<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): August 14, 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 28, 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 August 14, 1998 (the "Closing Date"), the Registrant consummated the
transactions contemplated by that certain Agreement and Plan of Merger (the
"Troy Merger Agreement") dated July 2, 1998 by and among the Registrant, Troy
Acquisition Corp. ("Newco"), Troy Lighting, Inc. ("Troy"), and certain
shareholders of Troy. Pursuant to the Troy Merger Agreement, Newco merged with
and into Troy, with Troy continuing as the surviving corporation and as a
wholly-owned subsidiary of the Registrant. Troy manufactures and distributes
portable and installed lighting and lighting fixtures. The acquisition of Troy
provides the Registrant with an expanded breadth of product offerings.
The purchase price paid by the Registrant consisted of $250,000 in cash
and Class A Common Stock of the Registrant ("Class A Shares") with a fair
market value of $975,000 (the "Troy Merger Shares") on the Closing Date. In
addition, the Registrant agreed to repay $1,700,000 to extinguish obligations
of Newco to certain former shareholders of Troy. The Troy Merger Shares are to
be held in escrow as collateral for certain indemnification obligations of the
former shareholders of Troy. If the Troy Merger Shares are worth less than
$1,053,000 as of July 2, 1999, less amounts in the escrow account and amounts
paid for resolved claims, the Registrant is required to issue additional Class
A Shares to the former Troy shareholders equal in value to such deficiency. If
the Troy Merger Shares are worth more than $1,053,000 as of July 2, 1999, the
former Troy shareholders are required to return Class A Shares to the
Registrant equal in value to such excess amount. The purchase price was
determined in arms-length negotiations between the Registrant and Troy.
On August 14, 1998, the Registrant entered into an Employment Agreement
(the "Langner Employment Agreement") with Todd R. Langner ("Langner"). Under
the Langner Employment Agreement, Langner will be paid an annual salary of
$150,000, compensation of $50,000 for facilitating the transition of ownership
in Troy, a signing bonus of $50,000, payment of certain attorneys fees, and
Class A Shares worth $50,000. Langner will also receive, under the Langner
Employment Agreement, bonuses upon the attainment of certain performance
criteria, an option to purchase 100,000 Class A Shares which vest at a rate of
20,000 Class A Shares per year commencing on the first anniversary of the
Langner Employment Agreement, and reimbursement for certain expenses.
-2-
<PAGE>
The cash portion of the purchase price paid pursuant to the Troy Merger
Agreement and the repayment of certain Troy indebtedness was financed by
unsecured borrowing of $1,500,000 from United Credit Corporation and cash on
hand.
The assets acquired pursuant to the Troy Merger Agreement included,
among other things, (i) fixed assets owned, leased or used by Troy, 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 Troy.
Copies of the Troy Merger Agreement and the Langner Employment Agreement
were appended as Exhibits to the Report on this transaction filed on Form 8-K
with the Commission on August 28, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
- ----------------------------------------------
(1) Financial Statements for Troy for the years ended December
31, 1997 and December 31, 1996 are appended as an Exhibit to
this Report.
(2) Interim Financial Statements (unaudited) for the three months
ended March 31, 1998 are appended as an Exhibit to this
Report.
(b) Pro Forma Financial Information
- -------------------------------------
(1) Pro Forma Financial Information with respect to the
acquisition of Troy by the Registrant is appended as an
Exhibit to this Report.
-3-
<PAGE>
(c) Exhibits
- -------------
<TABLE>
<CAPTION>
Document Description Exhibit No.
- ------------------ ----------
<S> <C>
Financial Statements of Troy for the years ended December 31, 1997 and
December 31, 1996 are appended as an Exhibit to this Report. 99.2
Interim Financial Statements (unaudited) of Troy for the three months
ended March 31, 1998 are appended as an Exhibit to this Report. 99.3
Pro Forma Financial Information with respect to the acquisition
of Troy by the Registrant is appended as an Exhibit to this Report. 99.4
</TABLE>
-4-
<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
-5-
<PAGE>
EXHIBIT INDEX
Exhibit
No. Document Description
- ------- -------------------
99.2 Financial Statements of Troy for the years ended December 31, 1997 and
December 31, 1996 are appended as an Exhibit to this Report.
99.3 Interim Financial Statements (unaudited) of Troy for the three months
ended March 31, 1998 are appended as an Exhibit to this Report.
