<PAGE>

                          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 MARCH 31, 1998
                                          
                          Commission file number 33-87820
                                          
                            RENAISSANCE COSMETICS, INC.
               (Exact name of registrant as specified in its charter)
                                          
                                      DELAWARE
          (State or other jurisdiction of incorporation or organization)  
                                          
                                    06-1396287 
                        (I.R.S. Employer Identification No.)
                                          
                         THREE LANDMARK SQUARE, FIFTH FLOOR
                            STAMFORD, CONNECTICUT 06901
                   (Address of principal executive office)(Zip Code)
                                          
                                   (203) 316-9800
                (Registrant's telephone number, including area code)
                                          
         Securities registered pursuant to Section 12(b) of the Act:  NONE
         Securities registered pursuant to Section 12(g) of the Act:  NONE
                                          
          Indicate by check mark whether the registrant:  (1) has filed all
     reports required to be filed by Section 13 or 15(d) of the Securities
     Exchange Act of 1934 during the preceding 12 months (or for such shorter
     period that the registrant was required to file such reports), and (2) has
     been 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 registrant's knowledge, in definitive proxy or
     information statements incorporated by reference in Part III of this Form
     10-K or any amendment to this Form 10-K. [X]

          As of March 31, 1998, there were outstanding 826,323 shares of the
     registrant's common stock, $.01 par value.

                      Documents Incorporated by Reference: NONE 
<PAGE>

                                        INDEX 

PART I

     Item 1.   Business ...................................................  1
     Item 2.   Properties.................................................. 23
     Item 3.   Legal Proceedings........................................... 26
     Item 4.   Submission of Matters to a Vote of Security Holders......... 27

PART II

     Item 5.   Market for Registrant's Common Equity and Related
                Stockholder Matters........................................ 27
     Item 6.   Selected Financial Data..................................... 28
     Item 7.   Management's Discussion and Analysis of Financial Condition 
                and Results of Operations.................................. 30
     Item 8.   Financial Statements and Supplementary Data................. 48
     Item 9.   Changes in and Disagreements with Accountants on Accounting
                Financial Disclosure....................................... 48

PART III

     Item 10.  Directors and Executive Officers............................ 48
     Item 11.  Executive Compensation...................................... 53
     Item 12.  Security Ownership of Certain Beneficial and Management..... 60
     Item 13.  Certain Relationships and Related Transactions.............. 62

PART IV

     Item 14.  Exhibits, Financial Statement Schedules and Reports on
                Form 8-K................................................... 63

<PAGE>
 
                 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
                                          
CERTAIN STATEMENTS UNDER THE CAPTIONS "BUSINESS," "MANAGEMENT'S DISCUSSION 
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE 
IN THIS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1998 
(THE "1997 FORM 10-K"), AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE 
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF 
THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT.  CERTAIN, BUT NOT 
NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE 
USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES," "EXPECTS," "MAY," 
"WILL," "SHOULD" OR "ANTICIPATES" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS 
THEREON OR COMPARABLE TERMINOLOGY, OR BY DISCUSSION OF STRATEGIES THAT 
INVOLVE RISKS AND UNCERTAINTIES.  SUCH FORWARD-LOOKING STATEMENTS INVOLVE 
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE 
ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS OF THE 
COMPANY, OR INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE 
RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED 
BY SUCH FORWARD-LOOKING STATEMENTS.  SUCH FACTORS INCLUDE, AMONG OTHERS, THE 
FOLLOWING: GENERAL ECONOMIC AND BUSINESS CONDITIONS; DIFFICULTIES INCURRED BY 
THE COMPANY IN IMPLEMENTING ITS NEW BUSINESS STRATEGY, INCLUDING THE ABILITY 
TO SIGNIFICANTLY RESTRUCTURE THE COMPANY'S OPERATIONS TO RESPOND TO MARKET 
CONDITIONS AND TO INTEGRATE RECENTLY ACQUIRED BUSINESSES INTO THE COMPANY; 
THE SUCCESS OF THE COMPANY'S EFFORTS TO RESTRUCTURE ITS OBLIGATIONS TO THE 
HOLDERS OF ITS 11 3/4% NOTES DUE 2004, ITS 14% SENIOR REDEEMABLE PREFERRED 
STOCK AND ITS 10% CUMULATIVE PREFERRED STOCK; RESTRICTIONS ON BORROWING BASE 
AVAILABILITY UNDER THE COMPANY'S REVOLVING CREDIT FACILITY; COVENANT 
COMPLIANCE UNDER THE COMPANY'S REVOLVING CREDIT FACILITY; ACTIONS THAT MAY BE 
TAKEN BY THE COMPANY'S LENDERS AND UNSECURED CREDITORS IF THE COMPANY FAILS 
TO MAKE TIMELY PAYMENTS OF INTEREST ON ITS OUTSTANDING 11 3/4% SENIOR NOTES 
DUE 2004 OR OTHER INDEBTEDNESS; THE CONTINUED AVAILABILITY OF TRADE CREDIT ON 
TERMS PREVIOUSLY ENJOYED BY THE COMPANY; CHANGES IN THE MASS MARKET COSMETICS 
INDUSTRY GENERALLY AND THE FRAGRANCE AND NAIL CARE INDUSTRIES SPECIFICALLY; 
CHANGES IN CONSUMER PREFERENCES; COMPETITION; AVAILABILITY OF KEY PERSONNEL; 
COMPETING DEMANDS ON MANAGEMENT'S TIME; FOREIGN CURRENCY EXCHANGE RATES; 
INDUSTRY CAPACITY; DEVELOPMENT AND OPERATING COSTS; ADVERTISING AND 
PROMOTIONAL EFFORTS; BRAND AWARENESS; ACCEPTANCE OF NEW PRODUCT LAUNCHES; AND 
CHANGES IN, OR THE FAILURE TO COMPLY WITH, GOVERNMENT REGULATIONS (ESPECIALLY 
ENVIRONMENTAL LAWS AND REGULATIONS); AND OTHER FACTORS REFERENCED IN THIS 
1997 FORM 10-K.  AS A RESULT OF THE FOREGOING AND OTHER FACTORS, NO ASSURANCE 
CAN BE GIVEN AS TO FUTURE RESULTS, LEVELS OF ACTIVITY AND ACHIEVEMENTS AND 
NEITHER THE COMPANY NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR THE 
ACCURACY AND COMPLETENESS OF THESE STATEMENTS. 

<PAGE>

                                  PART I

ITEM 1.   BUSINESS

GENERAL

     REFERENCES HEREIN TO "FISCAL 1995," "FISCAL 1996" AND "FISCAL 1997" MEAN 
THE FISCAL YEARS ENDED MARCH 31, 1996, MARCH 31, 1997 AND MARCH 31, 1998, 
RESPECTIVELY.  REFERENCES HEREIN TO "FISCAL 1998" MEAN THE FISCAL YEAR ENDING 
MARCH 31, 1999.   ALSO, UNLESS CLEARLY INDICATED OTHERWISE HEREIN, ALL 
REFERENCES TO THE COMPANY ARE TO RENAISSANCE COSMETICS, INC. ("RENAISSANCE"), 
AND ITS SUBSIDIARIES AND ALL REFERENCES TO THE HOLDING COMPANY ARE TO 
RENAISSANCE INDIVIDUALLY AND NOT TOGETHER WITH ITS SUBSIDIARIES.  ALL MARKET 
SHARE DATA DISCUSSED BELOW IS BASED ON DATA OBTAINED FROM INFORMATION 
RESOURCES, INC. ("IRI"), AN INDEPENDENT MARKET RESEARCH FIRM, AND REFLECT 
ACTUAL U.S. SALES DATA FOR THE 52 WEEK PERIOD ENDED APRIL 19, 1998, SCANNED 
BY IRI'S INFOSCAN SERVICE THROUGH RETAILERS' STORE REGISTERS IN THE DRUG 
STORE AND MASS MERCHANDISE SEGMENTS OF THE MASS MARKET. 

     Renaissance was incorporated in Delaware in 1994.  The Company is a 
leading manufacturer and marketer of mass market fragrances, artificial nail 
care products, mid-priced lip and eye make-up, nail polish and related 
products that are sold by more than 1,000 retailers in approximately 25,000 
locations in the United States ("U.S.") and in more than 50 foreign 
countries.  The Company sells its products principally through the 
mass market distribution channel which includes drug stores (such as 
Walgreens, CVS, Rite Aid and Eckerd), mass merchandisers (such as Wal-Mart 
and Kmart) and supermarkets and combination supermarket/drug stores (such as 
Kroger and Albertson's). 

     Renaissance is a holding company that conducts its business operations 
through its operating subsidiaries.  Renaissance's principal operating 
subsidiaries are Dana Perfumes Corp. ("Dana"), which conducts the Company's 
fragrance business, and Cosmar Corporation ("Cosmar"), which conducts the 
Company's cosmetics business (which includes artificial nail care products, 
lip and eye make-up and nail polish and related products). 
     
     The Company's principal executive offices are located at Three Landmark 
Square, Fifth Floor, Stamford, Connecticut 06901, and its telephone number is 
(203) 316-9800.

BACKGROUND

     FORMATION.  The Holding Company was formed in April 1994 by Kidd Kamm & 
Company ("Kidd Kamm") and Thomas V. Bonoma, the founding Chairman and Chief 
Executive Officer of the Company.  

     Dr. Bonoma died unexpectedly on May 21, 1997.  On May 28, the Board of 
Directors of the Holding Company appointed Norbert Becker, President of the 
Holding Company, as Chief Executive Officer and a director of the Holding 
Company.  

     In November 1996, the partners of Kidd Kamm agreed to a division of the
firm and its operations in relation to future investments.  The firm's two
founding partners, William J. Kidd and Kurt L. Kamm, formed separate entities
for future investments, including the formation of two firms, 

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Kidd & Company, LLC ("Kidd & Company"), and Kamm Theodore & Company LLC 
("Kamm Theodore"), in January, 1997.

     ACQUISITIONS.  Since 1994, the Company has completed the following
acquisitions:

     In July and August 1994, the Company entered into long-term exclusive
license agreements with Houbigant, Inc. ("Houbigant"), to manufacture,
distribute, use and sell throughout the world (excluding Canada) 12 mass market
fragrances formerly marketed by Houbigant, including CHANTILLY (the "Houbigant
Acquisition").  

     In August 1994, the Company purchased the operations of Cosmar, the 
largest manufacturer and marketer in the U.S. of artificial fingernails and 
related nail care products (the "Cosmar Acquisition").

     In December 1994, the Company acquired Les Parfums de Dana, Inc., and 
related companies (now known as Dana), which manufactured mass market 
fragrances and related products sold in the US and in 20 foreign countries 
(the "Dana Acquisition").

     In December 1994, the Company acquired the assets of ACB Mercantile, Inc.,
and related companies (the "ACB Acquisition") through which the Company acquired
certain rights to manufacture, distribute, use and sell the Houbigant Fragrances
in Canada which, when combined with the previous Houbigant license agreements,
gave the Company the exclusive worldwide right to manufacture and market the
Houbigant Fragrances.  
 
     In August 1996, Cosmar acquired Great American Cosmetics, Inc.
("GAC"), a company that marketed, distributed, advertised, promoted and
merchandised high-quality, mid-priced lip and eye make-up, nail polish and
related products (the "GAC Acquisition").  In Fiscal 1997, GAC merged
into Cosmar. 

     In December 1996, Dana acquired MEM Company, Inc. ("MEM") and its
wholly-owned subsidiaries, which manufactured mass market fragrances (the "MEM
Acquisition").  In Fiscal 1997, the Company merged all but four of MEM's
subsidiaries into MEM and consolidated all of MEM's domestic manufacturing
operations into Dana's Mountain Top, Pennsylvania, manufacturing facility (the
"Mountain Top Facility").  See Part I, Item 1. Business, "Employees"  below.

     In December 1996, Dana acquired from The Procter & Gamble Company
("P&G") the worldwide rights to manufacture and distribute certain mass market
fragrances (the "P&G Brands Acquisition").  In Fiscal 1997, the Company began
consolidating the manufacture of the domestic fragrances acquired from P&G at
the Company's Mountain Top Facility.  
 
     FINANCING TRANSACTIONS.  Since 1994, the Company has completed a number 
of financing transactions. The transactions that are currently operative are 
described below.

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     HOLDING COMPANY OBLIGATIONS.  The following transactions relate to 
equity securities of the Holding Company or debt obligations on which the 
Holding Company is the sole obligor.  None of the operating subsidiaries 
(including Dana and Cosmar) have any direct or indirect liability for any of 
these obligations.

     In May 1994, Kidd Kamm Equity Partners, L.P. ("KKEP"), an affiliate of Kidd
Kamm, purchased $22.5 million of common stock of the Holding Company, par value
$.01 per share ("Common Stock"), and management and certain other investors
purchased an additional $4 million of Common Stock.

     Also in May 1994, the Holding Company received $10 million of proceeds from
the issuance of 10,000 shares of 10% Cumulative Exchangeable Preferred Stock 
(the "10% Preferred Stock"), with warrants.

     In August 1994, the Holding Company executed four promissory notes (the
"Subordinated Seller Notes"), in the aggregate principal amount of $5 million in
favor of the selling shareholders of Cosmar.  The Subordinated Seller Notes were
subsequently purchased by Triumph-Connecticut Limited Partnership. 

     In August and September 1996, the Holding Company completed a Rule 144A 
offering of $115 million of 14%  Senior Redeemable Preferred Stock, Series B 
("Series B Preferred Stock"), with warrants to purchase Common Stock ("Series 
B Warrants").  At the same time, the Holding Company sold shares of Common 
Stock to CIBC WG Argosy Merchant Fund 2, LLC, and Bastion Capital Fund, L.P.  
The Holding Company received aggregate net proceeds from these transactions 
of $119.1 million.  The issuance of the Series B Preferred Stock and the 
concurrent sale of Common Stock are together referred to herein as the 
"Series B Financing."  The Holding Company used the proceeds from the Series 
B Financing to finance the GAC Acquisition, the MEM Acquisition and the P&G 
Brands Acquisition and to repay a portion of the Company's then outstanding 
credit facility and for general corporate purposes.

     In February 1997, the Holding Company completed a Rule 144A offering of 
$200 million aggregate principal amount of 11-3/4% Senior Notes, due 2004 
(the "Senior Notes"), issued pursuant to the Indenture, dated February 7, 
1997 (the "Indenture").  The Holding Company used a portion of the proceeds 
received from the sale of the Senior Notes to repay then-existing debt and to 
repurchase then-existing notes. 

     In April 1997, the Holding Company completed the exchange of 
substantially all of the issued and outstanding shares of Series B Preferred 
Stock for shares of 14% Senior Redeemable Preferred Stock, Series C ("Series 
C Preferred Stock" and together with the Series B Preferred Stock and the 10% 
Preferred Stock, collectively the "Preferred Stock").  The terms of the 
Series C Preferred Stock are substantially the same as the terms of the 
Series B Preferred Stock, except that the Series C Preferred Stock is 
registered under the Securities Act of 1933.

     In June 1997, the Holding Company completed the exchange of all of the
outstanding principal amount of its  Senior Notes  for a like principal amount
of its 11-3/4% Senior Notes due 2004 which are registered under the Securities
Act (the "1997 Senior Notes").

                                       3
<PAGE>

     OPERATING SUBSIDIARY OBLIGATIONS.  In March 1997,  Dana, as the 
borrower, entered into a new $75 million revolving credit facility with 
General Electric Capital Corporation ("GECC") (the " 1997 Credit Facility").  
In May 1997, GECC assigned 20% interests in the 1997 Credit Facility to each 
of National City Commercial Finance, Inc., and PNC Bank, N.A. (which, 
together with GECC, are collectively referred to herein as the "Revolving 
Credit Lenders").  The 1997 Credit Facility is guaranteed by each of the 
principal domestic operating subsidiaries and the Holding Company (which, 
together with Dana, are collectively referred to herein as the "Credit 
Parties"). The Credit Parties and the Revolving Credit Lenders have entered 
into a number of waivers, consents and amendments to the 1997 Credit Facility 
since March 1997 in order to make technical changes to various covenants, 
consent to certain transactions and corporate restructuring matters, and cure 
or waive certain defaults. See Part II, Item 7. Management's Discussion and 
Analysis of Financial Condition and Results of Operations below for more 
information concerning the 1997 Credit Facility.

