<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F 0 R M 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
----------------------
Date of Report
June 26, 1997
NeoStar Retail Group, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-25272 75-2559376
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2250 William D. Tate Avenue, Grapevine, Texas 76051
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 424-2000
<PAGE> 2
Item 5. Other Events
As previously reported, on September 16, 1996, NeoStar Retail Group, Inc.,
a Delaware corporation (the "Company"), and its direct and indirect
subsidiaries, Babbage's, Inc., a Texas corporation ("Babbage's"), Software Etc.
Stores, Inc., a Delaware corporation ("Software"), Augusta Enterprises, Inc., a
Delaware corporation, and Chasada, a Pennsylvania business trust, filed
voluntary petitions under Chapter 11 of the United States Bankruptcy Code,
Case No. 396-36648-SAF-11 in the United States Bankruptcy Court, Northern
District of Texas, Dallas Division (the "Bankruptcy Court"), U.S. Bankruptcy
Judge Steven A. Felsenthal presiding.
Also as previously reported, on November 27, 1996, substantially all of
the assets of the Company were sold following an auction process conducted in a
hearing in the Bankruptcy Court (the "Sale"). The auction resulted in the sale
of 447 of the Company's retail store locations, all of its merchandise
inventory and other related assets. All of the Company's other retail store
locations were closed or their operation was taken over by the purchaser of the
assets for its own account. The Company ceased its retail operations
effective upon the consummation of the Sale.
During the course of the proceedings of its Chapter 11 bankruptcy case,
the Company has filed four Monthly Operating Reports, one for each of the
following periods: September 17, 1996 through October 5, 1996; October 6, 1996
through November 2, 1996; November 3, 1996 through November 30, 1996; and
December 1, 1996 through February 1, 1997. Copies of such Monthly Operating
Reports are filed herewith.
The financial statements and related information contained in the Monthly
Operating Reports filed herewith have been compiled from the books and records
maintained by the Company during the course of its liquidation in its Chapter 11
bankruptcy case. Such financial statements and related information have been
prepared solely for the purpose of complying with the reporting requirements of
the Bankruptcy Court, have not been prepared in accordance with generally
accepted accounting principles and have not been audited.
<PAGE> 3
Item 7. Financial Statements and Exhibits
(c) Exhibits
The following exhibits are filed as part of this Report:
99.1 Monthly Operating Report - Initial Filing
(9/17/96 - 10/5/96)*
99.2 Monthly Operating Report - Fiscal October
(10/6/96 - 11/2/96)*
99.3 Monthly Operating Report - Fiscal November
(11/3/96 - 11/30/96)*
99.4 Monthly Operating Report - Fiscal
December/January (12/l/96 - 2/l/97)*
*The Company agrees to furnish supplementally a copy of any omitted
schedule or similar attachment to the Commission upon its request.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEOSTAR RETAIL GROUP, INC.
(Registrant)
By: /s/ OPAL P. FERRARO
--------------------------------------
Opal P. Ferraro
Vice President and
Chief Financial Officer
Date: June 27, 1997
<PAGE> 5
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
99.1 Monthly Operating Report - Initial
(9/17/96 - 10/5/96)*
99.2 Monthly Operating Report - Fiscal October
(10/6/96 - 11/2/96)*
99.3 Monthly Operating Report - Fiscal November
(11/3/96 - 11/30/96)*
99.4 Monthly Operating Report - Fiscal
December/January (12/l/96 - 2/l/97)*
*The Company agrees to furnish supplementally a copy of any omitted
schedule or similar attachment to the Commission upon its request.
<PAGE> 1
EXHIBIT 99.1
CASE NAME: NEOSTAR RETAIL GROUP, INC. Monthly Operating Report
(first MOR)
CASE NUMBER: 396-36648-SAF-11 THROUGH ACCRUAL BASIS
396-36652-SAF-11 Unaudited
administratively consolidated
JUDGE: Steven A. Felsenthal
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
MONTHLY OPERATING REPORT
INITIAL FILING (9/17/96-10/5/96)
In accordance with Title 28, Section 1746, of the United States Code, I
declare under penalty of perjury that I have examined the following monthly
operating report (Accrual Basis 1 through Accrual Basis 6) and the accompanying
attachments and, to the best of my knowledge, these documents are true, correct
and complete. Declaration of the preparer (other than responsible party): is
based on all information of which preparer has any knowledge.
RESPONSIBLE PARTY:
/s/ OPAL P. FERRARO CHIEF FINANCIAL OFFICER
- ---------------------------------------- --------------------------
Original Signature of Responsible Party Title
OPAL P. FERRARO 11/6/96
- ---------------------------------------- --------------------------
Printed name of Responsible Party Date
PREPARER:
/s/ AMY WESTBROOK ASSISTANT CONTROLLER
- ---------------------------------------- --------------------------
Original Signature of Responsible Party Title
AMY WESTBROOK 11/6/96
- ---------------------------------------- --------------------------
Printed name of Responsible Party Date
<PAGE> 2
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
Comparative Balance Sheet
<TABLE>
<CAPTION>
9/16/96 10/5/96
------------------------------
<C> <C> <C>
ASSETS
1. Unrestricted Cash 5,163,261 562,207
2. Restricted Cash 0
------------------------------
3. Total Cash 5,163,261 562,207
4.(a) Accounts Receivable-Trade 66,432 67,463
4.(b) Other Accounts Receivable 2,748,720 3,145,047
5. Inventory 82,085,336 79,876,315
6. Notes Receivable 0 0
7. Prepaid Expenses (rent, store supplies...) 3,859,099 9,369,114
8. Other (Attach List) 0 0
------------------------------
9. Total Current Assets 93,922,848 93,020,146
10. Property Plant & Equipment 122,658,354 122,950,706
11. Less Accumulated Depreciation (60,461,237) (61,290,805)
------------------------------
12. Net Property, Plant & Equipment 62,197,117 61,659,901
13. Due from Insiders 0 0
14. Other Assets Net of Amortization (Attach List) 103,560 103,026
15. Other (Attach List) 466,783 609,154
------------------------------
16. TOTAL ASSETS 156,690,308 155,392,227
POST-PETITION LIABILITIES
17.(a) Accounts Payable-Vendor 2,462,545
17.(b) Miscellaneous Accounts Payable-Net 20,499
18. Taxes Payable 1,339,660
19. Notes Payable 0
20. Accrued Professional Fees 482,641
21. Secured Debt 40,414,736
22. Other (Attach List) 7,996,877
------------------------------
23. Total Post-Petition Liabilities 0 52,716,958
PRE-PETITION LIABILITIES
24. Secured Debt 45,537,100 3,220,000
25. Priority Debt 1,864,179 1,862,128
26. Unsecured Debt 67,692,993 67,692,993
27. Other (Attach List) 15,273,227 7,648,468
------------------------------
28. Total Pre-Petition Liabilities 130,367,499 80,423,589
------------------------------
29. TOTAL LIABILITIES 130,367,499 133,140,547
EQUITY
30. Pre-Petition Owners' Equity 26,322,809 26,322,809
31. Post-Petition Cumulative Profit (Loss) 0 (4,071,128)
32. Direct Charges to Equity (attach exp) 0 0
------------------------------
33. Total Equity 26,322,809 22,251,680
------------------------------
34. Total Liabilities & Equity 156,690,308 155,392,226
</TABLE>
<PAGE> 3
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
9/16/96 10/5/96
-------------------------
14. Other Assets Net of Amortization
<S> <C> <C>
Organization Costs 160,162 160,162
Accumulated Amortization-Organization Costs (56,602) (57,136)
-------------------------
103,560 103,026
</TABLE>
<PAGE> 4
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
9/16/96 10/5/96
-----------------------
15. Other Assets
<S> <C> <C>
Utility Deposits 89,853 86,476
Lease Deposits 136,916 136,916
Other Deposits 240,014 385,762
-----------------------
466,783 609,154
</TABLE>
<PAGE> 5
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
22. Other Post-Petition Liabilities 9/16/96 10/5/96
-------------------------
<S> <C> <C>
Miscellaneous 399,565
Payroll expense accruals 1,104,362 **
Store closing expense accruals 235,845
Freight expense accruals 308,178
Accrued interest expense 391,669
Accrued credit card fees/accrued NSF check expense 209,565
Customer refund/gift certificate/store credit liability 2,814,351 *
Insurance claims liability 1,056,742 **
Severance and related expense accrual 631,437
Employee vacation accrual 845,163 **
-------------------------
0 7,996,877
</TABLE>
* Per court order, we are continuing to honor and process customer refunds,
gift certificates and store credits, some of which may be prepetition. We are
unable to differentiate between pre and postpetition, so we classified entire
liability as postpetition.
**Per court order, we are continuing to provide benefits such as vacation and
medical insurance to employees. We therefore classified this liability as
postpetition.
<PAGE> 6
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
27. Other Pre-Petition Liabilities 9/16/96 10/5/96
-----------------------------
<S> <C> <C>
Accrued Percentage Rent 448,778 446,578
Severance Accrual 153,219 153,219
Miscellaneous including reserve for uncollectible marketing funds 2,381,600 1,853,601
Deferred Lease Payment Accrual 5,124,878 5,098,300
Store closing expense accruals 96,770 96,770
Accrued interest expense 166,789
Accrued credit card fees/accrued NSF check expense 145,902
Customer Refund/Gift Certificate/Store Credit Liability* 4,118,681
Employee Vacation Accrual* 845,162
Insurance Claims Liability* 1,055,599
Payroll expense accruals* 735,848
-----------------------------
15,273,227 7,648,468
</TABLE>
*These items carried forward as postpetition obligations per court order.
<PAGE> 7
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-2
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
Income Statement
9/17/96-10/5/96 *
--------------------
REVENUES
<S> <C>
1. Gross Sales 21,447,481 **
2. Less Returns & Discounts 0
3. Net Sales 21,447,481
COST OF GOODS SOLD
4. Cost of Sales 16,859,534
5. Freight 626,199
6. Selling Fees 291,212
--------------------
7. Total Cost of Goods Sold 17,776,945
--------------------
8. Gross Profit 3,670,536
OPERATING EXPENSES
9. Store Operating Expenses 5,276,865
10. General & Administrative 930,006
11. Total Operating Expenses 6,206,871
--------------------
12. Income before non-operating income and expenses (2,536,335)
OTHER INCOME & EXPENSES
13. Non-Operating Income (Attach List) 0
14. Non-Operating Expense (Attach List) 0
15. Interest Expense (and associated loan fees) 392,770
16. Depreciation 659,383
17. Amortization 0
18. Other (Attach List) 0
--------------------
19. Net Other Income and Expenses 1,052,153
REORGANIZATION EXPENSES
20. Professional Fees 0
21. U.S. Trustee Fees 0
22. Other (Attach List) 482,640
23. Total Reorganization Expenses 482,640
24. Income Tax 0
--------------------
25. Net Profit (Loss) (4,071,128)
</TABLE>
* The income statement for the period 9/17/96-10/5/96 is an estimate derived
from financial statements for the fiscal month of October less an estimate of
results of operations from the beginning of fiscal October through 9/16/96.
