<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                       OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

FOR THE TRANSITION PERIOD FROM               TO

                         COMMISSION FILE NUMBER 0-18823
                            ------------------------

                         UNIVERSAL INTERNATIONAL, INC.

           (Exact name of the registrant as specified in its charter)

<TABLE>
<S>                                  <C>
             MINNESOTA                  41-0776502
  (State or other jurisdiction of    (I.R.S. Employer
  incorporation or organization)      Identification
                                           No.)

    5000 WINNETKA AVENUE NORTH,            55428
        NEW HOPE, MINNESOTA             (Zip Code)
  (Address of Principal Executive
              Office)
</TABLE>

                                 (612) 533-1169

                         Registrant's telephone number

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

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

                              TITLE OF EACH CLASS

                         COMMON STOCK, $0.05 PAR VALUE

    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES _X_ NO ____.

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. YES _X_ NO ____.

    As of March 17, 1998, 9,393,328 shares of common stock of the Registrant
were outstanding of which 3,897,236 shares were held by non-affiliates, and the
aggregate market value of the common stock of the Registrant as of that date
(based upon the $2.25 last reported sale price of the common stock at that date
by the NASDAQ National Market System), held by non-affiliates was approximately
$8,769,000.

                      DOCUMENTS INCORPORATED BY REFERENCE

1.  Portions of the Registrant's definitive proxy statement to be filed pursuant
    to Regulation 14A are incorporated by reference in this Form 10-K.

2.  The Registrant's Report on Form 8-K/A dated January 8, 1998 is incorporated
    by reference in this Form 10-K.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                                     PART I

ITEM 1.  BUSINESS

GENERAL

    Universal International, Inc. ("Universal" or the "Company") was a large
national wholesaler of quality "closeout" merchandise through early 1997.
However, in the first quarter of 1997, the Company began reducing wholesale
inventories and restructuring and downsizing wholesale operations to minimize
the impact of reductions in its credit line (see "Liquidity and Capital
Resources") and to focus more Company resources on retail operations.

    During 1997, the Company liquidated its wholesale inventory and eliminated
its wholesale business. Also during 1997, the Company adopted a plan to sell
Universal Asset-Based Services, Inc. (Asset-Based Services), a 95% owned
subsidiary formed during 1996 which provided inventory valuation and liquidation
services to a wide range of financial institutions, retailers and manufacturers.
The sale of Asset-Based Services was completed in January 1998 with no material
financial impact to the Company. These business segments have been accounted for
as discontinued operations, and prior years financial statements have been
restated to reflect the discontinuation of these segments.

    As of December 31, 1997, the Company, through its wholly owned subsidiary,
Only Deals, Inc. ("Only Deals"), owned and operated 56 retail stores offering
close-out merchandise in 8 states in the Upper Midwest and in Texas. Only Deals
stores sell consumer goods in a variety of categories including toys, food,
health and beauty aids, housewares, and many others.

    During 1994, the Company entered into a supply agreement with one of its
wholesale customers and in late 1994 the Company made a 40.5% equity investment
in this customer, Odd's-N-End's, Inc. ("Odd's-N-End's"). Odd's-N-End's owns and
operates 22 retail stores offering close-out merchandise in New York state. In
early 1995, the Company entered into a financing arrangement with Odd's-N-End's,
and assumed control over day to day operations of Odd's-N-End's. Accordingly,
commencing in 1995, the results of Odd's-N-End's are consolidated with those of
the Company for financial reporting purposes.

    The Company was incorporated under the laws of Minnesota in 1956. The
principal executive offices of the Company are located at 5000 Winnetka Avenue
North, New Hope, Minnesota, 55428, and its telephone number is (612) 533-1169.

    In the first quarter of 1997, the Company was in technical default on
several provisions of its then existing revolving credit agreement. As a result
of these defaults, the lender reduced the credit line in stages from $16 million
to $10 million as of May 31, 1997 and increased the interest rate on the
outstanding borrowings from prime plus 1.5% to prime plus 3.5%.

    In June 1997, the Company entered into a borrowing arrangement with a new
lender which replaced the previous credit line and Odd's-N-End's then existing
bank notes payable of $1.3 million. Under the new revolving credit agreement,
the Company may borrow up to $14 million against a borrowing base derived from
the level of qualifying accounts receivable and inventory. In September 1997,
the Company obtained a seasonal increase in the revolving credit agreement to
$16.75 million through December 31, 1997. In addition, the lender waived
compliance by the Company of its consolidated tangible net worth covenant
through December 31, 1997.

    In November 1997, the Company issued 4.5 million shares of Common Stock to
99 CENTS Only Stores for $4 million, $2 million in cash and $2 million in
merchandise credits. As a result 99 CENTS Only Stores currently owns 48% of the
Company's Common Stock. Subsequent to December 31, 1997, 99 CENTS Only Stores
made a proposal to the Company's Board of Directors to acquire the remaining
shares of Common Stock of the Company in exchange for shares of Common Stock of
99 CENTS Only Stores. In addition, 99 CENTS Only Stores made a proposal to the
Board of Directors of Odd's-N-End's to acquire all outstanding shares of Common
Stock of Odd's-N-End's not owned by the Company, for cash of approximately
$830,000.

                                       2
<PAGE>
    Subsequent to December 31, 1997, the Company's lender waived compliance by
the Company of its consolidated tangible net worth covenant through March 30,
1998. However, management does not believe that the Company will be in
compliance with this covenant as of March 31, 1998. This condition, as well as
the Company's operating results for 1997, raise a concern as to the Company's
ability to continue as a going concern.

    The Company is currently in the process of negotiating with the lender to
obtain another waiver of the consolidated tangible net worth covenant. In
addition, management believes that 99 CENTS Only Stores will provide sufficient
financing to satisfy the Company's planned operating requirements through
December 31, 1998. However, there can be no assurance that the Company will
obtain a waiver from the lender or that 99 CENTS Only Stores will provide
sufficient financing to operate the Company.

SUPPLY OF CLOSE-OUT MERCHANDISE

    The Company requires a significant number of close-out consumer products to
operate its business. During 1997, the Company experienced difficulty in
obtaining shipments from many of its vendors primarily due to concerns about the
Company's liquidity following its default under its credit facility. (See
"Liquidity and Capital Resources").

    The supply of merchandise improved dramatically during the second half of
1997 after the Company obtained its new revolving credit facility. However, the
Company continued to experience difficulty in obtaining shipments from certain
vendors until 99 CENTS Only Stores made its investment in the Company in
November 1997. The Company is currently experiencing no difficulty in obtaining
merchandise due to its relationship with 99 CENTS Only Stores, and the Company
does not anticipate having a significant problem sourcing an adequate supply of
merchandise for the foreseeable future.

SEASONALITY

    The Company's business is affected by the pattern of seasonality common to
most retail businesses, in particular the Christmas selling season. Quarterly
results are affected by, among other things, the timing of holidays, new store
openings and sales performance of existing stores.

COMPETITION

    The Company operates in a highly competitive environment, competing with
discount stores, chain stores and other retailers. Many of these competitors
have longer established relations with suppliers and consumers as well as
substantially greater financial resources and wider distribution capabilities
than the Company. In addition to competing in the retail sale of merchandise,
the Company encounters significant competition in purchasing merchandise for its
stores. The Company's ability to purchase a broad array of merchandise at
close-out prices is critical to its success. Large retailers enjoy a competitive
advantage of economies of scale in both the purchase and sale of merchandise.
These retailers are often unable to take advantage of close-out merchandise
purchases, however, due to the limited quantities of merchandise sometimes
available for purchase and the fact that the goods cannot be reordered.

EMPLOYEES

    At March 13, 1998, the Company had 273 full-time employees, of whom 6 were
involved in the purchase of close-out goods, 86 were involved in warehousing and
administration, and 181 were involved in the retail operations. Also, 685
employees were employed in a part-time capacity in the retail operations. In
addition, Odd's-N-End's had 66 full-time and 243 part-time employees at March
13, 1998. None of the Company's, Only Deals, or Odd's-N-End's employees are
covered by a collective bargaining agreement.

                                       3
<PAGE>
ITEM 2.  PROPERTIES

    The Company's executive offices and warehouse are located at 5000 Winnetka
Avenue North in New Hope, Minnesota. This facility has 210,000 square feet and
is currently being fully utilized by the Company. The Company has a 10-year
lease for this warehouse which commenced in 1989 and expires on July 31, 2000
and contains a right of first refusal to purchase the facility.

    All of the Company's stores are leased. Only Deals leases approximately
520,000 square feet of retail space for its 56 stores. Only Deals stores average
10,000 gross square feet. Only Deals store leases expire in April 1998 through
January 2003. Odd's-N-End's leases approximately 220,000 square feet of retail
space for its 22 operating stores, an average of 10,000 square feet per store.
Odd's-N-End's store leases expire in January 1999 through January 2004. Some
store leases have renewal options. For certain Only Deals store leases, the
Company has set provisions which allow the Company (and in some cases, the
landlord) to terminate the lease if stores do not obtain pre-established sales
levels at the end of a specified period of time from the lease commencement
date, or if other conditions are not met.