FISCAL 1997 

     FISCAL 1997 FINANCIAL RESULTS.  The Company is reporting operating 
income and earnings before interest, taxes, depreciation, amortization and 
impairment of long-lived assets ("EBITDAI") that are significantly lower than 
Fiscal 1996 results primarily as a result of four major factors.  

     The first factor relates to operational events, of which there are three 
primary components.  First, management believes, based on the Company's 
Fiscal 1997 results of operations, that the mass market fragrance industry 
has undergone a permanent change. Based on IRI data, the mass market 
fragrance industry as a whole (excluding bath and body products) suffered a 
greater than 7% (greater than 10% in the women's fragrance segment) decline 
in sales for the 52 week period ended March 22, 1998. The Company's sales 
reflected this industry trend.  Second, profitability in the Fragrance 
Division was adversely affected in Fiscal 1997 by higher than expected costs 
of goods sold and freight costs due to difficulties encountered in 
integrating the manufacture of the MEM and P&G brands into the Company's 
Mountain Top Facility.  Third, the Fiscal 1997 results also reflect lower 
sales and profitability of Cosmar's COSMAR branded artificial nail products 
as compared to Fiscal 1996, which the Company attributes to increased 
competition from new entrants in the category which, in turn, led to a loss 
of market share and higher product returns.

     The second factor relates to the Company's decision to increase its 
reserves in Fiscal 1997.  As a result of the operational events discussed 
above, during Fiscal 1997, the Company reviewed its balance sheet and 
determined that it should make adjustments to estimates and reserves 
reflected on its balance sheet that were based, when made, on the Company's 
prior historical 

                                        4
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experience.  Such review also included a reassessment of the assumptions that 
should be used to arrive at estimates and reserves in light of these changing 
market conditions.  The Company reviewed its estimates for customer 
charge-backs, sales returns and holiday markdowns, accounts receivable, 
inventory and trade promotion, among other items.  As a result of this 
review, the Company's results of operations for Fiscal 1997 includes 
adjustments of approximately $23.1 million to reflect actual costs that 
exceeded estimates and other changes to estimates that had been used in 
recording the prior year's results.

     The third factor relates to management's decision to write-down certain 
of its long-lived assets in Fiscal 1997. Based on the above developments 
during Fiscal 1997, the Company conducted an evaluation of long-lived assets, 
including goodwill, based upon the Company's estimates of its current 
business plans for the Fragrance businesses within the Fragrance and 
International Divisions.  As a result, during Fiscal 1997, the Company 
recorded an impairment loss of $85.4 million relating to the write-down of 
such assets.

     The fourth factor relates to costs resulting from the implementation of 
the Company's new business plan. In Fiscal 1997, the Company recorded $35.1 
million in costs relating to the operational restructuring component of its 
new business plan, consisting of, among other things, additional sales 
returns, excess inventory, severance costs, facilities consolidation costs 
and professional fees. There can be no assurance that actual costs will not 
be greater than estimated.  

     The Company expects to incur additional costs during Fiscal 1998 in 
connection with the implementation of the operational restructuring component 
of its new business plan for severance, facility consolidation costs, 
professional fees and other costs aggregating approximately $10.0 million to 
$12.0 million. The Company expects to incur additional professional fees of 
approximately $4.0 million to $6.0 million in connection with the planned 
financial restructuring of the Holding Company's obligations during Fiscal 
1998.  There can be no assurance that actual costs will not be greater than 
the above estimated amounts.

     See Part II, Item 7. Management's Discussion and Analysis of Financial
Condition and 

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Results of Operations below for a detailed discussion of the Fiscal 1997 
results of operations as compared to Fiscal 1996.  

     EXAMINATION OF BUSINESS STARTING IN THE THIRD QUARTER FISCAL 1997.  As 
evidenced by its Fiscal 1997 results of operations, the Company believes that 
several significant changes have occurred in the mass market fragrance and 
cosmetics industries.  First, the mass market fragrance consumer has shifted 
a percentage of his/her fragrance dollars to alternatives to traditional 
fragrances of the type sold by the Company.  The alternative products being 
purchased by the mass market fragrance consumer include specialty bath 
products, perfumed bubble bath, bath oils and soaps, less expensive body 
sprays and splashes and "prestige" fragrances (brands that traditionally have 
been sold in department and specialty stores; see Part I Item 1.  Business, 
"Industry Overview -- Distribution Channels" below for more information 
concerning "prestige" brands as compared to brands sold in mass market 
channels), which are becoming increasingly available in the mass market 
segment. Second, mass market fragrance consumers are purchasing an 
increasing percentage of their fragrance products from new, non-traditional 
distributors, such as Victoria's Secret, The Gap and mail order distributors. 
Third, gross margins have declined as large retailers have demanded greater 
product promotional and advertising allowances from the manufacturers and the 
cost of servicing smaller distributor accounts has increased.    

     In addition, new companies entered, and competition increased significantly
in, the nail care product industry, particularly in the segment in which the
COSMAR branded products compete. As a result of the increased competition, in
Fiscal 1997, Cosmar lost market share to competitors, gross margins compressed,
product returns increased significantly and inventories increased.

     Increased product returns are a significant consequence of the recent 
changes in both the fragrance and artificial nail care segments of the mass 
market industry.  Provisions for returns and allowances in Fiscal 1997 were 
approximately $91.9 million (including provisions for returns and allowances 
recorded in connection with the operational restructuring component of the 
Company's new business plan of $19.5 million) or, 33.8% of gross sales.  In 
North America, the Company customarily accepts returns of its products that 
are not sold by a retail customer, and then gives the retail customer a 
credit for the amount it paid for the returned products.  The Company 
believes that its policy regarding returns is consistent with industry 
practice. The amount of returns in any given period is a function of several 
factors, including (without limitation) general economic conditions and their 
effect on retail businesses; the popularity of the Company's products; the 
magnitude and success of the Company's marketing and advertising efforts; the 
Company's pricing policy; competition; and product placement by retailers.  
Returns in any period may be significantly more or less than in comparable 
prior periods.  The Company attempts to resell returned products, although 
this is not always possible.  In certain instances, returns may require 
re-packaging, which in turn involves labor and other expenses that reduce 
profits from the resale of such products.  Sometimes, it is not possible to 
resell returned products either because of their promotional nature or 
because of the high cost of repackaging the products. 
 
     The Company completed the MEM Acquisition and P&G Brands Acquisition in
December 1996.  In 1997, the Company shifted manufacturing of these newly
acquired brands to its Mountain Top Facility.  The Company experienced greater
difficulty  effecting the manufacturing transition 

                                      6
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than it had anticipated which resulted in excess inventory buildup, increased 
costs of goods sold and shipping costs.
   
     The MEM Acquisition and P&G Brands Acquisitions were based on the 
Company's then-existing strategy of acquiring underperforming brands and 
restoring the acquired brand equities through a program of marketing 
initiatives.  The Company incurred indebtedness to acquire these brands based 
on certain assumptions about their turnarounds. The assumptions, in turn, 
were based on the historical performance of the mass market fragrance 
industry, and on estimates of the amount of time and costs required to turn 
around the sales of the acquired brands and integrate the manufacturing of 
these brands into the Mountain Top Facility.  The changes in the mass market 
fragrance industry discussed above combined with the difficulties  
encountered by the Company in completing the manufacturing shift of the new 
brands has (1) significantly extended the timetable for the completion of the 
turnaround of these brands and raised doubts about whether turnaround can be 
achieved for certain brands, (2) significantly reduced the Company's 
profitability and (3) significantly reduced the cash flows from such brands 
that the Company expected in Fiscal 1997 to service the debt it incurred to 
acquire these brands.       

     After suffering its second consecutive disappointing Christmas holiday 
season in 1997, it became evident to management that results of operations 
for Fiscal 1997 reflected a permanent change in the mass market fragrance 
industry.  As a result, the Company began a thorough review of its business, 
including its business strategy, its product lines, its sales and marketing 
strategies, its production and advertising, general and administrative 
overhead, personnel, and capital and debt structure.  The objectives of this 
review were to (1) identify and quantify operational problems, (2) develop 
strategies and tactics to improve the Company's performance, (3) quantify the 
costs and timing to effect the necessary changes and (4) quantify the impact 
of the changes on the Company's profitability and cash flow.

     As part of this review process, in February 1998, the Company retained 
Arthur Andersen L.L.P. to assist it in performing a comprehensive, 
forward-looking review of its operations, including a review of its 
operational efficiencies, working capital, overhead and administrative 
structures, management structures, subsidiary structures and related 
operational issues.  In March 1998, the Company retained Wasserstein 
Perella & Co., Inc. to (1) review and analyze the Company's capital 
structure, including reviewing its outstanding indebtedness and equity 
securities and (2) assist the Company in restructuring its capital structure, 
including negotiating with its various senior lenders and holders of debt and 
equity securities.

     The Company is restructuring on two fronts.  Its operating subsidiaries 
are currently engaged in an operational restructuring of their respective 
businesses, and the Holding Company is initiating a financial restructuring.  
The two are, in certain respects, separate and 

                                       7
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distinct from each other.    

     The Company believes that its operating subsidiaries have viable core 
businesses and growth brands that have the potential for improved operating 
and financial performance in 1998 and beyond.  However, in order to improve 
their operating and financial performance, the operating subsidiaries must 
implement a costly operational restructuring in 1998, which will include 
numerous management and organizational changes and cost reduction programs. 
The operating subsidiaries have already (1) initiated many of these changes 
and  (2) refocused their advertising and promotional programs to preserve and 
enhance the value of their growth brands. There can be no assurance that the 
operating subsidiaries will be successful in implementing their operational 
restructuring.     

     At the same time that its operating subsidiaries are implementing their 
operational restructuring, management believes that the Holding Company must 
implement a financial restructuring. To this end, the Holding Company intends 
to enter into negotiations with the holders of its Preferred Stock, Common 
Stock and 1997 Senior Notes to restructure these obligations with the goal of 
de-leveraging and strengthening its balance sheet. There can be no assurance 
that the Holding Company will be successful in implementing its financial 
restructuring.    

BUSINESS STRATEGY 

     HISTORICAL BUSINESS STRATEGY.   The Company's business strategy through 
the end of Fiscal 1996 was to acquire mass-market brands and other related 
assets that it believed were underperforming and/or undermanaged and then 
restore and/or expand the acquired brand equities through a program of 
focused marketing initiatives tailored to the needs of each brand.  The 
Company based its strategy, at least in part, on the critical assumption that 
the markets in which the brands were sold, retailers who sold the Company's 
products  and consumers who purchased the Company's products, would all 
behave similarly to the way they had behaved in the past.  

     In furtherance of its strategy, the Company acquired Dana, the Cosmar
business, GAC, MEM, the P&G Brands and the Houbigant Licenses.  Following each
acquisition,  the Company  eliminated redundant overhead, closed redundant
plants, began selling the acquired brands through the Company's existing sales
force, attempted to reduce costs related to the ongoing production of the
acquired brands by using common componentry when possible and implemented
extensive and costly advertising and promotional campaigns in support of the
acquired products.  

      When the Company  suffered its second consecutive disappointing 
Christmas holiday season in 1997, it became evident to management that the 
Fiscal 1997 results of operations reflected a permanent change in the mass 
market fragrance industry.  This change was also reflected in an overall
decline in sales of over 7% (over 10% in the women's fragrance segment) 
during the 52 week period ended March 22, 1998 in the mass market fragrance 
industry(excluding bath and body products). As a result, management has now 
concluded that certain of the longer-term assumptions underlying its 
acquisition strategy are no longer accurate and the Company may not be able 
to realize fully the anticipated benefits from these acquisitions.

                                      8
<PAGE>

     In addition, over the last 18 months several new competitors entered the 
segment of the artificial nail care business in which Cosmar's COSMAR branded 
products compete, resulting in lower gross margins for the entire segment  
and significantly increased competition. Cosmar's market share 
for its COSMAR brand declined, its new product launches were adversely 
affected and product returns increased.  Cosmar's product returns also 
increased because of sales of the NAT ROBBINS branded products, acquired in 
the GAC Acquisition, which compete in a segment of the market that 
historically has a higher percentage rate of returns than the artificial nail 
care segment.  

     NEW BUSINESS STRATEGY.  The principal components of the Company's 
revised business strategy are set forth below.

     First, as part of its operational restructuring, the Company has 
re-defined its core business and re-focused its brand strategy.  Dana, for 
example, is focusing its marketing efforts on core brands. Other brands will 
receive less costly marketing support programs. Dana intends to shift the 
emphasis of its marketing efforts from promotional items to basic stock items 
(i.e., items other than promotional items).  There are five main promotional 
programs in the industry each year --Christmas, Mother's Day, Father's Day, 
Back to School and Year End Specials. The products produced for sale at these 
times can be identified by special packaging and/or special pricing.  
Promotional programs can be high risk due to the high costs of goods sold, 
short time frame in which the products are to be sold and higher product 
returns than for basic stock items. In addition, Dana intends to focus on 
matching sell-in to retailers to recent historical sell-through to consumers. 
Dana and Cosmar both intend to conduct market research and allocate resources 
to their brands with the highest growth potential.

     Second, the Company's operating subsidiaries will complete a review of 
their customer relationships in order to (1) develop detailed marketing 
strategies for their largest customers and (2) increase the profitability of 
existing profitable customer accounts.  Specifically, the operating 
subsidiaries intend to continue to sell directly to their large retail 
customers and transition their small customer accounts to distributors.  
Additionally, Dana is attempting to negotiate a new return policy with its 
retail customers on sales of promotional items that will limit the amount of 
product returns it will accept, although there is no assurance that the 
customers will accept such terms. 

     Third, the Company intends to reduce its overhead costs to reflect the 
current and expected size of the Company.  The Company has already taken 
steps to significantly reduce infrastructure and overhead by eliminating 
certain unprofitable operations, eliminating excess facilities, flattening 
its management structure and eliminating personnel at all levels.  The 
Company intends to reduce manufacturing costs by reducing manufacturing 
overhead, upgrading production lines, and reducing labor, packaging and 
material costs. 
  
     Fourth, the Company will focus on cash flow.  This means that working 
capital management will be a top priority for the Company.  As part of the 
overall working capital management program, Dana and Cosmar intend to reduce 
inventory by selling excess inventory and reducing inventory requirements by 
eliminating 

                                      9
<PAGE>

slow moving, redundant or otherwise unprofitable SKUs.

     Fifth, the Company will consolidate its international operations.  Dana 
will consolidate its domestic fragrance and Canadian fragrance manufacturing 
operations at its Mountain Top Facility.  The Company intends to (1) sell its 
Argentine manufacturing facility, (2) consolidate all of its South American 
operations into its Brazilian subsidiary, (3) consolidate the management of 
its European operations under its United Kingdom ("UK") subsidiary and (4) 
consolidate its international headquarters operations into its domestic 
corporate headquarters.  The Company intends to focus its international sales 
efforts on those markets where product sales have been strongest, 
specifically the UK, Brazil and Canada, and move to a regional export 
business for sales to other countries.

     The Company implemented a significant portion of its new business 
strategy during the last quarter of Fiscal 1997 and the first quarter of 
Fiscal 1998, including (1) eliminating a total of five (5) positions at the 
Vice President level and above, including three Named Executive Officers (as 
defined in Part III, Item 11.  Executive Compensation, below), (2) reducing 
its total employee headcount from 1,142 at March 31, 1997, to 1,019 at June 
15, 1998, (3) closing its manufacturing facility in Argentina and (4) 
disposing of its China Joint Venture interest to its joint venture partner. 
The Company intends to implement the remainder of its new business strategy 
as appropriate over the next six to twelve months. 