**The POS register system transmits sales already net of discounts and returns.
<PAGE> 8
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-2
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<S> <C>
24. Other Reorganization Expenses
Accrual of estimated outstanding expenses 482,640
-----------
482,640
</TABLE>
<PAGE> 9
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-3
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
CASH RECEIPTS AND DISBURSEMENTS
Schedule
Amount
10/5/96
--------------
<S> <C>
1. Cash-Beginning of Month 5,163,261
RECEIPTS FROM OPERATIONS
2. Cash Sales 21,447,481
COLLECTION OF ACCOUNTS RECEIVABLE
3. Prepetition 0
4. Postpetition 397,714 *
--------------
5. Total Operating Receipts 21,845,195
NON-OPERATING RECEIPTS
6. Loans and Advances (Attach List) 10,942
7. Sale of Assets
8. Other (Attach List)
--------------
9. Total Non-Operating Receipts 10,942
--------------
10. Total Receipts 21,856,138
--------------
11. Total Cash Available 27,019,399
OPERATING DISBURSEMENTS
12. Net Payroll 3,219,745
13. Payroll Taxes Paid 678,992
14. Sales, Use & Other Taxes Paid 6,125
15. Secured/Rental/Leases 4,052,534
16. Utilities
17. Insurance
18. Inventory Purchases 13,937,554
19. Vehicle Expenses
20. Travel
21. Entertainment
22. Repairs & Maintenance
23. Supplies
24. Advertising
25. Other (See Note) 4,562,242 **
--------------
26. Total Operating Disbursements 26,457,192
REORGANIZATION EXPENSES
27. Professional Fees
28. U.S. Trustee Fees
29. Other (Attach List) 0
--------------
30. Total Reorganization Expenses 0
--------------
31. Total Disbursements 26,457,192
32. Net Cash Flow (4,601,054)
33. Cash-End of Month 562,207
</TABLE>
* Postpetition collection of customer prepetition and postpetition receivables.
** Due to system limitations, we are not able to detail cash payments by
expense category beyond amounts listed are not readily available.
<PAGE> 10
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-4
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
ACCOUNTS RECEIVABLE AGING** 10/5/96
------------
<S> <C>
1 0-30 39,382
2. 31-60 17,205
3. 61-90 3,164
4. 91+ 10,712
------------
5. Total Accounts Receivable 70,463
6. Amount Considered Uncollectible 3,000
------------
7. Accounts Receivable (Net) 67,463
------------
</TABLE>
** A/R Trade is the only Accounts Receivable with aged balances.
Employee receivable, Trade-in receivable, and Other Miscellaneous
receivables are not aged.
<TABLE>
<CAPTION>
AGING OF POST-PETITION TAXES AND PAYABLES 0-30 31-60 61-90 91+
Days Days Days Days Total
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Taxes Payable
1. Federal 0 0
2. State (Sales Tax) 1,325,747 1,325,747
3. Local 0 0
4. Other (Canadian PST/GST) 13,913 13,913
----------------------------------------------------------------
5. Total Taxes Payable 1,339,660 0 0 0 1,339,660
----------------------------------------------------------------
6. Accounts Payable*** 2,462,545 2,462,545
----------------------------------------------------------------
</TABLE>
***Accounts Payable-Vendor is the only A/P account with aged balances.
Other vendor adjustment accounts are not aged.
<TABLE>
<CAPTION>
Beginning Amount Ending
STATUS OF POST-PETITION TAXES Tax Withheld or Amount Tax
Liability Accrued Paid Liability
FEDERAL
<S> <C> <C> <C> <C>
1. Withholding 0 232,200 232,200 0
2. FICA-Employee 0 178,436 178,436 0
3. FICA-Employer 0 178,436 178,436 0
4. Unemployment 0 8,372 8,372 0
5. Income 0 0 0 0
6. Other (Attach List) 0 0 0 0
---------------------------------------------------------
7. Total Federal Taxes 0 597,444 597,444 0
STATE AND LOCAL
8. Withholding 0 49,266 49,266 0
9. Sales 0 1,331,872 6,125 1,325,747
10. Excise 0 0 0 0
11. Unemployment 0 32,281 32,281 0
12. Real Property 0 0 0 0
13. Personal Property 0 0 0 0
14a.Other -Canadian GST 0 7,672 0 7,672
14b.Other -Canadian PST 0 6,241 0 6,241
---------------------------------------------------------
15. Total State and Local 0 1,427,333 87,673 1,339,660
16. Total Taxes 0 2,024,777 685,117 1,339,660
</TABLE>
<PAGE> 11
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-5
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
BANK RECONCILIATIONS Amount
<S> <C>
PLEASE SEE ATTACHED SCHEDULES 282,767
Store Change Fund (money in store cash registers) 278,701
-------
561,467
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT ACCOUNTS
Date of Type of Purchase Current
Bank Account Name & Number Purchase Instrument Price Value
<S> <C> <C> <C> <C>
NO INVESTMENT ACCOUNTS 0
Currency on hand 739
Total Cash - End of month 562,207
=======
</TABLE>
<PAGE> 12
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-6
Month:September, 1996
(9/17/96-10/5/96)
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
PAYMENTS TO INSIDERS AND PROFESSIONALS
<TABLE>
<CAPTION>
INSIDERS
Total Paid
Name Salary Severance BOD Fees T&E To Date
<S> <C> <C> <C> <C>
1. James McCurry 16,666.67 0.00 16,666.67
2. Opal Ferraro 8,125.00 0.00 630.49 8,755.49
3. Barry R. Fehrs 4,291.67 0.00 4,291.67
4. Ron E. Freeman 5,793.75 0.00 5,793.75
5. Mike Ivanich 4,720.83 0.00 4,720.83
6. Roxanne M. Koepsell 7,916.67 0.00 10.50 7,927.17
7. Alan Bush 11,666.67 0.00 1,479.53 13,146.20
8. R. Richard Fontaine 0.00 700.00 700.00
9. Jan Michiel Hessels 0.00 0.00 0.00
10. John D. Miller 0.00 700.00 700.00
11. Thomas G. Plaskett 0.00 700.00 700.00
12. Leonard Riggio 0.00 0.00 0.00
13. W. Mitt Romney 0.00 700.00 700.00
14. Dan DeMatteo 0.00 700.00 700.00
-------------------------------------------------------------------
Total Payments 59,181.26 0.00 3,500.00 2,120.52 64,801.78
</TABLE>
<TABLE>
<CAPTION>
PROFESSIONALS
Total Paid Total Incurred
Name Amt Approved Amt Paid to Date and Unpaid
<S> <C> <C> <C> <C>
None paid 0 0
As of this date, no additional invoices have been submitted. 0
</TABLE>
<PAGE> 13
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-7
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
QUESTIONNAIRE
<TABLE>
<CAPTION>
Yes No
<S> <C> <C>
1 Have any assets been sold or transferred outside the normal course of business this
reporting period? x
- ----------------------------------------------------------------------------------------------------------------
2 Have any funds been disbursed from any account other than a debtor-in-possession account? x
- ----------------------------------------------------------------------------------------------------------------
3 Are any postpetition receivables (accounts, notes, or loans) due from related parties? x
- ----------------------------------------------------------------------------------------------------------------
4 Have any payments been made on prepetition liabilities during this reporting period? x *
- ----------------------------------------------------------------------------------------------------------------
5 Have any postpetition loans been received by the debtor from any party? x **
- ----------------------------------------------------------------------------------------------------------------
6 Are any postpetition payroll taxes past due? x
- ----------------------------------------------------------------------------------------------------------------
7 Are any postpetition state or federal income taxes past due? x
- ----------------------------------------------------------------------------------------------------------------
8 Are any postpetition real estate taxes past due? x
- ----------------------------------------------------------------------------------------------------------------
9 Are any other postpetition taxes past due? x
- ----------------------------------------------------------------------------------------------------------------
10 Are any amounts owed to postpetition creditors delinquent? x
- ----------------------------------------------------------------------------------------------------------------
11 Have any prepetition taxes been paid during the reporting period? x *
- ----------------------------------------------------------------------------------------------------------------
12 Are any wage payments past due? x
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Pursuant to court order, the Debtor continued to pay wages and payroll
taxes, some of which were prepetition. Also per court order, we have
continued to process customer refunds, some of which were prepetition.
** Foothill Capital Corporation, as Agent bank for a group of lenders, provided
DIP financing in the amount of $70,000,000 per the court order dated October
2, 1996.
INSURANCE
1 Are workers compensation, general liability and other necessary insurance
coverages in effect? x
2 Are all premium payments paid current? x
3 Please itemize policies below.
<TABLE>
<CAPTION>
Period Annual Amount
Type of Policy Insurance Carrier Covered amount Frequency Outstanding
<S> <C> <C> <C> <C> <C>
Auto-NY Atlantic Mutual Ins. 11/l/95-11/l/96 1,591 10 installments 0
Auto-VA Atlantic Mutual Ins. 11/1/95-11/l/96 1,264 10 installments 0
Auto-MA Atlantic Mutual Ins. 11/1/95-11/l/96 2,051 10 installments 0
Auto-Out of state Atlantic Mutual Ins. 11/l/95-11/l/96 3,460 10 installments 0
Auto-TX Atlantic Mutual Ins. 11/1/95-11/l/96 2,495 10 installments 0
Workers compensation Atlantic Mutual Ins. 11/l/95-11/l/96 780,346 10 installments 0
Property Atlantic Mutual Ins. 11/l/95-11/l/96 213,713 10 installments 0
General liability Atlantic Mutual Ins. 11/l/95-11/l/96 16,144 10 installments 0
Umbrella-primary Atlantic Mutual Ins. 11/l/95-11/l/96 30,500 10 installments 0
Umbrella-excess Chubb Ins. Companies 11/l/95-11/l/96 18,000 annually 0
</TABLE>
<PAGE> 14
List of Omitted Schedules
1. Employee Loan Payroll Deductions Received Postpetition (See Cash
Receipts and Disbursements)
2. Store Bank Balances, including Credit Card and Canadian Accounts (See
Bank Reconciliations)
3. Bank Reconciliation Analysis (See Bank Reconciliations)
<PAGE> 1
EXHIBIT 99.2
CASE NAME: - NEOSTAR RETAIL GROUP, INC. Monthly Operating Report
(second MOR)
CASE NUMBER: 396-36648-SAF-11 THROUGH ACCRUAL BASIS
396-36652-SAF-11 Unaudited
administratively consolidated
JUDGE: Steven A. Felsenthal
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
MONTHLY OPERATING REPORT
FISCAL OCTOBER (10/6/96-11/2/96)
In accordance with Title 28, Section 1746, of the United States Code, I declare
under penalty of perjury that I have examined the following monthly operating
report (Accrual Basis 1 through Accrual Basis 6) and the accompanying
attachments and, to the best of my knowledge, these documents are true, correct
and complete except for those changes as described in Note 1. Declaration of
the preparer (other than responsible party) is based on all information of
which preparer has any knowledge.