ITEM 3.  LEGAL PROCEEDINGS

    The Company experiences routine litigation in the normal course of its
business. The Company does not believe that any pending litigation will have a
material adverse effect on the financial condition, results of operations, or
cash flows of the Company.

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

    No matter was submitted to a vote of the Company's security holders during
the fourth quarter ended December 31, 1997.

ITEM 4A.  EXECUTIVE OFFICERS OF THE COMPANY

    The following table sets forth certain information concerning the executive
officers of the Company as of March 17, 1998.

<TABLE>
<CAPTION>
NAME                                             AGE      POSITION
-------------------------------------------  -----------  -------------------------------------------
<S>                                          <C>          <C>
Richard L. Ennen...........................          45   Chief Executive Officer
Robert R. Langer...........................          42   Chief Operating Officer
Dennis A. Hill.............................          34   Chief Financial Officer
</TABLE>

    Richard L. Ennen became Chief Executive Officer of the Company in January
1998. Mr. Ennen joined the Company in September 1996, as Executive Vice
President and General Merchandising Manager and became President of Only Deals
in October 1996. From 1992 to September 1996, Mr. Ennen was Director of Retail
Merchandising and Retail Operations for Holiday Companies, a large grocery,
wholesale and gasoline company based in Bloomington, Minnesota. Mr. Ennen is
also a director of Odd's-N-End's, Inc.

    Robert R. Langer became Chief Operating Officer of Only Deals in September
1994. Mr. Langer joined Only Deals in February 1992, as Vice President--Retail
Operations. From June 1989 to January 1992, Mr. Langer was Director of the
Retail Division for Lieberman Enterprises, a major music and video distributor.
Mr. Langer is also a director of Odd's-N-End's, Inc.

    Dennis A. Hill became Chief Financial Officer of the Company in January
1998. Mr. Hill joined the Company in January 1996, as Corporate Controller. From
January 1994 to January 1996, Mr. Hill was Manager of Financial Reporting for
Damark International, a mail order retailer. From September 1986 to January
1994, Mr. Hill was employed by Touche Ross/Deloitte & Touche, an international
accounting firm, where he served as Audit Manager from September 1991.

                                       4
<PAGE>
                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    Universal's common stock trades on The NASDAQ Stock Market under the symbol
UNIV. The following table sets forth the quarterly high and low sale prices of
the common stock for the periods indicated.

<TABLE>
<CAPTION>
                                                                                 HIGH        LOW
                                                                               ---------  ---------
<S>                                                                            <C>        <C>
Year Ended December 31, 1996
  First Quarter..............................................................  $    5.25  $    3.38
  Second Quarter.............................................................  $    5.13  $    4.38
  Third Quarter..............................................................  $    4.63  $    2.63
  Fourth Quarter.............................................................  $    2.88  $    1.63

Year Ended December 31, 1997
  First Quarter..............................................................  $    2.75  $    1.13
  Second Quarter.............................................................  $    1.94  $     .31
  Third Quarter..............................................................  $    1.00  $     .50
  Fourth Quarter.............................................................  $    4.00  $     .72
</TABLE>

    As of March 17, 1998, there were more than a hundred holders of record of
the Company's common stock. The Company believes that there are more than 1,400
beneficial owners in addition to the shareholders of record. The last reported
sales price of the common stock on March 17, 1998, was $2.25. Over-the-counter
market quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions.

    Universal has not declared any cash dividends with respect to its common
stock within the past 10 years. The Company presently intends to continue to
retain any earnings in connection with its business. Currently, dividends are
prohibited by the terms of the Company's revolving line of credit. Payment of
dividends on its common stock in the future will be within the discretion of the
Board of Directors and will depend upon, among other factors, earnings and the
operating and financial condition of the Company, and any restrictions in future
revolving credit agreements.

                                       5
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA

    The following data has been derived from the Company's Consolidated
Financial Statements and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and notes.

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                            ------------------------------------------------------
                                                               1997       1996       1995       1994       1993
                                                            ----------  ---------  ---------  ---------  ---------
                                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                         <C>         <C>        <C>        <C>        <C>
Statement of Operations Data:
Net sales.................................................  $   68,705  $  59,863  $  47,655  $  22,335  $  17,592
Gross margin..............................................  $   29,476  $  26,205  $  21,584  $  10,153  $   8,299
Loss from continuing operations...........................  $   (7,379) $  (2,956) $    (695) $  (1,322) $    (836)
Income (loss) from discontinued operations................  $   (4,508) $  (1,345) $   2,005  $    (301) $  (2,430)
Net Income (loss).........................................  $  (11,887) $  (4,301) $   1,310  $  (1,623) $  (3,266)
                                                            ----------  ---------  ---------  ---------  ---------
                                                            ----------  ---------  ---------  ---------  ---------
Basic Income (loss) Per Common Share:
  From Continuing Operations..............................  $    (1.35) $    (.60) $    (.14) $    (.27) $    (.17)
  From Discontinued Operations............................        (.83)      (.28)       .41       (.06)      (.50)
                                                            ----------  ---------  ---------  ---------  ---------
Net income (loss).........................................  $    (2.18) $    (.88) $     .27  $    (.33) $    (.67)
                                                            ----------  ---------  ---------  ---------  ---------
                                                            ----------  ---------  ---------  ---------  ---------
Diluted Income (loss) Per Common Share:
  From Continuing Operations..............................  $    (1.35) $    (.60) $    (.14) $    (.27) $    (.17)
  From Discontinued Operations............................        (.83)      (.28)       .40       (.06)      (.50)
                                                            ----------  ---------  ---------  ---------  ---------
Net income (loss).........................................  $    (2.18) $    (.88) $     .26  $    (.33) $    (.67)
                                                            ----------  ---------  ---------  ---------  ---------
                                                            ----------  ---------  ---------  ---------  ---------
Weighted average common shares outstanding:
  Basic...................................................       5,456      4,893      4,893      4,893      4,893
  Diluted.................................................       5,456      4,893      5,082      4,893      4,893
</TABLE>

<TABLE>
<CAPTION>
                                                                              AS OF DECEMBER 31,
                                                            ------------------------------------------------------
                                                               1997       1996       1995       1994       1993
                                                            ----------  ---------  ---------  ---------  ---------
                                                                                (IN THOUSANDS)
<S>                                                         <C>         <C>        <C>        <C>        <C>
Balance Sheet Data:
Working capital...........................................  $    1,105  $   8,038  $  18,641  $  14,519  $  17,326
Total assets..............................................      31,388     42,207     35,509     27,346     26,922
Long term debt and revolver, including current
  maturities..............................................      11,398     10,078      4,465     --            738
Total liabilities.........................................      22,787     25,719     14,224      7,867      5,820
Stockholders' equity......................................       8,601     16,488     20,789     19,479     21,102
</TABLE>

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

GENERAL

    Universal International, Inc. ("Universal" or the "Company") was a large
national wholesaler of quality "closeout" merchandise through early 1997.
However, in the first quarter of 1997, the Company began reducing wholesale
inventories and restructuring and downsizing wholesale operations to minimize
the impact of reductions in its credit line (see "Liquidity and Capital
Resources") and to focus more Company resources on retail operations.

    During 1997, the Company liquidated its wholesale inventory and eliminated
its wholesale business. Also during 1997, the Company adopted a plan to sell
Universal Asset-Based Services, Inc. (Asset-Based Services), a 95% owned
subsidiary formed during 1996 which provided inventory valuation and liquidation
services to a wide range of financial institutions, retailers and manufacturers.
The sale of Asset-Based Services was completed in January 1998 with no material
financial impact to the Company. These business segments have been accounted for
as discontinued operations, and prior years financial statements have been
restated to reflect the discontinuation of these segments.

    The Company, through its wholly owned subsidiary, Only Deals, Inc. ("Only
Deals"), owns and operates 56 retail stores offering close-out merchandise in 8
states in the Upper Midwest and in Texas. Only Deals stores sell consumer goods
in a variety of categories including toys, food, health and beauty aids,
housewares, and many others.

    On December 28, 1994, the Company acquired a 40.5 percent interest in
Odd's-N-End's, Inc., a Buffalo, New York-based close-out retailer with 22 retail
stores. The Company's investment was under a court approved plan of
reorganization of Odd's-N-End's, Inc. which emerged from bankruptcy on December
28, 1994. In early 1995, the Company assumed control over day to day operations
of Odd's-N-End's. Accordingly, commencing in 1995, the Company is fully
consolidating the results of Odd's-N-End's with those of the Company with
elimination of intercompany transactions, including those under a supply
agreement between the Company and Odd's-N-End's.