     The Company accrued $35.1 million of costs at March 31, 1998 relating to 
the implementation of its new business strategy.  The Company expects to 
incur additional costs during Fiscal 1998 for severance, costs associated 
with facility closings, and other costs aggregating approximately 
$10.0 million to $12.0 million.  There can be no assurance that actual 
costs will not be greater than these estimates.  A substantial portion of the 
incremental sales return provision will reduce cash flow in Fiscal 1998.  The 
incremental provision for excess inventory will reduce borrowing base 
availability under the 1997 Credit Facility.

     Components of the new business strategy may change significantly before 
it is fully implemented.  There can be no assurance that the Company will be 
able to achieve all or specific components of the strategy, or that the 
strategy, once fully implemented, will be successful.  See Part II, Item 7. 
Management's Discussion and Analysis of Financial Condition and Results of 
Operations, "Liquidity and Capital Resources," below for a detailed 
discussion of the impact the implementation of the new business strategy is 
likely to have on (1) the operating subsidiaries' cash flow, their ability to 
service their obligations under the 1997 Credit Facility and other 
obligations and their ability to conduct and fund their day-to-day operations 
and (2) the Holding Company's cash flow and its ability to service its 
obligations.

                                      10
<PAGE>

FINANCIAL RESTRUCTURING

     Interest in the aggregate amount of $11.8 million on the 1997 Senior 
Notes is due and payable on August 15, 1998.  The Holding Company does not 
have sufficient funds to make the payment and an Event of Default will occur 
30 days after the due date.  Upon the occurrence of an Event of Default, 
holders of 25% of the 1997 Senior Notes can declare the entire principal 
amount of the 1997 Senior Notes due and payable.  As the operating 
subsidiaries implement their operational restructuring, the Holding Company 
intends to pursue a financial restructuring of its outstanding 1997 Senior 
Notes, Preferred Stock and Common Stock, with the goal of de-leveraging and 
strengthening its balance sheet.  The Holding Company is estimating that it 
will incur professional fees of approximately $4 million to $6 million in 
connection with this financial restructuring.  There can be no assurance that 
the Holding Company will be successful in restructuring its 1997 Senior 
Notes, Preferred Stock and Common Stock on terms acceptable to it, or at all. 
Failure to successfully complete a financial restructuring could result in 
the insolvency of the Holding Company and will have a direct material adverse 
effect on the Holding Company's ability to service its obligations to the 
holders of its debt and equity obligations and may have an indirect material 
adverse effect on the financial condition, business and results of operations 
of the operating subsidiaries. 

INDUSTRY OVERVIEW

     DISTRIBUTION CHANNELS.  The fragrance and cosmetics industry relies on 
two primary distribution channels, (1) mass market retailers and (2) 
department and specialty stores.  These two channels have materially 
different sales and marketing strategies because of the different economic, 
demographic, demand and usage characteristics of their consumers.

     The mass market distribution channel is characterized by value-oriented 
products with emphasis on price and image.  Since mass market retailers 
depend on self-selection of products by consumers and employ only a nominal 
amount of in-store sales support personnel, the allocation and placement of 
retail shelf space is one of the most important means of gaining consumer 
awareness in this channel.  Retailers are reluctant to allow new products to 
displace proven, high-volume products without a guarantee of extensive 
advertising support to generate consumer interest.  As a result, the 
introduction of new products into the mass market is more difficult and 
relatively more expensive than in department and specialty stores.  These 
characteristics of the mass market limit the number of new product offerings, 
enabling proven products to retain existing shelf space and creating barriers 
to entry.  As a result, this channel is generally characterized by greater 
brand stability, consumer loyalty and repeat purchases than the department 
and specialty store channel.

     Fragrance and cosmetics products sold through the department and 
specialty store channel are generally characterized as "prestige" brands 
which are primarily sold based upon perceived "designer" image and quality at 
substantially higher price points than those sold in the mass-market channel. 
Consequently, product offerings in the department and specialty store channel 
tend to be more sensitive to changes in fashion and popular trends than those 
sold in the mass market.  Such fashion consciousness results in a greater 
number of product introductions in this channel than in the mass market.  The 
introduction of new products in department and specialty stores is 
facilitated, in part, by a greater level of personal customer service during 
the sales process.  In addition, department and specialty retailers generally 
reallocate their selling space and product mix several times per year to 
accommodate changing fashion trends, whereas mass-market retailers generally 
do so only once per year.  As a result, manufacturers are able to introduce 
new products more easily and frequently in the department and specialty store 
channel, as well as depend on in-store direct selling efforts 

                                      11
<PAGE>

rather than broad-based consumer advertising to attract consumers.  While 
such reallocation results in greater flexibility to change product offerings, 
it also reduces brand stability and consumer loyalty over time.

     Fragrance products sold in the mass market typically have the following 
characteristics in relation to prestige brands: (1) more frequent 
purchase/use; (2) sales that are less affected by changing fashions (which 
results in fewer new product introductions); (3) lower packaging costs; (4) 
faster inventory turnover; and (5) lower prices.  In the past, these 
characteristics have enabled mass market fragrances to achieve, on average, 
greater customer loyalty and more stable sales volume than prestige products. 

     As discussed above, the mass market fragrance distribution channel has 
undergone recent change.  Consumers are purchasing an increasing percentage 
of their mass-market fragrances from new non-traditional distributors such as 
Victoria's Secret, The Gap and mail order distributors.  Consumers have also 
shifted a percentage of their fragrance dollars to alternatives to 
traditional fragrances, such as specialty bath products, perfumed bubble 
bath, bath oils and soaps, and less expensive body sprays and splashes.   
These sales are adversely impacting sales of traditional fragrance products 
by traditional mass-market distributors.  In addition, over the past year,  
prestige fragrances recently have become more available in the mass market 
segment.  The Company believes that brands such as CK 1 and L'AIR DU TEMPS 
have recently appeared in mass market retailers due to the greater 
accessibility of these products from distributors who have become specialty 
"agents" for prestige brand manufacturers.

     FRAGRANCE MARKET.  The market for both men's and women's fragrances is 
highly fragmented, with the most popular brand in each segment commanding a 
share of less than 7% of the total market (although there are large 
competitors with significant aggregate market shares).  The mass-market 
fragrance industry is relatively recession-resistant due to its low average 
price point and more frequent usage of the product.  Although there is no 
data to show whether consumers of such products "move up" to prestige brands 
during periods when their disposable incomes increase, it may be a 
contributing factor to the disappointing last two Christmas holiday seasons, 
along with the increasing availability of prestige fragrances in the mass 
market segment.

     Dana also competes with alternative designer fragrances ("ADFs"), which 
are impostors of designer and prestige fragrances.  ADFs began capturing 
market share from both designer and prestige fragrances and mass-market 
products in 1990.  

     COSMETICS MARKET.  Cosmar focuses on the artificial nail care, lip and 
eye make-up segments of the mass market for cosmetics.  Cosmar has also 
entered into other segments of the cosmetics market, including the nail 
polish category with the introduction of its line of PRO 10 nail lacquers.  
As discussed below, Cosmar entered into the teenage cosmetics segment in 
January 1998 with the introduction of its FETISH cosmetics line for teenage 
girls.

                                      12
<PAGE>

     NAIL CARE MARKET.  The retail nail care mass market is divided into four 
major product categories: (1) nail polish; (2) artificial nail care; (3) nail 
implements; and (4) nail polish removers.  Although the mass-market 
artificial nail care market has many participants, the top three brands 
generate over 60% of total category sales.  During Fiscal 1997, Cosmar's 
products accounted for approximately 30% (by total sales dollars) of the 
domestic artificial nail care mass market compared to approximately 33% of 
the market in Fiscal 1996. 

     Repeat purchases by consumers, who typically purchase 10 to 15 packages 
per year, as well as high inventory turnover, have resulted in increased 
retail shelf space allocation and market stability for artificial nail care 
products. It is expected that in the future there will be less opportunity 
for niche players in the artificial nail care market, with more shelf space 
being allocated to market leaders with sophisticated category management 
capabilities. 

     The COSMAR branded products saw increased competition in Fiscal 1997.
Such increase has resulted in lower pricing, lower profit margins, increased 
product choices for consumers, increased product returns and increased 
promotional expenditures, markdowns and other promotional allowances.

     LIP AND EYE MAKE-UP MARKETS. The domestic lip and eye make-up markets 
are highly competitive and dependent upon strong brand recognition, consumer 
trust in product quality, product selections aligned with current fashion and 
color trends and distinct price brackets that meet particular consumer needs 
and demographics.  Cosmar has focused on the mid-priced segment of the 
category.  In general, Cosmar believes that the lip and eye make-up markets 
have experienced strong growth over the past year because of enhancements in 
color cosmetics technology and formulations coupled with a renewed emphasis 
on fashion-conscious color selections. 

     TEEN MARKET.  The teen market is currently the fastest growing segment 
of the mass market fragrance and cosmetics market.  The Company entered the 
teen nail care segment with its launch of NAIL FETISH in 1995.  In August 
1997, the Company launched FETISH SCENT.  In order to capitalize on the 
success of NAIL FETISH and FETISH SCENT, the Company launched a line of 
cosmetics for teenage girls under the name FETISH in January 1998.  Finally, 
in April 1998, the Company launched FETISH BODY, a line of bath and body 
products.

PRODUCTS

     FRAGRANCE.  Dana and its subsidiaries  manufacture and market a wide 
variety of men's and women's fragrances, which include some "classic" as well 
as other "established" brands.  Classic brands, which generally have more 
than 20 years of sales history, and established brands are typically 
characterized by extensive brand name recognition and strong consumer 
loyalty.  Dana estimates that less than 1% of all fragrance brands introduced 
each year achieve classic status.  Dana currently manufactures nine classic 
brands -CHANTILLY, TABU, AMBUSH, TOUJOURS MOI, RAFFINEE, HEAVEN SENT, CANOE, 
ENGLISH LEATHER and BRITISH STERLING.   In addition to

                                      13
<PAGE>

Dana's classic fragrances, Dana markets its women's fragrance brands under 
such names as NAVY, LE JARDIN and LOVE'S and markets its men's fragrance 
brands under such names as NAVIGATOR FROM CANOE, NAVY FOR MEN, INSIGNIA, 
CALIFORNIA FOR MEN and HERBISSIMO.

     Following the Houbigant, Dana and ACB Acquisitions in 1994, the Company 
immediately began supporting its newly-acquired product lines and brands with 
increased advertising and promotional expenditures, more efficient production 
scheduling and shipping, increased inventory levels and more responsive order 
filling.  In 1995 and 1996, Dana launched several new brands, including 
CLASSIC GARDENIA, WHITE CHANTILLY, a flanker product for the core CHANTILLY 
brand and DREAMS BY TABU, a focused flanker of TABU.  In February 1997, Dana 
relaunched AMBUSH.  During Fiscal 1997, Dana received significant returns of 
WHITE CHANTILLY, DREAMS BY TABU and AMBUSH, leading management to the 
conclusion that these launches were not successful. 

     In December 1996,  the Company closed the MEM Acquisition and the P&G 
Brands Acquisition and acquired several more well known brands, including 
NAVY FOR MEN, NAVY FOR WOMEN, ENGLISH LEATHER, BRITISH STERLING and LOVE'S.  

     In August 1997, Dana launched FETISH, a fragrance for teen girls, and in 
March 1998, Dana launched SHADES OF NAVY, a flanker of the NAVY FOR WOMEN 
brand.  

     In Fiscal 1997,  a limited number of brands represented a majority of 
Dana's sales.  As part of its new business strategy, Dana has identified 
these brands as its core fragrance brands, and intends to focus on these core 
brands and initiate programs to increase sales, or dispose, of its other 
fragrance brands.  Dana will limit new fragrance launches during Fiscal 1998 
and re-focus its advertising, marketing and promotional expenditures on its 
core brands.  Dana intends to conduct market research on all of these brands 
to reassess customer profiles and determine the most cost-effective way to 
reach these customers.
    
     NAIL CARE.  Cosmar has approximately a 30% share of the mass market 
domestic artificial nail care category.  Cosmar's nail care products include 
full-length, artificial press-on or glue-on fingernails, artificial 
fingernail tips, fingernail sculpturing kits, nail lacquer, natural 
fingernail cuticle treatments and strengtheners and related accessories.  
Cosmar markets its products under such brand names as COSMAR (formerly known 
as LA JOIE) (including SCULPTURE QUIK, PRESS & GO and QUIK FIT), PRO 10 
ARTIFICIAL, PRO 10 LACQUER, ULTRAGEL and NAIL FETISH.  The COSMAR branded 
line is an easy-to-use line of artificial fingernail products, acrylic 
applications and accessories targeted at the consumer who generally does not 
visit a professional nail care salon.  The PRO 10 line has established itself 
as a leading professional "salon-standard" nail care line sold through 
retailers.  This line includes artificial fingernail tips, a selection of 
nail sculpturing applications, abrasive and other professional quality nail 
strengtheners, nail builders, finish coats and cuticle creams.  Cosmar's 
PRESS & GO colored nails dominate the instant pre-colored nail care segment 
of the mass market.

                                      14
<PAGE>

     Under its new business strategy, Cosmar intends to reinvigorate its 
COSMAR branded products  by resetting all planograms (i.e., the selling 
space, usually wall or shelf space, allocated by the retailers to any given 
brand or company) with a new product mix and redeploy advertising spending to 
focus its resources on its high growth products.    

     LIP AND EYE MAKE-UP.  Cosmar markets high quality, mid-priced lip and 
eye make-up, make-up brushes and nail polish and related products sold 
through the mass-market channel.  Cosmar's lip and eye cosmetics include 
lipliner pencils, lipstick, lipgloss, eyeliner pencils, eye shadow, mascara 
and assorted accessories.  Under previous ownership, the NAT ROBBINS line 
successfully achieved a leading position in the mid-priced cosmetics market 
by offering high quality, consumer-friendly products, in an assortment of 
colors.  Cosmar intends to invest in new in-store fixtures for its NAT 
ROBBINS brand.  In January 1998, Cosmar introduced a new line of cosmetics 
for teenage girls under the brand name FETISH, to capitalize on the success 
of the FETISH fragrance.   

INTERNATIONAL OPERATIONS

     The Company currently has operations in four foreign countries, Brazil, 
Canada, Spain and the UK, and sells its products in more than 50 foreign 
countries (as of June 1998).  

     As part of its new business strategy, the Company has decided to 
consolidate its operations in three geographic areas, North America, South 
America and Europe in order to eliminate duplicative manufacturing 
facilities, systems and management structure. 

     The Company is in the process of consolidating its Canadian fragrance
manufacturing and distribution operation, its domestic children's cosmetics 
business, its close-out sales business and its domestic fragrance operations 
into one combined operation known as Dana North America.  Dana North America 
will be responsible for managing all North American fragrance operations as 
well as the export of all fragrance products from the United States.

     The Company is in the process of consolidating all of its South American 
manufacturing and distribution operations into its Brazilian subsidiary 
located in Sao Paolo, Brazil.  As part of this consolidation, the Company 
closed and plans to sell its manufacturing facilities in Argentina and move 
to a regional export organization structure.

     The Company is in the process of consolidating the management of its 
European operations under its UK subsidiary. The Company intends to focus its 
European operations on (1) its recently launched INSIGNIA, FETISH and 
TINKERBELL brands in the UK and (2) export sales of INSIGNIA, FETISH, 
HERBISSIMO and selected other U.S. brands throughout Europe.  

     Risks inherent in foreign operations include changes in social, 
political and economic conditions.  Changes in currency exchange rates may 
affect the relative prices at which the Company and foreign competitors 
purchase and sell their products in the same market.  The Company does 

                                      15
<PAGE>

not hedge its exposure to foreign currency exchange rate changes.  The 
Company is also exposed to risks associated with changes in the laws and 
policies that govern foreign investments in countries where it has operations 
as well as, to a lesser extent, changes in US laws and regulations 
relating to foreign trade and investment. While such changes in laws, 
regulations and conditions to date have not had a material adverse effect on 
the Company's business or financial condition, there can be no assurance as 
to the future effect of any such changes.

     See Note 20 to the Consolidated Financial Statements for additional 
information concerning the Company's foreign and domestic operations and 
export sales.