RESPONSIBLE PARTY:
/s/ OPAL P. FERRARO CHIEF FINANCIAL OFFICER
- --------------------------------------- ---------------------------------------
Original Signature of Responsible Party Title
OPAL P. FERRARO 12/4/96
- --------------------------------------- ---------------------------------------
Printed name of Responsible Party Date
PREPARER:
AMY WESTBROOK ASSISTANT CONTROLLER
- --------------------------------------- ---------------------------------------
Original Signature of Preparer Title
AMY WESTBROOK 12/4/96
- --------------------------------------- ---------------------------------------
Printed name of Preparer Date
<PAGE> 2
Note 1
The balance sheet, income statement and schedules contained herein are as of
November 2, 1996. On November 27, 1996, pursuant to court order, the Debtor
sold substantially all of its assets to Software Acquisition Company, LLC. The
financial statements for November 2, 1996 have NOT been adjusted to reflect the
change in the value of inventory, leasehold improvements, other assets and
accrued liabilities as a result of the transaction that occurred on November 27,
1996. Such adjustments and the transaction itself will be reflected in the
Monthly Operating Report for the period ended November 30, 1996.
<PAGE> 3
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
October, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
Comparative Balance Sheet
<TABLE>
<CAPTION>
9/16/96 10/5/96 11/2/96
<C> <C> <C> <C>
ASSETS
1. Unrestricted Cash 5,163,261 562,207 4,688,554
2. Restricted Cash 0 0
3. Total Cash 5,163,261 562,207 4,688,554
4.(a) Accounts Receivable-Trade 66,432 67,463 47,213
4.(b) Other Accounts Receivable 2,748,720 3,145,047 3,399,095
5. Inventory 82,085,336 79,876,315 85,041,648
6. Notes Receivable 0 0 0
7. Prepaid Expenses (rent,store
supplies ...) 3,859,099 9,369,114 8,011,269
8. Other (Attach List) 0 0 0
-----------------------------------------------
9. Total Current Assets 93,922,848 93,020,146 101,187,779
10. Property Plant & Equipment 122,658,354 122,950,706 123,062,244
11. Less Accumulated Depreciation (60,461,237) (61,290,805) (62,376,883)
12. Net Property. Plant & Equipment 62,197,117 61,659,901 60,685,361
13. Due from Insiders 0 0 0
14. Other Assets Net of Amortization
(Attach List) 103,560 103,026 102,492
15. Other (Attach List) 466,783 609,154 607,532
16. TOTAL ASSETS 156,690,308 155,392,227 162,583,164
POST-PETITION LIABILITIES
17.(a) Accounts Payable-Vendor 2,462,545 12,382,259
17.(b) Miscellaneous Accounts
Payable-Net 20,499 4,296,691
18. Taxes Payable 1,339,660 882,658
19. Notes Payable 0 0
20. Accrued Professional Fees 482,641 482,641
21. Secured Debt 40,414,736 43,137,721
22. Other (Attach List) 7,996,877 8,021,427
-----------------------------------------------
23. Total Post-Petition Liabilities 0 52,716,958 69,203,397
PRE-PETITION LIABILITIES
24. Secured Debt 45,537,100 3,220,000 3,020,000*
25. Priority Debt 1,864,179 1,862,128 1,662,158
26. Unsecured Debt 67,692,993 67,692,993 66,349,660
27. Other (Attach List) 15,273,227 7,648,468 7,625,175
-----------------------------------------------
28. Total Pre-Petition Liabilities 130,367,499 80,423,589 78,656,992
-----------------------------------------------
29. Total Liabilities 130,367,499 133,140,547 147,860,389
EQUITY
30. Pre-Petition Owners' Equity 26,322,809 26,322,809 26,322,809
31. Post-Petition Cumulative Profit (Loss) 0 (4,071,128) (11,600,034)
32. Direct Charges to Equity (attach exp) 0 0 0
-----------------------------------------------
33. TOTAL EQUITY 26,322,809 22,251,680 14,722,775
-----------------------------------------------
34. TOTAL LIABILITIES & EQUITY 156,690,308 155,392,227 162,583,164
</TABLE>
*Payment made per court order
<PAGE> 4
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
October, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
9/16/96 10/5/96 11/2/96
-------------------------
<S> <C> <C> <C>
15. Other Assets
Utility Deposits 89,853 86,476 84,855
Lease Deposits 136,916 136,916 136,916
Other Deposits 240,014 385,762 385,762
-------------------------
466,783 609,154 607,532
</TABLE>
<PAGE> 5
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
October, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
9/16/96 10/5/96 11/2/96
---------------------------
<S> <C> <C> <C>
14. Other Assets Net of Amortization
Organization Costs 160,162 160,162 160,162
Accumulated Amortization-Organization Costs (56,602) (57,136) (57,671)
---------------------------
103,560 103,026 102,492
</TABLE>
<PAGE> 6
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
October, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-1 1
administratively consolidated
<TABLE>
<CAPTION>
22. Other Post-Petition Liabilities 9/16/96 10/5/96 11/2/96
-----------------------------
<S> <C> <C>
Miscellaneous 399,565 592,247
Payroll expense accruals 1,104,362 942,865**
Store closing expense accruals 235,845 310,338
Freight expense accruals 308,178 520,080
Accrued interest expense 391,669 24,875
Accrued credit card fees/accrued NSF check expense 209,565 34,808
Customer refund/gift certificate/store credit liability 2,814,351 2,967,696*
Insurance claims liability 1,056,742 1,149,557**
Severance and related expense accrual 631,437 629,042
Employee vacation accrual 845,163 845,162**
Deferred lease payment accrual 3,687
Accrued overage rent 1,069
-----------------------------
0 7,996,877 8,021,427
</TABLE>
* Per court order, we are continuing to honor and process customer refunds,
gift certificates and store credits, some of which may be prepetition. We are
unable to differentiate between pre and postpetition, so we classified entire
liability as postpetition.
**Per court order, we are continuing to provide
benefits such as vacation and medical insurance to employees. We therefore
classified this liability as postpetition.
<PAGE> 7
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
October, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
27. Other Pre-Petition Liabilities 9/16/96 10/5/96 11/2/96
--------------------------------
<S> <C> <C> <C>
Accrued Percentage Rent 448,778 446,578 423,355**
Severance Accrual 153,219 153,219 153,219
Misc including reserve for uncollectible mkting funds 2,381,600 1,853,601 1,853,530
Deferred Lease Payment Accrual 5,124,878 5,098,300 5,098,301
Store closing expense accruals 96,770 96,770 96,770
Accrued interest expense 166,789
Accrued credit card fees/accrued NSF check expense 145,902
Customer Refund/Gift Cert/Store Credit Liability* 4,118,681
Employee Vacation Accrual* 845,162
Insurance Claims Liability* 1,055,599
Payroll expense accruals* 735,848
--------------------------------
15,273,227 7,648,468 7,625,175
</TABLE>
* These items carried forward as postpetition obligations per court order.
**Change in accrual due to actual prepetition invoices lowering this accrual and
raising prepetition A/P balance.
<PAGE> 8
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-2
October, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
Income Statement
<TABLE>
<CAPTION>
9/17/96-10/5/96 11/2/96
----------------------------
<S> <C> <C>
REVENUES
1. Gross Sales 21,447,481 21,312,006 **
2. Less Returns & Discounts 0 0
-----------------------------
3. Net Sales 21,447,481 21,312,006
COST OF GOODS SOLD
4. Cost of Sales 16,859,534 16,056,807
5. Freight 626,199 494,499
6. Selling Fees 291,212 103,406
-----------------------------
7. Total Cost of Goods Sold 17,776,945 16,654,712
----------------------------
8. Gross Profit 3,670,536 4,657,294
Operating Expenses
9. Store Operating Expenses 5,276,865 9,027,162
10. General & Administrative 930,006 1,254,601
11. Total Operating Expenses 6,206,871 10,281,763
----------------------------
12. Income before non-operating income and expenses (2,536,335) (5,624,469)
OTHER INCOME & EXPENSES
13. Non-Operating Income (Attach List) 0 0
14. Non-Operating Expense (Attach List) 0 0
15. Interest Expense (and associated loan fees) 392,770 474,509
16. Depreciation 659,383 1,087,382
17. Amortization 0 0
18. Other (Attach List) 0 0
----------------------------
19. Net Other Income and Expenses 1,052,153 1,561,892
REORGANIZATION EXPENSES
20. Professional Fees 0 0
21. U.S. Trustee Fees 0 0
22. Other (Attach List) 482,640 342,545
23. Total Reorganization Expenses 482,640 342,545
24. Income Tax 0 0
-----------------------------
25. Net Profit (Loss) (4,071,128) (7,528,906)
</TABLE>
**The POS register system transmits sales already net of discounts and returns.
<PAGE> 9
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-2
9/17/96-10/5/96
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
24. Other Reorganization Expenses
<TABLE>
<S> <C> <C>
Accrual of estimated outstanding expenses 482,640 342,545
-----------------
482,640 342,545
</TABLE>
<PAGE> 10
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-3
October, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
CASH RECEIPTS AND DISBURSEMENTS
<TABLE>
<CAPTION>
10/5/96 11/2/96
-----------------------------
<C> <C> <C>
1. Cash-Beginning of Month 5,163,261 562,207
RECEIPTS FROM OPERATIONS
2. Cash Sales 21,447,481 21,312,006
COLLECTION OF ACCOUNTS RECEIVABLE
3. Prepetition 0 0
4. Postpetition 397,714 1,012,987*
-----------------------------
5. Total Operating Receipts 21,845,195 22,324,993
NON-OPERATING RECEIPTS
6. Loans and Advances (Attach List) 10,942 21,575
7. Sale of Assets
8. Other (Attach List)
-----------------------------
9. Total Non-Operating Receipts 10,942 21,575
-----------------------------
10. Total Receipts 21,856,138 22,346,568
-----------------------------
11. Total Cash Available 27,019,399 22,908,775
OPERATING DISBURSEMENTS
12. Net Payroll 3,219,745 2,814,707
13. Payroll Taxes Paid 678,992 1,010,451
14. Sales, Use & Other Taxes Paid 6,125 1,803,695
15. Secured/Rental/Leases 4,052,534 0
16. Utilities
17. Insurance
18. Inventory Purchases 13,937,554 12,127,982
19. Vehicle Expenses
20. Travel
21. Entertainment
22. Repairs & Maintenance
23. Supplies
24. Advertising
25. Other (See Note) 4,562,242 463,386**
-----------------------------
26. Total Operating Disbursements 26,457,192 18,220,222
REORGANIZATION EXPENSES
27. Professional Fees
28. U.S. Trustee Fees
29. Other (Attach List) 0 0
-----------------------------
30. Total Reorganization Expenses 0 0
-----------------------------
31. Total Disbursements 26,457,192 18,220,222
32. Net Cash Flow (4,601,054) 4,126,346
33. Cash-End of Month 562,207 4,688,554
</TABLE>
* Postpetition collection of customer prepetition and postpetition
receivables.