99.4 Pro Forma Financial Information with respect to the acquisition of Troy
by the Registrant is appended as an Exhibit to this Report.
-6-
<PAGE>
TROY LIGHTING, INC.
FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 1997 AND 1996 AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Troy Lighting, Inc.
City of Industry, California
We have audited the accompanying balance sheets of Troy Lighting, Inc. (the
Company) as of December 31, 1997 and 1996, and the related statements of
operations, stockholders' deficiency 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, such financial statements present fairly, in all material
respects, the financial position of Troy Lighting, 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/ DELOITTE & TOUCHE LLP
April 16, 1998
<PAGE>
TROY LIGHTING, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 3,740 $ 23,515
Accounts receivable, net of allowances for doubtful accounts of
$86,363 (1997) and $75,622 (1996) 2,149,123 1,928,638
Inventories, net (Notes 1 and 2) 2,163,650 1,737,523
Prepaid expenses and other current assets 402,571 251,533
Deferred taxes 83,208
----------- -----------
Total current assets 4,802,292 3,941,209
PROPERTY AND EQUIPMENT, less accumulated depreciation
and amortization (Notes 1 and 3) 238,198 208,294
GOODWILL, less accumulated amortization of $32,993 (1997)
and $23,595 (1996) (Note 1) 14,993 24,391
OTHER ASSETS 59,885 59,885
DEFERRED TAXES 110,443
----------- -----------
$ 5,225,811 $ 4,233,779
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,801,027 $ 1,663,793
Current portion of long-term debt (Note 5) 1,802,656 1,316,984
----------- -----------
Total current liabilities 3,603,683 2,980,777
LONG-TERM DEBT (Note 5) 1,689,866 1,485,204
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' DEFICIENCY:
Common stock, $.01 par value; 1,000,000 shares authorized;
319,000 (1997) and 312,600 (1996) shares issued and outstanding 3,190 3,126
Additional paid-in capital 315,810 309,474
Accumulated deficit (386,738) (544,802)
----------- -----------
Total stockholders' deficiency (67,738) (232,202)
----------- -----------
$ 5,225,811 $ 4,233,779
=========== ===========
</TABLE>
See accompanying notes to financial statements. 2
<PAGE>
TROY LIGHTING, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
NET SALES $ 12,530,070 $ 11,715,549
COST OF GOODS SOLD 8,699,497 8,034,353
------------ ------------
GROSS PROFIT 3,830,573 3,681,196
EXPENSES (Note 4):
Administrative 973,109 928,453
Selling 2,321,079 2,230,224
Engineering 112,400 107,200
------------ ------------
Total expenses 3,406,588 3,265,877
------------ ------------
INCOME BEFORE INTEREST EXPENSE AND
PROVISION FOR INCOME TAXES 423,985 415,319
INTEREST EXPENSE (Note 5) 408,871 370,557
------------ ------------
INCOME BEFORE INCOME TAX (BENEFIT) PROVISION 15,114 44,762
INCOME TAX (BENEFIT) PROVISION (Notes 1 and 6) (142,950) 1,600
------------ ------------
NET INCOME $ 158,064 $ 43,162
============ ============
</TABLE>
See accompanying notes to financial statements. 3
<PAGE>
TROY LIGHTING, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996 319,000 $ 3,190 $ 315,810 $(587,964) $(268,964)
Net income 43,162 43,162
Repurchase of common stock (6,400) (64) (6,336) (6,400)
------- --------- --------- --------- ---------
BALANCE, December 31, 1996 312,600 3,126 309,474 (544,802) (232,202)
Net income 158,064 158,064
Sale of common stock 6,400 64 6,336 6,400
------- --------- --------- --------- ---------
BALANCE, December 31, 1997 319,000 $ 3,190 $ 315,810 $(386,738) $ (67,738)
======= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements. 4
<PAGE>
TROY LIGHTING, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 158,064 $ 43,162
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation 98,983 58,823
Amortization and accretion (15,442) (15,442)
Accretion of investor debt interest 166,017 147,717
Changes in operating assets and liabilities:
Accounts receivable (220,485) (100,554)
Inventories (426,127) 46,730
Prepaid expenses and other current assets (151,038) (73,113)
Other assets 2,855
Deferred taxes (193,651)
Accounts payable and accrued liabilities 137,234 247,011
------------ ------------
Net cash (used in) provided by operating activities (446,445) 357,189
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of property and equipment (128,887) (188,837)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit and long-term borrowings 12,928,983 49,700
Principal payments on revolving line of credit and long-term debt (12,379,826) (192,658)
Repurchase of share capital (6,400)
Issuance of share capital 6,400
------------ ------------
Net cash provided by (used in) financing activities 555,557 (149,358)
------------ ------------
NET (DECREASE) INCREASE IN CASH (19,775) 18,994
CASH, beginning of year 23,515 4,521
------------ ------------
CASH, end of year $ 3,740 $ 23,515
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - Cash paid
during the year for:
Interest $ 242,849 $ 222,839
============ ============
Income taxes $ 26,850 $ 1,000
============ ============
</TABLE>
See accompanying notes to financial statements. 5
<PAGE>
TROY LIGHTING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business - TLI Acquisition Corp. (the Purchaser) was
incorporated in the State of Illinois on December 29, 1993 for the
purpose of acquiring the operations of Troy Lighting, Inc. (the
Company), a subsidiary of JJI Lighting Group, Inc. (the Seller), which
manufactures and distributes electrical lighting and related products
for consumer and industrial use. The Company is headquartered in
Southern California and sells to markets across the continental U.S.A.