PRODUCT DEVELOPMENT

     The Company's product development activity is primarily conducted 
in-house, utilizing feedback from consumer focus groups, tests in nail care 
salons for its nail care products and consumer questionnaires.  The cycle of 
market research, product conceptualization, product design and development, 
consumer testing and package design typically requires approximately six to 
nine months for the Company.  The Company believes that the average cycle for 
the industry is approximately 18 months.
 
DISTRIBUTION

     The Company's products are sold principally through the mass-market 
distribution channel and through its foreign subsidiaries and distributors.  
The mass market distribution channel includes chain drug stores (such as CVS, 
Rite Aid, Eckerd and Walgreens), mass merchandisers and discount stores (such 
as Wal-Mart and Kmart), supermarkets and combination supermarket/drug stores 
(such as Kroger and Albertson's) and just recently non-traditional mass 
market fragrance distributors such as Victoria's Secret, The Gap and mail 
order distributors, and specialty bath product stores.  Cosmar also sells a 
limited amount of its artificial nail care products to professional salon 
owners.  

     The Company's fragrance and nail care products are sold 
internationally through a combination of distributors, licensees and 
subsidiary operations. See Part I. Item 1. Business, "International 
Operations," above for a discussion of the Company's international distribution.

SALES AND MARKETING

     To induce consumers' trial and repeat purchases, the Company relies 
primarily on price, quality, effective product packaging and distinctive 
in-store displays that are generally provided to retailers free-of-charge.  
The Company also has instituted significant promotions for the Company's 
products through ongoing trade advertising directed toward chain drug 
retailers, mass merchandisers and supermarket chains.  The Company also 
advertises in many national women's magazines including COSMOPOLITAN, ELLE, 
GLAMOUR, MADEMOISELLE, PEOPLE, SEVENTEEN, VOGUE, and YM  and runs focused 
television advertising campaigns during new product launches or relaunches of 
existing brands. 

                                      16
<PAGE>

     The Company's domestic fragrance and cosmetics products are sold 
primarily through an in-house sales force comprised of a dedicated staff of 
21 people, including 5 in sales administration, 2 account managers, 8 
regional managers, 5 national account managers and 2 vice presidents of 
sales.  Additional sales are generated by a network of over 45 independent 
sales representatives, who are compensated solely on a commission basis.  
These sales representatives are supervised by the Company's internal sales 
personnel.

     Cosmar communicates directly with its domestic nail care product 
consumers through its Consumer Assistance Hotline. Cosmar's toll-free 
number for consumer assistance is displayed on each nail care product 
package. Cosmar believes that its toll-free number has enhanced its
consumer loyalty.

COMPETITION
         
     The fragrance and cosmetics businesses are characterized by vigorous 
competition throughout the world.  Brand recognition, together with product 
quality, performance and price and the extent to which consumers are educated 
about specific product attributes, have a marked influence on consumers' 
choices among competing products and brands.  Advertising, promotion, 
merchandising, packaging and the timing of new and focused flanker product 
introductions also have a significant impact on buying decisions.  Further, 
the structure and quality of the manufacturer's sales force affects product 
reception, in-store position, permanent display space and inventory levels in 
retail outlets.  The Company competes in most of its product categories 
against a large number of companies, some of which have substantially greater 
resources than the Company. In addition to products sold in the mass-market 
and department and specialty store distribution channels, the Company's 
products also compete with similar products sold door-to-door or through mail 
order or telemarketing by representatives of direct sales companies.

     In the fragrance market, Dana competes with numerous companies 
domestically and internationally, including more than 500 brands competing 
for market share in the mass-market segment.  Dana's principal competitors in 
this market include Benckiser Coty, Revlon, P&G, Cosmair, Parfums d'Coer and 
Unilever N.V.

     Cosmar has approximately a 30% share of the artificial nail care market 
compared to approximately 20% for the next largest participant in this 
market. For the three years preceding Fiscal 1997, Cosmar had virtually 
driven the category's growth via new product launches and realized 
significant shelf space gains as a result of such launches, category 
management expertise and strong in-store promotional support.  Cosmar made 
these gains against competitors such as Nailene (Pacific World Corp.), Jonel 
(a division of Barristo Ltd.), Kiss Professional Fingernail Products (Dae Do, 
a Korean manufacturer), Sally Hansen (Del Laboratories), Fing'rs (a division 
of Entrecap Corp.), Lee (Lee Pharmaceutical) and Kristy Wells in the 
mass-market distribution channel and several companies such as International 
Beauty Distributors and Orly that sell their professional salon products into 
the retail market.  Cosmar's market share declined to approximately 30% in 
Fiscal 1997 from approximately 33% in Fiscal 1996 principally because of 
increased competition 

                                      17
<PAGE>

(including the entry into the segment of Revlon, and an expanded line of 
products from Kiss Professional Fingernail Products carried by an increased 
number of stores) and the disappointing performance of certain new product 
launches.  Cosmar's new business strategy is designed to enable it to 
recapture market share. 

     Cosmar's principal competitors in the nail lacquer category include 
Revlon, Del Laboratories, L'Oreal S.A., Maybelline, Inc., Estee Lauder, Inc., 
Helene Curtis Industries, Inc., Unilever N.V., Pavion and P&G.

     Cosmar believes that its products occupy a leading position within the 
mid-priced lipstick and eye make-up segments because they offer superior 
quality, consumer-friendly products.  Cosmar's competitors include Lancetti 
Cosmetics, and Eco Beauty Inc., both marketers of mid-priced lipstick and eye 
make-up products.  Cosmar also competes with Revlon, L'Oreal S.A., 
Maybelline, Inc., P&G and Pavion, Ltd. in this category.

CATEGORY MANAGEMENT

     Category management involves strategic partnering with retailers whereby 
manufacturers such as the Company utilize state-of-the-art mathematical 
modeling tools to understand the sales dynamics of categories, brands and 
specific SKUs so that retailers can offer the best mix of products to boost 
category sales, profits and customer satisfaction.  Cosmar is the category 
captain for five of its top ten nail care accounts and Dana is category 
captain or advisor for most of its major fragrance accounts.  As category 
captain, Dana and Cosmar work with retailers to define optimum space 
allocation for their fragrance and nail care product categories and, as 
advisor, Dana validates the analysis provided by the category captain.  The 
Company commits significant funds each year to IRI to track weekly sales data 
on all products it sells through mass-market channels.

     Category management allows Dana and Cosmar to work with retailers to 
assist the retailers in determining the optimal product mix for each 
category, recommend the SKUs in the entire category that the retailer should 
carry and monitor the sales results, both for the Company's products and its 
competitors' products, on a weekly basis.  Dana's and Cosmar's category 
management programs also enable their marketing departments to perform a 
variety of functions including real time understanding of relaunch marketing 
effectiveness, gauging new product success rates for the their products and 
their competitors' products and amassing competitive intelligence about 
consumer buying patterns.

MANUFACTURING

     FRAGRANCE.  Dana's fragrance and related products sold in the US and in 
selected export markets are manufactured at the Company's Mountain Top 
Facility. Some of the brands acquired by Dana continue to be manufactured by 
a contract packer.  Additionally, Dana's facility in Brazil manufactures 
fragrances and related products for local markets and for export.  The 
Company is 

                                      18
<PAGE>

currently evaluating whether it will upgrade its Brazilian facility to become 
a regional production and export facility or outsource some or all of these 
operations.  

     The Company closed its manufacturing facility in Argentina in March 1998 
and is looking for a buyer for the facility.  In Fiscal 1998, the Company 
also intends to close its manufacturing facility in Canada and consolidate 
its Canadian fragrance manufacturing operations into Dana North America which 
manufactures all of its fragrance products at Dana's Mountain Top Facility.  
The Company closed MEM's facilities in New Jersey and Boucherville, Quebec, 
in February 1997.  

     Dana's strategy for sourcing, producing and distributing its fragrance 
products consists of (1) conducting operations in-house that add significant 
value to its products and that can be executed economically based upon volume 
efficiencies, (2) sourcing component materials and products from outside 
vendors when reliable, ongoing and multiple sources can be secured at 
competitive prices and (3) least-cost sourcing for local markets whereby 
international subsidiary facilities will become regional producers of 
products for export to their regional markets.

     Key supplies in the manufacturing and packaging of fragrances, including 
bottles, scents and packages, are all sourced from a network of reliable 
vendors.  Final assembly of finished products, warehousing and shipping of 
fragrance products to customers is performed at the Mountain Top Facility and 
the Company's foreign facilities.

     NAIL CARE.  Cosmar currently operates manufacturing facilities in Garden 
Grove, California (the "Garden Grove Facility"), and Sparks, Nevada (the 
"Sparks Facility").  Under its new business strategy, Cosmar intends to 
consolidate its Garden Grove assembly operations into its Sparks Facility, 
leaving the distribution operations in Garden Grove.  Cosmar's strategy for 
contracting, producing and distributing its nail care products consists of 
(1) conducting operations in-house that add significant value to Cosmar's 
products and that can be executed economically based on volume efficiencies 
and (2) sourcing from outside vendors component materials and products when 
reliable, ongoing and multiple sources can be secured at competitive prices.  
Cosmar uses an injection molding process to manufacture all artificial nails 
and tips for its own COSMAR product line at its Sparks Facility.  All glues, 
hardeners and other chemical compounds are supplied to Cosmar by third-party 
contract manufacturers.  Most of the raw materials and components sourced 
externally are readily available through standard industry sources and 
represent small percentages of unit manufacturing costs.

     LIP AND EYE MAKE-UP.  Cosmar outsources substantially all of its raw 
materials, manufacturing and distribution needs for its lip and eye make-up 
products.  By sourcing from industry-leading color cosmetics suppliers that 
also service large manufacturers such as Revlon and Estee Lauder, management 
believes it can purchase the latest technologically advanced components at 
reasonable prices.  Cosmar currently intends to continue to outsource the 
production of its lip and eye make-up products.

     See Part I, Item 2.  Properties, below for additional information 
regarding the Company's 

                                      19
<PAGE>

manufacturing facilities.

SUPPLIERS AND RAW MATERIAL

     The principal raw materials for Dana's fragrance products are fragrance 
oils (which are either purchased from third parties or manufactured by Dana 
from individual raw materials), bottles, caps, pumps and sprayers. The 
principal raw materials used by Cosmar in the manufacture of its nail care 
products are common polymers, waxes, pigments, dyes and other processing 
components, such as bottles and brushes, all of which are readily available. 
The principal materials that Cosmar sources for its NAT ROBBINS line include 
waxes, pigments and silicone commonly used to manufacture lip and eye make-up 
products. While all raw materials are purchased from outside sources, the 
Company is not dependent upon a single supplier in any of its operations for 
any materials essential to its business that are not otherwise commercially 
available to the Company.  Historically, the Company has been able to obtain 
an adequate supply of raw materials, and no shortage of such materials is 
currently anticipated.

MANAGEMENT INFORMATION SYSTEMS

     The Company has invested a significant amount of capital in its MIS 
infrastructure to install new corporate information systems, sales/marketing 
systems, personal computers and communication systems throughout the Company. 
The MIS platform is based on an IBM AS/400 mini-computer with personal 
computers on local and wide area networks.  This platform allows the Company 
to (1) facilitate electronic communication among its employees, (2) conduct 
electronic data interchange ("EDI") with its top customers which enables 
customers to place orders electronically, (3) enable sales force and accounts 
receivable managers to process and track orders and returns, (4) provide 
sophisticated inventory management and distribution capabilities and (5) 
install corporate-wide measurement systems which yield accurate and timely 
information regarding sales, costs, profits, accounting functions, customer 
service and asset management.

     The Company upgraded its MIS infrastructure during the first five months 
of calendar 1998.  The Company (1) installed new/upgraded J.D. Edwards 
financial software modules including, but not limited to, inventory 
management, billings and collection software and (2) began testing and using 
its new software.  Dana North America is now running on the new software.  
The new software provides management with an additional tool to assist it in 
the implementation of the Company's new business plan.

     The Company also uses a sales order processing system, along with a 
sales order pick management system.  The integration of these two systems 
allows the Company to closely manage each step of the selling process (i.e., 
from a sales order to the distribution and actual delivery of products).

     The Company believes that its MIS provides adequate capacity base for 
its operations in Fiscal 1998.

YEAR 2000 COMPLIANCE

     Until recently, many computer programs were written using two digits 
rather than four digits to define the applicable year in the twentieth 
century.  Such software may recognize a date using "00" as the year 1900 
rather than the year 2000.  Utilizing both internal and external resources, 
the Company is in the process of  defining, assessing and converting or 
replacing various programs, 

                                      20
<PAGE>

hardware and instrumentation systems to make them Year 2000 compatible.  The 
Company anticipates that it will have "Year 200 Compliant" software no later 
than the end of Fiscal 1998.  The Company's Year 2000 project is comprised of 
two components - business applications and equipment.  The business 
applications component consists of the Company's business computer systems, 
as well as the computer systems of third-party suppliers or customers, whose 
Year 2000 problems could potentially impact the Company. Equipment exposures 
consist of personal computers, system servers and telephone equipment whose 
Year 2000 problems could also impact the Company.  The cost of the Year 2000 
initiatives is not expected to be material to the Company's results of 
operations or financial position. 
 
     The Company presently believes that with conversions to new systems and 
modifications to existing software, the Year 2000 problem can be mitigated. 
However, if such modifications and conversions are not made in a timely 
fashion, the Year 2000 problem can have a material impact on the operations 
of the Company.

EMPLOYEES

     As of March 31, 1998, the Company employed 1,189 people, of whom 205 
were general and administrative personnel and 181 were sales and marketing 
personnel. All of the Company's production employees at its Mountain Top 
Facility, as well as the plants located in Spain, Argentina (which was closed 
in March 1998 and is in the process of being sold) and Brazil, are covered by 
collective bargaining agreements.  The Company recorded $3.5 million 
(including $2.4 million relating to the impairment of long-lived assets) for 
costs relating to closing the plant in Argentina.  The collective bargaining 
agreements for the Company's production employees at its Mountain Top 
Facility and Brazilian manufacturing facilities expire in February 1999 and 
November 1998, respectively.  There can be no assurance that the Company 
will be able to negotiate extensions to such agreements on terms acceptable 
to it and the failure to obtain such extensions could have a material adverse 
effect on the Company.  The Company considers its relations with its 
employees to be good.

     On February 7, 1997, the Company closed the Northvale, New Jersey, and 
Boucherville, Quebec, facilities of MEM and Tom Fields (a division of MEM) 
and terminated substantially all of the employees working at such facilities. 
The union employees in the Northvale facilities had been covered by a 
collective bargaining agreement which included participation in the local 
union pension fund (the "Fund").  Closure of such plants and termination of 
the employees triggered an automatic withdrawal from the Fund.  In connection 
with such withdrawal, the Company incurred ERISA withdrawal liability, 
pursuant to which the Fund demanded that the Company pay the Fund $68,900 per 
quarter for 80 calendar quarters.  The Company began making such payments on 
September 1, 1997. The Fund's actuary also informed the Company that for 
several years the Fund has not received the minimum annual level of 
contributions required by ERISA. The Fund is in the process of seeking to 
obtain certain waivers under ERISA and the Internal Revenue Code so that the 
participating employers will not have to pay any penalties for the Fund's 
failure to receive such minimum levels of contributions.  The Fund's actuary 
has estimated the Company's liability, if such 

                                      21
<PAGE>

waivers are not obtained, to be approximately $1.1 million. 