** Due to system limitations, we are not able to detail cash payments by expense
category beyond amounts listed are not readily available.
<PAGE> 11
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-4
October, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
ACCOUNTS RECEIVABLE AGING 10/5/96 11/2/96
----------------
<C> <C> <C> <C>
1. 0-30 39,382 35,549
2. 31-60 17,205 8,983
3. 61-90 3,164 2,072
4. 91+ 10,712 2,609
----------------
5. Total Accounts Receivable 70,463 49,213
6. Amount Considered Uncollectible 3,000 2,000
----------------
7. Accounts Receivable (Net) 67,463 47,213
----------------
</TABLE>
**A/R Trade is the only Accounts Receivable with aged balances.
Employee receivable, Trade-in receivable, and Other Miscellaneous receivables
are not aged.
<TABLE>
<CAPTION>
AGING OF POST-PETITION TAXES AND PAYABLES 0-30 31-60 61-90 91+
Days Days Days Days Total
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Taxes Payable
1. Federal 0 0
2. State (Sales Tax) 854,776 854,776
3. Local 0 0
4. Other (Canadian PST/GST) 27,882 27,882
-------------------------------------------------------
5. Total Taxes Payable 882,658 0 0 0 882,658
6. Accounts Payable 11,683,343 698,916 12,382,259
</TABLE>
***Accounts Payable-Vendor is the only A/P account with aged balances.
Other vendor adjustment accounts are not aged.
<TABLE>
<CAPTION>
Beginning Amount Ending
STATUS OF POST-PETITION TAXES Tax Withheld or Amount Tax
Liability Accrued Paid Liability
----------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL
1. Withholding 0 349,998 349,998 0
2. FICA-Employee 0 267,096 267,096 0
3. FICA-Employer 0 267,095 267,095 0
4. Unemployment 0 11,304 11,304 0
5. Income 0 0 0 0
6. Other (Attach List) 0 0 0 0
-------------------------------------------------
7. Total Federal Taxes 0 895,492 895,492 0
STATE AND LOCAL
8. Withholding 0 78,390 78,390 0
9. Sales 1,325,747 1,332,724 1,803,695 854,776
10. Excise 0 0 0 0
11. Unemployment 0 36,569 36,569 0
12. Real Property 0 0 0 0
13. Personal Property 0 0 0 0
14a.Other -Canadian GST 7,672 7,754 0 15,426
14b.Other -Canadian PST 6,241 6,215 0 12,456
-------------------------------------------------
15. Total State and Local 1,339,660 1,461,652 1,918,654 882,658
16. Total Taxes 1,339,660 2,357,144 2,814,146 882,658
</TABLE>
<PAGE> 12
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-5
October, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-1 1
administratively consolidated
<TABLE>
<CAPTION>
BANK RECONCILIATIONS Amount
<S> <C>
Please See Attached Schedules 4,408,569
Store Change Fund (money in store cash registers). 279,401
---------
4,687,970
</TABLE>
INVESTMENT ACCOUNTS
<TABLE>
<CAPTION>
Date of Type of Purchase Current
Bank Account Name & Number Purchase Instrument Price Value
<S> <C> <C> <C> <C>
0
No investment accounts
</TABLE>
<TABLE>
<S> <C>
Currency on hand (corporate petty cash) 584
Total Cash - End of month 4,688,554
=========
</TABLE>
<PAGE> 13
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-6
CASE NUMBER: 396-36648-SAF-11 THROUGH Month: October, 1996
396-36652-SAF-11
administratively consolidated
Payments to Insiders and Professionals
INSIDERS
<TABLE>
<CAPTION>
Total Paid
Name Salary Severance BOD Fees T&E To Date
<S> <C> <C>
1. James McCurry 33,333.34 33,333.34
2. Opal Ferraro 16,250.00 16,250.00
3. Barry R. Fehrs 8,583.34 211.36 8,794.70
4. Ron E. Freeman 11,587.50 11,587.50
5. Mike Ivanich 9,441.66 9,441.66
6. Roxanne M. Koepsell 15,833.34 10.50 15,843.84
7. Alan Bush 23,333.34 4,530.08 27,863.42
8. R. Richard Fontaine 1,500.00 1,500.00
9. Jan Michiel Hessels 0.00
10. John D. Miller 1,500.00 1,500.00
11. Thomas G. Plaskett 25,000.00 941.82 25,941.82
12. Leonard Riggio 0.00
13. W. Mitt Romney 1,500.00 1,500.00
14. Dan DeMatteo 1,500.00 1,500.00
------------------------------------------------------------------
Total Payments 118,362.52 0.00 31,000.00 5,693.76 155,056.28
</TABLE>
PROFESSIONALS
<TABLE>
<CAPTION>
Total Paid Total Incurred
Name Amt Approved Amt Paid to Date and Unpaid
<S> <C> <C> <C> <C>
None paid 0 0
As of this date, no additional invoices have been submitted 0
</TABLE>
<PAGE> 14
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-7
October, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
QUESTIONNAIRE
<TABLE>
<CAPTION>
Yes No
<S> <C>
1 Have any assets been sold or transferred outside the normal course of business this
reporting period? (See Note 1) x
- ------------------------------------------------------------------------------------------------------------
2 Have any funds been disbursed from any account other than a debtor-in-possession account? x
- ------------------------------------------------------------------------------------------------------------
3 Are any postpetition receivables (accounts, notes, or loans) due from related parties? x
- ------------------------------------------------------------------------------------------------------------
4 Have any payments been made on prepetition liabilities during this reporting period x *
- ------------------------------------------------------------------------------------------------------------
5 Have any postpetition loans been received by the debtor from any party? x **
- ------------------------------------------------------------------------------------------------------------
6 Are any postpetition payroll taxes past due? x
- ------------------------------------------------------------------------------------------------------------
7 Are any postpetition state or federal income taxes past due? x
- ------------------------------------------------------------------------------------------------------------
8 Are any postpetition real estate taxes past due? x
- ------------------------------------------------------------------------------------------------------------
9 Are any other postpetition taxes past due? x
- ------------------------------------------------------------------------------------------------------------
10 Are any amounts owed to postpetition creditors delinquent? x ***
- ------------------------------------------------------------------------------------------------------------
11 Have any prepetition taxes been paid during the reporting period? x *
- ------------------------------------------------------------------------------------------------------------
12 Are any wage payments past due? x
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Pursuant to court order, the Debtor continued to pay wages and payroll
taxes, some of which may have been prepetition. Also, per court order,
we have continued to process customer refunds, some of which may have
been prepetition. Payment was also made per court order to Western
Atlas for $75,000 and Exeter Software for $125,000.
**Foothill Capital Corporation, as Agent bank for a group of lenders,
provided DIP financing in the amount of $70,000,000 per the court order
dated October 2, 1996.
***November store rent due November 1, 1996 was delinquent 11/2/96. It has
subsequently been paid. Some A/P inventory invoices were past due also.
INSURANCE
<TABLE>
<CAPTION>
Yes No
<S> <C> <C>
1 Are worker's compensation, general liability and other necessary x
insurance coverages in effect?
2 Are all premium payments paid current? x *
3 Please itemize policies below.
</TABLE>
<TABLE>
<CAPTION>
Period Annual Amount
Type of Policy Insurance Carrier Covered amount Frequency Outstanding
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Auto-NY Atlantic Mutual Ins. 11/l/95-11/l/96 1,591 10 installments 0
Auto-VA Atlantic Mutual Ins. 11/l/95-11/l/96 1,264 10 installments 0
Auto-MA Atlantic Mutual Ins. 11/l/95-11/l/96 2,051 10 installments 0
Auto-Out of state Atlantic Mutual Ins. 11/l/95-11/l/96 3,460 10 installments 0
Auto-TX Atlantic Mutual Ins. 11/l/95-11/l/96 2,495 10 installments 0
Workers' compensation Atlantic Mutual Ins. 11/l/95-11/l/96 780,346 10 installments 0
Property Atlantic Mutual Ins. 11/l/95-11/l/96 213,713 10 installments 0
General liability Atlantic Mutual Ins. 11/l/95-11/l/96 16,144 10 installments 0
Umbrella-primary Atlantic Mutual Ins. 11/l/95-11/1/96 30,500 10 installments 0
Umbrella-excess Chubb Ins. Companies 11/l/95-11/l/96 18,000 annually 0
</TABLE>
*Interim coverage has been established from the period of 11/2/96 forward.
<PAGE> 15
List of Omitted Schedules
1. Computer Loan Repayments (from employees) (See Cash Receipts and
Disbursements)
2. Store Bank Balances (See Bank Reconciliations)
3. Bank Reconciliation Analysis, including Credit Card and Canadian
Accounts (See Bank Reconciliations)
<PAGE> 1
EXHIBIT 99.3
CASE NAME: NEOSTAR RETAIL GROUP, INC. Monthly Operating Report
(third MOR)
CASE NUMBER: 396-36648-SAF-11 THROUGH ACCRUAL BASIS
396-36652-SAF-11 Unaudited
administratively consolidated
JUDGE: Steven A. Felsenthal
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
MONTHLY OPERATING REPORT
FISCAL NOVEMBER (11/3/96-11/30/96)
In accordance with Title 28, Section 1746, of the United States Code, I declare
under penalty of perjury that I have examined the following monthly operating
report (Accrual Basis 1 through Accrual Basis 6) and the accompanying
attachments and, to the best of my knowledge, these documents are true, correct
and complete except for those changes as described in Note 1. Declaration of
the preparer (other than responsible party) is based on all information of
which preparer has any knowledge.
RESPONSIBLE PARTY:
/s/ OPAL P. FERRARO CHIEF FINANCIAL OFFICER
- --------------------------------------- ----------------------------------
Original Signature of Responsible Party Title
OPAL P. FERRARO 2/11/97
- --------------------------------------- ----------------------------------
Printed name of Responsible Party Date
PREPARER:
/s/ AMY WESTBROOK FORMER ASSISTANT CONTROLLER
- --------------------------------------- ----------------------------------
Original Signature of Preparer Title
AMY WESTBROOK 2/11/97
- --------------------------------------- ----------------------------------
Printed name of Preparer Date
<PAGE> 2
Note 1
The balance sheet, income statement and schedules contained herein are as of
November 30, 1996. On November 27, 1996, pursuant to court order, the Debtor
sold substantially all of its assets to Software Acquisition Company, LLC. The
assets and liabilities have been adjusted to reflect the transaction, however,
certain adjustments will be recorded in future Monthly Operating Reports as
final reconciliations are completed.
