Munn
-------------------------------
Max Munn,
President
-6-
<PAGE>
EXHIBIT INDEX
Exhibit
No. Document Description
- ------- -------------------
99.5 Financial Statements for Windsor for the years ended December 31,
1997 and December 31, 1996 are appended as an Exhibit to this
Report.
99.6 Interim Financial Statements (unaudited) for the three months
ended March 31, 1998 are appended as an Exhibit to this Report.
99.7 Pro Forma Financial Information with respect to the
acquisition of Windsor by the Registrant is appended as an
Exhibit to this Report.
-7-
<PAGE>
- ------------------------------------------------------------------------------
WINDSOR ART, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1997
- ------------------------------------------------------------------------------
<PAGE>
CONTENTS
- --------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT........................................1
FINANCIAL STATEMENTS
Balance Sheet..................................................2
Statements Of Income And Retained Earnings.....................3
Statement Of Cash Flows........................................4
Notes To Financial Statements..............................5 - 9
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Windsor Art, Inc.
St. Louis, Missouri
We have audited the accompanying balance sheet of Windsor Art, Inc. (a
wholly-owned subsidiary of Bentley International, Inc.) as of December 31, 1997
and 1996 and the related statements of income, retained earnings and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Windsor Art, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP
St. Louis, Missouri
February 27, 1998
<PAGE>
WINDSOR ART, INC.
- -----------------------------------------------------------------------------
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 91,197 $ 110,782
Accounts receivable (less allowance for doubtful
accounts of $151,000 in 1997 and $255,000 in
1996 - Note 5) 1,886,527 1,736,050
Inventories (Notes 3 and 5) 1,824,908 1,329,689
Due from related companies -- 54,514
Other current assets 83,621 79,663
---------- ----------
TOTAL CURRENT ASSETS 3,886,253 3,310,698
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - NET
(NOTES 4 AND 5) 190,381 196,392
---------- ----------
$4,076,634 $3,507,090
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (Note 5) $ 730,565 $1,100,000
Accounts payable and accrued expenses 865,572 930,534
Due to related companies 75,280 --
---------- ----------
TOTAL CURRENT LIABILITIES 1,671,417 2,030,534
---------- ----------
EXCESS OF ACQUIRED ASSETS OVER COST (NOTE 6) 298,127 623,358
---------- ----------
STOCKHOLDERS= EQUITY
Common stock:
Authorized 30,000 shares of $1 par value;
issued and outstanding 100 shares 100 100
Retained earnings 2,106,990 853,098
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 2,107,090 853,198
---------- ----------
$4,076,634 $3,507,090
========== ==========
</TABLE>
- -------------------------------------------------------------------------------
See the accompanying notes to financial statements. Page 2
<PAGE>
WINDSOR ART, INC.
- ------------------------------------------------------------------------------
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
STATEMENT OF INCOME
NET SALES $ 12,713,313 $ 11,630,022
COST OF SALES 8,523,636 8,219,838
------------ ------------
GROSS PROFIT 4,189,677 3,410,184
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,859,014 2,808,118
------------ ------------
INCOME FROM OPERATIONS 1,330,663 602,066
INTEREST EXPENSE (129,283) (159,860)
OTHER INCOME 332,512 325,230
------------ ------------
NET INCOME $ 1,533,892 $ 767,436
============ ============
STATEMENT OF RETAINED EARNINGS
BALANCE - BEGINNING OF YEAR $ 853,098 $ 85,662
NET INCOME 1,533,892 767,436
DISTRIBUTIONS TO PARENT COMPANY (280,000) --
BALANCE - END OF YEAR $ 2,106,990 $ 853,098
============ ============
</TABLE>
- -------------------------------------------------------------------------------
See the accompanying notes to financial statements. Page 3
<PAGE>
WINDSOR ART, INC.
-----------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,533,892 $ 767,436
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 61,362 54,851
Amortization of excess of acquired assets over cost (325,230) (325,230)
Change in assets and liabilities:
Increase in accounts receivable (150,477) (168,821)
(Increase) decrease in inventories (495,219) 676,360
Decrease in due to/from related companies 129,794 10,793
(Increase) decrease in other current assets (3,958) 2,175
Decrease in accounts payable and accrued expenses (64,962) (161,085)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 685,202 856,479
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES
Payments for furniture and equipment (55,352) (15,516)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments under line of credit (369,435) (800,000)
Distributions to parent company (280,000) --
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (649,435) (800,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (19,585) 40,963
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 110,782 69,819
----------- -----------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 91,197 $ 110,782
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 129,385 $ 168,502
----------- -----------
</TABLE>
- -------------------------------------------------------------------------------
See the accompanying notes to financial statements. Page 4
<PAGE>
WINDSOR ART, INC.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements include only the accounts of
Windsor Art, Inc., a wholly-owned subsidiary of Bentley International,
Inc.
ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make certain
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. The reported amounts of revenues and
expenses during the reporting period may also be affected by the
estimates and assumptions management is required to make. Actual results
may differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Inventory costs
have been determined by the last-in, first-out (LIFO) method.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are carried at cost, less
accumulated depreciation and amortization computed on the straight-line
method. The assets are depreciated and amortized over periods ranging
from five to seven years.
- -------------------------------------------------------------------------------
Page 5
<PAGE>
EXCESS OF ACQUIRED ASSETS OVER COST
Excess of acquired assets over cost in connection with the acquisition
of a company, Windsor Art, Inc., is treated as negative goodwill and is
amortized on the straight-line basis over five years.
2. OPERATIONS
Windsor Art, Inc. manufactures and distributes decorative mirrors and
framed prints to furniture stores, mass merchants and designers
throughout the United States.
3. INVENTORIES
Inventories consist of:
1997 1996
---------- ----------
Finished goods $1,096,627 $ 688,062
Raw materials 909,477 766,767
---------- ----------
2,006,104 1,454,829
Less: Adjustment from FIFO to LIFO 181,196 125,140
---------- ----------
$1,824,908 $1,329,689
========== ==========
If the FIFO basis had been used, net income for the years ended December
31, 1997 and 1996 would have increased by $56,056 and decreased by
$32,419, respectively.
4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of:
1997 1996
-------- --------
Furniture and fixtures $185,799 $141,290
Machinery and equipment 72,938 62,096
Leasehold improvements 112,789 112,789
-------- --------
371,526 316,175
Less: Accumulated depreciation and
amortization 181,145 119,783
-------- --------
$190,381 $196,392
======== ========
Depreciation and amortization charged against income amounted to $61,362
in 1997 and $54,851 in 1996.
- -------------------------------------------------------------------------------
Page 6
<PAGE>
WINDSOR ART, INC.
- ------------------------------------------------------------------------------
Notes To Financial Statements (Continued)
5. NOTES PAYABLE
Notes payable consist of:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Borrowings under a $2,000,000 line of credit, secured
by all business assets, bearing interest at the prime rate
plus 1.5%, due December 1, 1998 $ 730,565 $ --
Notes payable - officer, secured by collateral agreement,
subordinate to bank debt, bearing interest at the prime
rate plus 2%, due July 1997 -- 900,000
Borrowings under a bank line of credit, secured by
inventories, accounts receivable, equipment and
personal guarantees of officers, due on demand, bearing
interest at the prime rate plus 1/2%, expiring May 1997 -- 200,000
---------- ----------
$ 730,565 $1,100,000
========== ==========
</TABLE>
All of the notes payable totaling $1,100,000 at December 31, 1996 were
refinanced under a new line of credit agreement in January 1997.
The line-of-credit agreement contains covenants imposing certain
restrictions and requirements as follows:
1. The Company's minimum debt service coverage ratio shall not be
less than 3 to 1.
2. The Company's net income shall not be less than a negative
$25,000 per month.
3. The Company's minimum book net worth shall not be less than
$765,000, excluding excess of acquired assets.
4. Key person life insurance of $2,000,000 must be maintained on the
Chairman of the Company.
5. Capital expenditures cannot exceed $150,000 in the aggregate for
the year, $80,000 of which shall be used only for the purchase of
upgraded computer equipment. In addition, no more than $25,000
can be spent in any one transaction.
- -------------------------------------------------------------------------------
Page 7
<PAGE>
WINDSOR ART, INC.
- ------------------------------------------------------------------------------
Notes To Financial Statements (Continued)
6. Salaries cannot increase by more than 10% in any one year for any
director, officer or consultant or their families.
The Company was not in compliance with covenant number 6 at December 31,
1997. However, the covenant was subsequently waived by the bank.
6. EXCESS OF ACQUIRED ASSETS OVER COST
In November 1993, the Company purchased certain operating assets of a
company operating under the protection of the bankruptcy laws. The
acquisition was accounted for as a purchase and the Company's equity in
the assets acquired exceeded the purchase price by approximately
$1,627,000. This excess of acquired assets over cost (so-called
"negative goodwill") is being amortized over a five-year period.
7. DEFERRED COMPENSATION PLAN
On December 31, 1997, Bentley International froze a qualified, defined
contribution profit-sharing plan covering eligible full-time and
part-time employees, of which Windsor employees are eligible to
participate. The plan was qualified under Section 401(k) of the Internal
Revenue Code, and allowed employees to contribute on a tax deferred
basis. The plan also provided for non-elective or discretionary
contributions by the Company in such amounts as the Board of Directors
may annually determine. There were no Company contributions to the
401(k) plan in 1997 or 1996.