INTELLECTUAL PROPERTY

     The Company believes that the trademarks relating to its brand and 
product names and patents are important to both its fragrance, artificial 
nail care and cosmetics businesses.  In addition to COSMAR, an unregistered 
brand name used in its artificial nail care business, the product trademarks 
owned or licensed by the Company include CHANTILLY, WHITE CHANTILLY, LUTECE, 
RAFFINEE, TABU, DREAMS BY TABU, AMBUSH, FETISH, FRENCH VANILLA BY DANA, 
CLASSIC GARDENIA, MONSIEUR MUSK, FRENCH GARDEN FLOWERS, ENGLISH WATERLILYS, 
CANOE, CANOE SPORT, HERBISSIMO, ENGLISH LEATHER, BRITISH STERLING, LOVE'S, 
HEAVEN SENT, NAVY, TOUJOURS MOI, NAVY FOR MEN, INSIGNIA, CALIFORNIA FOR MEN 
and LE JARDIN with respect to its fragrance products, COLOR POWER, PRESS & 
GO, PETITE PRESS & GO, SPORT PRESS & GO, PRO 10, SCULPTURE QUIK, SCULPTURE 
QUIK II, ULTRAGEL, NAIL FETISH, WRAP QUIK, QUIKFILE, QUIKSHINE, FILEPRO, QUIK 
FIT, and LAJOIE with respect to its artificial nail care products and NAT 
ROBBINS, LIP LACQUER, EVER SHEER, and COLOR INTENSE 24 with respect to its 
lip and eye make-up products.   The Company's other principal trademarks are 
registered in the United States and several are registered in other countries.

     As part of its new business strategy, the Company is re-examining all of 
its licensing arrangements.  In certain cases, the Company is attempting to 
renegotiate its licensing arrangements under terms more beneficial to its new 
business strategy. The Company will consider terminating license arrangements 
that are no longer beneficial and which cannot be renegotiated with the 
licensor.  The termination of any licensing agreement may involve substantial 
termination payments on the part of the Company.  

     In July and August 1994, the Company entered into two long-term license 
agreements pursuant to which it obtained certain exclusive rights to 
manufacture, sell, use and distribute the Houbigant fragrances worldwide 
(excluding Canada). The Company acquired similar rights for the Houbigant 
fragrances in Canada in December 1994 through the  ACB Acquisition and the 
execution of a new license agreement with Houbigant in July 1996, which 
superseded and restated its prior rights acquired in the ACB Acquisition.  
Each of these licenses is with Houbigant and has an initial term ending in 
2001 with options for seven additional five-year terms, or a total extension 
of 35 years if all of the options are exercised.  Houbigant, which was the 
subject of a proceeding under Chapter 11 of the Bankruptcy Code at the time, 
was authorized and empowered to enter into each license by the federal 
bankruptcy court.

     The Company and Houbigant entered into a License Modification Agreement, 
dated March 20, 1998, pursuant to which Houbigant agreed, absent any defaults 
under the License Modification Agreement, to forbear, for a period of one 
year from March 20, 1998, from taking any action with respect to certain 
disputes and alleged defaults under the license agreements existing as of 
March 20, 1998 or any defaults which might occur during the forbearance 
period, with the exception of certain specified defaults.  In consideration 
of this forbearance, (1) the first renewal period of five (5) years was 
bifurcated into two (2) sub-terms of two and one-half (2-1/2) years each, (2) 
the 

                                      22
<PAGE>

Company agreed to an early renewal of the License for the first 2-1/2 year 
sub-term (from July 1, 2001 through December 31, 2003), (3) the $5 million of 
credits the Company was to receive against the payment of future royalties 
after an aggregate of $7.6 million of royalties were paid was reduced to  
$2.5 million, and (4) the Company and Houbigant agreed on the allocation of 
the $2.5 million of credits.  There is no assurance that Houbigant will agree 
to continue to forbear from exercising its rights under the license 
agreements after March 19, 1999.

     During Fiscal 1997, the Company was notified by Harby's Corporation NV 
("Harby's") that the Company had failed to meet certain covenants and 
requirements under the license agreement assumed in August 1994 by the 
Company.  In April 1998, after attempts to negotiate a mutually acceptable 
termination of the license failed, Harby's delivered a default notice to the 
Company, pursuant to which it elected to terminate the license in accordance 
with the terms provided thereunder.  The termination of the Harby's license 
and the discontinuation thereafter of sales of the Harby's products is not 
expected to have a material adverse effect on the Company's operations and/or 
its business.
  
     The Company, through Cosmar, has various patent rights and a pending 
application in connection with its nail care and cosmetics businesses, 
including (1) an artificial nail sizing ring which allows for manufacturing 
efficiencies and ease of measurement and application by women, (2) a clam 
shell package design that displays artificial nails in a unique manner and 
(3) an artificial nail file/buffer that is more comfortable for a woman to 
use due to its unique cushion and plastic core.  Cosmar also is the exclusive 
licensee for two patented artificial nail sculpturing applications.

ITEM 2.   PROPERTIES

     Dana currently manufactures its fragrances at its 155,000 square-foot 
Mountain Top Facility, and at its facilities in Sao Paolo, Brazil, Laval, 
Quebec, Canada, and Granollers, Spain.  The Company has closed and plans to 
sell its manufacturing facility in Argentina.  The Company is also in the 
process of closing its manufacturing operations in Canada and consolidating 
such operations into its Mountain Top Facility.  Each of these facilities 
contains production, warehouse and office facilities.  Dana (or one of its 
subsidiaries; see the table below) (1) owns the Mountain Top Facility and the 
facilities in Argentina, Brazil and Spain, (2) leases its facility in Canada, 
(3) leases a 105,000 square-foot distribution facility and two warehouse 
facilities in Mountain Top, Pennsylvania,  and (4) leases a facility in 
Calumet City, Illinois, which it uses for its close-out business.

     Cosmar occupies a 95,320 square foot facility in Garden Grove, 
California that houses  warehouse, distribution and production assembly 
operations. Cosmar performs most of its manufacturing for its artificial nail 
care business at its 44,000 square-foot facility in Sparks, Nevada, which it 
leases.  Cosmar intends to consolidate its California assembly operations 
into its Sparks, Nevada, facility during Fiscal 1998.

     The Company leases or subleases facilities in Stamford and Greenwich, 
Connecticut, New York City, Cypress, California, and London, England, at 
which it conducts executive, marketing and 

                                      23
<PAGE>

administrative activities.  The Company is in the process of trying to 
sub-let the offices in Greenwich and New York City.

     As a result of the MEM Acquisition, the Company acquired two facilities 
in Northvale, New Jersey, which it sold in October 1997 and May 1998.  MEM's 
Canadian subsidiary, MEM (Canada) Ltd., (which was merged into Houbigant 
(1995) Ltd. during Fiscal 1997) owns a 32,000 square-foot plant in 
Boucherville, Quebec, which was closed on February 7, 1997.  The Company is 
seeking to sell the facility.   

     The following table provides information on the Company's operating 
facilities (not including facilities used only for office or warehouse 
purposes):





                                      24

<PAGE>

<TABLE>
<CAPTION>
                                                                      APPROX.
                                                  YEAR    LAST        SIZE       LEASED/
 SUBSIDIARY             LOCATION                  OPENED  EXPANSION   (SQ. FT.)  OWNED  
 ----------             --------                  ------  ---------   ---------  -----  
 <S>                    <C>                       <C>     <C>         <C>        <C>    
 Dana                   Mountain Top, PA          1963    1996        155,000    Owned
 Dana                   Mountain Top, PA          1996    1996        105,000    Leased
 Houbigant              Laval, Canada(1)          1994    --           43,087    Leased
 (1995) Ltd.
 Houbigant              Laval, Canada(1)          1997    __           93,156    Leased 
 (1995) Ltd.
 Dana S.A.              Granollers, Spain         1971    --           67,500    Owned
 Perfumes               Sao Paolo, Brazil         1954    1984         20,810    Owned
 Dana do
 Brasil
 Perfumes               Buenos Aires,             1955    --           24,600    Owned
 Dana                   Argentina(2)
 S.A.I.C.
 Dana                   Calumet City, IL(3)       1997    --           42,000    Leased
 Cosmar                 Sparks, NV                1987    --           43,859    Leased
 Cosmar                 Garden Grove, CA(4)       1996    --           95,320    Leased
 Tinkerbell U.K. Ltd.   Folkestone, England(5)      --    --            9,500    Leased
                                                                     --------
                                                                      699,832
</TABLE>
----------
(1)  The Company is in the process of consolidating all of its Canadian 
     fragrance manufacturing operations into Dana North America at its 
     Mountain Top Facility.  

(2)  The Company has closed and is in the process of selling its manufacturing
     facility in Argentina.

(3)  The Company intends to close this facility.

(4)  Cosmar intends to consolidate the assembly operations located at this 
     facility into the Sparks Facility.

                                       25

<PAGE>

     during Fiscal 1998.

(5)  The Company intends to close this facility during Fiscal 1998.


ITEM 3.   LEGAL PROCEEDINGS

     LITIGATION

     PREMIER SALES GROUP LITIGATION.  Renaissance, GAC and Cosmar were sued 
in the District Court of Jefferson County, Texas, in August 1997 by Premier 
Sales Group, Inc. and David Gosdin (together, "PSG"), a former sales 
representative for the NAT ROBBINS brand.  The complaint alleged breach of 
contract,  unjust enrichment,  failure to provide an accounting,  fraud, 
interference with business relations and prospective advantage, breach of 
duty of good faith and fair dealing and  violation of certain provisions of 
the Texas Business and Commerce Code, and sought actual, statutory, special, 
punitive and exemplary damages in amounts to be proven at trial.  
Renaissance, Cosmar and GAC denied all the material allegations of the 
complaint, and filed a third party complaint against the sellers of GAC (the 
"Sellers") in November 1997 seeking damages for breach of representations and 
warranties in the Stock Purchase Agreement and indemnification pursuant to 
the terms of the Stock Purchase Agreement.  In March 1998, PSG, Renaissance, 
Cosmar, GAC and the Sellers entered into settlement agreements pursuant to 
which (1) $299,999.99 of the $500,000 held in an escrow account set up under 
the Stock Purchase Agreement was released from the escrow account and 
delivered to PSG, (2) $30,000 of the amount remaining in the escrow account 
was delivered to Renaissance, Cosmar and GAC to be applied against 
outstanding attorneys' fees for the litigation, (3) the balance of the escrow 
account was delivered to the Sellers, and (4) all parties signed mutual 
releases (except that Renaissance, GAC and Cosmar did not release any claims 
arising under the existing consulting agreements with the Sellers).  The 
litigation was dismissed with prejudice by order entered on March 13, 1998.

     ORIGINAL ADDITIONS.  In November 1997, Cosmar filed a AAA arbitration 
claim against Original Additions (Beauty Products), Ltd.  ("Original 
Additions"), a former distributor of Cosmar products in the UK, seeking 
recovery of approximately $130,000 owed to Cosmar pursuant to a distribution 
agreement between the parties.  On the same day, Original Additions filed a 
complaint in Superior Court in Los Angeles County, California, against the 
Renaissance, Cosmar and Dana U.K. Limited ("Dana U.K."), the Company's UK 
subsidiary.  The complaint alleges breach of contract, interference with and 
conspiracy to interfere with contract, unfair competition and conspiracy to 
unfairly compete and fraud. Original Additions is seeking reformation of the 
original distribution agreement, declaratory relief with respect to its 
alleged right of set-off and compensatory and punitive damages in amounts to 
be proven.  In April 1998, the parties executed an Agreement pursuant to 
which (1) they agreed to submit their claims to binding arbitration before a 
retired judge from the Los Angeles or Orange County Superior Court or the 
United States District Court for the Central District of California, (2) 
Cosmar agreed to withdraw its arbitration demand without 

                                       26

<PAGE>

prejudice and (3) Original Additions agreed to dismiss the litigation without 
prejudice.  The parties have thirty days after the execution of the Agreement 
to serve their claims on each other and the arbitrator.  The arbitration is 
to be commenced on or before December 31, 1998, unless extended by mutual 
agreement of the parties.  

     OTHER LITIGATION.  The Company is involved from time to time in various 
legal proceedings arising from the ordinary course of business. The Company 
believes that the outcome of all pending legal proceedings in the aggregate 
will not have a material effect on the financial condition or results of 
operations of the Company.

     ENVIRONMENTAL AND OTHER REGULATION

     Due to the nature of the Company's business, its operations are subject 
to a variety of environmental laws relating to the storage, discharge, 
handling, emission, generation, manufacture, use and disposal of chemicals, 
solid and hazardous waste and other toxic and hazardous materials used to 
manufacture the Company's products.  The Company believes that it has been 
operating its facilities in substantial compliance in all material respects 
with existing laws and regulations.

     Compliance with federal, state and local laws and regulations pertaining 
to the discharge of materials into the environment, or otherwise relating to 
the protection of the environment, is not anticipated to have a material 
effect upon the operations of the Company.

     The Company is subject to regulation by the US Food and Drug 
Administration. The Company's advertising and sales practices are subject to 
the jurisdiction of the Federal Trade Commission.  In addition, the Company 
is subject to numerous federal, state and local laws relating to marketing 
and to the content, labeling, packaging and shipping of its products.

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

     An amendment to the Holding Company's Stock Option Plan (the "Plan") 
increasing the number of shares of Common Stock eligible for stock option 
grants under the Plan was approved as of February 6, 1998 by written consent 
of a majority of the holders of the Common Stock.

                                       PART II

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

     There is no established public trading market for the Holding Company's 
Common Stock.  As of March 31, 1998, there were 23 holders of the Holding 
Company's Common Stock.  The Holding Company does not anticipate declaring cash 
dividends in the foreseeable future because the Holding Company intends to 

                                       27

<PAGE>

retain its earnings to finance the implementation its business restructuring 
and for general corporate purposes.  Any payment of future dividends will be 
at the discretion of the Holding Company's Board of Directors and will depend 
upon, among other things, the Holding Company's earnings, financial condition, 
capital requirements, level of indebtedness, contractual restrictions with 
respect to the payment of dividends and other relevant factors.  The 1997 
Credit Facility prohibits the distribution of dividends on the Holding 
Company's Common Stock without the prior consent of the Revolving Credit 
Lenders.  In addition, the 1997 Senior Notes and the Indenture governing the 
1997 Senior Notes prohibit the Holding Company from paying a dividend which 
would cause the Holding Company to fail to comply with certain financial 
covenants therein.

ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA

     The selected historical financial data of Cosmar (Predecessor) and the 
Company set forth below has been derived from and should be read in 
conjunction with the Company's (and its predecessor's) consolidated financial 
statements and the notes thereto included elsewhere herein and Part II, Item 
7.  Management's Discussion and Analysis of Financial Condition and Results 
of Operations, below.

                     [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




                                       28

<PAGE>

<TABLE>
<CAPTION>
                            COSMAR (PREDECESSOR)                                        COMPANY
                            --------------------       -----------------------------------------------------------------------
                                                       JANUARY 1
                                  YEAR ENDED               TO   
                                 DECEMBER 31,          AUGUST 17,       FISCAL             FISCAL        FISCAL         FISCAL
                                     1993                 1994           1994               1995          1996           1997 
                                     ----                 ----           ----               ----          ----           ---- 
<S>                              <C>                   <C>              <C>              <C>            <C>             <C>   
                                                           (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
STATEMENT OF OPERATIONS                                                                                                          
DATA:                                                                                                                            
Net sales                          $25,844               $18,301        $57,714           $131,286      $174,612        $179,696 
Operating income (loss)              5,063                 3,326          2,744              8,451         4,524        (169,347)
Interest expense                       132                    61          8,694             19,458        24,417          31,143 
Income (loss) before                                                                                                             
 extraordinary item                  4,801                 3,364         (5,459)           (12,057)      (19,380)       (197,446)
Net income (loss)                    4,801                 3,364         (5,459)           (12,057)      (41,818)       (197,446)
Net income (loss) applicable                                                                                                     
 to common stockholders(a)           4,801                 3,364         (6,174)           (13,390)      (55,886)      $(221,783)
Income (loss) applicable to                                                                                                      
 common stockholders per                                                                                                         
 common share                           --                    --         $(8.50)           $(18.62)      $(71.63)      $ (268.58)
BALANCE SHEET DATA (END                                                                                                          
 OF PERIOD):                                                                                                                     
Total assets                        $8,489                    --       $162,253           $184,619      $361,383        $240,484 
Intangible assets - net                 --                    --         82,499             76,895       174,177          88,414 
Long-term debt, excluding                                                                                                        
 current maturities (b)                294                    --         97,032(a)          67,323(a)    203,877(a)        4,072(a)
Series B and C Preferred Stock (c)      --                    --             --                 --        86,660         109,925   
10% Preferred Stock(c)                  --                    --         10,365             11,698        13,167          14,333   
Common stockholders'                                                                                                               
 equity (deficiency)(d)              5,390                    --         20,189              6,451        (8,181)       (230,734)  
__________
</TABLE>

     (a)  Represents net loss less preferred stock dividends.