    In November 1997, the Company issued 4.5 million shares of Common Stock to
99 CENTS Only Stores for $4 million, $2 million in cash and $2 million in
merchandise credits. As a result 99 CENTS Only Stores currently owns 48% of the
Company's Common Stock. Subsequent to December 31, 1997, 99 CENTS Only Stores
made a proposal to the Company's Board of Directors to acquire the remaining
shares of Common Stock of the Company in exchange for shares of Common Stock of
99 CENTS Only Stores. In addition, 99 CENTS Only Stores made a proposal to the
Board of Directors of Odd's-N-End's to acquire all outstanding shares of Common
Stock of Odd's-N-End's not owned by the Company, for cash of approximately
$830,000.

FORWARD LOOKING INFORMATION

    Information contained in this Form 10-K contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which can be identified by the use of forward-looking terminology such
as "may", "will", "expect", "plan", "anticipate", "estimate" or "continue" or
the negative thereof or other variations thereon or comparable terminology.
There are certain important factors that could cause results to differ
materially from those anticipated by some of these forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty. The factors, among others, that could cause actual results to
differ materially include: the ability of the Company to obtain from its lender
a waiver of the consolidated tangible net worth covenant, the ability of the
Company to obtain additional financing from 99 CENTS Only Stores, the Company's
ability to execute its business plan, continuity of a relationship with or
purchases from major vendors, competitive pressures on sales and pricing,
increases in other costs which cannot be recovered through improved pricing of
merchandise, and the adverse effect of weather conditions on retail sales.

                                       7
<PAGE>
RESULTS OF CONTINUING OPERATIONS

    The following table sets forth, for the periods indicated, certain items
from the Company's consolidated statement of operations expressed as a
percentage of net sales.

<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31,
                                          ------------------------------
                                            1997       1996       1995
                                          --------   --------   --------
<S>                                       <C>        <C>        <C>
Net sales...............................     100.0%     100.0%     100.0%
Cost of goods sold......................      57.1       56.2       54.7
                                          --------   --------   --------
Gross margin............................      42.9       43.8       45.3
Selling, general & administrative
  expenses..............................      51.6       47.4       46.8
                                          --------   --------   --------
Operating loss..........................      (8.7)%     (3.6)%     (1.5)%
                                          --------   --------   --------
                                          --------   --------   --------
Net income (loss).......................     (17.3)%     (7.2)%      2.7%
                                          --------   --------   --------
                                          --------   --------   --------
</TABLE>

1997 COMPARED TO 1996

    NET SALES

    Overall net sales for the Company in 1997 increased to $68.7 million, a
14.8% increase from net sales of $59.9 million for 1996. This increase was
primarily due to the full year performance from the addition of 21 new stores
during 1996 and the addition of eight new stores in October 1997. At December
31, 1997, the Company had 78 retail stores in operation (including five stores
reserved for closing) compared to 73 (including one store reserved for closing)
at December 31, 1996. Three stores were closed in 1997. Net sales in 1997 were
negatively impacted by supply disruptions which began prior to the closing of
the new credit facility and which continued through the remainder of 1997.
Despite these disruptions, net sales improved in the second half of 1997 due to
aggressive advertising and improvements in merchandise mix and inventory levels.
Management expects 1998 net sales to increase significantly as a result of a
more consistent flow of merchandise, including merchandise from 99 CENTS Only
Stores, and due to an effort currently underway to re-merchandise the stores.

    GROSS MARGINS

    Gross margins for 1997, excluding the impact of intercompany profit under
the supply agreement, increased to $29.5 million, a 12.5% increase from gross
margins of $26.2 million for 1996. Gross margins, as a percent of sales,
decreased due primarily to increased promotional pricing during 1997 and due to
the lack of higher margin import merchandise as a result of supply disruptions.

    SELLING, GENERAL AND ADMINISTRATIVE

    Selling, general and administrative expenses for 1997 were $35.5 million, a
25% increase from 1996 selling, general and administrative expenses of $28.4
million. This increase was due primarily to the addition of 21 and 8 stores
during 1996 and 1997, respectively. Increased advertising costs, increased store
closing reserve and higher hourly wages in 1997 also contributed to the
increase. These increases were partially offset by decreases due to the
elimination of certain corporate overhead costs associated with the Buffalo, New
York office and warehouse, which was sold during the third quarter of 1996.

    INTEREST EXPENSES AND OTHER

    Interest expense increased to $1.4 million in 1997 compared to $1.3 million
in 1996. Interest expense in 1997 reflects the higher level of borrowings to
support the Company's continuing losses.

    INCOME TAXES

    The Company is in a net operating loss carryforward position with no
remaining carryback available.

                                       8
<PAGE>
    INCOME (LOSS) FROM DISCONTINUED OPERATIONS

    Income (loss) from discontinued operations was a loss of $4.5 million in
1997 compared to a loss of $1.3 million in 1996. The increase was primarily due
to the Company's liquidation of the wholesale business in 1997 and the related
reductions in (i) sales from $26.7 million in 1996 to $14.2 million in 1997 and
(ii) gross margin from 22.5% in 1996 to 5.2% in 1997.

1996 COMPARED TO 1995

    NET SALES

    Overall net sales for the Company in 1996 increased to $59.9 million, a
25.6% increase from net sales of $47.7 million in 1995. This increase was
primarily due to the addition of nine new stores in the second half of 1995 and
the addition of 21 new stores during 1996. At December 31, 1996, the Company had
73 stores in operation (including one store reserved for closing) compared to 53
(including two stores reserved for closing) at December 31, 1995. Two stores
were closed in January 1996 and one was closed in February 1997.

    GROSS MARGINS

    Gross margins for 1996, excluding the impact of intercompany profit under
the supply agreement, increased to $26.2 million a 21.3% increase from gross
margins of $21.6 million for 1995. Gross margins decreased as a % of net sales
primarily due to higher than planned markdowns of seasonal merchandise in the
first quarter of 1996 and increased promotional pricing during the fourth
quarter of 1996.

    SELLING, GENERAL AND ADMINISTRATIVE

    Selling, general and administrative expenses were $28.4 million for 1996 an
increase of 27% from the 1995 level of $22.3 million.

    The increase was due primarily to the addition of nine and 21 stores during
1995 and 1996, respectively. Pre-opening expenses incurred by the 21 new stores
opened during 1996 in addition to increased infrastructure costs incurred to
support the growth in the retail business also contributed to the increase. The
Company charges to expense as incurred all costs associated with the opening of
new stores, except for purchases of equipment and the costs of leasehold
improvements which are capitalized.

    The increase was offset partially by the elimination of certain corporate
overhead costs associated with the Buffalo, New York office and warehouse, which
was sold during the third quarter of 1996 for a nominal gain.

    INTEREST EXPENSE AND OTHER

    Interest expense increased to $1,276,000 in 1996 compared to $667,000 in
1995 due to an increase in borrowings under the revolving credit facility to
support the Only Deals expansion and to fund Odd's-N-End's working capital
needs.

    INCOME (LOSS) FROM DISCONTINUED OPERATIONS

    Income (loss) from discontinued operations was a loss of $1.3 million in
1996 compared to income of $2.0 million in 1995. The decrease was due to lower
net sales and lower wholesale gross margins of 22.5% in 1996 versus 23.4% in
1995.

    LIQUIDITY AND CAPITAL RESOURCES

    At December 31, 1996, the Company had a $16 million revolving credit
agreement with a financial institution. During the first quarter of 1997, the
Company defaulted on several provisions of the amended

                                       9
<PAGE>
loan agreement. As a result of these defaults, the lender reduced the credit
line to $12.5 million and increased the interest rate on the outstanding
borrowings from prime plus 1.5% to prime plus 3.5%. The lender further reduced
the credit line to $11 million as of April 30, 1997 and $10 million as of May
31, 1997.

    As a result of these reductions in the credit line and to focus more Company
resources on retail operations, during early 1997, the Company began the process
of substantially reducing wholesale inventories and restructuring and downsizing
wholesale operations. The Company completed this process during the second half
of 1997.

    In June 1997 the Company entered into a borrowing arrangement with a new
lender which replaced the previous credit line and the then existing
Odd's-N-End's bank notes payable of $1.3 million. Under the new revolving credit
agreement, as amended, the Company may borrow up to $14 million against a
borrowing base derived from the level of qualifying accounts receivable and
inventory. The agreement expires in June 1999, but may be automatically renewed
each year thereafter at the option of both the lender and the Company.
Borrowings under the agreement are collateralized by substantially all assets of
the Company, and outstanding borrowings bear interest at prime plus 2% (the
prime rate at December 31, 1997 was 8.5%). The Company also obtained $1.9
million of term loan financing from the new lender, which is included in the
total line limit. The term note is payable in monthly installments of $39,000
plus interest at prime plus 2% through June 30, 1999, at which time the
remaining balance is due. The term note is collateralized by the Company's
equipment and fixtures. The amount available under the revolving credit
agreement at December 31, 1997, based on the borrowing base, was $13.25 million,
of which there were outstanding borrowings of $9.3 million, outstanding
borrowings on the fixture loan of $1.7 million, and outstanding letters of
credit of $0.5 million.