Effective January 1, 1998, Bentley International adopted a qualified,
SIMPLE-IRA plan. All employees who are reasonably expected to earn at
least $5,000 per year are eligible to participate. Under this plan, the
employee can contribute through payroll deductions up to $6,000 to the
IRA. The Company will match up to 3% of each employee=s salary into the
plan.
8. INCOME TAXES
The Company files consolidated income tax returns with its parent
company and other subsidiaries. The consolidated group is in a net
operating loss position. Consequently, there is no provision for income
taxes recorded for 1997 or 1996.
- -------------------------------------------------------------------------------
Page 8
<PAGE>
WINDSOR ART, INC.
- ------------------------------------------------------------------------------
Notes To Financial Statements (Continued)
9. RELATED PARTY TRANSACTIONS
The Company is paying an officer $2,000 per month beginning in December
1996 for use of a condominium by certain Company employees, customers
and sales representatives.
10. LEASE COMMITMENT
The Company leases office, production and showroom facilities under
operating leases which expire over the next three years. Certain of
these leases provide for standard annual increases in base rent.
The future minimum annual rentals under the leases are as follows:
YEAR AMOUNT
---------------------------------------------------------
1998 $ 361,590
1999 102,249
2000 31,431
---------------------------------------------------------
$ 495,270
=========================================================
Total rent expense under all operating leases was $419,311 in 1997 and
$395,360 in 1996.
11. SIGNIFICANT CUSTOMERS AND SUPPLIERS
During 1997 and 1996, sales to one customer approximated 21% and 24% of
total net sales, respectively. Accounts receivable from the customer
amounted to approximately $251,000 and $373,000 at December 31, 1997 and
1996, respectively. Purchases from two suppliers represented 26% and 25%
of total purchases for 1997 and 24% and 17% of total purchases for 1996.
Accounts payable to the two suppliers amounted to $42,397 and $110,388
for 1997 and 1996, respectively.
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Page 9
<PAGE>
WINDSOR ART, INC.
PRO FORMA INTERIM FINANCIAL INFORMATION (UNAUDITED) FOR WINDSOR ART, INC.
March 31, December 31,
1998 1997
----- -----
BALANCE SHEET
ASSETS
CURRENT ASSETS:
Cash 209 91
Accounts receivable, net 2,000 1,886
Inventories 1,177 1,825
Other current assets 4 9
----- -----
Total current assets 3,390 3,811
----- -----
PROPERTY AND EQUIPMENT, at cost
Machinery and equipment 67 73
Furniture and fixtures 194 186
Leasehold improvements 118 113
----- -----
Total property and equipment 379 372
Less : Accumulated depreciation 198 181
----- -----
Net property and equipment 181 191
----- -----
PURCHASE PRICE IN EXCESS OF BOOK
VALUE OF ACQUIRED COMPANIES (217) (298)
----- -----
TOTAL ASSETS 3,354 3,704
===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes & Current Maturities of LTD 424 740
Accounts payable and accrued liabilities 888 857
----- -----
Total current liabilities 1,312 1,597
----- -----
STOCKHOLDERS' EQUITY:
Common Stock -- --
Additional paid-in-capital
Retained deficit 2,042 2,107
----- -----
Total stockholders' equity 2,042 2,107
----- -----
Total liabilities and stockholders' equity 3,354 3,704
===== =====
See notes to financial statements
<PAGE>
WINDSOR ART, INC.
PRO FORMA INTERIM FINANCIAL INFORMATION (UNAUDITED) FOR WINDSOR ART, INC.
STATEMENT OF OPERATIONS
Three months ended
--------------------
3/31/98 3/31/97
------- ------
SALES AND OTHER REVENUES:
Net Sales 3,684 3,105
------ ------
Total Sales and Other Revenues 3,684 3,105
------ ------
EXPENSES:
Cost of goods sold 2,565 2,073
Selling, general, and administrative 769 757
------ ------
Total Expenses: 3,334 2,830
------ ------
Income (loss) from operations: 350 275
OTHER INCOME (EXPENSE), Net 81 81
INTEREST EXPENSE (26) (42)
------ ------
Income (loss) from operations before
(benefit) provision for taxes 405 314
PROVISION FOR TAXES -- --
------ ------
Income(loss) from operations 405 314
------ ------
See notes to financial statements
<PAGE>
WINDSOR ART, INC.
PRO FORMA INTERIM FINANCIAL INFORMATION (UNAUDITED) FOR WINDSOR ART, INC.
STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) 405 314
Adjustments to reconcile net (loss) to net
cash provided/(used) in operating activities:
Depreciation & Amortization 17 14
Amortization of excess of acquired assets
over cost (81) (81)
Net change in assets and liabilities:
Accounts receivable (113) 110
Inventories 648 (43)
Other assets 3 148
Accounts payable and other liabilities 32 (236)
---- ----
Net Cash Provided by Operating Activities 911 226
---- ----
CASH FLOW FROM INVESTING ACTIVITIES:
Capital Expenditures (8) (21)
---- ----
Net Cash Used in Investing Activities (8) (21)
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on lines of credit (315) (12)
Dividends to parent company (470) (100)
---- ----
Net cash provided/(used) by/in financiang activities (785) (112)
---- ----
Net Increase(Decrease) in Cash 118 93
Cash-Beginning of Period 91 111
---- ----
Cash-End of Period 209 204
---- ----
See notes to financial statements
<PAGE>
WINDSOR ART, INC.
PRO FORMA INTERIM FINANCIAL INFORMATION (UNAUDITED) FOR WINDSOR ART, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1998 and 1997
The accompanying interim financial statements are unaudited, but, in the
opinion of managment, reflect all adjustments (consisting only of normal
recurring accruals) necessary for fair presentation. The results of operations
for the three-month period ended March 31, 1998 are not necessarily indicative
of the results to be expected for the year ending December 31, 1998.
<PAGE>
EXHIBIT 99.7 - PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Combined Financial Information as of June 30, 1997 and
the year then ended and as of March 31, 1998 and for the nine months then ended
for Interiors, Inc. and comparable periods for the Combined Companies has been
prepared to reflect the combined financial position and the results of
operations of Interiors, Inc. ("Interiors"), Henlor, Inc. and subsidiaries DBA
Vanguard Studios ("Vanguard"), Merchandise Sales, Inc. DBA Artmaster Studios
("Artmaster"), Decor Group, Inc., Windsor Art, Inc. ("Windsor") and Troy
Lighting, Inc. ("Troy") as if the combination, described in Note 1, had been
effective as of June 30, 1997 and July 1, 1996 (for one year operations), March
31, 1998 and July 1, 1997 (for nine months' operations), respectively. The
acquisitions of Vanguard and Artmaster and the probable acquisitions of Decor,
Windsor and Troy have been accounted for as purchases and the excess of
purchase price over fair value of assets acquired, $17,847,000 if the
acquisitions had all occurred as of June 30, 1997, will be reflected as an
intangible asset and will be amortized over 40 years.
The Pro Forma Combined Financial Information is unaudited and not necessarily
indicative of the consolidated results which actually would have occurred if
the combination had been consummated at the beginning of the periods presented,
nor does it purport to represent the future financial position and results of
operations for future periods.
<PAGE>
Pro Forma Historical Financial Information for Interiors and Combined Companies
<TABLE>
<CAPTION>
Interiors Vanguard Artmaster Decor Windsor Troy
BALANCE SHEET 6/30/97 7/31/97 3/28/97 3/31/97 6/30/97 6/30/97
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash 271 72 87 170 268 (50)
Accounts receivable, net 947 1,932 454 1,118 1,692 1,856
Inventories 1,521 1,799 612 960 1,702 1,870
Other current assets 898 112 79 106 23 501
---------------------------------------------------------------------------------------
Total current assets 3,637 3,915 1,232 2,354 3,685 4,177
INVESTMENTS 3,977
PROPERTY AND EQUIPMENT, at cost
Machinery and equipment 1,546 1,059 350 258 67 226
Furniture and fixtures 144 357 41 122 188 91
Leasehold improvements 213 829 180 137 120 47
Land and Building 247
---------------------------------------------------------------------------------------
Total property and equipment 1,903 2,492 571 517 375 364
Less: Accumulated depreciation 1,019 1,977 414 401 148 139
---------------------------------------------------------------------------------------
Net property and equipment 884 515 157 116 227 225
PURCHASE PRICE IN EXCESS OF BOOK
VALUE OF ACQUIRED COMPANIES 2,026 (461) (16)
OTHER ASSETS 263 131 261 814 60
=======================================================================================
TOTAL ASSETS 8,761 4,561 1,650 5,310 3,451 4,446
=======================================================================================
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
Windsor/
BALANCE SHEET Adjmts Troy adjmt Total