     (b)  Excludes (i) outstanding indebtedness under the 1997 Senior Notes of
          $200,000 and outstanding indebtedness under the 1997 Credit Facility
          of $55,554, both of which are classified within current liabilities at
          March 31, 1998, (ii) outstanding indebtedness under the Old Credit
          Facility of $57,000 at March 31, 1996 which is classified within
          current liabilities, and (iii) long-term minimum royalty obligations
          and other long term liabilities of $8,229, $3,768 and $4,686 at March
          31, 1998, 1997 and 1996, respectively.

     (c)  The carrying values of the Series B and Series C Preferred Stock and 
          the 10% Preferred Stock have been reduced by an allocation of 
          proceeds to the respective common stock warrants and have been 
          increased by the accumulated dividends and accretion through the 
          respective balance sheet date.

     (d)  No cash dividends have been paid since April 15, 1994 (Inception).

                                       29

<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

     This discussion and analysis relates to the consolidated results of 
operations of the Company, which for purposes of this Item 7 are discussed 
separately for each of the Company's major operating divisions (the 
"Fragrance Division," consisting of Dana and its subsidiaries, the "Cosmetics 
Division" consisting of Cosmar, and the "International Division," which 
includes both fragrance and cosmetics sales). See Part I, Item 1. Business, 
"Background," below for a discussion of the acquisitions completed by the 
Company since July 1994.

     The Company is reporting Operating Income and EBITDAI (as defined below) 
for Fiscal 1997 that are significantly lower than for Fiscal 1996, primarily 
as a result of four major factors.  

     The first factor relates to operational events, of which there are three 
primary components.  First, management believes, based on the Company's 
Fiscal 1997 results of operations, that the mass market fragrance industry 
has undergone a permanent change.  Based on IRI data, the mass market 
fragrance industry as a whole (excluding bath and body products) suffered a 
greater than 7% (greater than 10% in the women's fragrance segment) decline 
in sales during the 52 week period ended March 22, 1998. The Company's sales 
reflected this industry trend.  Second, profitability in the Fragrance 
Division was adversely affected in Fiscal 1997 by higher costs of goods sold 
and freight costs  than during Fiscal 1996 due to difficulties encountered in 
integrating the manufacturing of new brand products acquired 

                                       30
<PAGE>

in the MEM Acquisition and the P&G Brands Acquisition into the Mountain Top 
Facility.  Third, the Fiscal 1997 results reflect lower sales and 
profitability of Cosmar's COSMAR branded artificial nail products as compared 
to Fiscal 1996, which the Company attributes to increased competition from 
new entrants into the category resulting in loss of market share and higher 
product returns as compared to Fiscal 1996. 
 
     The second factor relates to the Company's decision to increase its 
reserves in Fiscal 1997.  As a result of the operational events discussed 
above, during Fiscal 1997, the Company reviewed its balance sheet and 
determined that it should make adjustments to estimates and reserves 
reflected on its balance sheet that were based, when made, on the Company's 
prior historical experience.  Such review also included a reassessment of the 
assumptions that should be used to arrive at estimates and reserves in light 
of these changing market conditions.  The Company reviewed its estimates for 
customer charge-backs, sales returns and holiday markdowns, accounts 
receivable, inventory and trade promotion, among other items.  As a result of 
this review, the Company's results of operations for Fiscal 1997 include 
adjustments of approximately $23.1 million to reflect actual costs that 
exceeded estimates and other changes to estimates that had been used in 
recording the prior years' results.

     The third factor relates to management's decision to write-down certain 
of its long-lived assets in Fiscal 1997.  Based on the above developments 
during Fiscal 1997, the Company conducted an evaluation of long-lived assets, 
including goodwill, based upon the Company's estimates of its current 
business plans for the fragrance businesses within the Fragrance and 
International Divisions.  As a result, during Fiscal 1997, the Company 
recorded an impairment loss of $85.4 million  relating to the write-down of 
such assets.

     The fourth factor relates to costs resulting from the implementation of 
the Company's new business plan. In Fiscal 1997, the Company recorded $35.1 
million in estimated costs relating to its new business plan, consisting of, 
among other things, additional sales returns, excess inventory, severance 
costs, facilities consolidation costs and professional fees. There can be no 
assurance that actual costs will not be greater than estimated.  See the 
table below for a description of the costs recorded in Fiscal 1997: 

<TABLE>
           <S>                                         <C>
           (dollars in millions) 

           Sales returns and markdown provisions       $  19.5 
           Incremental excess inventory provisions        11.3 
           Severance, relocation and recruiting            1.8 
           Severance and additional asset write-offs       1.1 
              relating to closing businesses                   
           Professional fees                               1.4 
                                                       ------- 
           Total                                       $  35.1 
                                                       ------- 
                                                       ------- 
</TABLE>

     The provisions for sales returns and markdowns are included in net 
sales, and provisions for excess inventory are included in costs of goods 
sold in the accompanying statement of operations as required under generally 
accepted accounting principles ("GAAP").

                                       31

<PAGE>

     The Company expects to incur additional costs to implement the operational 
restructuring component of its new business plan during Fiscal 1998 for 
severance, facility consolidation costs, professional fees  and other costs 
aggregating approximately $10.0 million to $12.0 million. The Company 
expects to incur additional professional fees of approximately $4.0 million to 
$6.0 million in connection with the planned financial restructuring of the 
Holding Company's obligations during Fiscal 1998.  There can be no assurances 
that actual costs will not be greater than the above estimated amounts.

     During the fourth quarter of Fiscal 1997, the Company began a thorough 
review of its business, including its business strategy, its product lines, 
its sales and marketing strategies, its general and administrative overhead, 
personnel, capital and debt structure, production and advertising.  The 
objectives of this review were to (1) identify and quantify operational 
problems, (2) develop strategies and tactics to improve the Company's 
performance , (3) quantify the costs and timing to effect the necessary 
changes and (4) quantify the impact of the changes on the Company's 
profitability and cash flow.  The Company has now developed a revised 
business plan that de-emphasizes increasing sales volume in favor of a 
greater emphasis on long-term profitability.  Elements of the business plan 
include:

     Fragrance Division:

     -    Focus on core and growth brands, the highest turning SKU's and core
          customers; and

     -    Integrate into one domestic US operation, headquartered on the east
          coast of the US, all of the domestic fragrance operations,
          the Canadian fragrance business, the domestic children's cosmetic 
          business, and the close-out sales business (referred to elsewhere 
          herein as "Dana North America") along with the international and 
          corporate headquarters.  

     Cosmetics Division:

     -    Focus on growth brands, the highest turning SKUs and core 
          customers; and 

     -    Consolidate assembly and manufacturing operations into one location

     International Division:

     -    Consolidate the South American operations into the Brazilian
          subsidiary and the management of the European operations under the 
          UK subsidiary;

     -    Consolidate the UK children's cosmetics business into the UK
          fragrance operations; and

     -    Grow sales in other countries through regional export business.

                                       32
<PAGE>

     The Company is restructuring on two fronts.  Its operating subsidiaries 
are currently engaged in an operational restructuring of their respective 
businesses.  The Holding Company is about to begin a financial restructuring 
of its capital structure.  The two are, in certain respects, separate and 
distinct from each other.    

     The Company believes that its operating subsidiaries have viable core 
businesses and growth brands that have the potential for improved operating 
and financial performance in 1998 and beyond.  However, in order to improve 
their operating and financial performance, the operating subsidiaries must 
implement a costly operational restructuring in 1998, which will include 
numerous management and organizational changes and cost reduction programs. 
The operating subsidiaries have already (1) initiated many of these changes 
and  (2) refocused their advertising and promotional programs to preserve and 
enhance the value of  their growth brands. There can be no assurances that 
the operating subsidiaries will be successful in implementing their 
operational restructuring.     

     At the same time that its operating subsidiaries are implementing their 
operational restructuring, management believes that the Holding Company must 
implement a financial restructuring. To this end, the Holding Company intends 
to enter into negotiations with the holders of its Preferred Stock, Common 
Stock  and 1997 Senior Notes to restructure these obligations with the goal 
of de-leveraging and strengthening its balance sheet. There can be no 
assurances that the Holding Company will be successful in implementing its 
financial restructuring.    

     In late June 1998, the Revolving Credit Lenders agreed to extend their 
financing commitments to June 1999 and increase the amount available to be 
borrowed under the 1997 Credit Facility.  The Company believes that it will 
now have sufficient liquidity to enable it to implement the operational 
restructuring of the operating subsidiaries, consummate the Holding Company's 
financial restructuring, and execute the Company's new business plan.

OPERATIONS FOR FISCAL 1997 COMPARED TO OPERATIONS FOR FISCAL 1996

     NET SALES.  The Company's net sales in Fiscal 1997 and Fiscal 1996 were 
as follows (dollars in million):
<TABLE>
<CAPTION>
                                   FISCAL 1997             FISCAL 1996     
                            -----------------------  ----------------------
            DIVISION         NET SALES   % OF TOTAL   NET SALES  % OF TOTAL
           -------------    -----------  ----------  ----------- ----------
           <S>              <C>          <C>         <C>         <C>       
           Fragrance           $80.8       45.0%       $74.9       42.9%
           Cosmetics            50.6       28.1%        59.2       33.9
           International        48.3       26.9%        40.5       23.2%
                             -------       ----       ------      -----   
             Total           $ 179.7        100%      $174.6      100.0%
                             -------       ----       ------      -----   
                             -------       ----       ------      -----   
</TABLE>

                                       33
<PAGE>

     Total net sales increased in Fiscal 1997 compared to Fiscal 1996 by 2.9% 
to $179.7 million.

     Fragrance Division net sales increased in Fiscal 1997 compared to Fiscal 
1996 by 7.9% to $80.8 million which includes approximately $12.1 million of 
adjustments to reflect actual returns and allowances related to prior year 
activities that exceeded estimated accruals at March 31, 1997.  These 
adjustments reflect the impact of product returns during Fiscal 1997 of 
Fiscal 1996 new product launches and promotional items.  Fragrance Division 
net sales were also affected by approximately $12.2 million of additional 
provisions for sales returns and allowances that were recorded in connection 
with the Company's new business plan.  Without giving effect to these  
adjustments and returns and allowances recorded in connection with the 
Company's new business plan, adjusted net sales for the Fragrance Division 
would have been $105.1 million for Fiscal 1997, or an increase of 40.3% over 
Fiscal 1996.  The increase in Fiscal 1997 net sales was due principally to 
net sales of brands acquired in the MEM Acquisition and P&G Brands 
Acquisition and new brands launched during the current year (e.g., FETISH 
SCENT and SHADES OF NAVY).  Additionally, Fragrance Division net sales were 
negatively affected by higher than expected returns and markdowns accruals.

     Cosmetics Division net sales decreased in Fiscal 1997 compared to Fiscal 
1996 by 14.5% to $50.6 million, which includes additional adjustments of $5.3 
million to reflect actual returns and allowances related to prior year 
activities that exceeded estimated accruals at March 31, 1997.  These 
adjustments reflect the impact of  product returns of calendar year 1997 
planogram changes and 1996 promotional items during Fiscal 1997. Cosmetics 
Division net sales were also affected by approximately $4.6 million of 
additional provisions for sales returns that were recorded in connection with 
the Company's new business plan. Without giving effect to these adjustments 
and returns, adjusted net sales for the Cosmetic Division in Fiscal 1997 
would have been $60.5 million, or an increase of 2.2% over Fiscal 1996 sales. 
The increase in Fiscal 1997 adjusted net sales was due principally to 
increased sales of the NAT ROBBINS brand of cosmetics acquired in the GAC 
Acquisition and the FETISH brand of cosmetics launched in Fiscal 1997, offset 
by the declines in the sales of the Company's COSMAR branded products.  
Fiscal 1997 net sales of the NAT ROBBINS and FETISH brands of cosmetics were 
approximately $8.9 million higher than Fiscal 1996 sales of NAT ROBBINS 
cosmetics.  Fiscal 1997 net sales of the COSMAR branded products were 
approximately $14.0 million lower than Fiscal 1996 sales.

     International Division net sales increased in Fiscal 1997 compared to 
Fiscal 1996 by 19.3% to $48.3 million which includes additional adjustments 
of $1.4 million to reflect actual returns and allowances related to prior 
year activities that exceeded estimated accruals at March 31, 1997.  
International Division net sales were also affected by $2.7 million of 
additional provisions for sales returns that were recorded in connection with 
the Company's new business plan.  Without giving effect to these adjustments 
and returns, adjusted net sales for Fiscal 1997 would have been $52.4 million 
or an increase of 29.4% over Fiscal 1996. The increase in adjusted net sales 
is attributable principally to sales from the Company's UK subsidiary that 
began operations in December 1996, offset, in part, by a decrease in export 
sales. 

                                       34

<PAGE>

     GROSS PROFIT.   The Company's gross profit in Fiscal 1997 and Fiscal 
1996 was as follows (dollars in millions):
<TABLE>
<CAPTION>
                        FISCAL 1997                    FISCAL 1996
                --------------------------     ---------------------------
DIVISION        GROSS PROFIT      % OF NET     GROSS PROFIT       % OF NET
                                   SALES                           SALES
--------        ------------      --------     ------------       --------
<S>             <C>               <C>          <C>                <C>
Fragrance           $22.4          27.7%           $ 46.6          62.2%
Cosmetics            20.9          41.3%             35.0          59.1%
International        20.7          42.9%             23.3          57.5%
                ------------      --------     ------------       --------
     Total          $64.0          35.6%           $104.9          60.1%
</TABLE>

     Fragrance Division gross profit margin declined to 27.7% in Fiscal 1997 
from 62.2 % in Fiscal 1996 due in part to $12.1 million of adjustments to net 
sales described in NET SALES above and approximately $0.8 million of 
adjustments to cost of goods sold that reflected actual costs related to 
prior year activities that exceeded estimated accruals at March 31, 1997.  
Fragrance Division gross profit in Fiscal 1997 also included $12.2 million of 
adjustments to net sales and $7.7 million of adjustments to cost of goods 
sold, to reflect additional provisions for sales returns, markdowns and 
excess inventories recorded in connection with the Company's new business 
plan.  Without such adjustments and additional costs, gross profit for Fiscal 
1997 for the Fragrance Division would have been $55.2 million or 52.5% of 
adjusted net sales compared to 62.2% in Fiscal 1996.  This decline is due to 
higher levels of close-out sales and higher sales of children's cosmetics 
products, which, in each case, generate lower gross margins. Nonetheless, the 
gross margin on fragrance products sold through normal channels declined to 
56.9% of adjusted net sales in Fiscal 1997 from 62.2% in Fiscal 1996.  This 
decline is principally due to difficulties encountered in integrating the 
manufacturing of new brand products acquired in the MEM Acquisition and P&G 
Brands Acquisition into the Company's Mountain Top Facility, which resulted 
in delays in production and required the Company to out-source a large 
portion of 1997 Christmas holiday season production.  Higher labor and 
overhead costs at the Mountain Top Facility caused by increased levels of 
overtime and lower through-put also contributed to the decline in Fiscal 1997 
gross margins on fragrance products.  Gross profit in Fiscal 1997 was further 
reduced by additional depreciation incurred in connection with the expansion 
of the Mountain Top Facility. 

     Cosmetics Division gross profit margin declined to 41.3% in Fiscal 1997 
from 59.1 % in Fiscal 1996 due in part to $5.3 million of adjustments to net 
sales described in NET SALES above and approximately $1.4 million of 
adjustments to cost of goods sold that reflected actual costs related to 
prior year activities that exceeded estimated accruals at March 31, 1997.  
Cosmetics Division gross profit in Fiscal 1997 also included approximately 
$4.6 million of adjustments to net sales and $2.1 million of adjustments to 
cost of goods sold to reflect additional provisions for sales returns and 
excess inventories recorded in connection with the Company's restructuring 
plan.  Without such

                                       35

<PAGE>

adjustments and additional provisions for returns and costs recorded in 
connection with the Company's restructuring plan, gross profit for the 
Cosmetics Division in Fiscal 1997 would have been 56.7% of adjusted net sales 
compared to 59.1% in Fiscal 1996.  The remaining decrease is due to changes 
in product mix. 