<PAGE> 3
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
Comparative Balance Sheet
<TABLE>
<CAPTION>
10/5/96 11/2/96 11/30/96
------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. Unrestricted Cash 562,207 4,688,554 2,760,653
2. Restricted Cash 0 0 58,500,000
------------------------------------------------
3. Total Cash 562,207 4,688,554 61,260,653
4.(a) Accounts Receivable-Trade 67,463 47,213 25,225
4.(b) Other Accounts Receivable 3,145,047 3,399,095 2,659,246
5. Inventory 79,876,315 85,041,648 0
6. Notes Receivable 0 0 0
7. Prepaid Expenses (rent, store supplies......) 9,369,114 8,011,269 550,000
8. Other (Attach List) 0 0 0
------------------------------------------------
9. Total Current Assets 93,020,146 101,187,779 64,495,124
10. Property Plant & Equipment 122,950,706 123,062,244 14,648,494
11. Less Accumulated Depreciation (61,290,805) (62,376,883) (14,648,494)
------------------------------------------------
12. Net Property, Plant & Equipment 61,659,901 60,685,361 0
13. Due from Insiders 0 0 0
14. Other Assets Net of Amortization (Attach List) 103,026 102,492 0
15. Other (Attach List) 609,154 607,532 416,041
------------------------------------------------
16. TOTAL ASSETS 155,392,227 162,583,164 64,911,165
POST-PETITION LIABILITIES
17.(a) Accounts Payable-Vendor 2,462,545 12,382,259 15,763,457
17.(b) Miscellaneous Accounts Payable-Net 20,499 4,296,691 1,236,635
18. Taxes Payable 1,339,660 882,658 371,903
19. Notes Payable 0 0 0
20. Accrued Professional Fees 482,641 482,641 482,641
21. Secured Debt 40,414,736 43,137,721 36,826,920
22. Other (Attach List) 7,996,877 8,021,427 2,641,442
------------------------------------------------
23. Total Post-Petition Liabilities 52,716,958 69,203,397 57,322,998
PRE-PETITION LIABILITIES
24. Secured Debt 3,220,000 3,020,000 3,020,000*
25. Priority Debt 1,862,128 1,662,158 1,576,147
26. Unsecured Debt 67,692,993 66,349,660 62,508,227**
27. Other (Attach List) 7,648,468 7,625,175 21,893,251
------------------------------------------------
28. Total Pre-Petition Liabilities 80,423,589 78,656,992 88,997,625
------------------------------------------------
29. TOTAL LIABILITIES 133,140,547 147,860,389 146,320,623
EQUITY
30. Pre-Petition Owners' Equity 26,322,809 26,322,809 26,322,809
31. Post-Petition Cumulative Profit (Loss) (4,071,128) (11,600,034) (107,732,267)
32. Direct Charges to Equity (attach exp) 0 0 0
------------------------------------------------
33. TOTAL EQUITY 22,251,680 14,722,775 (81,409,458)
------------------------------------------------
34. TOTAL LIABILITIES & EQUITY 155,392,227 162,583,164 64,911,165
</TABLE>
* Payment made per court order
**Certain property taxes are included in this amount. After reconciliation and
review, amount will be reclassed to line 25.
<PAGE> 4
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
10/5/96 11/2/96 11/30/96
------------------------------------------------
<S> <C> <C> <C>
14. Other Assets Net of Amortization
Organization Costs 160,162 160,162 0
Accumulated Amortization-Organization Costs (57,136) (57,671) 0
------------------------------------------------
103,026 102,492 0*
</TABLE>
*Balance reduced as a result of sale of all operating assets on November 27,
1997
<PAGE> 5
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
10/5/96 11/2/96 11/30/96
--------------------------------------------------
<S> <C> <C> <C>
15. Other Assets
Utility Deposits 86,476 84,855 32,974
Lease Deposits 136,916 136,916 0
Other Deposits 385,762 385,762 383,067
--------------------------------------------------
609,154 607,532 416,041
</TABLE>
<PAGE> 6
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
22. Other Post-Petition Liabilities 10/5/96 11/2/96 11/30/96
------------------------------------------------
<S> <C> <C> <C>
Miscellaneous 399,565 592,247 58,296
Payroll expense accruals 1,104,362 942,865 530,891 (2)
Store closing expense accruals 235,845 310,338 0
Freight expense accruals 308,178 520,080 50,912
Accrued interest expense 391,669 24,875 428,503
Accrued credit card fees/accrued NSF check expense 209,565 34,808 64,449
Customer refund/gift certificate/store credit liability 2,814,351 2,967,696 5,099 (1)(4)
Insurance claims liability 1,056,742 1,149,557 462,334 (2)
Severance and related expense accrual 631,437 629,042 257,485 (3)
Purchase price adjustment 775,966 (5)
Employee vacation accrual 845,163 845,162 0 (2)(4)
Deferred lease payment accrual 3,687 6,438
Accrued overage rent 1,069 1,069
------------------------------------------------
7,996,877 8,021,427 2,641,442
</TABLE>
(1) Per court order, we are continuing to honor and process customer refunds,
gift certificates and store credits, some of which may be prepetition. We
are unable to differentiate between pre and postpetition, so we classified
entire liability as postpetition.
(2) Per court order, we continued to provide benefits such as vacation and
medical insurance to employees until the sale of assets on November 27. We
therefore classified this liability as postpetition. Reduction in
liability at November 30, 1996 is due, in large part, to a change in
estimate.
(3) Includes accrual of $257,485 owed under court approved retention
agreements. Of this amount, payment of $153,577 is subject to further
order of the court.
(4) This liability was reduced as a result of the assumption of certain
liabilities by Software Acquisition Company, LLC on November 27, 1996 as
part of the sale of all operating assets.
(5) Purchase price adjustment owed to Software Acquisition Company, LLC due to
final inventory count totaling less than estimate paid on November 27.
<PAGE> 7
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-1
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
27. Other Pre-Petition Liabilities 10/5/96 11/2/96 11/30/96
------------------------------------------------
<S> <C> <C> <C>
Accrued Percentage Rent 446,578 423,355 0 **
Severance Accrual 153,219 153,219 0 **
Misc including reserve for uncollectible mkting funds 1,853,601 1,853,530 0 **
Deferred Lease Payment Accrual 5,098,300 5,098,301 0 **
Store closing expense accruals 96,770 96,770 0 **
Canadian rent due-September 23,135
Estimate of unclaimed property reserve 99,473
Lease rejection claim 21,770,643
Accrued interest expense
Accrued credit card fees/accrued NSF check expense
Customer Refund/Gift
Cert/Store Credit Liability*
Employee Vacation Accrual*
Insurance Claims Liability*
Payroll expense accruals*
------------------------------------------------
7,648,468 7,625,175 21,893,251
</TABLE>
* These items carried forward as postpetition obligations per court order.
**These accruals were reduced as a result of the sale of all operating assets
on November 27, 1996.
<PAGE> 8
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-2
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
Income Statement
<TABLE>
<CAPTION>
11/2/96 11/30/96
---------------------------
<S> <C> <C>
REVENUES
1. Gross Sales 21,312,006 14,574,914 *
2. Less Returns & Discounts 0 0
---------------------------
3. Net Sales 21,312,006 14,574,914
COST OF GOODS SOLD
4. Cost of Sales 16,056,807 10,409,268
5. Freight 494,499 373,018
6. Selling Fees 103,406 323,110
---------------------------
7. Total Cost of Goods Sold 16,654,712 11,105,396
---------------------------
8. Gross Profit 4,657,294 3,469,518
OPERATING EXPENSES
9. Store Operating Expenses 9,027,162 7,827,268
10. General & Administrative 1,254,601 1,160,165
11. Total Operating Expenses 10,281,763 8,987,433
---------------------------
12. Income before non-operating income and expenses (5,624,469) (5,517,915)
OTHER INCOME & EXPENSES
13. Non-Operating Income (Attach List) 0 0
14. Non-Operating Expense (Attach List) 0 0
15. Interest Expense (and associated loan fees) 474,509 1,613,101 **
16. Depreciation 1,087,382 1,123,569
17. Amortization 0 0
18. Other (Attach List) 0 87,871,648
---------------------------
19. Net Other Income and Expenses 1,561,892 90,608,318
REORGANIZATION EXPENSES
20. Professional Fees 0 0
21. U.S. Trustee Fees 0 6,000
22. Other (Attach List) 342,545 0
23. Total Reorganization Expenses 342,545 6,000
24. Income Tax 0 0
---------------------------
25. Net Profit (Loss) (7,528,906) (96,132,233)
</TABLE>
* The POS register system transmits sales already net of discounts and returns.
**Includes bank fees of $1,209,221 originally recorded in September, 1996 to be
amortized over the life of the loan. Upon the sale of all operating assets on
November 27, 1996 and the subsequent termination of the loan agreement, the
unamortized portion of the fees was recorded as expense.
<PAGE> 9
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-2
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
Line 18: Other Income and Expense
<TABLE>
<CAPTION>
<S> <C>
Lease Rejection Claim 21,770,643
Loss on Sale of Inventory 40,594,547
Loss on Sale of Leasehold Improvements and Equipment 37,100,679
Assumption of certain liabilities and reduction in accruals for future (11,594,221)
liabilities as a result of the sale of assets on November 27
-------------
87,871,648
</TABLE>
<PAGE> 10
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-2
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
11/2/96 11/30/96
-----------------------------
<S> <C> <C>
24. Other Reorganization Expenses
Accrual of estimated outstanding expenses 342,545 *
---------------
342,545
</TABLE>
*Accrual of professional fees will be reflected in the December and January
reports.