Effective March 15, 1994, the Purchaser acquired certain assets and
liabilities with an estimated net fair value of $2,440,000 from the
Seller for an aggregate purchase price of approximately $2,319,000,
consisting of approximately $2,200,000 in cash and approximately
$119,000 in notes payable and assumed liabilities. The acquisition has
been accounted for as a purchase; and, accordingly, the purchase price
was allocated to assets and liabilities based on their estimated fair
market values as of March 15, 1994. The excess value has been included
in long-term debt in the accompanying balance sheets and will be
accreted into income over five years. For both the years ended December
31, 1997 and 1996, $24,840 was accreted into income. Subsequent to the
acquisition date, the Purchaser changed its name to Troy Lighting, Inc.
On July 1, 1994, the Company purchased all of the inventory and
equipment, the trade name, and specific accounts receivable of Tri-Lite
Mfg. Co. through the United States Bankruptcy Court for $321,000, plus
acquisition expenses. The excess of cost over the fair market value of
the acquired assets of approximately $48,000 is shown as goodwill in the
accompanying balance sheets and will be amortized over five years.
Amortization expense was $9,398 for both the years ended December 31,
1997 and 1996.
Inventories - Inventories are stated at the lower of cost or market.
Cost is determined principally by the first-in, first-out method.
Property and Equipment - Property and equipment are stated at cost.
Depreciation and amortization are provided for in amounts sufficient to
relate the cost of depreciable assets to operations over their estimated
service lives. The straight-line method of depreciation is followed for
substantially all assets for financial reporting purposes, but
accelerated methods are used for income tax purposes.
Income Taxes - The Company follows the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes. This statement requires the recognition of deferred tax assets
and liabilities for the future consequences of events that have been
recognized in the Company's financial statements or tax returns.
Measurement of the deferred items is based on enacted tax laws. In the
event the future consequences of differences between financial reporting
bases and tax bases of the Company's assets and liabilities result in a
deferred tax asset, SFAS No. 109 requires an evaluation of the
probability of being able to realize the future benefits indicated by
such asset. A valuation allowance related to a deferred tax asset is
recorded when it is more likely than not that some portion or all of the
deferred tax asset will not be realized.
6
<PAGE>
TROY LIGHTING INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (Continued)
- -------------------------------------------------------------------------------
Credit Risk - The Company sells its products to customers in the
building supply and retail industry. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral.
The Company maintains reserves for potential credit losses.
Use of Estimates - The preparation of financial statements involves the
significant use of estimates by management in the calculation of various
components of financial measures including but not limited to estimates
for bad debt reserves, amounts for certain accrued liabilities, and the
net realizable value and estimated useful lives of assets. Estimates are
inherently subjective in nature and involve uncertainty and significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect estimates used in the preparation
of these financial statements.
Reclassification - Certain amounts as previously reported have been
reclassified to conform to the current year presentation.