    During 1997, the Company was unable to pay its vendors within normal trade
terms as it experienced continued net losses and a substantial decline in
consolidated net worth. As a result, management focused its efforts on obtaining
additional financing, and in November 1997, the Company issued 4.5 million
shares of Common Stock to 99 CENTS Only Stores for $4 million, $2 million in
cash and $2 million in merchandise credits. Subsequent to December 31, 1997,
99 CENTS Only Stores made a proposal to the Company's Board of Directors to
acquire the remaining shares of Common Stock of the Company in exchange for
shares of Common Stock of 99 CENTS Only Stores.

    Subsequent to December 31, 1997, the Company's lender waived compliance by
the Company of its consolidated tangible net worth covenant through March 30,
1998. However, management does not believe that the Company will be in
compliance with this covenant as of March 31, 1998.

    The Company is currently in the process of negotiating with the lender to
obtain another waiver of the consolidated tangible net worth covenant. In
addition, management believes that 99 CENTS Only Stores will provide sufficient
financing to satisfy the Company's planned operating requirements through
December 31, 1998. There can be no assurance that the Company will obtain a
waiver from the lender or that 99 CENTS Only Stores will provide sufficient
financing to operate the Company through December 31, 1998.

    Net cash used by operating activities was $1.6 million for the year ended
December 31, 1997 principally due to an $11.9 million net loss and a $4.3
million decrease in operating liabilities, offset by a $7.6 million decrease in
inventories, a $3.4 million decrease in accounts receivable and $3.8 million of
non-cash expenses. Payments of long-term debt totaling $2.0 million and the $1.6
million net cash used by operating activities were funded primarily by proceeds
from the $1.9 million term loan, $2.0 million of proceeds from the issuance of
Common Stock and by a $1.5 million increase in borrowings under the revolving
credit facility.

    Net cash used by operating activities was $1.7 million for the year ended
December 31, 1996 versus net cash used by operating activities of $1.4 million
for the year ended December 31, 1995. Inventories increased $4.4 million in
1996, net of shrink and obsolescence, and accounts payable increased $5.8
million.

                                       10
<PAGE>
Inventories increased $3.5 million in 1995, net of shrink and obsolescence, and
accounts payable increased approximately $900,000. Inventories increased $1.2
million in 1995 in the Odd's-N-End's retail locations to a more historically
normal level. In addition, Only Deals inventories increased to support the
increased retail space in 1995 and 1996, and wholesale inventories increased to
support the increased needs of Only Deals and Odd's-N-End's. Accounts payable
increased due to substantially increased operations and increased inventory
levels in 1996.

    The Company has an agreement which, as amended, provides for advances of up
to $10 million to Odd's-N-End's, collateralized by a secondary interest in
substantially all assets, with interest payable at prime plus 2.5%. There were
advances totaling $8.7 million and $3.6 million under this agreement as of
December 31, 1997 and 1996, respectively.

EFFECTS OF INFLATION AND ECONOMIC TRENDS

    In the Company's business of buying and selling close-out merchandise, each
purchase is individually negotiated based upon the price at which the Company
feels the product can be resold. Therefore, since inflation generally will
affect overall price levels similarly in the types of merchandise the Company
purchases, the impact of inflation is not expected to have a significant impact
on the Company's overall buying or selling opportunities.

    The Company is in the process of assessing its systems and equipment with
respect to Year 2000 compliance. The Year 2000 issues will either be addressed
with scheduled system upgrades or through the Company's internal systems
development staff. The incremental costs will be charged to expense as incurred
and are not expected to have a material impact on the financial position or
results of operations of the Company. However, the Company could be adversely
impacted if the Year 2000 modifications are not properly completed by either the
Company or its vendors, banks or any other entity with whom the Company conducts
business. Accordingly, the Company plans to devote the necessary resources to
resolve all significant Year 2000 issues in a timely manner.

                                       11
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The following consolidated financial statements of the Company are included
under this item:

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                             ---------
<S>                                                                                                          <C>
Report of Independent Public Accountants...................................................................         13

Report of Independent Accountants..........................................................................         14

Consolidated Balance Sheets, December 31, 1997 and 1996....................................................         15

Consolidated Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995.................         16

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1997, 1996 and 1995.......         17

Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995.................         18

Notes to Consolidated Financial Statements.................................................................         19

Report of Independent Accountants on Consolidated Financial Statement Schedule.............................         29

Consolidated Financial Statement Schedule..................................................................         30
</TABLE>

                                       12
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Universal International, Inc.:

    We have audited the accompanying consolidated balance sheet of Universal
International, Inc. and subsidiaries (a Minnesota corporation) as of December
31, 1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

    We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Universal International,
Inc. and subsidiaries as of December 31, 1997, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.

    The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2, the Company has experienced negative operating results and liquidity
constraints that raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 2. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.

    Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements and supplementary data is presented for purposes of
complying with the Securities and Exchange Commissions rules and is not part of
the basic financial statements. This schedule for the year ended December 31,
1997 has been subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.

                                             ARTHUR ANDERSEN LLP

Minneapolis, Minnesota
March 6, 1998

                                       13
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
Universal International, Inc.:

    We have audited the accompanying consolidated balance sheet of Universal
International, Inc. as of December 31, 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
two years in the period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Universal
International, Inc. as of December 31, 1996, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

    The accompanying consolidated financial statements have been prepared
assuming that Universal International, Inc. will continue as a going concern. As
more fully described in Note 6, the Company was in default of several provisions
of its then existing revolving credit agreement and had not obtained new
financing to replace this revolving credit agreement. In addition, the Company
incurred a consolidated net loss of $4.3 million in 1996. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans are described in Note 2. The 1996 consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

                                             COOPERS & LYBRAND L.L.P.

Minneapolis, Minnesota
April 15, 1997

                                       14
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

            CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1997 AND 1996

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                             ---------------------
                                                                                                1997       1996
                                                                                             ----------  ---------
<S>                                                                                          <C>         <C>
Current assets:
  Cash.....................................................................................  $    1,053  $     521
  Accounts receivable, net of allowance of $480 and $200, respectively.....................         312      3,707
  Inventories..............................................................................      18,901     26,458
  Other current assets.....................................................................       2,105      1,313
                                                                                             ----------  ---------
    Total current assets...................................................................      22,371     31,999
  Equipment and improvements, net..........................................................       8,880     10,056
  Other assets, net........................................................................         137        152
                                                                                             ----------  ---------
    Total assets...........................................................................  $   31,388  $  42,207
                                                                                             ----------  ---------
                                                                                             ----------  ---------

                                       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Borrowings under revolving credit agreement..............................................  $    9,270  $   7,791
  Current portion of long-term debt........................................................         634        556
  Accounts payable.........................................................................       7,014     12,606
  Accrued expenses.........................................................................       4,348      3,008
                                                                                             ----------  ---------
    Total current liabilities..............................................................      21,266     23,961
Deferred income taxes......................................................................          27         27
Long-term debt, less current portion.......................................................       1,494      1,731
                                                                                             ----------  ---------
    Total liabilities......................................................................      22,787     25,719
                                                                                             ----------  ---------
Commitments and contingencies (Notes 8, 9 and 11)
Stockholders' equity:
  Common stock, $.05 par value, 75,000 shares authorized; 9,393 and 4,893 shares issued and
    outstanding for 1997 and 1996, respectively............................................         470        245
  Additional paid-in capital...............................................................      26,692     22,917
  Accumulated deficit......................................................................     (18,561)    (6,674)
                                                                                             ----------  ---------
    Total stockholders' equity.............................................................       8,601     16,488
                                                                                             ----------  ---------
    Total liabilities and stockholders' equity.............................................  $   31,388  $  42,207
                                                                                             ----------  ---------
                                                                                             ----------  ---------
</TABLE>

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

                                       15
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                     YEARS ENDED DECEMBER 31,
                                                                                ----------------------------------
                                                                                   1997        1996        1995
                                                                                ----------  ----------  ----------
<S>                                                                             <C>         <C>         <C>
Net sales.....................................................................  $   68,705  $   59,863  $   47,655
Cost of goods sold............................................................      39,229      33,658      26,071
                                                                                ----------  ----------  ----------
  Gross margin................................................................      29,476      26,205      21,584
Selling, general and administrative expenses..................................      35,483      28,376      22,299
                                                                                ----------  ----------  ----------
  Operating loss..............................................................      (6,007)     (2,171)       (715)
Interest expense and other....................................................      (1,372)     (1,281)       (607)
                                                                                ----------  ----------  ----------
Loss before non-controlling interest, income taxes, and discontinued
  operations..................................................................      (7,379)     (3,452)     (1,322)
Non-controlling interest in subsidiary's net loss.............................      --             496         657
                                                                                ----------  ----------  ----------
Loss before income taxes, and discontinued operations.........................      (7,379)     (2,956)       (665)
Income tax expense............................................................      --          --              30
                                                                                ----------  ----------  ----------
Loss from continuing operations...............................................      (7,379)     (2,956)       (695)
Income (loss) from discontinued operations....................................      (4,508)     (1,345)      2,005
                                                                                ----------  ----------  ----------
Net income (loss).............................................................  $  (11,887) $   (4,301) $    1,310
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
Basic Income (loss) Per Common Share:
From Continuing Operations:...................................................  $    (1.35) $     (.60) $     (.14)
From Discontinued Operations:.................................................        (.83)       (.28)        .41
                                                                                ----------  ----------  ----------
    Net income (loss).........................................................  $    (2.18) $     (.88) $      .27
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
Diluted Income (loss) Per Common Share:
From Continuing Operations:...................................................  $    (1.35) $     (.60) $     (.14)
From Discontined Operations:..................................................        (.83)       (.28)        .40
                                                                                ----------  ----------  ----------
    Net income (loss).........................................................  $    (2.18) $     (.88) $      .26
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
Weighted average common shares outstanding:
Basic.........................................................................       5,456       4,893       4,893
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
Diluted.......................................................................       5,456       4,893       5,082
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
</TABLE>