--------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash (450) f (450) 368
Accounts receivable, net 7,999
Inventories 461 ae 205 8,925
Other current assets 1,719
--------------------------------------------
Total current assets 11 (245) 19,011
INVESTMENTS (2,593) ce 244 1,384
PROPERTY AND EQUIPMENT, at cost
Machinery and equipment 3,506
Furniture and fixtures 943
Leasehold improvements 1,526
Land and Building 247
--------------------------------------------
Total property and equipment 6,222
Less: Accumulated depreciation 4,098
--------------------------------------------
Net property and equipment 2,124
PURCHASE PRICE IN EXCESS OF BOOK
VALUE OF ACQUIRED COMPANIES 18,254 abcef 10,999 19,803
-----------------
OTHER ASSETS (127) b 1,402
-----------------
============================================
TOTAL ASSETS 15,545 10,998 43,724
============================================
</TABLE>
Page 1
<PAGE>
Pro Forma Historical Financial Information for Interiors and Combined Companies
<TABLE>
<CAPTION
Interiors Vanguard Artmaster Decor Windsor Troy
BALANCE SHEET 6/30/97 7/31/97 3/28/97 3/31/97 6/30/97 6/30/97
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes & Current Maturities of LTD 1,637 2,421 4 362 1,268 1,602
Accounts payable and accrued liabilities 2,098 1,347 667 570 731 1,643
Due to related parties - - 463
-----------------------------------------------------------------------------
Total current liabilities 3,735 3,768 1,134 932 1,999 3,245
NON-CURRENT LIABILITIES:
Notes & Loans payable 908 464 31 651 167
Due to related parties 294 52 1,434
-----------------------------------------------------------------------------
Total non-current liabilities 908 758 83 651 - 1,601
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock 11 - - 2
Common Stock 7 - 1 1 313
Additional paid-in-capital 13,217 90 668 6,459
Retained deficit (8,679) (55) (236) (956) 1,452 (713)
Other items (438) - (1,779)
-----------------------------------------------------------------------------
Total stockholders' equity 4,118 35 433 3,727 1,452 (400)
=============================================================================
Total liabilities and stockholders' equity 8,761 4,561 1,650 5,310 3,451 4,446
=============================================================================
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
Windsor/
BALANCE SHEET Adjmts Troy adjmt Total
---------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes & Current Maturities of LTD 8,771 abcef 8,500 16,065
Accounts payable and accrued liabilities 2,038 abcef 1,084 9,094
Due to related parties (463) b -
---------------------------------------------------------------
Total current liabilities 10,346 9,584 25,159
NON-CURRENT LIABILITIES:
Notes & Loans payable 4,318 ab 6,539
Due to related parties (1,780) abf (1,434) -
---------------------------------------------------------------
Total non-current liabilities 2,538 (1,434) 6,539
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock (2) c 11
Common Stock (312) abcf (313) 10
Additional paid-in-capital 1,015 abcef 4,025 21,449
Retained deficit 181 abcef (864) (9,006)
Other items 1,779 c (438)
---------------------------------------------------------------
Total stockholders' equity 2,661 2,848 12,026
===============================================================
Total liabilities and stockholders' equity 15,545 10,998 43,724
===============================================================
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
Interiors Vanguard Artmaster Decor Windsor Troy
6/30/97 7/31/97 3/28/97 3/31/97 6/30/97 6/30/97
<S> <C> <C> <C> <C> <C> <C>
SALES AND OTHER REVENUES:
Net Sales 4,652 9,700 8,292 2,003 12,195 11,939
Royalty & commission revenues 144
Proceeds from sales to Photo-to-Art 1,140
-------------------------------------------------------------------------------------
Total Sales and Other Revenues 5,936 9,700 8,292 2,003 12,195 11,939
-------------------------------------------------------------------------------------
EXPENSES:
Cost of goods sold 3,076 6,099 5,955 991 8,409 8,337
Selling, general, and administrative 2,570 3,380 2,477 1,527 2,984 3,327
Amortization of intangibles 98
-------------------------------------------------------------------------------------
Total Expenses: 5,646 9,479 8,432 2,616 11,393 11,664
-------------------------------------------------------------------------------------
Income (loss) from operations: 290 221 (140) (613) 802 275
GAIN ON SALE OF INVESTMENT 201
OTHER INCOME (EXPENSE), Net - 163 8 325
INTEREST EXPENSE (405) (321) (125) (243) (151) (373)