     International Division gross profit margin declined to 42.9% in Fiscal 
1997 from 57.5% in Fiscal 1996 principally due to $1.4 million of 
adjustments to net sales described in NET SALES above that reflected actual 
returns and allowances related to prior year activities that exceeded 
estimated accruals at March 31, 1997. International Division gross profit in 
Fiscal 1997 also included $2.7 million of adjustments to net sales and $1.6 
million of adjustments to cost of goods sold to reflect additional provisions 
for sales returns and excess inventories recorded in connection with the 
Company's new business plan. Without such adjustments and returns, gross 
profit for the International Division in Fiscal 1997 would have been 50.4% of 
adjusted net sales compared to 57.5% in Fiscal 1996.  The decline in gross 
margin percentage is due principally to higher than anticipated costs of 
production experienced by the Company during Fiscal 1997 in its overseas 
operations compared to Fiscal 1996.

     SELLING EXPENSES.  The Company's selling expenses in Fiscal 1997 and 
Fiscal 1996 were $92.2 million (51.3% of net sales) and $64.8 million (37.1% 
of net sales), respectively.  Selling expenses in Fiscal 1997 also included 
$0.4 million of additional trade promotion costs that reflected actual costs 
related to prior year activities that exceeded estimated accruals at March 
31, 1997. Without giving effect to these additional trade promotion costs 
incurred in connection with the Company's restructuring plan, selling 
expenses would have been $91.8 million, or 42.1% of Fiscal 1997 adjusted net 
sales.  Selling expenses increased in Fiscal 1997 due to higher advertising 
and promotion expenditures during the first half of Fiscal 1997, primarily to 
support the brands acquired in the MEM Acquisition and P&G Brands 
Acquisition, and due to the additional selling costs related to larger 
selling organizations required by the Company's expanded product offerings. 
The increase in selling expenses as a percentage of net sales is attributable 
to the combination of the aforementioned increased costs and lower than 
expected net sales in Fiscal 1997. 

     GENERAL AND ADMINISTRATIVE EXPENSES.  The Company's general and 
administrative expenses in Fiscal 1997 and Fiscal 1996 were $39.0 million 
(21.7% of net sales) and $25.7 million (14.7% of net sales), respectively. 
General and administrative expenses in Fiscal 1997 include $1.6 million of 
adjustments which reflect actual costs related to prior year activities that 
exceeded estimated accruals at March 31, 1997. Excluding these adjustments, 
general and administrative expenses were $37.4 million (17.1% of adjusted net 
sales). The increase in general and administrative expenses was attributable 
to the additional costs for the infrastructure necessary to run a larger 
organization, primarily resulting from increased expenses related to the GAC 
Acquisition, MEM Acquisition, P&G Brands Acquisition, the corporate 
headquarters office, the children's cosmetics business and the Company's U.K. 
subsidiary that began operations in December 1996.  The increase in general 
and administrative expenses as a percentage of net sales reflects the 
additional costs discussed above and lower than expected net sales in Fiscal 
1997.

                                       36
<PAGE>

     RESTRUCTURING COSTS.  Restructuring costs were $0.6 million (.3% of net
sales). Restructuring costs consist of costs related to the closing of the
Company's Argentina operations.    

     OTHER SEVERANCE COSTS AND PROFESSIONAL FEES.  Other severance costs and 
professional fees in Fiscal 1997 were $3.2 million (1.8% of net sales) 
compared to $0 in Fiscal 1996.  These costs include severance, relocation 
and recruiting costs incurred during Fiscal 1997 by the Company to reorganize 
its management team, and fees incurred by the Company for the professional 
services of its outside advisors to assist in the development and 
implementation of the Company's  new business plan and planned financial 
restructuring.  

     AMORTIZATION OF INTANGIBLES AND OTHER ASSETS.  Amortization of intangibles
and other assets were $13.0 million (7.2 % of net sales) and $9.8 million (5.6%
of  net sales) in Fiscal 1997 and 1996, respectively.   This increase in Fiscal
1997 compared to Fiscal 1996 is principally due to an increase in intangible
assets resulting from the GAC Acquisition, MEM Acquisition and P&G Brands
Acquisition.

     IMPAIRMENT OF LONG-LIVED ASSETS.   The asset impairment charge during 
Fiscal 1997 reflects the Company's evaluation of long-lived assets in 
accordance with Statement of Financial Accounting Standards No. 121, 
"Accounting for Impairment of Long Lived Assets and for Lived Assets to be 
Disposed of" ("SFAS 121").  Based on the Company's evaluation of such 
long-lived assets, an impairment charge of $85.4 million (47.5% of net sales) 
was recorded to reflect declines in value of long lived assets used in the 
fragrance business within the Fragrance and International Divisions.  
Approximately $3.8 million of these charges relate to assets of foreign 
operations that the Company intends to close or sell.  The remainder relates 
to fixed and intangible assets, including goodwill, that were deemed to be 
impaired based upon the future expected cash flows of the Fragrance and 
International Divisions.

     The Fiscal 1997 asset impairment charge had no impact on the Company's
Fiscal 1997 cash flow and will not impact its ability to generate cash flow in
the future.  As a result of the SFAS 121 charge, depreciation and amortization
expenses related to certain assets will be reduced in future periods.  In
conjunction with the review for impairment, the estimated useful lives of
certain assets were reviewed.  This review resulted in the acceleration of
amortization expense for certain intangible assets. 

     Management believes that, as an additional operational measurement, 
earnings (loss) before interest, taxes, depreciation, amortization and 
impairment of long-lived assets ("EBITDAI") is useful and meaningful 

                                    37
<PAGE>

to an understanding of the operating performance of the Company.  EBITDAI 
should not be considered in isolation or as a substitute for net income 
(loss), cash flow from operations or other consolidated income (loss) or cash 
flow data or as a measure of the Company's profitability or liquidity. Items 
excluded for EBITDAI, such as depreciation and amortization, are significant 
components in understanding and assessing the Company's financial 
performance.  Management uses EBITDAI as one means of analyzing its ability 
to service its debt.  Management believes that lenders use it for purposes of 
analyzing a company's performance with respect to its credit facilities and 
certain investors use it as one measure of a company's historical ability to 
service its debt.  All companies do not calculate EBITDAI the same way.       
   
     The computation of Fiscal 1997 and Fiscal 1996 EBITDAI is set forth in 
the table below (in millions):

<TABLE>
                                                     FISCAL           FISCAL
                                                      1997             1996
                                                      ----             ----
<S>                                                 <C>               <C>
Operating income (loss)                             $(169.3)          $ 4.5
Plus amortization of intangibles and other assets      13.0             9.8
Plus impairment of long-lived assets                   85.4              --
Plus depreciation                                       8.2             4.9
                                                    -------           -----
EBITDAI                                             $ (62.7)          $19.2
</TABLE>

     Without giving effect to the adjustments to reflect actual costs that 
exceed estimates that had been used in recording prior years' results and the 
additional costs recorded in connection with the operational component of the 
Company's new business plan discussed above, EBITDAI for Fiscal 1997 would 
have been $(4.5) million.   

     INTEREST EXPENSE.  The Company's interest expense was $31.1 million and
$24.4 million in Fiscal 1997 and Fiscal 1996, respectively.  Interest expense
consisted of the following (in millions): 

                                       38
<PAGE>

<TABLE>
                                                      FISCAL           FISCAL
                                                       1997             1996
                                                       ----             ----
<S>                                                   <C>              <C>
Interest on  1997 Senior Notes (a)                    $23.5            $ 3.4
Interest on  1997 Credit Facility                       3.6               --
Interest on Old Senior Notes                             --              7.6
Interest on Subordinated Seller Notes 
 (payable in 2002)                                      0.5              0.5
Interest on Old Credit Facility                          --              4.9
Interest on Old Senior Secured Credit Facility           --              2.4
Other Interest                                          0.2              0.4
Amortization of deferred financing costs                2.1              3.2
Accretion of Subordinated Seller Notes 
(and Old Senior Notes in Fiscal 1996)                   0.2              0.3

Accretion of interest on obligations for                
   minimum royalty payment                              1.0              1.7
                                                      -----            -----
Total Interest Expense                                $31.1            $24.4
</TABLE>

---------------
     (a)  See "Liquidity and Capital Resources," below for additional
information in connection with the February 15, 1998 interest payment.

     OTHER EXPENSE (INCOME) - NET.  Other expense (income) - net was ($2.5)
million for Fiscal 1997 compared to $0.1 million for Fiscal 1996 and consists
primarily of the proceeds from a key man life insurance policy covering the late
Chairman and Chief Executive Officer, Dr. Thomas V. Bonoma, on which the Company
was the beneficiary, net of incremental expenses incurred by the Company
relating to his death.  Other expense (income) - net also includes other fees
payable to the Company's majority stockholder during Fiscal 1997 of $0.7
million.  As of March 31, 1998,  $0.4 of such fees had been paid.  As of  August
15, 1997, the Company was restricted from making such payments pursuant to the
terms of the Company's Series C Preferred Stock.  No fees were paid or accrued
during Fiscal 1996, because the Company was prohibited from making such payments
pursuant to the terms of the Company's Old Credit Facility. Other expenses
(income) - net also includes $0.8 million of foreign currency losses primarily
from short-term intercompany transactions.

     INCOME TAX PROVISION.  Income tax provision was $.9 million and $1.3
million for Fiscal 1997 and Fiscal 1996, respectively.  The Company's effective
tax rates differ from the United States federal income tax rate due to state and
foreign income taxes and limitations on utilization of federal 

                                    39
<PAGE>

income tax benefits. The decrease in income taxes during Fiscal 1997 compared 
to Fiscal 1996 is due to lower income in certain foreign jurisdictions. 

OPERATIONS FOR FISCAL 1996 COMPARED TO OPERATIONS FOR FISCAL 1995

     NET SALES.  The Company's net sales in Fiscal 1996 and Fiscal 1995 were as
follows (dollars in millions):

<TABLE>
                              FISCAL 1996                     FISCAL 1995
                         ----------------------           ---------------------
                                          % OF                             % OF
DIVISION                 NET SALES        TOTAL           NET SALES        TOTAL
--------                 ---------        -----           ---------        -----
<S>                        <C>            <C>             <C>             <C>
Fragrance                  $ 74.9          42.9%           $ 63.9          48.6%
Cosmetics                    59.2          33.9              44.5          33.9
International                40.5          23.2              22.9          17.5
                           ------         -----            ------         -----
                           $174.6         100.0%           $131.3         100.0%
</TABLE>

     Total net sales increased in Fiscal 1996 compared to Fiscal 1995 by 33.0%
to $174.6 million.  

     Fragrance Division net sales increased in Fiscal 1996 compared to Fiscal
1995 by 17.2% to $74.9 million.  Approximately three-quarters of this increase 
resulted from new launches, primarily NAVIGATOR and AMBUSH, and the
revitalization of existing brands.  The remaining increase in Fiscal 1996 net
sales was attributable to the brands acquired during Fiscal 1996. 

     Cosmetics Division net sales increased in Fiscal 1996 compared to Fiscal
1995 by 33.0% to $59.2 million.  Approximately two-thirds of this increase was
attributable to sales of the NAT ROBBINS brand, which was acquired in the GAC
Acquisition.  The remaining increase in Fiscal 1996 net sales was attributable
to NAIL FETISH and other new product introductions.  
     
     International Division net sales increased in Fiscal 1996 compared to
Fiscal 1995 by 76.9% to $40.5 million.  Approximately two-thirds of this
increase was attributable to sales by the Company's Brazilian subsidiary which
was acquired in December 1995.  The remaining increase in Fiscal 1996 net sales
was equally attributable to existing brands, new launches and brands acquired
during Fiscal 1996. 

     GROSS PROFIT.  The Company's gross profit in Fiscal 1996 and Fiscal 1995
was as follows (dollars in millions):

                                        40
<PAGE>

<TABLE>
                               FISCAL 1996                   FISCAL 1995
                            ------------------           -------------------
                             GROSS    % OF NET           GROSS      % OF NET 
DIVISION                    PROFIT     SALES            PROFIT       SALES
--------                    ------     -----            ------       -----
<S>                         <C>        <C>               <C>         <C>
Fragrance                   $ 46.6     62.1%             $39.3       61.6%
Cosmetics                     35.0     59.2               28.5       64.0
International                 23.3     57.7               12.1       52.9
                            ------     ----              -----       ----
                            $104.9     60.1%             $79.9       60.9%
</TABLE>

     The overall gross profit margin decreased from 60.9% in Fiscal 1995 to
60.1% in Fiscal 1996 due primarily to the changing sales mix among the
Fragrance, Cosmetics and International Divisions.  

     The Fragrance Division gross profit margin increased from 61.6% in Fiscal
1995 to 62.1% in Fiscal 1996 due primarily to a change in sales mix between
men's and women's brands.
     
     The Cosmetics Division gross profit margin decreased from 64.0% in 
Fiscal 1995 to 59.2% in Fiscal 1996 due primarily to the lower gross profit 
margin carried by the NAT ROBBINS brand which was acquired in the GAC 
Acquisition in 1996.

     The International Division gross profit margin increased from 52.9% in
Fiscal 1995 to 57.7% in Fiscal 1996  primarily due to changes in product mix.  

     SELLING EXPENSES.  The Company's selling expenses for Fiscal 1996 and
Fiscal 1995 were $64.8 million (37.1% of net sales) and $52.3 million (39.8% of
net sales), respectively.  The increase in Fiscal 1996 selling expenses was
principally attributable to increased advertising and promotional expenses,
reflecting the Company's strategy of reinvigorating existing brand equities.  As
discussed above, net sales increased during Fiscal 1996 compared to Fiscal 1995
due to new launches, revitalizing existing brands and new brand acquisitions. 
The decrease in selling expenses as a percentage of net sales in Fiscal 1996
compared to Fiscal 1995 is principally attributable to net sales increasing at a
faster rate than selling expenses.

     GENERAL AND ADMINISTRATIVE EXPENSES.  The Company's general and
administrative expenses for Fiscal 1996 and Fiscal 1995 were $25.7 million
(14.7% of net sales) and $14.0 million (10.7% of net sales), respectively.  The
increase in general and administrative expenses in Fiscal 1996 compared to 1995
was attributable to the addition of key personnel at both the Company's
corporate and operating levels in connection with the GAC Acquisition, MEM
Acquisition and P&G Brands Acquisition.

     AMORTIZATION OF INTANGIBLE AND OTHER ASSETS.  Amortization of intangible
and other assets for Fiscal 1996 and Fiscal 1995 was $9.8 million (5.6% of net
sales) and $5.2 million (4.0% of net 

                                        41
<PAGE>

sales), respectively.  The increase in amortization in Fiscal 1996 compared 
to Fiscal 1995 is principally due to an increase in intangible assets 
resulting from the GAC Acquisition, MEM Acquisition and P&G Brands 
Acquisition.