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

                                       16
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               COMMON STOCK
                                                         ------------------------  ADDITIONAL                    TOTAL
                                                                          PAR        PAID-IN    ACCUMULATED   STOCKHOLDERS'
                                                           SHARES       AMOUNT       CAPITAL      DEFICIT        EQUITY
                                                         -----------  -----------  -----------  ------------  ------------
<S>                                                      <C>          <C>          <C>          <C>           <C>
Balances, January 1, 1995..............................       4,893    $     245    $  22,917    $   (3,683)   $   19,479
Net income.............................................      --           --           --             1,310         1,310
                                                              -----        -----   -----------  ------------  ------------
Balances, December 31, 1995............................       4,893          245       22,917        (2,373)       20,789
Net loss...............................................      --           --           --            (4,301)       (4,301)
                                                              -----        -----   -----------  ------------  ------------
Balances, December 31, 1996............................       4,893          245       22,917        (6,674)       16,488
Issuance of Common Stock...............................       4,500          225        3,775        --             4,000
Net loss...............................................      --           --           --           (11,887)      (11,887)
                                                              -----        -----   -----------  ------------  ------------
Balances, December 31, 1997............................       9,393    $     470    $  26,692    $  (18,561)   $    8,601
                                                              -----        -----   -----------  ------------  ------------
                                                              -----        -----   -----------  ------------  ------------
</TABLE>

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

                                       17
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                     YEARS ENDED DECEMBER 31,
                                                                                ----------------------------------
                                                                                   1997        1996        1995
                                                                                ----------  ----------  ----------
<S>                                                                             <C>         <C>         <C>
Cash flows from operating activities:
  Net income (loss)...........................................................  $  (11,887) $   (4,301) $    1,310
  Adjustments to reconcile net income (loss) to net cash used for continuing
    operations:
    (Income) loss from discontinued operations................................       4,508       1,345      (2,005)
    Depreciation and amortization.............................................       1,249         895         463
    Provision for inventory obsolescence and shrinkage........................       1,151       1,257         858
    Provision for losses on store closings....................................         296      --          --
    Non-controlling interest in subsidiary's net loss.........................      --            (496)       (657)
    Changes in operating assets and liabilities:
      Inventories.............................................................      (6,499)     (3,329)     (3,296)
      Other current assets....................................................          56         159        (387)
      Accounts payable........................................................         557       2,910         672
      Accrued expenses........................................................       1,184         221          63
                                                                                ----------  ----------  ----------
          Net cash used for operating activities of continuing operations.....      (9,385)     (1,339)     (2,979)
                                                                                ----------  ----------  ----------
Cash flows from investing activities:
  Additions to equipment and improvements, Net................................        (506)     (3,603)     (3,008)
                                                                                ----------  ----------  ----------
Cash flows from financing activities:
  Proceeds from borrowings under revolving credit agreements..................      83,329      89,548      63,363
  Payments on borrowings under revolving credit agreements....................     (81,850)    (84,080)    (61,040)
  Issuance of Common Stock....................................................       2,000      --          --
  Proceeds from long-term debt................................................       1,873      --          --
  Payments of long-term debt..................................................      (2,032)       (485)       (107)
                                                                                ----------  ----------  ----------
      Net cash provided by financing activities...............................       3,320       4,983       2,216
                                                                                ----------  ----------  ----------
Cash provided by (used in) discontinued operations............................       7,103        (331)      1,591
                                                                                ----------  ----------  ----------
Net increase (decrease) in cash...............................................         532        (290)     (2,180)
Cash, beginning of year.......................................................         521         811       2,991
                                                                                ----------  ----------  ----------
Cash, end of year.............................................................  $    1,053  $      521  $      811
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
</TABLE>

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

                                       18
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

1.  BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS DESCRIPTION:

    Universal International, Inc. (the Company) acquires close-out merchandise
from company overstocks, business liquidations and other sources and sells this
merchandise through its retail operations.

    The Company's wholly owned subsidiary, Only Deals, Inc. ("Only Deals"),
operates 56 variety close-out retail stores in eight states in the upper Midwest
and in Texas as of December 31, 1997. These stores are located in strip shopping
centers and enclosed shopping malls. The stores offer close-out consumer
products.

    The Company has a 40.5% equity investment in Odd's-N-End's, Inc.
("Odd's-N-End's"), which operates 22 variety close-out retail stores in New York
state. The Company also has control over the day-to-day operations of
Odd's-N-End's and as a result, Odd's-N-End's financial information is fully
consolidated with that of the Company.

SIGNIFICANT ACCOUNTING POLICIES:

    REVENUE RECOGNITION:

    The Company recognized revenue for its wholesale operations upon shipment of
merchandise to customers and recognizes revenue for its retail operations upon
sale of merchandise.

    PRINCIPLES OF CONSOLIDATION:

    The consolidated financial statements include the accounts of the Company
and its subsidiaries, as well as, the full consolidation of the accounts of
Odd's-N-End's. All significant intercompany accounts and transactions have been
eliminated in consolidation.

    STORE PRE-OPENING COSTS:

    Purchases of equipment and the costs of leasehold improvements are
capitalized. All other costs associated with the opening of new stores are
charged to expense as incurred.

    INVENTORIES:

    Inventories, consisting of finished goods merchandise held for sale, are
stated at the lower of cost or market, with cost determined on a first-in,
first-out basis. The retail inventory method is utilized by the retail
operations.

    EQUIPMENT AND IMPROVEMENTS:

    Equipment and improvements are recorded at cost. Maintenance and repairs are
charged to expense as incurred. The cost and related accumulated depreciation or
amortization of assets sold or disposed of are removed from the accounts and the
resulting gain or loss is included in the results of operations.

    Depreciation and amortization is calculated using the straight-line method
over the shorter of the estimated useful lives or related lease terms of the
assets.

                                       19
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

1.  BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
    ADVERTISING COSTS:

    Advertising costs are expensed as incurred. Advertising expense, including
costs incurred by Odd's-N-End's, totaled $3,944, $2,361, and $1,583 for the
years ended December 31, 1997, 1996 and 1995, respectively.

    INCOME TAXES:

    The Company accounts for income taxes using the liability method. Deferred
income taxes are recorded to reflect the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.

    NET INCOME (LOSS) PER COMMON SHARE:

    Basic income (loss) per common share is computed by dividing net income
(loss) for the period by the weighted average number of common shares
outstanding during each period. Diluted income (loss) per common share is
computed by dividing net income (loss) by the weighted average number of common
shares outstanding during each year, adjusted in 1995 for incremental shares
assumed issued on the exercise of stock options. Stock options were excluded
from diluted per share computations for the years ended December 31, 1997 and
1996 as the effect would be anti-dilutive.

    USE OF ESTIMATES:

    The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The most
significant areas which require the use of management's estimates relate to the
determination of the allowances for obsolete inventories, uncollectible accounts
receivable and inventory shrink reserves, as well as the assessment of
impairment related to long-lived assets.

    OTHER COMPREHENSIVE INCOME:

    The Company has no significant items of other comprehensive income.

2.  GOING CONCERN:

    The Company's viability as a going concern is dependent upon obtaining
additional financing, maintaining its current credit facility and ultimately, a
return to profitability.

    During 1997, the Company was unable to pay its vendors within normal trade
terms as it experienced continued net losses and a substantial decline in
consolidated net worth. As a result, management focused its efforts on obtaining
additional financing, and in November 1997, the Company issued 4.5 million
shares of Common Stock to 99 CENTS Only Stores for $4 million, of which $2
million was paid in cash and $2 million in merchandise credits. Subsequent to
December 31, 1997, 99 CENTS Only Stores made a proposal to the

                                       20
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

2.  GOING CONCERN: (CONTINUED)
Company's Board of Directors to acquire the remaining shares of Common Stock of
the Company in exchange for shares of Common Stock of 99 CENTS Only Stores.

    Subsequent to December 31, 1997, the Company's lender waived compliance by
the Company of its consolidated tangible net worth covenant through March 30,
1998. However, management does not believe that the Company will be in
compliance with this covenant as of March 31, 1998. This condition, as well as
the Company's operating results and negative operating cash flow, raise
substantial doubt about the Company's ability to continue as a going concern.