-------------------------------------------------------------------------------------
Income (loss) from operations before
(benefit) provision for taxes 86 63 (257) (856) 976 (98)
(BENEFIT) PROVISION FOR TAXES (19) 4 1 2
=====================================================================================
Income(loss) from operations 105 59 (258) (856) 976 (100)
=====================================================================================
Basic EPS 0.02
Diluted EPS 0.02
Shares (000) 4527
Shares (000) 4527
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
Adjustments Total
----------------------------------------------------
<S> <C> <C>
SALES AND OTHER REVENUES:
Net Sales (75) c 48,706
Royalty & commission revenues 144
Proceeds from sales to Photo-to-Art 1,140
----------------------------------------------------
Total Sales and Other Revenues (75) 49,990
----------------------------------------------------
EXPENSES:
Cost of goods sold 32 e 32 32,899
Selling, general, and administrative (75) c 16,190
Amortization of intangibles 733 abcef - 831
----------------------------------------------------
Total Expenses: 690 32 49,920
----------------------------------------------------
Income (loss) from operations: (765) (32) 70
GAIN ON SALE OF INVESTMENT (201) d -
OTHER INCOME (EXPENSE), Net (325) (325)
INTEREST EXPENSE (1,192) abcef (895) (2,810)
----------------------------------------------------
Income (loss) from operations before
(benefit) provision for taxes (2,483) (1,252) (2,740)
(BENEFIT) PROVISION FOR TAXES (12)
====================================================
Income(loss) from operations (2,483) (1,252) (2,728)
====================================================
Basic EPS (0.30)
Diluted EPS (0.30)
Shares (000) 4521 9048
Shares (000) 4521 9048
Page 3
<PAGE>
PRO FORMA INTERIM FINANCIAL INFORMATION FOR INTERIORS AND COMBINED COMPANIES
Interiors Windsor Troy Decor
BALANCE SHEET 3/31/98 3/31/98 3/31/98 12/31/97 Adjustments Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash 1,739 209 (132) 23 (450) f 1,389
Accounts receivable, net 3,164 2,000 2,246 789 8,199
Inventories 4,230 1,177 2,351 884 291 e 8,933
Other current assets 984 4 436 194 1,618
-------------------------------------------------------------------------------------
Total current assets 10,117 3,390 4,901 1,890 (159) 20,139
-------------------------------------------------------------------------------------
INVESTMENTS 3,977 (2,593) ce 1,384
PROPERTY AND EQUIPMENT, at cost
Machinery and equipment 2,078 67 303 242 2,690
Furniture and fixtures 209 194 97 291 791
Leasehold improvements 345 118 56 - 519
Land and Building -
-------------------------------------------------------------------------------------
Total property and equipment 2,632 379 456 533 4,000
Less: Accumulated depreciation 1,420 198 214 431 2,263
-------------------------------------------------------------------------------------
Net property and equipment 1,212 181 242 102 1,737
OTHER ASSETS 1,083 60 21 - 1,164
PURCHASE PRICE IN EXCESS OF BOOK
VALUE OF ACQUIRED COMPANIES 5,836 (217) (4) 2,200 13,075 abcef 20,890
=====================================================================================
TOTAL ASSETS 22,225 3,354 5,199 4,213 10,323 45,314
=====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes & Current Maturities of LTD 5,067 424 1,898 566 8,500 ef 16,455
Accounts payable and accrued liabilities 4,822 888 1,915 783 1,210 cef 9,618
Due to related parties - - -
-------------------------------------------------------------------------------------
Total current liabilities 9,889 1,312 3,813 1,349 9,710 26,073
-------------------------------------------------------------------------------------
NON-CURRENT LIABILITIES:
Notes & Loans payable 5,295 122 623 - 6,040
Due to related parties 1,599 (1,599) -
-------------------------------------------------------------------------------------
Total non-current liabilities 5,295 - 1,721 623 (1,599) 6,040
-------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock 8 2 (2) c 8
Common Stock 18 319 - (318) cf 19
Additional paid-in-capital 16,810 6,547 (64) cef 23,293
Retained deficit (8,847) 2,042 (654) (3,647) 1,935 cef (9,171)
Other items (948) (661) 661 c (948)
-------------------------------------------------------------------------------------
Total stockholders' equity 7,041 2,042 (335) 2,241 2,212 13,201
-------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 22,225 3,354 5,199 4,213 10,323 45,314
=====================================================================================
</TABLE>
Page 4
<PAGE>
INTERIORS, INC.