<PAGE> 11
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-3
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
CASH RECEIPTS AND DISBURSEMENTS
<TABLE>
<CAPTION>
11/2/96 11/30/96
---------------------------
<S> <C> <C>
1. Cash-Beginning of Month 562,207 4,688,554
RECEIPTS FROM OPERATIONS
2. Cash Sales 21,312,006 14,574,914
COLLECTION OF ACCOUNTS RECEIVABLE
3. Prepetition 0 0
4. Postpetition 1,012,987 33,907
---------------------------
5. Total Operating Receipts 22,324,993 14,608,821
NON-OPERATING RECEIPTS
6. Loans and Advances (Attach List) 21,575 19,411
7. Sale of Assets 58,500,000 ***
8. Other (Attach List)
---------------------------
9. Total Non-Operating Receipts 21,575 58,519,411
---------------------------
10. Total Receipts 22,346,568 73,128,232
---------------------------
11. Total Cash Available 22,908,775 77,816,786
OPERATING DISBURSEMENTS
12. Net Payroll 2,814,707 2,783,724
13. Payroll Taxes Paid 1,010,451 1,025,332
14. Sales, Use & Other Taxes Paid 1,803,695 1,436,107
15. Secured/Rental/Leases 0 3,951,721
16. Utilities
17. Insurance
18. Inventory Purchases 12,127,982 0
19. Vehicle Expenses
20. Travel
21. Entertainment
22. Repairs & Maintenance
23. Supplies
24. Advertising
25. Other (See Note) 463,386 1,042,448 **
25a.Reduction in Bank Loan Balance 6,310,801
---------------------------
26. Total Operating Disbursements 18,220,222 16,550,133
REORGANIZATION EXPENSES
27. Professional Fees
28. U.S. Trustee Fees 6,000
29. Other (Attach List) 0 0
---------------------------
30. Total Reorganization Expenses 0 6,000
---------------------------
31. Total Disbursements 18,220,222 16,556,133
32. Net Cash Flow 4,126,346 56,572,099
33. Cash-End of Month 4,688,554 61,260,653
</TABLE>
* Postpetition collection of customer prepetition and postpetition receivables.
** Due to system limitations, we are not able to detail cash payments by expense
category beyond amounts listed are not readily available.
***Cash received for sale of assets on November 27, 1996.
<PAGE> 12
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-4
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
Accounts Receivable Aging** 10/5/96 11/2/96 11/30/96
--------------------------------
<S> <C> <C> <C>
1. 0-30 39,382 35,549 11,906
2. 31-60 17,205 8,983 10,917
3. 61-90 3,164 2,072 2,619
4. 91+ 10,712 2,609 1,783
--------------------------------
5. Total Accounts Receivable 70,463 49,213 27,225
6. Amount Considered Uncollectible 3,000 2,000 2,000
--------------------------------
7. Accounts Receivable (Net) 67,463 47,213 25,225
--------------------------------
</TABLE>
** A/R Trade is the only Accounts Receivable with aged balances.
Employee receivable, Trade-in receivable, and Other Miscellaneous
receivables are not aged.
<TABLE>
<CAPTION>
AGING OF POST-PETITION TAXES AND PAYABLES 0-30 31-60 61-90 91+
Days Days Days Days Total
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Taxes Payable
1. Federal 0 0
2. State (Sales Tax) 332,960 332,960
3. Local 0 0
4. Other (Canadian PST/GST) 38,943 38,943
----------------------------------------------------------------
5. Total Taxes Payable 371,903 0 0 0 371,903
6. Accounts Payable *** 753,839 14,494,981 514,637 15,763,457
</TABLE>
***Accounts Payable-Vendor is the only A/P account with aged balances.
Other vendor adjustment accounts are not aged.
<TABLE>
<CAPTION>
Beginning Amount Ending
STATUS OF POST-PETITION TAXES Tax Withheld or Amount Tax
Liability Accrued Paid Liability
FEDERAL
<S> <C> <C> <C> <C>
1. Withholding 0 371,872 371,872 0
2. FICA-Employee 0 263,440 263,440 0
3. FICA-Employer 0 263,440 263,440 0
4. Unemployment 0 11,461 11,461 0
5. Income 0 0 0 0
6. Other (Attach List) 0 0 0 0
-------------------------------------------------------
7. Total Federal Taxes 0 910,213 910,213 0
STATE AND LOCAL
8. Withholding 0 79,953 79,953 0
9. Sales 854,776 914,291 1,436,107 332,960
10. Excise 0 0 0 0
11. Unemployment 0 35,166 35,166 0
12. Real Property 0 0 0 0
13. Personal Property 0 0 0 0
14a.Other-Canadian GST 15,426 6,121 0 21,547
14b.Other-Canadian PST 12,456 4,940 0 17,396
-------------------------------------------------------
15. Total State and Local 882,658 1,040,471 1,551,226 371,903
I6. Total Taxes 882,658 1,950,684 2,461,439 371,903
</TABLE>
<PAGE> 13
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-5
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
BANK RECONCILIATIONS Amount
<S> <C>
Please See Attached Schedules 2,635,573
Cash on sale of assets 58,500,000
Store Change Fund (money in store cash registers) 125,080
------------
61,260,653
</TABLE>
INVESTMENT ACCOUNTS
<TABLE>
<CAPTION>
Date of Type of Purchase Current
Bank Account Name & Number Purchase Instrument Price Value
<S> <C>
0
NO INVESTMENT ACCOUNTS
Currency on hand (corporate petty cash) 0
Total Cash - End of month 61,260,653
==========
61,260,653
</TABLE>
<PAGE> 14
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-6
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
PAYMENTS TO INSIDERS AND PROFESSIONALS
Insiders
<TABLE>
<CAPTION>
Total Paid
Name Salary Severance BOD Fees T&E This Reporting Period
<S> <C> <C> <C> <C> <C>
1. James McCurry 33,333.34 33,333.34
2. Opal Ferraro 16,250.00 16,250.00
3. Barry R. Fehrs 4,233.00 25,750.02 29,983.02
4. Ron E. Freeman 11,587.50 11,587.50
5. Mike Ivanich 4,720.83 4,720.83
6. Roxanne M. Koepsell 7,916.67 7,916.67
7. Alan Bush 23,333.34 776.48 24,109.82
8. R. Richard Fontaine 0.00
9. Jan Michiel Hessels 0.00
10. John D. Miller 0.00
11. Thomas G. Plaskett 25,000.00 25,000.00
12. Leonard Riggio 0.00
13. W. Mitt Romney 0.00
14. Dan DeMatteo 0.00
----------------------------------------------------------------------
Total Payments 101,374.68 25,750.02 25,000.00 776.48 152,901.18
</TABLE>
Professionals
<TABLE>
<CAPTION>
Total Paid Total Incurred
Name Amt Approved Amt Paid to Date and Unpaid
<S> <C> <C> <C>
None paid 0 0 0
</TABLE>
As of November 30, no additional invoices have been submitted. Fee applications
submitted in January, 1997 will be reflected on future Monthly Operating
Reports.
<PAGE> 15
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-7
November, 1996
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
QUESTIONNAIRE
<TABLE>
<CAPTION>
Yes No
<S> <C> <C>
1 Have any assets been sold or transferred outside the normal course of business this
reporting period? (See Note 1) x
- --------------------------------------------------------------------------------------------------------------------------
2 Have any funds been disbursed from any account other than a debtor-in-possession account? x
- --------------------------------------------------------------------------------------------------------------------------
3 Are any postpetition receivables (accounts, notes, or loans) due from related parties? x
- --------------------------------------------------------------------------------------------------------------------------
4 Have any payments been made on prepetition liabilities during this reporting period? x *
- --------------------------------------------------------------------------------------------------------------------------
5 Have any postpetition loans been received by the debtor from any party? x
- --------------------------------------------------------------------------------------------------------------------------
6 Are any postpetition payroll taxes past due? x
- --------------------------------------------------------------------------------------------------------------------------
7 Are any postpetition state or federal income taxes past due? x
- --------------------------------------------------------------------------------------------------------------------------
8 Are any postpetition real estate taxes past due? x
- --------------------------------------------------------------------------------------------------------------------------
9 Are any other postpetition taxes past due? x
- --------------------------------------------------------------------------------------------------------------------------
10 Are any amounts owed to postpetition creditors delinquent? x **
- --------------------------------------------------------------------------------------------------------------------------
11 Have any prepetition taxes been paid during the reporting period? x *
- --------------------------------------------------------------------------------------------------------------------------
12 Are any wage payments past due? x
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Pursuant to court order, the Debtor continued to pay wages and payroll taxes,
some of which may have been prepetition. Also, per court order, we have
continued to process customer refunds, some of which may have been
prepetition.
**November store rent due November 1, 1996 was delinquent 11/2/96. It has
subsequently been paid. Some A/P inventory invoices were past due also. Many
postpetition balances are delinquent pending payment per further order of the
court.
INSURANCE
<TABLE>
Yes No
<S> <C> <C>
1 Are workers compensation, general liability and other necessary insurance coverages in effect? x
2 Are all premium payments paid current? x *
3 Please itemize policies below.
</TABLE>
<TABLE>
<CAPTION>
Period Annual Amount
Type of Policy Insurance Carrier Covered amount Frequency Outstanding
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Auto-NY Atlantic Mutual Ins. 11/l/95-11/l/96 1,591 10 installments 0
Auto-VA Atlantic Mutual Ins. 11/l/95-11/l/96 1,264 10 installments 0
Auto-MA Atlantic Mutual Ins. 11/l/95-11/l/96 2,051 10 installments 0
Auto-Out of state Atlantic Mutual Ins. 11/l/95-11/l/96 3,460 10 installments 0
Auto-TX Atlantic Mutual Ins. 11/l/95-11/l/96 2,495 10 installments 0
Workers' compensation Atlantic Mutual Ins. 11/l/95-11/l/96 780,346 10 installments 0
Property Atlantic Mutual Ins. 11/l/95-11/l/96 213,713 10 installments 0
General liability Atlantic Mutual Ins. 11/l/95-11/l/96 16,144 10 installments 0
Umbrella-primary Atlantic Mutual Ins. 11/l/95-11/l/96 30,500 10 installments 0
Umbrella-excess Chubb Ins. Companies 11/l/95-11/l/96 18,000 annually 0
</TABLE>
*Interim coverage was established for the period of 11/2/96 through 11/26/96.
Subsequent to the sale of assets on November 26, the insurance policies were
cancelled.
<PAGE> 16
List of Omitted Schedules
1. Employee Loan Payroll Deductions Received Postpetition (See Cash
Receipts and Disbursements)
2. Store Bank Balances, including Credit Card and Canadian Accounts (See
Bank Reconciliations)
3. Bank Reconciliation Analysis (See Bank Reconciliations)
<PAGE> 1
EXHIBIT 99.4
CASE NAME: NEOSTAR RETAIL GROUP, INC. Monthly Operating Report
(Fourth MOR)
CASE NUMBER: 396-36648-SAF-11 THROUGH ACCRUAL BASIS
396-36652-SAF-11 Unaudited
administratively consolidated
JUDGE: Steven A. Felsenthal
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
MONTHLY OPERATING REPORT
FISCAL DECEMBER/JANUARY (12/l/96-2/l/97)
In accordance with Title 28, Section 1746, of the United States Code, I declare
under penalty of perjury that I have examined the following monthly operating
report (Accrual Basis 1 through Accrual Basis 6) and the accompanying
attachments and, to the best of my knowledge, these documents are true, correct
and complete. Declaration of the preparer (other than responsible party) is
based on all information of which preparer has any knowledge.