    The Company is currently in the process of negotiating with the lender to
obtain another waiver of the consolidated tangible net worth covenant. In
addition, management believes that 99 CENTS Only Stores will provide sufficient
financing to satisfy the Company's planned operating requirements through
December 31, 1998. Management's plans to return operations to profitability
include planned increases in sales from remerchandising the retail stores and
from providing an uninterrupted supply of merchandise; reduction of store
operating costs, such as advertising, freight and supplies; and further
reductions of corporate overhead costs.

    There can be no assurance that the Company will obtain a waiver from the
lender or that 99 CENTS Only Stores will provide sufficient financing to operate
the Company through December 31, 1998. In addition, there can be no assurance
that management's plans to return operations to profitability will be
successful.

3.  DISCONTINUED OPERATIONS:

    During 1997, the Company liquidated its wholesale inventory and eliminated
its wholesale business. Also during 1997, the Company adopted a plan to sell
Asset-Based Services, which sale was completed in January 1998 with no material
financial impact to the Company. These business segments have been accounted for
as discontinued operations, and prior years financial statements have been
restated to reflect the discontinuation of these segments. Revenues for 1997,
1996 and 1995 for the wholesale business were $14,203, $26,678 and $29,315,
respectively and for Asset-Based Services $943, $1,089 and $0, respectively. No
interest expense was allocated to discontinued operations as all amounts
incurred were in support of continuing operations.

4.  INVESTMENT IN ODD'S-N-END'S:

    The Company has entered into an agreement, as amended, to advance up to
$10,000 to Odd's-N-End's, collateralized by a secondary interest in
substantially all assets of Odd's-N-End's, with interest payable at prime plus
2.5%.

    During 1996, the non-controlling interest in Odd's-N-End's was reduced to $0
due to losses incurred by Odd's-N-End's. As a result, during 1996, the Company
began recording the entire amount of Odd's-N-End's net loss, and such losses
totaled $2,630 through December 31, 1997.

                                       21
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

5.  OTHER FINANCIAL STATEMENT DATA:

    The following provides additional disclosures for selected consolidated
balance sheet accounts:

<TABLE>
<CAPTION>
                                                                               DECEMBER 31
                                                                           --------------------
                                                                             1997       1996
                                                                           ---------  ---------
<S>                                                                        <C>        <C>
Equipment and improvements:
  Fixtures and equipment.................................................  $   8,369  $   8,179
  Leasehold improvements.................................................      5,234      5,311
                                                                           ---------  ---------
                                                                              13,603     13,490
  Less accumulated depreciation and amortization.........................      4,723      3,434
                                                                           ---------  ---------
                                                                           $   8,880  $  10,056
                                                                           ---------  ---------
                                                                           ---------  ---------
</TABLE>

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31
                                                                             --------------------
                                                                               1997       1996
                                                                             ---------  ---------
<S>                                                                          <C>        <C>
Accrued expenses:
  Accrued payroll..........................................................  $   1,072  $     896
  Unremitted sales tax.....................................................        619        598
  Other....................................................................      2,657      1,514
                                                                             ---------  ---------
                                                                             $   4,348  $   3,008
                                                                             ---------  ---------
                                                                             ---------  ---------
</TABLE>

    The following provides supplemental disclosures of consolidated cash flow
information:

<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31
                                                                     -------------------------------
                                                                       1997       1996       1995
                                                                     ---------  ---------  ---------
<S>                                                                  <C>        <C>        <C>
Cash paid during the year for:
  Interest.........................................................  $   1,293  $   1,279  $     649
  Income taxes.....................................................     --             20         13

Noncash disclosures:
  Disposal of inventories, equipment and improvements related to
    store closings.................................................        140         74        818
  Capital leases for equipment.....................................     --            630        102
  Common stock issued for inventories..............................      2,000     --         --
</TABLE>

                                       22
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

6.  DEBT:

REVOLVING CREDIT AGREEMENT:

    At December 31, 1996, the Company had a $16,000 revolving credit agreement
with a financial institution. During the first quarter of 1997, the Company
defaulted on several provisions of the amended loan agreement. As a result of
these defaults, the lender reduced the credit line to $12,500 and increased the
interest rate on outstanding borrowings to prime plus 3.5%. The lender further
reduced the credit line to $10,000 as of May 31, 1997.

    In June 1997 the Company entered into a borrowing arrangement with a new
lender which replaced the previous credit line and the then existing
Odd's-N-End's bank notes payable of $1,300. Under the new revolving credit
agreement, as amended, the Company may borrow up to $14,000 (seasonally adjusted
to the $16,750 for the fourth quarter of 1997) against a borrowing base derived
from the level of qualifying accounts receivable and inventory. The agreement
expires in June 1999, but may be automatically renewed each year thereafter at
the option of both the lender and the Company. Borrowings under the agreement
are collateralized by substantially all assets of the Company, and outstanding
borrowings bear interest at prime plus 2% (the prime rate at December 31, 1997
was 8.5%). The Company also obtained $1,873 of term loan financing from the new
lender, which is included in the total line limit. The amount available at
December 31, 1997, based on the borrowing base, was $13,244, of which there were
outstanding borrowings of $9,270, outstanding borrowings on the fixture loan of
$1,678, and outstanding letters of credit of $499.

    LONG-TERM DEBT:

    Long-term debt consists of the following at December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31,
                                                                                                 --------------------
                                                                                                   1997       1996
                                                                                                 ---------  ---------
<S>                                                                                              <C>        <C>
Note payable--bank, due in monthly installments of $39 plus interest of prime plus 2% (10.5% at
  December 31, 1997) remaining balance due June 30, 1999.......................................  $   1,678  $  --

Note payable--bank, paid June 1997, interest paid monthly at prime plus 3.25% during 1996 and
  prime plus 4% during 1997....................................................................     --            566

Note payable--bank, paid June 1997, interest paid monthly at prime plus 3.25% during 1996, and
  prime plus 4% during 1997....................................................................     --          1,096

Capital lease obligations payable in various monthly installments through August 2000,
  including interest at 5.0% to 11.1%..........................................................        450        625
                                                                                                 ---------  ---------

                                                                                                     2,128      2,287

  Less current maturities......................................................................        634        556
                                                                                                 ---------  ---------

                                                                                                 $   1,494  $   1,731
                                                                                                 ---------  ---------
                                                                                                 ---------  ---------
</TABLE>

                                       23
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

6.  DEBT: (CONTINUED)
    Scheduled future maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
<S>                                                                                <C>
Year Ending December 31:
1998.............................................................................  $     634
1999.............................................................................      1,342
2000.............................................................................        152
                                                                                   ---------
                                                                                   $   2,128
                                                                                   ---------
                                                                                   ---------
</TABLE>

    Future minimum lease payments under capital lease obligations are as
follows:

<TABLE>
<CAPTION>
<S>                                                                                 <C>
Year Ending December 31:
1998..............................................................................  $     208
1999..............................................................................        155
2000..............................................................................        161
                                                                                    ---------
                                                                                          524
Less interest.....................................................................         74
                                                                                    ---------
Present value of minimum lease payments...........................................  $     450
                                                                                    ---------
                                                                                    ---------
</TABLE>

7.  INCOME TAXES:

    At December 31, 1997, the Company has federal net operating loss
carryforwards of approximately $13,900 and apportioned state net operating loss
carryforwards of approximately $11,500 available to offset against future
taxable income.

    The federal net operating loss carryforwards expire as follows:

<TABLE>
<S>                                                              <C>
2008...........................................................
2009...........................................................   $   1,100
2010...........................................................      --
2011...........................................................       3,000
2012...........................................................       9,800
                                                                 -----------
Total..........................................................   $  13,900
                                                                 -----------
                                                                 -----------
</TABLE>

    The Company utilized approximately $900 of net operating loss carryforwards
in 1995, resulting in a variance between the effective tax rate and the
statutory tax rate. The provision recorded in 1995 represents alternative
minimum taxes due for federal and state tax purposes.

                                       24
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

7.  INCOME TAXES: (CONTINUED)
    Temporary differences reflected in the Company's balance sheets for December
31, 1997 and 1996, consisted of:

<TABLE>
<CAPTION>
                                                                        1997       1996
                                                                      ---------  ---------
<S>                                                                   <C>        <C>
Inventories.........................................................  $     597  $     508
AMT credit carryover................................................        152        152
NOL carryover.......................................................      5,569      1,829
Other...............................................................        268        375
Depreciation........................................................       (693)      (693)
Deferred tax valuation allowance....................................     (5,920)    (2,198)
                                                                      ---------  ---------
  Net deferred taxes................................................  $     (27) $     (27)
                                                                      ---------  ---------
                                                                      ---------  ---------
</TABLE>

8.  COMMITMENTS:

OPERATING LEASES:

    The Company is committed under long-term operating leases for the rental of
its office and warehouse facilities and retail store locations. The main
facility lease expires on July 31, 2000 and contains a right of first refusal to
purchase the facility.