PRO FORMA INTERIM FINANCIAL INFORMATION FOR INTERIORS AND COMBINED COMPANIES
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Interiors Vanguard Artmaster Decor Windsor Troy
9 mo. to 7 mo. to 9 mo. to 9 mo. to 9 mo. to 9 mo. to
3/31/98 2/28/98 12/23/97 12/31/97 3/31/98 3/31/98
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SALES AND OTHER REVENUES:
Net Sales 6,225 7,832 5,469 3,797 10,257 10,224
-----------------------------------------------------------------------------
Total Sales and Other Revenues 6,225 7,832 5,469 3,797 10,257 10,224
-----------------------------------------------------------------------------
EXPENSES:
Cost of goods sold 3,775 5,205 3,556 1,894 7,071 6,957
Selling, general, and administrative 1,597 2,573 1,949 3,314 2,161 2,877
Amortization of intangibles 86
-----------------------------------------------------------------------------
Total Expenses: 5,372 7,778 5,505 5,294 9,232 9,834
-----------------------------------------------------------------------------
Income (loss) from operations: 853 54 (36) (1,497) 1,025 390
LOSS ON SALE OF INVESTMENT - (1,113)
OTHER INCOME (EXPENSE), Net 7 (3) 37 5 251 (5)
INTEREST EXPENSE (483) (217) (104) (78) (81) (325)
Income (loss) from operations before
(benefit) provision for taxes 377 (166) (103) (2,683) 1,195 60
PROVISION FOR TAXES 15 - - 9 (143)
Income(loss) from operations 362 (166) (103) (2,692) 1,195 203
Basic EPS 0.06
Diluted EPS 0.06
Shares (000) 5839
Shares (000) 6161
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
Adjustments Total
-----------------------------------
<S> <C> <C>
SALES AND OTHER REVENUES:
Net Sales (45) c 43,759
-
-----------------------------------
Total Sales and Other Revenues (45) 43,759
-----------------------------------
EXPENSES:
Cost of goods sold 28,458
Selling, general, and administrative (101) c 14,370
Amortization of intangibles 471 abcef 557
------------- --------------
Total Expenses: 370 43,385
------------- --------------
Income (loss) from operations: (415) 374
LOSS ON SALE OF INVESTMENT 1,113 c -
OTHER INCOME (EXPENSE), Net (251) 41
INTEREST EXPENSE (930) abcef (2,218)
Income (loss) from operations before
(benefit) provision for taxes (483) (1,803)
PROVISION FOR TAXES 143 24
Income(loss) from operations (626) (1,827)
Basic EPS (0.18)
Diluted EPS (0.17)
Shares (000) 4521 10360
Shares (000) 4521 10682
</TABLE>
<PAGE>
INTERIORS, INC. and Combined Companies
As of June 30, 1997 and for the year then ended, as of March 31, 1998 and for
the nine months then ended for Interiors, Inc.; as of comparable periods for
the Combined Companies
NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE
PRO FORMA COMBINED FINANCIAL INFORMATION
1. Basis of Presentation
On March 10, 1998 Interiors acquired Vanguard. On March 23, 1998 Interiors
acquired Artmaster. On April 21, 1998 Interiors and Decor agreed on terms for
Interiors to acquire the outstanding Common Stock of Decor. On July 30, 1998
Interiors acquired Windsor and on August 14, 1998 Interiors acquired Troy.
These acquisitions and probable acquisitions have been accounted for as
purchases. The excess of purchase price over fair value of assets acquired of
$17,847,000, if the acquisitions had all occurred as of June 30, 1997, is
reflected as an intangible asset and is being amortized over forty years.
The above Pro Forma Combined Financial Information as of June 30, 1997 and the
year then ended and as of March 31, 1998 and for the nine months then ended for
Interiors, Inc. and comparable periods for the Combined Companies has been
prepared to reflect the Combined financial position and the results of
operations of Interiors, Inc. ("Interiors"), Henlor, Inc. and subsidiary DBA
Vanguard Studios ("Vanguard"), Merchandise Sales, Inc. DBA Artmaster Studios
("Artmaster"), Decor Group, Inc. ("Decor"), Windsor Art, Inc. ("Windsor") and
Troy Lighting, Inc. ("Troy") as if the combination had been effective as of
June 30, 1997 and July 1, 1996 (for one year operations) and March 31, 1998 and
July 1, 1997 (for nine months operations), respectively.
This Pro Forma Combined Financial Information should be read in conjunction
with the audited historical financial statements and notes thereto of
Interiors, as of June 30, 1997 and for the year then ended; Vanguard, as of
July 31, 1997 and for the nine months then ended, Artmaster as of March 31,
1997 and the year then ended, Decor as of March 31, 1997 and for the year then
ended, Windsor, as of December 31, 1997 and for the year then ended, Troy, as
of December 31, 1997 and for the year then ended. It should also be read in
conjunction with the unaudited interim period financial statements and notes
thereto of Interiors, as of March 31, 1998 and for the nine months then ended
(Interiors Form 10QSB); Vanguard, as of February 28, 1998 and for the seven
months then ended, Artmaster as of December 23, 1997 and for the nine months
then ended, Decor as of December 31, 1997, and for the nine months then ended
(Decor Form 10QSB), Windsor, as of March 31, 1998 and for the nine months then
ended and Troy as of March 31, 1998 and for the nine months then ended.
In management's opinion, all material adjustments necessary to reflect the
effects of the combination have been made.
<PAGE>
The unaudited Pro Forma financial Information is not necessarily indicative of
what actual results of operations of the Company would have been, assuming the
combination had been completed as of July 1, 1996 and July 1, 1997,
respectively, nor is it necessarily indicative of the results of operations for
future periods.
The pro forma information has been prepared as follows for companies with
historical periods that differ from the registrant.