Note: The Income Statement (AB-2), the Cash Receipts and Disbursements Schedule
(AB-3) and related supporting schedules are for the two-month period ended
February 1, 1997.
RESPONSIBLE PARTY:
/s/ OPAL FERRARO CHIEF FINANCIAL OFFICER
- ---------------------------------------- ---------------------------------
Original Signature of Responsible Party Title
OPAL P. FERRARO 6/16/97
- ---------------------------------------- ---------------------------------
Printed name of Responsible Party Date
PREPARER:
/s/ AMY WESTBROOK FORMER ASSISTANT CONTROLLER
- ---------------------------------------- ---------------------------------
Original Signature of Preparer Title
AMY WESTBROOK 6/16/97
- ---------------------------------------- ---------------------------------
Printed name of Preparer Date
<PAGE> 2
Accrual Basis-1
CASE NAME: NEOSTAR RETAIL GROUP, INC. January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
Comparative Balance Sheet
<TABLE>
<CAPTION>
11/2/96 11/30/96 2/l/97
--------------------------------------------
ASSETS
<C> <C> <C> <C>
1. Unrestricted Cash 4,688,554 2,760,653 17,302,261
2. Restricted Cash 0 58,500,000
--------------------------------------------
3. Total Cash 4,688,554 61,260,653 17,302,261
4.(a) Accounts Receivable-Trade 47,213 25,225 2,122
4.(b) Other Accounts Receivable 3,399,095 2,659,246 4,216,715
5. Inventory 85,041,648 0 0
6. Notes Receivable 0 0 0
7. Prepaid Expenses (rent, store supplies ...) 8,011,269 550,000 0
8. Other (Attach List) 0 0 0
--------------------------------------------
9. Total Current Assets 101,187,779 64,495,124 21,521,098
10. Property Plant & Equipment 123,062,244 14,648,494 0
11. Less Accumulated Depreciation (62,376,883) (14,648,494) 0
--------------------------------------------
12. Net Property, Plant & Equipment 60,685,361 0 0
13. Due from Insiders 0 0 0
14. Other Assets Net of Amortization (Attach List) 102,492 0 0
15. Other (Attach List) 607,532 416,041 239,833
--------------------------------------------
16. TOTAL ASSETS 162,583,164 64,911,165 21,760,931
POST-PETITION LIABILITIES
17.(a) Accounts Payable-Vendor 12,382,259 15,763,457 12,765,597
17.(b) Miscellaneous Accounts Payable-Net 4,296,691 1,236,635 0
18. Taxes Payable 882,658 371,903 0
19. Notes Payable 0 0 0
20. Accrued Professional Fees 482,641 482,641 1,091,466
21. Secured Debt 43,137,721 36,826,920 0
22. Other (Attach List) 8,021,427 2,641,442 1,224,709
--------------------------------------------
23. Total Post-Petition Liabilities 69,203,397 57,322,998 15,081,772
PRE-PETITION LIABILITIES
24. Secured Debt 3,020,000 3,020,000 3,020,000
25. Priority Debt 1,662,158 1,576,147 1,759,686
26. Unsecured Debt 66,349,660 62,508,227 63,340,857*
27. Other (Attach List) 7,625,175 21,893,251 20,226,294
--------------------------------------------
28. Total Pre-Petition Liabilities 78,656,992 88,997,625 88,346,837
--------------------------------------------
29. TOTAL LIABILITIES 147,860,389 146,320,623 103,428,609
EQUITY
30. Pre-Petition Owners' Equity 26,322,809 26,322,809 26,322,809
31. Post-Petition Cumulative Profit (Loss) (11,600,034) (107,732,267) (107,990,487)
32. Direct Charges to Equity (attach exp) 0 0 0
--------------------------------------------
33. TOTAL EQUITY 14,722,775 (81,409,458) (81,667,678)
--------------------------------------------
34. TOTAL LIABILITIES & EQUITY 162,583,164 64,911,165 21,760,931
</TABLE>
*Certain property taxes are included in this amount.
<PAGE> 3
Accrual Basis-1
CASE NAME: NEOSTAR RETAIL GROUP, INC. January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
11/2/96 11/30/96 2/l/97
-------------------------------
<S> <C> <C> <C>
14. Other Assets Net of Amortization
Organization Costs 160,162 0
Accumulated Amortization-Organization Costs (57,671) 0
-------------------------------
102,492 0 0 *
</TABLE>
*Balance reduced as a result of sale of all operating assets on
November 27, 1997
<PAGE> 4
Accrual Basis-1
CASE NAME: NEOSTAR RETAIL GROUP, INC. January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
11/2/96 11/30/96 2/l/97
-------------------------------
<S> <C> <C> <C>
15. Other Assets
Utility Deposits 84,855 32,974 34,348
Lease Deposits 136,916 0 0
Other Deposits 385,762 383,067 205,485
-------------------------------
607,532 416,041 239,833
</TABLE>
<PAGE> 5
Accrual Basis-1
CASE NAME: NEOSTAR RETAIL GROUP, INC. January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
11/2/96 11/30/96 2/l/97
----------------------------------
<S> <C> <C> <C>
22. Other Post-Petition Liabilities
Miscellaneous 592,247 58,296 130,744
Payroll expense accruals 942,865 530,891 111,252(2)
Store closing expense accruals 310,338 0 0
Freight expense accruals 520,080 50,912 0
Accrued interest expense 24,875 428,503 0
Accrued credit card fees/accrued NSF check expense 34,808 64,449 0
Customer refund/gift certificate/store credit liability 2,967,696 5,099 0(1)(3)
Insurance claims liability 1,149,557 462,334 111,833(2)
Severance and related expense accrual 629,042 257,485 0(3)
Purchase price adjustment 775,966 0(4)
Employee vacation accrual 845,162 0 0(3)
Deferred lease payment accrual 3,687 6,438 0
Accrued overage rent 1,069 1,069 0
Allowed brokers fee and November insurance 117,429
Estimated expenses to complete liquidation 268,451
Allowed additional bank fees 485,000
----------------------------------
8,021,427 2,641,442 1,224,709
</TABLE>
(1) Per court order, we continued to honor and process customer refunds, gift
certificates and store credits, some of which may have been prepetition. We
were unable to differentiate between pre and postpetition, so we classified
entire liability as postpetition.
(2) Per court order, we continued to provide benefits such as vacation and
medical insurance to employees until the sale of assets on November 27. We
therefore classified this liability as postpetition. Reduction in liability
at November 30, 1996 is due, in large part, to a change in estimate.
Remaining liability at February 1, 1997 consists of allowed fourth quarter
employer match for the 401-k plan, unpaid December salaries and remaining
approved but unpaid employee medical claims.
(3) This liability was reduced as a result of the assumption of certain
liabilities by Software Acquisition Company, LLC ("SAC") on November 27,
1996 as part of the sale of all operating assets.
(4) Purchase price adjustment owed to SAC due to final inventory count
totaling less than estimate paid on November 27. Final adjustment netted
against receivable from SAC as of February 1, 1997.
<PAGE> 6
Accrual Basis-1
CASE NAME: NEOSTAR RETAIL GROUP, INC. January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
27. Other Pre-Petition Liabilities 11/2/96 11/30/96 2/l/97
-------------------------------------
<S> <C> <C> <C>
Accrued Percentage Rent 423,355 0 0 *
Severance Accrual 153,219 0 0 *
Misc including reserve for uncollectible mkting funds 1,853,530 0 0 *
Deferred Lease Payment Accrual 5,098,301 0 0 *
Store closing expense accruals 96,770 0 0 *
Canadian rent due-September 23,135 23,135
Estimate of unclaimed property reserve 99,473 99,473
Lease rejection claim 21,770,643 20,103,686 **
-------------------------------------
7,625,175 21,893,251 20,226,294
</TABLE>
* These accruals were reduced as a result of the sale of all operating assets on
November 27, 1996.
**The lease rejection claim estimate was reduced following further analysis.
<PAGE> 7
Accrual Basis-2
CASE NAME: NEOSTAR RETAIL GROUP, INC. January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
Income Statement Two Months
Ended
11/2/96 11/30/96 2/l/97 (1)
-------------------------------------------
<C> <C> <C> <C>
REVENUES
1. Gross Sales 21,312,006 14,574,914 0 *
2. Less Returns & Discounts 0 0 0
-------------------------------------------
3. Net Sales 21,312,006 14,574,914 0
COST OF GOODS SOLD
4. Cost of Sales 16,056,807 10,409,268 0
5. Freight 494,499 373,018 94,945
6. Selling Fees 103,406 323,110 177,550
-------------------------------------------
7. Total Cost of Goods Sold 16,654,712 11,105,396 272,495
-------------------------------------------
8. Gross Profit 4,657,294 3,469,518 (272,495)
OPERATING EXPENSES
9. Store Operating Expenses 9,027,162 7,827,268 1,096,785
10. General & Administrative 1,254,601 1,160,165 1,394,378
11. Total Operating Expenses 10,281,763 8,987,433 2,491,163
-------------------------------------------
12. Income before non-operating income and expenses (5,624,469) (5,517,915) (2,763,658)
OTHER INCOME & EXPENSES
13. Non-Operating Income (interest Income) 0 0 (207,884)
14. Non-Operating Expense (Attach List) 0 0 0
15. Interest Expense (and associated loan fees) 474,509 1,613,101 760,592 **
16. Depreciation 1,087,382 1,123,569 0
17. Amortization 0 0 0
18. Other (See Note 1.) 0 87,871,648 (1,707,314)
-------------------------------------------
19. Net Other Income and Expenses 1,561,892 90,608,318 (1,154,606)
REORGANIZATION EXPENSES
20. Professional Fees 0 0 1,164,792
21. U.S. Trustee Fees 0 6,000 11,000
22. Other (Attach List) 342,545 0 0
23. Total Reorganization Expenses 342,545 6,000 1,175,792
24. Income Tax (Benefit) 0 0 (2,526,624)
-------------------------------------------
25. Net Profit (Loss) (7,528,906) (96,132,233) (258,220)
</TABLE>
(1) See Note 1 to the Income Statement
* The POS register system transmits sales already net of discounts and returns.
** Fees for November include $1,209,221 originally recorded in September, 1996
to be amortized over the life of the loan. Upon the sale of all operating
assets on November 27, 1996 and the subsequent termination of the loan
agreement, the unamortized portion of the fees was recorded as expense.
Additional allowed fees and expenses were recorded as expense in the two
month period ended February 1, 1997.
<PAGE> 8
Note 1. to Income Statement
Cost of Goods Sold (lines 5. and 6.) represents late bills for freight, check
processing and returned checks that were not accrued in the November
statements. Store Operating Expenses (line 9.) consist primarily of various
expense accruals and adjustments which related to operations prior to November
27, but were not accrued in the November statements. General and Administrative
Expenses (line 10) include $450,000 for directors' and officers' insurance for
1997 and future years, $471,000 for various state tax assessments and $268,000
for various costs for the liquidation of the estate in 1997.