    The terms for the retail store leases range from one to ten years with the
leases structured so that the Company generally can extend, at its option, the
terms of the leases to a total of ten years. The Company is also required to pay
additional rent for some of the retail store locations based on a percentage of
sales and, in most cases, real estate taxes and other expenses. Additional rent
incurred was not significant in 1997, 1996 or 1995.

    Total rent expense under all leases, for the years ended December 31, 1997,
1996 and 1995 was $8,158, $6,341, and $5,431, respectively, including percentage
rent, real estate taxes and other rental pass through expenses.

    As of December 31, 1997, future minimum lease payments (excluding real
estate taxes, other rental pass through expenses and percentage rents) due under
existing noncancellable operating leases, with remaining terms of greater than
one year are as follows:

<TABLE>
<CAPTION>
<S>                                                                              <C>
1998...........................................................................  $   4,966
1999...........................................................................      4,624
2000...........................................................................      3,483
2001...........................................................................      2,049
2002...........................................................................      1,155
Thereafter.....................................................................        581
                                                                                 ---------
                                                                                 $  16,858
                                                                                 ---------
                                                                                 ---------
</TABLE>

                                       25
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

9.  EMPLOYEE BENEFIT PLANS:

STOCK OPTIONS:

    The Company has reserved 450 shares of common stock for issuance under the
1990 Stock Option Plan (the Plan), as amended in 1996. Options granted under the
Plan can be either incentive stock options or nonqualified stock options. The
Board of Directors has the authority to grant options and set the terms. The
options are granted at fair market value on the date of grant.

    The Plan also provides for the issuance of stock appreciation rights (SARs)
and restricted stock awards. No SARs or restricted stock awards have been issued
as of December 31, 1997.

    All stock options under the Plan have a maximum term of five years from the
date of grant, unless a lesser period is provided for in the option agreement.
Generally, stock options vest in equal annual portions over five years.

    In addition to the options under the Plan, the Company has granted
nonqualified stock options to certain officers and directors. All nonqualified
stock options have a maximum term of five years from the date of grant, unless a
lesser period is provided for in the option agreement. Generally, nonqualified
stock options vest in equal annual portions over a maximum four-year period.

    A summary of changes in outstanding stock options is as follows:

<TABLE>
<CAPTION>
                                                                                 1990 PLAN                NONQUALIFIED
                                                                          ------------------------  ------------------------
                                                                                        WEIGHTED                  WEIGHTED
                                                                                         AVERAGE                   AVERAGE
                                                                            OPTION      EXERCISE      OPTION      EXERCISE
                                                                            SHARES        PRICE       SHARES        PRICE
                                                                          -----------  -----------  -----------  -----------
<S>                                                                       <C>          <C>          <C>          <C>
Balance, December 31, 1994..............................................         197    $    2.50          528    $    6.40
Options canceled........................................................         (55)        2.50         (300)        7.75
Options granted.........................................................          99         3.69          458         2.49
                                                                                 ---        -----          ---        -----
Balance, December 31, 1995..............................................         241         2.99          686         3.20
Options canceled........................................................         (65)        3.38       --           --
Options granted.........................................................         137         3.73          100         4.75
                                                                                 ---        -----          ---        -----
Balance, December 31, 1996..............................................         313         3.23          786         3.40
Options canceled........................................................        (164)        2.68         (228)        4.63
Options granted.........................................................         263         1.54          125         1.13
                                                                                 ---        -----          ---        -----
Balance, December 31, 1997..............................................         412    $    2.37          683    $    2.57
                                                                                 ---        -----          ---        -----
                                                                                 ---        -----          ---        -----
Options exercisable:
December 31, 1995.......................................................          59    $    2.50          347    $    3.90
December 31, 1996.......................................................          90         2.51          464         3.54
December 31, 1997.......................................................          59         2.94          583         2.20
</TABLE>

                                       26
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

9.  EMPLOYEE BENEFIT PLANS: (CONTINUED)
    Proforma disclosures of net income (loss) and net income (loss) per common
share as if the fair value based method of accounting for stock options had been
applied are as follows:

<TABLE>
<CAPTION>
                                                                                      1997       1996       1995
                                                                                   ----------  ---------  ---------
<S>                                         <C>                                    <C>         <C>        <C>
Net income (loss):                          As reported..........................  $  (11,887) $  (4,301) $   1,310
                                            Pro forma............................     (12,391)    (4,663)       976
Net income (loss) per common share:         As reported
                                            Basic................................  $    (2.18) $    (.88) $     .27
                                            Diluted..............................       (2.18)      (.88)       .26
                                            Pro forma............................
                                            Basic................................       (2.27)      (.95)       .20
                                            Diluted..............................       (2.27)      (.95)       .19
</TABLE>

    The fair value of each employee and director stock option has been estimated
on the date of grant using the Black-Scholes option pricing model with the
following assumptions used for grants in 1997, 1996 and 1995, respectively:
risk-free interest rates of 6.27%, 6.17% and 6.31%; expected volatility of 204%,
49% and 57%; expected life of one to five years; and no dividend yields. The pro
forma disclosures may not be representative of the effects on net earnings in
future years because the disclosures do not consider pro forma compensation
expense related to grants made prior to 1995.

    PROFIT SHARING AND 401(K) PLAN:

    The Company maintains a defined contribution profit sharing plan covering
employees who meet certain age and service requirements and which contains
provisions for a savings portion to be qualified under Internal Revenue Code
Section 401(k). Participants in the savings portion of the plan may contribute
up to 15 percent of annual compensation. The Company contributes discretionary
amounts to both the profit sharing and savings portions of the plan. The total
Company contributions to the defined contribution plan were $32, $33 and $33 in
1997, 1996 and 1995, respectively.

10.  STOCKHOLDERS' EQUITY:

    STOCKHOLDERS' RIGHTS PLAN:

    In June 1996, the Company adopted a stockholder rights plan, pursuant to
which the Company declared a dividend distribution of one Common Stock Purchase
Right for each outstanding share of the Company's Common Stock. Each Right
entitles the stockholder to purchase one share of Common Stock at a price of $25
per share, subject to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement dated April 19, 1996, between the Company and
Norwest Bank Minnesota, N.A., as Rights Agent.

11.  CONTINGENCIES:

    The Company is a defendant in various claims and disputes arising in the
ordinary course of business. While the outcome of these matters cannot be
predicted with certainty, management presently believes the disposition of these
matters will not have a material effect on the results of operations, financial
position or cash flows of the Company.

                                       27
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

12.  SUBSEQUENT EVENT:

    Subsequent to December 31, 1997, 99 CENTS Only Stores made a proposal to the
Company's Board of Directors to acquire the remaining shares of Common Stock of
the Company in exchange for shares of Common Stock of 99 CENTS Only Stores. As
proposed, 99 CENTS Only Stores would issue to the stockholders of the Company
one share of common stock of 99 CENTS Only Stores for each 16 shares of the
Company's Common Stock. In addition, subsequent to December 31, 1997, 99 CENTS
Only Stores made a proposal to the Board of Directors of Odd's-N-End's to
acquire all outstanding shares of Common Stock of Odd's-N-End's not owned by the
Company for cash of approximately $830,000.

13.  RECLASSIFICATIONS:

    Certain reclassifications have been made to the prior year financial
statements to conform with the current year presentation. These
reclassifications had no impact on net income (loss) or stockholders' equity, as
previously reported.

                                       28
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
Universal International, Inc.:

    Our report on the consolidated financial statements of Universal
International, Inc. as of December 31, 1996 and for the years ended December 31,
1996 and 1995 is included on page 14 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in the index in Item 14 of this Form 10-K.

    In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

    The accompanying consolidated financial statements have been prepared
assuming that Universal International, Inc. will continue as a going concern. As
more fully described in Note 6, the Company was in default of several provisions
of its then existing revolving credit agreement and had not obtained new
financing to replace this revolving credit agreement. In addition, the Company
incurred a consolidated net loss of $4.3 million in 1996. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans are described in Note 2. The 1996 consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

                                             COOPERS & LYBRAND L.L.P.

Minneapolis, Minnesota
April 15, 1997

                                       29
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
             FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
COLUMN A                                                             COLUMN B     COLUMN C     COLUMN D     COLUMN E
------------------------------------------------------------------  -----------  -----------  -----------  -----------

<S>                                                                 <C>          <C>          <C>          <C>
                                                                    BALANCE AT    ADDITIONS   DEDUCTIONS     BALANCE
                                                                     BEGINNING   CHARGED TO      FROM        AT END
DESCRIPTION                                                          OF PERIOD     EXPENSE     ALLOWANCE    OF PERIOD
------------------------------------------------------------------  -----------  -----------  -----------  -----------
Year ended December 31, 1997:
  Allowance for doubtful accounts (deducted from accounts
    receivable)...................................................   $     200    $     575    $     295    $     480
  Inventory obsolescence and shrink reserve (deducted from
    inventory)....................................................   $   1,017    $   1,347    $   1,611    $     753
  Store closing allowance.........................................   $      74    $     296    $     140    $     230

Year ended December 31, 1996:
  Allowance for doubtful accounts (deducted from accounts
    receivable)...................................................   $     200    $     204    $     204    $     200
  Inventory obsolescence and shrink reserve (deducted from
    inventory)....................................................   $     728    $   1,506    $   1,217    $   1,017
  Store closing allowance.........................................   $     195    $  --        $     121    $      74

Year ended December 31, 1995:
  Allowance for doubtful accounts (deducted from accounts
    receivable)...................................................   $     300    $     168    $     268    $     200
  Inventory obsolescence and shrink reserve (deducted from
    inventory)....................................................   $     525    $     950    $     747    $     728
  Store closing allowance.........................................   $   1,220    $  --        $   1,025    $     195
</TABLE>

                                       30
<PAGE>
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

    Reference is hereby made to the Company's Report on Form 8-K/A dated January
8, 1998, which is incorporated herein by reference.