2. Adjustments to Pro Forma Combined Financial Information
Adjustments were made in order to reflect:
(a) The acquisition of Vanguard for a cash payment of $705,621, an 8% Henlor,
Inc. subordinated promissory note in the amount of $794,379; 299581
unregistered shares of Interiors Common Stock valued at $500,000 and the
repayment of indebtedness of Vanguard owed to the principal shareholders of
Henlor in the amount of $294,379. The cash payments were financed by debt of
$1,000,000, with an assumed interest rate of 15% per annum. Elimination of
related party debt and all equity on Vanguard books as well as an accrual of
$450,000 of acquisition expenses and reserves resulted in a purchase price in
excess of net fair value of assets acquired of $3,394,000 if the combination
occurred as of June 30, 1997. Adjustments for interest expense at the rates
stated above and amortization of intangibles over 40 years were made to results
of operations.
(b) The acquisition of Artmaster for and Interiors, Inc. 10% subordinated
promissory note in the amount of $537,248; 779,302 unregistered shares of
Interiors Common Stock valued at $1,250,000 and the repayment of indebtedness
of Artmaster owed to the principal shareholders of Artmaster in the amount of
$1,022,752 through a cash payment of $750,000 and an Interiors, Inc. 10%
subordinated promissory note in the amount of $272,752. The cash payment was
indirectly financed by debt of $750,000 with an assumed interest rate of 15%
per annum. Elimination of related party assets and debt and all equity on
Artmaster books as well as an accrual of $380,000 of acquisition expenses
resulted in a purchase price in excess of net fair value of assets acquired of
$2,368,000 if the combination occurred as of June 30, 1997. Adjustments for
interest expense at the rates stated above and amortization of intangibles over
40 years were made to results of operations.
(c) The probable acquisition of that portion of Decor not already owned by
Interiors has been proposed as a swap of two Decor shares of Common Stock for
one share of Interiors Common Stock. Interiors Common Stock had a market value
of about $2 per share at the time the related agreement was made, so this value
was used for purposes of the Pro Forma Combined Financial Information. As of
December 31, 1997 Decor had 1,709, 176 common shares outstanding and 250,000
series A convertible (at 3 for 1) preferred stock outstanding, not owned by
Interiors. This is equivalent to 2,459,176 shares of Decor, 1,229,588 shares of
Interiors or $2,459,176 with Interiors at $2 per share. Elimination of related
party debt and all equity on Decor books as well as an accrual of $125,000 of
acquisition expenses resulted in a purchase price in excess of net fair value
of assets acquired of $1,694,000 if the combination occurred as of June 30,
<PAGE>
1997 and $3,181,000 if it occurred as of March 31, 1998, based on Decor's
December 31, 1997 balance sheet. Adjustments for amortization of intangibles
over 20 years were made to results of operations. During the nine months ended
December 31, 1997 Decor sold Interiors stock it owned and incurred a loss of
$1,113,000. Since a company cannot have a gain or loss on the sale of its own
securities and the Pro Forma Interim Financial Information Statements of
Operations are based on the assumption that Interiors purchased Decor prior to
the sale of stock, the loss has been eliminated for Pro Forma purposes.
(d) During the year ended June 30, 1997, Interiors recorded a gain of $201,000
on the sale of Decor shares held by Interiors. This gain has been eliminated in
the Pro Forma Historical financials as of June 30, 1997.
(e) The acquisition of Windsor is to occur for $2,000,000 cash, a short term 8%
Interiors secured subordinated promissory note in the amount of $3,000,000 and
a long term 8% Interiors secured subordinated promissory note in the amount of
$2,000,000. In addition Interiors purchased 150,000 common stock of Bentley
International, Inc. (Windsor's erstwhile parent company) and a warrant to
purchase 300,000 shares of common stock of Bentley for 1,500,000 shares of
Interiors Class A Common Stock. The cash payment of $2,000,000 was financed by
private placement of unregistered subordinated convertible promissory notes in
the amount of $2,250,000 with an assumed interest rate of 6.0% per annum.
Elimination of all equity on Windsor books as well as an accrual of $200,000 of
acquisition expenses (and reserves) resulted in a purchase price in excess of
net fair value of assets acquired of $8,622,000 if the combination occurred as
of June 30, 1997. Adjustments for interest expense at the rates stated above
and amortization of intangibles over 40 years were made to results of
operations.
(f) The acquisition of Troy is to occur for $250,000 cash, payment of
indebtedness of $1,700,000 to former shareholders of Troy and Interiors stock
valued at $975,000. The cash payments were financed from cash on hand and
unsecured borrowing of $1,500,000 with an assumed interest rate of 15% per
annum. Elimination of related party debt and all equity on Troy books resulted
in a purchase price in excess of net fair value of assets acquired of
$2,025,000 if the combination occurred as of June 30, 1997. Adjustments for
interest expense at the rates stated above and amortization of intangibles over
40 years were made to results of operations.