2. INVENTORIES
Inventories consist of the following:
1997 1996
----------- -----------
Raw materials and work-in-process $ 1,899,088 $ 1,124,403
Finished goods 554,562 889,260
----------- -----------
2,453,650 2,013,663
Less reserve for excess inventories (290,000) (276,140)
----------- -----------
$ 2,163,650 $ 1,737,523
=========== ===========
7
<PAGE>
TROY LIGHTING INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (Continued)
- ------------------------------------------------------------------------------
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
1997 1996
--------- ---------
Computer equipment $ 35,530 $ 23,935
Leasehold improvements 55,628 41,075
Furniture and fixtures 340,410 237,670
--------- ---------
431,568 302,680
Less accumulated depreciation and amortization (193,370) (94,386)
--------- ---------
$ 238,198 $ 208,294
========= =========
4. RELATED-PARTY TRANSACTIONS
During the year ended December 31, 1997, the Company had the following
transactions with related parties:
Consulting expense to a stockholder paid during the year $ 12,000
During the year ended December 31, 1996, the Company had the following
transactions with related parties:
Consulting expense to a stockholder, of which $7,800 is included
in accounts payable and accrued liabilities $ 24,000
8
<PAGE>
TROY LIGHTING INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (Continued)
- -------------------------------------------------------------------------------
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revolving line of credit with a lender for the lower of the available borrowing
base (as defined) or $3,000,000, unpaid balance bearing interest at lender's
prime rate plus 2% (10.5% at December 31, 1997), collateralized by
substantially all assets of the Company, due March 15, 1999 $ 1,719,392 $ 1,238,635
9% Junior subordinated promissory notes, payable to stockholders of the
Company, interest-only payments due quarterly, principal balance due March
15, 2004; the notes contain provisions for contingent additional interest in
the event of prepayment ranging from 10% to 20% over the stated rate; the
minimum amount of contingent interest is
being accrued and added to principal 1,549,283 1,383,266
Term loans payable to bank, subordinate to the revolving line of credit,
collateralized by substantially all assets of the Company, payable in monthly
installments of $5,021 including interest at the bank's prime rate plus 2%
(10.5% at December 31, 1997) 200,833 132,433
Other 23,014 47,854
----------- -----------
3,492,522 2,802,188
Less current portion (1,802,656) (1,316,984)
----------- -----------
$ 1,689,866 $ 1,485,204
=========== ===========
</TABLE>
In connection with the revolving line of credit agreement, the Company
is committed to a quarterly servicing fee of $2,500 through March 1999,
plus a fee of 0.25% for any unused borrowings, below a specified level
of $2,750,000. Additionally, the revolving line of credit agreement is
subject to certain conditions, including specified restrictions on
subordinated debt interest payments and payments of dividends. The
Company was in compliance with all requirements at December 31, 1997.
9
<PAGE>
TROY LIGHTING INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (Continued)
- -------------------------------------------------------------------------------
Both the revolving line and the term loan have the potential for
additional interest rate reductions (as defined) based on projected
earnings.
Aggregate maturities of long-term debt as of December 31, 1997 are as
follows:
Year ending December 31:
1998 $ 1,802,656
1999 60,250
2000 60,250
2001 20,083
2002 1,549,283
-----------
Thereafter $ 3,492,522
===========
6. INCOME TAXES
Income taxes for the year ended December 31, 1997 and 1996 are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Current:
Federal $ 44,701 $ --
State 6,000 1,600
--------- ---------
50,701 1,600
Deferred (benefit):
Federal (164,603)
State (29,048)
--------- ---------
(193,651)
--------- ---------
$(142,950) $ 1,600
========= =========
</TABLE>
Temporary differences that give rise to deferred tax assets at December
31, 1997 consist primarily of contingent investor interest, inventory,
accounts receivable and warranty reserves.
The deferred tax provision for 1997 includes an adjustment to the
beginning of the year balance in the deferred tax asset valuation
allowance in the amount of $242,000, reducing the valuation allowance of
$242,000 at December 31, 1996 to zero at December 31, 1997.
10
<PAGE>
TROY LIGHTING INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (Continued)
- -------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
Future minimum lease payments under noncancelable operating facility and
equipment leases having remaining terms of more than one year as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1998 $ 444,596
1999 40,392
---------
$ 484,988
=========
</TABLE>
Rent expense for facility and equipment leases aggregated approximately
$420,112 for the year ended December 31, 1997.
11
<PAGE>
TROY LIGHTING, INC.