    There were no disagreements with accountants on accounting and financial
disclosures.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information regarding the Company's directors required by Item 10 is
incorporated herein by reference to the section entitled, "Item 1--Election of
Directors," in the Company's proxy statement for its 1998 Annual Meeting of
Shareholders which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days of the Company's fiscal year ended
December 31, 1997. Information regarding the Company's executive officers
required by Item 10 is included in Part I of this Annual Report on Form 10-K as
permitted by General Instruction G(3) to Form 10-K. Information required by this
Item concerning compliance with Section 16(a) of the Securities Act of 1934 is
included in the proxy statement under the section entitled "Security Ownership
of Certain Beneficial Owners and Management," and such information is
incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

    The information required by Item 11 is incorporated herein by reference to
the section entitled "Compensation of Executive Officers and Directors" in the
Company's proxy statement for its 1998 Annual Meeting of Shareholders which will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days of the Company's fiscal year ended December 31, 1997.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by Item 12 is incorporated herein by reference to
the section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Company's proxy statement for its 1998 Annual Meeting of
Shareholders which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days of the Company's fiscal year ended
December 31, 1997.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by Item 13 is incorporated herein by reference to
the section entitled "Certain Transactions" in the Company's proxy statement for
its 1998 Annual Meeting of Shareholders which will be filed with the Securities
and Exchange Commission pursuant to Regulation 14A within 120 days of the
Company's fiscal year ended December 31, 1997.

                                       31
<PAGE>
                                    PART IV

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

    a)  Documents filed as part of this report:

       1.  The Consolidated Financial Statements, notes thereto, and
           accountants' reports thereon are included in Part II, Item 8 of this
           report.

       2.  Consolidated Financial Statements Schedule included in Part II Item 8
           of this report:

           Schedule II--Valuation and Qualifying Accounts

           Other financial statement schedules are omitted because they are not
           required or are not applicable.

       3.  Exhibits

           See Exhibit Index immediately following signature page.

    b)  Reports on Form 8-K

           The Company filed a Form 8-K during the quarter ended December 31,
           1997 relating to the issuance of 4.5 million shares of common stock
           to 99 CENTS Only Stores.

                                       32
<PAGE>
                                   SIGNATURES

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

<TABLE>
<S>                             <C>  <C>
                                UNIVERSAL INTERNATIONAL, INC.

Date: March 30, 1998            By:             /s/ RICHARD L. ENNEN
                                     -----------------------------------------
                                                  Richard L. Ennen
                                              CHIEF EXECUTIVE OFFICER
</TABLE>

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

NAME                                   TITLE
------------------------------  -------------------

                                Chief Executive
     /s/ RICHARD L. ENNEN       Officer
------------------------------  and Director           March 30, 1998
       Richard L. Ennen         (principal
                                executive officer)

                                Chief Financial
      /s/ DENNIS A. HILL        Officer
------------------------------  (principal             March 30, 1998
        Dennis A. Hill          financial and
                                accounting officer)

     /s/ ROBERT R. LANGER       Chief Operating
------------------------------  Officer and            March 30, 1998
       Robert R. Langer         Director

        /s/ JEFF GOLD
------------------------------  Director               March 30, 1998
          Jeff Gold

       /s/ HOWARD GOLD
------------------------------  Director               March 30, 1998
         Howard Gold

       /s/ ANDY FARINA
------------------------------  Director               March 30, 1998
         Andy Farina

                                       33
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

                                 EXHIBIT INDEX
                                      FOR
                        1997 ANNUAL REPORT ON FORM 10-K

    All exhibits, except those marked (1) below, have already been filed with
the Commission and are incorporated herein by reference.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<C>    <S>
  3.1  Articles of Incorporation, as amended

  3.2  By-laws

  4.3  Revolving Credit Agreement with Firstar Bank of Minnesota, N.A. and First
         Wisconsin National Bank of Milwaukee dated December 18, 1991

  4.3.1 Master Amendment Agreement (Including Amendment No. 2 to Revolving Credit
         Agreement)

  4.4  Account Financing Agreement among Universal International, Inc., Only
         Deals, Inc. and Congress Financial Corporation

  4.5  Inventory and Equipment Security Agreement

  4.6  Trade Financing Agreement

  9.2  Shareholders' Agreement and Irrevocable Proxy dated November 12, 1992 by
         and among the Company and Mark H. Ravich, L. Jack Roth and Gilbert L.
         Wachsman

 10.1  Lease Agreement between the Company and Hoyt Development Company for
         premises located at 5000 Winnetka Avenue North, New Hope, Minnesota,
         dated April 21, 1989 as amended August 29, 1990

 10.2  Sublease Agreement between the Company and United Hardware Distributing
         Co. for premises located at 5005 Nathan Lane, New Hope, Minnesota dated
         April 17, 1991 and Consent to Sublease

 10.2.1 First Amendment to Sublease Agreement between the Company and United
         Hardware Distribution Co. dated April 17, 1991

 10.2.2 Second Amendment to Sublease Agreement between the Company and United
         Hardware Distribution Co.

 10.3  1990 Stock Option Plan, as amended

 10.4  Lease Agreement between the Company and Carlson Real Estate Company for
         premises located at 13120 County Road 6, Plymouth, Minnesota, dated
         September 29, 1995

 10.5  Bonus Plan

 10.6  Employment Agreement between the Company and L. Jack Roth dated February
         7, 1989

 10.7  Employment Agreement between the Company and Norman J. Ravich dated
         September 4, 1990

 10.7.1 Employment Agreement between the Company and Norman J. Ravich dated
         October 26, 1992

 10.7.2 First Amendment to Employment Agreement

 10.7.3 Second Amendment to Executive Employment Agreement dated October 9, 1997
         (1)
</TABLE>

                                       34
<PAGE>
                         UNIVERSAL INTERNATIONAL, INC.

                                 EXHIBIT INDEX
                                      FOR
                  1997 ANNUAL REPORT ON FORM 10-K (CONTINUED)

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<C>    <S>
 10.9.1 Employment Agreement between the Company and Mark H. Ravich dated October
         26, 1992

 10.9.2 First Amendment to Employment Agreement

 10.9.3 Second Amendment to Executive Employment Agreement dated October 9, 1997
         (1)

 10.10 Stock Purchase Agreement dated January 20, 1992

 10.10.1 Pension termination ruling regarding the Company's defined benefit pension
         plan

 10.11 Loan and Security Agreement dated November 21, 1995 among BankAmerica
         Business Credit, Inc., Universal International, Inc., and Only Deals,
         Inc.

 10.11.1 Waiver and First Amendment to Loan and Security Agreement dated July 30,
         1996

 10.11.2 Second Amendment to Loan and Security Agreement dated August 20, 1996

 10.11.3 Waiver and Second Amendment to Loan and Security Agreement dated December
         10, 1996

 10.12 Loan and Security Agreement by and between Universal International, Inc.
         and Odd's-N-End's, Inc.

 10.12.1 Alonge dated July 30, 1996 to Revolving Note with Odd's-N-End's, Inc.

 10.12.2 Amended and Restated Loan and Security Agreement with Odd's-N-End's, Inc.

 10.13 Employment Agreement between the Company and Wesley J. Laseski dated
         February 25, 1993

 10.13.1 First Amendment to Employment Agreement

 10.14 Loan and Security Agreement between the Company and Coast Business Credit
         dated June 6, 1997

 10.14.1 Schedule to Loan and Security Agreement dated June 6, 1997

 10.14.2 First Amendment to Loan and Security Agreement between the Company and
         Coast Business Credit dated September 25, 1997

 10.14.3 Waiver of Event of Default dated February 19, 1998 (1)

 11.0  Detail Computation of Income (loss) per share (1)

 22.0  Subsidiaries of the Registrant
       The Company has three subsidiaries, Only Deals, Inc., a Minnesota
         corporation, which is wholly owned, Universal Asset-Based Services,
         Inc., a Minnesota corporation, which is 95% owned, and Odd's-N-End's,
         Inc., a Delaware corporation, which is 40.5% owned.
</TABLE>

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

(1) Filed herewith.

                                       35