The reduction in Other Expense, line 18. is primarily due to an adjustment to
the accrual for the lease rejection liability. Additionally, other accruals and
liabilities were adjusted as a result of continued analysis following the sale
of all operating assets on November 27, 1996.
<PAGE> 9
Accrual Basis-2
CASE NAME: NEOSTAR RETAIL GROUP, INC. January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
11/2/96 11/30/96 2/l/97
----------------------------
<S> <C> <C> <C>
22. Other Reorganization Expenses
Accrual of estimated outstanding expenses 342,545
----------------------------
342,545 0 0
</TABLE>
<PAGE> 10
Accrual Basis-3
CASE NAME: NEOSTAR RETAIL GROUP, INC. January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
CASH RECEIPTS AND DISBURSEMENTS Two Months
Ended
11/2/96 11/30/96 2/l/97
--------------------------------------
<C> <C> <C> <C>
1. Cash-Beginning of Month 562,207 4,688,554 61,260,653
RECEIPTS FROM OPERATIONS
2. Cash Sales 21,312,006 14,574,914 0
Collection of Accounts Receivable
3. Prepetition 0 0
4. Postpetition 1,012,987 33,907
--------------------------------------
5. Total Operating Receipts 22,324,993 14,608,821 0
NON-OPERATING RECEIPTS
6. Loans and Advances (Attach List) 21,575 19,411 23,103
7. Sale of Assets 58,500,000 **
8. Other (Interest Income) 207,884
--------------------------------------
9. Total Non-Operating Receipts 21,575 58,519,411 230,987
--------------------------------------
10. Total Receipts 22,346,568 73,128,232 230,987
--------------------------------------
11. Total Cash Available 22,908,775 77,816,786 61,491,640
OPERATING DISBURSEMENTS
12. Net Payroll 2,814,707 2,783,724 46,843
13. Payroll Taxes Paid 1,010,451 1,025,332 26,246
14. Sales, Use & Other Taxes Paid 1,803,695 1,436,107 402,333
15. Secured/Rental/Leases 0 3,951,721
16. Utilities
17. Insurance 849,931 ***
18. Inventory Purchases 12,127,982 0 0
18a Partial payment of stipulated claims 4,394,399
19. Vehicle Expenses
20. Travel
21. Entertainment
22. Repairs & Maintenance
23. Supplies
24. Advertising
25. Other (See Note) 463,386 1,042,448 (366,200) *
25a.Reduction in Bank Loan Balance and Interest 6,310,801 37,516,359
25b.Net receivable from SAC 1,308,468
--------------------------------------
26. Total Operating Disbursements 18,220,222 16,550,133 44,178,379
REORGANIZATION EXPENSES
27. Professional Fees
28. U.S. Trustee Fees 6,000 11,000
29. Other (Attach List) 0 0 0
--------------------------------------
30. Total Reorganization Expenses 0 6,000 11,000
--------------------------------------
31. Total Disbursements 18,220,222 16,556,133 44,189,379
32. Net Cash Flow 4,126,346 56,572,099 (43,958,392)
33. Cash-End of Month 4,688,554 61,260,653 17,302,261
</TABLE>
* Due to system limitations, we are not able to detail cash payments by expense
category beyond amounts listed because amounts are not readily available. At
February 1, 1997 this includes $550,573 of checks listed as outstanding at
November month end but were subsequently voided.
** Cash received for sale of assets on November 27, 1996.
***Consists of $450,000 for directors' and officers' liability insurance and
approved payments for employee medical claims incurred prior to November 27,
1996.
<PAGE> 11
Accrual Basis-4
CASE NAME: NEOSTAR RETAIL GROUP, INC. January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
ACCOUNTS RECEIVABLE AGING** 11/2/96 11/30/96 2/1/97
-------------------------
<C> <C> <C> <C> <C>
1. 0-30 35,549 11,906
2. 31-60 8,983 10,917
3. 61-90 2,072 2,619 1,314
4. 91+ 2,609 1,783 8,139
-------------------------
5. Total Accounts Receivable 49,213 27,225 9,453
6. Amount Considered Uncollectible 2,000 2,000 7,330
-------------------------
7. Accounts Receivable (Net) 47,213 25,225 2,122
-------------------------
</TABLE>
**A/R Trade is the only Accounts Receivable with aged balances.
Employee receivable, Trade-in receivable, and Other Miscellaneous
receivables are not aged.
<TABLE>
<CAPTION>
AGING OF POST-PETITION TAXES AND PAYABLES 0-30 31-60 61-90 91+
Days Days Days Days Total
-------------------------------------------
<C> <C> <C> <C> <C> <C>
Taxes Payable
1. Federal 0 0
2. State (Sales Tax) 0 0
3. Local 0 0
4. Other (Canadian PST/GST) 0 0
-------------------------------------------
5. Total Taxes Payable 0 0 0 0 0
6. Accounts Payable*** 753,839 14,494,981 514,637 15,763,457
</TABLE>
***Accounts Payable-Vendor is the only A/P account with aged balances.
Other vendor adjustment accounts are not aged.
<TABLE>
<CAPTION>
Beginning Amount Ending
STATUS OF POST-PETITION TAXES Tax Withheld or Amount Tax
Liability Accrued Paid Liability
<C> <C> <C> <C> <C>
FEDERAL
1. Withholding 0 22,168 22,168 0
2. FICA-Employee 0 2,039 2,039 0
3. FICA-Employer 0 2,039 2,039 0
4. Unemployment 0 0 0 0
5. Income 0 0 0 0
6. Other (Attach List) 0 0 0 0
----------------------------------------------
7. Total Federal Taxes 0 26,246 26,246 0
STATE AND LOCAL
8. Withholding 0 0 0 0
9. Sales 332,960 0 332,960 0
10. Excise 0 0 0 0
11. Unemployment 0 0 0 0
12. Real Property 0 0 0 0
13. Personal Property 0 0 0 0
14a.Other -Canadian GST 21,547 0 21,547 0
14b.Other -Canadian PST 17,396 0 17,396 0
----------------------------------------------
15. Total State and Local 371,903 0 371,903 0
16. Total Taxes 371,903 26,246 398,149 0
</TABLE>
<PAGE> 12
Accrual Basis-5
CASE NAME: NEOSTAR RETAIL GROUP, INC. January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
BANK RECONCILIATIONS Amount
<TABLE>
<S> <C>
PLEASE SEE ATTACHED SCHEDULE 1,400,856
Cash in blocked account 15,896,712
Store Cash 4,693
----------
17,302,261
</TABLE>
INVESTMENT ACCOUNTS
Date of Type of Purchase Current
Bank Account Name & Number Purchase Instrument Price Value
0
NO INVESTMENT ACCOUNTS
Currency on hand (corporate petty cash) 0
Total Cash - End of month 17,302,261
==========
<PAGE> 13
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-6
CASE NUMBER: 396-36648-SAF-11 THROUGH Month: Dec/Jan 1997
396-36652-SAF-1 1
administratively consolidated
PAYMENTS TO INSIDERS AND PROFESSIONALS
INSIDERS
<TABLE>
<CAPTION>
Total Paid
Name Salary Severance BOD Fees T&E This Reporting Period
<S> <C> <C> <C> <C> <C>
1. James McCurry 33,333.34 33,333.34
2. Opal Ferraro 39,118.48 39,118.48
--------------------------------------------------------
Total Payments 72,451.82 0.00 0.00 0.00 72,451.82
</TABLE>
PROFESSIONALS
<TABLE>
<CAPTION>
Total Paid
to Date Total Incurred
Name Amt Approved Amt Paid (Retainer) and Unpaid
---- ------------ -------- ---------- ----------
<S> <C> <C> <C> <C>
See schedule below 1,680,818 0 799,353 881,465
for detail
</TABLE>
PROFESSIONAL FEES
<TABLE>
<CAPTION>
Firm Total Retained Balance
---- -------- -------- -------
<S> <C> <C> <C>
Cox & Smith 651,916 479,353 172,563
Price Waterhouse 434,330 270,000 164,330
Traub, Bonacquist 287,268 0 287,268
Coopers & Lybrand 189,384 0 189,384
Ernst & Young 40,163 50,000 (9,837)
Simon, Anison 47,046 0 47,046
Official Committee 30,711 0 30,711
--------- ------- -------
1,680,818 799,353 881,465
</TABLE>
<PAGE> 14
CASE NAME: NEOSTAR RETAIL GROUP, INC. Accrual Basis-7
January, 1997
CASE NUMBER: 396-36648-SAF-11 THROUGH
396-36652-SAF-11
administratively consolidated
<TABLE>
<CAPTION>
QUESTIONNAIRE
Yes No
<C> <C> <C>
1 Have any assets been sold or transferred
outside the normal course of business
this reporting period? x
- --------------------------------------------------------------------
2 Have any funds been disbursed from any
account other than a debtor-in-
possession account? x
- --------------------------------------------------------------------
3 Are any postpetition receivables (accounts,
notes, or loans) due from related parties? x
- --------------------------------------------------------------------
4 Have any payments been made on prepetition
liabilities during this reporting period? x
- --------------------------------------------------------------------
5 Have any postpetition loans been received
by the debtor from any party? x
- --------------------------------------------------------------------
6 Are any postpetition payroll taxes past due? x
- --------------------------------------------------------------------
7 Are any postpetition state or federal income
taxes past due? x
- --------------------------------------------------------------------
8 Are any postpetition real estate taxes past due? x
- --------------------------------------------------------------------
9 Are any other postpetition taxes past due? x
- --------------------------------------------------------------------
10 Are any amounts owed to postpetition creditors
delinquent? x *
- --------------------------------------------------------------------
11 Have any prepetition taxes been paid during the
reporting period? x
- --------------------------------------------------------------------
12 Are any wage payments past due? x
</TABLE>
* Many postpetition balances are delinquent pending payment per further
order of the court.
INSURANCE Yes No
1 Are worker's compensation, general liability
and other necessary insurance coverages in effect? x
2 Are all premium payments paid current? x
3 Please itemize policies below.
<TABLE>
<CAPTION>
Period Annual Amount
Type of Policy Insurance Carrier Covered amount Frequency Outstanding
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Directors' & Officers' Executive Risk Mgt. 12/15/96-12/15/02 450,000 Pre-payment 0
Fiduciary Liability Texas Pacific 12/15/96-12/15/97 5,700 Annually 0
ERISA Texas Pacific 12/15/96-12/15/97 1,000 Annually 0
</TABLE>
<PAGE> 15
List of Omitted Schedules
1. Bank Reconciliation Analysis (See Bank Reconciliations)