PRO FORMA INTERIM FINANCIAL INFORMATION (UNAUDITED) FOR TROY LIGHTING, INC.
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- ------------
<S> <C> <C>
BALANCE SHEET
ASSETS
CURRENT ASSETS:
Cash (132) 4
Accounts receivable, net 2,246 2,149
Inventories 2,351 2,164
Other current assets 436 430
----- -----
Total current assets 4,901 4,747
----- -----
PROPERTY AND EQUIPMENT, at cost
Machinery and equipment 303 281
Furniture and fixtures 97 94
Leasehold improvements 56 56
----- -----
Total property and equipment 456 431
Less: Accumulated depreciation 214 193
----- -----
Net property and equipment 242 238
----- -----
PURCHASE PRICE IN EXCESS OF BOOK
VALUE OF ACQUIRED COMPANIES (4) (8)
OTHER ASSETS 60 60
----- -----
TOTAL ASSETS 5,199 5,037
===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes & Current Maturities of LTD 1,898 1,784
Accounts payable and accrued liabilities 1,915 1,778
----- -----
Total current liabilities 3,813 3,562
----- -----
NON-CURRENT LIABILITIES:
Notes & Loans payable 122 137
Due to related parties 1,599 1,549
----- -----
Total non-current liabilities 1,721 1,686
----- -----
STOCKHOLDERS' EQUITY:
Common Stock 319 319
Retained deficit (654) (530)
----- -----
Total stockholders' equity (335) (211)
----- -----
Total liabilities and stockholders' equity 5,199 5,037
===== =====
</TABLE>
See notes to financial statements
<PAGE>
TROY LIGHTING, INC.
PRO FORMA INTERIM FINANCIAL INFORMATION (UNAUDITED) FOR TROY LIGHTING, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
---------------------
3/31/98 3/31/97
------- --------
<S> <C> <C>
SALES AND OTHER REVENUES:
Net Sales 3,410 2,845
----- -----
Total Sales and Other Revenues 3,410 2,845
----- -----
EXPENSES:
Cost of goods sold 2,495 2,112
Selling, general, and administrative 930 711
----- -----
Total Expenses: 3,425 2,823
----- -----
Income (loss) from operations: (15) 22
OTHER INCOME (EXPENSE), Net (5) 2
INTEREST EXPENSE (104) (88)
----- -----
Income (loss) from operations before
(benefit) provision for taxes (124) (64)
PROVISION FOR TAXES -- --
----- -----
Income(loss) from operations (124) (64)
----- -----
</TABLE>
See notes to financial statements
<PAGE>
TROY LIGHTING, INC.
PRO FORMA INTERIM FINANCIAL INFORMATION (UNAUDITED) FOR TROY LIGHTING, INC.
STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) (124) (64)
Adjustments to reconcile net (loss) to net
cash provided/(used) in operating activities:
Depreciation & Amortization 17 17
Net change in assets and liabilities:
Accounts receivable (97) (176)
Inventories (188) (139)
Other assets (6) (89)
Accounts payable and other liabilities 187 (14)
---- ----
Net Cash Provided by Operating Activities (211) (465)
---- ----
CASH FLOW FROM INVESTING ACTIVITIES:
Capital Expenditures (23) (18)
---- ----
Net Cash Used in Investing Activities (23) (18)
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments) on lines of credit 98 370
---- ----
Net cash provided/(used) by/in financiang activities 98 370
---- ----
Net Increase(Decrease) in Cash (136) (113)
Cash-Beginning of Period 4 24
---- ----
Cash-End of Period (132) (89)
---- ----
</TABLE>
See notes to financial statements
<PAGE>
TROY LIGHTING, INC.
PRO FORMA INTERIM FINANCIAL INFORMATION (UNAUDITED) FOR TROY LIGHTING, 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 99.4 - 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>
Adjmts Windsor/ Total
BALANCE SHEET Troy adjmt
-------------------------------------------------
<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
</TABLE>
Page 3
<PAGE>
PRO FORMA INTERIM FINANCIAL INFORMATION FOR INTERIORS AND COMBINED COMPANIES
<TABLE>
<CAPTION>
Interiors Windsor Troy Decor Adjustments Total
BALANCE SHEET 3/31/98 3/31/98 3/31/98 12/31/97
-------------------------------------------------------------------------------------
<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,
1997 and
<PAGE>
$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.