     The computation of Fiscal 1996 and Fiscal 1995 EBITDA (i.e., EBITDAI, 
without taking into account impairment of long-lived assets) is set forth in 
the table below (in millions):

<TABLE>
                                      FISCAL 1996               FISCAL 1995
                                      -----------               -----------
<S>                                      <C>                       <C>
Operating Income                         $ 4.5                     $ 8.5
Plus Amortization of Intangibles           9.8                       5.2
  and Other Assets
Plus Depreciation                          4.9                       2.8
                                         -----                     -----
EBITDA                                   $19.2                     $16.5
</TABLE>

     INTEREST EXPENSE.  The Company's total interest expense for Fiscal 1996 and
Fiscal 1995 was $24.4 million and $19.5 million, respectively.  Interest expense
consisted of (in millions):

<TABLE>
                                              FISCAL 1996      FISCAL 1995
                                              -----------      -----------
<S>                                            <C>              <C>
Interest on Senior Notes                     $  3.4           $   --
Interest on Old Senior Notes                    7.6              9.0
Interest on Subordinated Seller Notes 
 (payable in 2002)                              0.5              0.4
Interest on Old Senior Secured Credit 
 Facility                                       2.4               --
Interest on Old Credit Facility                 4.9              6.0
Other Interest                                  0.4              0.2
Accretion of Interest on Old                    0.3              0.3
 Senior Notes and Subordinated Seller Notes
Amortization of deferred financing costs        3.2              2.6
Accretion of interest on obligations for
 minimum royalty payment                        1.7              1.0
                                              -----            -----
     Total Interest Expense                   $24.4            $19.5
                                              -----            -----
                                              -----            -----
</TABLE>

     INCOME TAX PROVISION.  Income tax provision for Fiscal 1996 and Fiscal 1995
was $1.3 million and $1.3 million, respectively.  The effective tax rates differ
from the United States federal income tax rate due to the effects of filing
separate income tax returns in certain state and foreign jurisdictions, and
limitations on utilization of federal income tax benefits.

                                     42
<PAGE>

INFLATION

     The impact of inflation on the reported periods has not been significant to
date.  There can be no assurances that a high rate of inflation in the future
would not have an adverse impact on the Company's results.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131") and SFAS No. 130, "Reporting
Comprehensive Income" ("SFAS 130").  SFAS 131 establishes standards for
reporting financial and descriptive information for reportable segments on the
same basis which is used internally for evaluating segment performance and the
allocation of resources to segments.  SFAS 130 establishes standards for
presenting items that are not related to shareholders, that are excluded from
net income and reported as components of stockholders' equity, such as foreign
currency translation.  These statements are effective for fiscal years beginning
after December 15, 1997.  The adoption of these statements is not expected to
have a material effect on the Company's results of operations or financial
position.

     In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 98-5, Reporting on the Costs
of Start-Up Activities ("SOP 98-5").  SOP 98-5 requires that entities expense
start-up costs and organization costs as they are incurred.  In March 1998, the
AICPA issued SOP No. 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1").  SOP 98-1 was issued to
remedy the diversity in the approaches to accounting for internal-use software
by providing guidance on expensing versus capitalization of costs, accounting
for the costs incurred in the upgrading and amortization of capitalized cost
software costs. These statements are effective for fiscal years beginning after
December 15, 1998. Management is currently evaluating the impact such statements
will have on its future financial position and results of operations.

OTHER

     Until recently, many computer programs were written using two digits rather
than four digits to define the applicable year in the twentieth century.  Such
software may recognize a date using "00" as the year 1900 rather than the year
2000.  Utilizing both internal and external resources, the Company is in the
process of  defining, assessing and converting or replacing various programs,
hardware and instrumentation systems to make them Year 2000 compatible.  The
Company anticipates that it will have "Year 2000 Compliant" software no later
than the end of Fiscal 1998.  The Company's Year 2000 project is comprised of
two components - business applications and equipment.  The business applications
component consists of the Company's business computer systems, as well as the
computer systems of third-party suppliers or customers, whose Year 2000 problems
could potentially impact the Company. Equipment exposures consist of personal
computers, system servers and telephone equipment whose Year 2000 problems could
also impact 

                                       43
<PAGE>

the Company.  The cost of the Year 2000 initiatives is not expected to be 
material to the Company's results of operations or financial position. 
 
     The Company presently believes that with conversions to new systems and
modifications to existing software, the Year 2000 problem can be mitigated. 
However, if such modifications and conversions are not made in a timely fashion,
the Year 2000 problem can have a material impact on the operations of the
Company.

LIQUIDITY AND CAPITAL RESOURCES

     NET CASH USED IN/PROVIDED BY OPERATING, INVESTING AND FINANCING 
ACTIVITIES. Net cash used by the Company in operating activities for Fiscal 
1997 was $55.1 million, consisting primarily of  a net loss of $197.4 
million, less (1) non-cash items of  $109.7 million, (2) increases in 
inventories of $1.5 million, offset by (3) decreases in accounts receivable 
and prepaid expenses and other assets, increases in accounts payable and 
increases in accrued expenses and other current liabilities, and increases in 
other of $16.4 million, $1.0 million, $11.2 million, $3.3 million and $2.2 
million, respectively.

     Net cash provided by investing activities was $10.5 million, consisting 
primarily of net proceeds from the sale of marketable securities of $21.6 
million and proceeds from the sale of one of the properties acquired in the 
MEM Acquisition of $1.8 million, offset by capital expenditures of $11.4 
million, other investing activities of $0.9 million and an investment in a 
joint venture of $0.6 million, net of cash acquired.  

     Net cash provided by financing activities was $51.6 million, consisting 
primarily of borrowings on the 1997 Credit Facility (which is discussed 
below) of $73.5 million offset by repayments on the 1997 Credit Facility of 
$17.9 million, the payment of minimum royalty obligations of $3.1 million and 
financing fees of $0.9 million.

     OUTSTANDING INDEBTEDNESS AND LIQUIDITY REQUIREMENTS.  As of  March 31, 
1998, the Holding Company had total outstanding indebtedness on which it is 
the sole obligor of $204.1 million, consisting of (1) $200.0 million of 
Senior Notes and (2) $4.1 million of Subordinated Seller Notes.  At March 31, 
1998, the Credit Parties had total outstanding indebtedness of $55.6 million 
under the 1997 Credit Facility, including an overadvance of $0.6 million.  
Additionally, the Credit Parties had outstanding letters of credit of $1.7 
million 

                                      44
<PAGE>

against its 1997 Credit Facility.

     1997 CREDIT FACILITY.  The maximum borrowing amount under the 1997 
Credit Facility, as amended, is (1) $75 million, subject to a borrowing base 
calculation based upon eligible inventory and accounts receivable, plus (2) 
as part of the $75 million, an overadvance component in the amount of $30 
million.  The $30 million overadvance component is to be reduced to $15 
million at December 31, 1998 and to zero at June 30, 1999.  As of June 19, 
1998, (1) $56.8 million was outstanding under the 1997 Credit Facility 
(including $14.9 million of overadvances) and (3) $2.6 million of letters of 
credit were outstanding.  

     The Credit Parties have agreed to pay to the Revolving Credit Lenders 
$500,000 on the earliest to occur of (a) receipt by the Credit Parties of 
proceeds in excess of $5 million from the sale of assets or stock of any 
subsidiary of a Credit Party (a "Disposition"), (b) payment in full of all 
obligations under the 1997 Credit Facility and (c) December 31, 1998.  If the 
obligations under the 1997 Revolving Credit Facility have not been paid in 
full by December 31, 1998, the Credit Parties have agreed to pay the 
Revolving Credit Lenders an additional fee of $1 million, payable on the 
earliest to occur of (i) receipt of proceeds in excess of $5 million from a 
Disposition, (ii) payment in full of all obligations under the 1997 Credit 
Facility and (iii) June 30, 1999. 
  
     Loans drawn under the 1997 Credit Facility bear interest at the Index 
Rate plus 2.00%.   Overadvances bear interest at (i) the Index Rate (i.e., 
the higher of the prime rate or the overnight Federal Funds rate plus 0.5%) 
plus 4.00% through June 26, 1998, (ii) the Index Rate plus 5.5% through 

                                    45
<PAGE>

December 31,1998 and (iii) the Index Rate plus 6.5% through June 30, 1999. 

     The 1997 Credit Facility is secured by all of the assets of the Credit
Parties.  In addition, the Credit Parties pledged 66% of the stock of their
principal first-tier operating foreign subsidiaries and 100% of the stock of
their principal first-tier operating domestic subsidiaries as additional
collateral for the loans under the 1997 Credit Facility.

     The 1997 Credit Facility, as amended, contains a number of covenants 
that restrict the operation of the Company, including restrictions on, among 
other things, (1) certain mergers, acquisitions or sales of the Company's 
assets or stock (other than stock of the Holding Company), (2) cash dividends 
and other distributions to equity holders of the Company, (3) interest 
payments with respect to the Company's indebtedness, (4) payments in respect 
of subordinated debt, (5) certain transactions with affiliates, (6) 
indebtedness and liens and (7) Restricted Payments.  The 1997 Credit Facility 
also contains several financial covenants.  The Revolving Credit Lenders have 
agreed to waive compliance with the Maximum Leverage Ratio and Minimum 
Interest Coverage Ratio through June 30, 1999, and the parties have revised 
the Minimum EBITDA covenant.  The Credit Parties have covenanted not to 
permit the outstanding amount of overadvances to exceed certain monthly set 
amounts.

     The Revolving Credit Lenders have waived or consented to all of the 
Company's covenant violations since the inception of the 1997 Credit Facility 
for all purposes thereunder except for purposes of the Restricted Payments 
covenant. As a result, the Holding Company is prohibited from making the 
following payments: (1) scheduled interest payments on the 1997 Senior Notes 
and Subordinated Seller Notes, (2) fees due and payable to Kidd Kamm pursuant 
to the Management Agreement between Kidd Kamm and the Holding Company, (3) 
payments to purchase, redeem or otherwise acquire the Common Stock of the 
Holding Company (or options to acquire shares of Common Stock) held by former 
employees or their estates and (4) cash dividends on the Holding Company's 
10% Preferred Stock.  

     1997 SENIOR NOTES. Interest in the aggregate amount of $11.8 million on 
the Holding Company's 1997 Senior Notes is due and payable on August 15, 
1998.  The Holding Company does not have sufficient funds to make this 
payment and an Event of Default will occur 30 days after such due date.  Upon 
the occurrence of an Event of Default, holders of 25% of the 1997 Senior 
Notes can declare the entire principal amount of the 1997 Senior Notes due 
and payable.  As discussed above, the 1997 Senior Notes are obligations of 
just the Holding Company and are not guaranteed by any of the Holding 
Company's operating subsidiaries.  At the time the Senior Notes were issued 
(prior to the exchange for the 1997 Senior Notes), a special purpose 
subsidiary of the Company (the "Guarantor") established an escrow account to 
secure certain payments of interest due on the  Senior Notes. On February 13, 
1998, the Company announced that, in order to maximize its available 
liquidity for marketing, product launch and trade related efforts, it had, on 
February 12, 1998, advised the trustee under the Indenture, that neither the 
Company nor the Guarantor would pay the portion of the interest payment due 
on the 1997 Senior Notes required to be paid by them.  The Company instead 
requested that the trustee exercise its right to request the escrow agent to 
make available additional funds to pay the balance 

                                      46
<PAGE>

of the interest due to the holders of the 1997 Senior Notes.  On February 17, 
1998, pursuant to the request of the trustee, the escrow agent released funds 
held in the escrow account to make such interest payment in full.  As of 
March 31, 1998, this escrow account held approximately $1.8 million.  Based 
on the Holding Company's current and expected level of operations, the 
Holding Company does not expect to be able to pay the installment of interest 
due on August 15, 1998. Additionally, under the terms of the 1997 Credit 
Facility, the Holding Company is prohibited from making the interest payments 
on the 1997 Senior Notes.

     OPERATIONAL AND FINANCIAL RESTRUCTURING. As previously discussed, 
management has re-evaluated the mass-market fragrance and cosmetics markets 
and has developed a new business plan that emphasizes profitability and cash 
flow through an operational restructuring, and focusing on the operating 
subsidiaries' core and growth brands.  There can be no assurance that the 
operating subsidiaries will be successful in restructuring their operations. 
Failure to successfully implement the operational restructuring of the 
operating subsidiaries will have a material adverse effect on the Company's 
overall financial condition, business and results of operations.      

     In addition to the aforementioned operational restructuring, the Holding
Company intends to pursue a financial restructuring of its outstanding 1997
Senior Notes, Preferred Stock and Common Stock, with the goal of de-leveraging
and strengthening its own balance sheet. There can be no assurance that the
Holding Company will be successful in restructuring its 1997 Senior Notes,
Preferred Stock and Common Stock on terms acceptable to it, or at all. Failure
to successfully complete a financial restructuring will have a direct material
adverse effect on the Holding Company's ability to service its obligations to
the holders of its debt and equity obligations and may have an indirect material
adverse effect on the financial condition, business and results of operations of
the operating subsidiaries.                 

     FISCAL 1998. In Fiscal 1998, the Company anticipates that, in addition 
to its ordinary operating needs, its cash needs will include: (1) 
approximately $10 million to $12 million for costs associated with the 
implementation of the operational restructuring component of its new business 
plan, (2) approximately $4 million to $6 million for additional professional 
fees in connection with the planned financial restructuring of the Holding 
Company's obligations, and (3) approximately $10 million for capital 
expenditures.  The Company is a seasonal business and its operating cash 
requirements vary depending on the season.  The Company believes that it will 
have sufficient liquidity over the next 12 months to enable it to implement 
the operational restructuring of the operating subsidiaries, consummate the 
Holding Company's financial restructuring, and execute the Company's new 
business plan.


                                       47
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA          

     The financial statements and supplementary financial data required by 
this Item 8 are set forth in Item 14 of this Form 10-K.  All information 
which has been omitted is either inapplicable or not required.  

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

          None.

                                       PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

DIRECTORS, OFFICERS AND CERTAIN KEY EMPLOYEES 

     The following table sets forth certain information concerning the 
executive officers, directors and certain key employees of the Company as of 
May 31, 1998, and those persons who were Named Executive Officers during 
Fiscal 1997 (as defined in Part III Item 11. Executive Compensation below).
<TABLE>
<CAPTION>
       NAME                        AGE                               POSITION
       ----                        ---                               --------
<S>                                <C>            <C>
Thomas V. Bonoma(1)                --             Former Chairman, Chief Executive Officer and Director
Norbert Becker                     50             President, Chief Executive Officer and Director
Ronald D. Bowen(2)                 54             Group Vice President, Corporate Production and Operations
Robert J. Corso                    42             Group Vice President and Chief Financial Officer
Albert E. DeChellis(3)             48             Group Vice President and President, International
Sean E. Greene                     57             Group Vice President, President Renaissance Sales, Vice Chairman and Director
John R. Jackson                    40             Group Vice President, Corporate Development and Human Resources, and Secretary
Anne E. Leets                      46             General Manager, Cosmar
Nicholas Longano                   32             Group Vice President, Marketing
Marc L. Rovner(4)                  46             Group Vice President and President, Fragrance

                                       48

<PAGE>

Anthony J. Wesley                  41             Vice President, Treasurer, and Chief Financial Officer, International
Kurt L. Kamm                       55             Director
William J. Kidd                    56             Director
Richard Nevins                     51             Director
Terry M. Theodore                  34             Director
</TABLE>

(1)  Dr. Bonoma died unexpectedly on May 21, 1998.  Mr. Becker was appointed
     Chief Executive Officer and a director effective May 28, 1998.

(2)  Mr. Bowen left the employment of the Company effective May 15, 1998 as part
     of the Company's management restructuring.  Effective May 15, 1998, Mr.
     Bowen began providing consulting services to the Company pursuant to a
     consulting agreement with a two month term.

(3)  Mr. DeChellis left the employment of the Company effective May 15, 1998 as
     part of the Company's management restructuring.  

(4)  Mr. Rovner left the employment of the Company effective May 15, 1998 as
     part of the Company's management restructuring.

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

     Officers of the Company are appointed by and serve at the discretion of 
the Board of Directors of the Holding Company.  Directors of the Holding 
Company are elected annually and hold office until the next annual meeting of 
shareholders or until their successors are duly elected and qualified.

BUSINESS EXPERIENCE OF DIRECTORS, OFFICERS AND CERTAIN KEY EMPLOYEES

     NORBERT BECKER, President and Chief Executive Officer and Director, 
joined the Company in July 1996.  At a special meeting of the Board of 
Directors of the Holding Company held on May 28, 1997, Mr. Becker was 
appointed as Chief Executive Officer and a director effective May 28, 1997.  
Prior to that, Mr. Becker served as Chief Operating Officer of the Company.  
From April 1981 to 1996, Mr. Becker held a number of positions with 
Benckiser, GmbH in different countries. His last position was as President 
and Chief Executive Officer of Lancaster Group USA, the American subsidiary 
of Benckiser, GmbH, selling and marketing prestige fragrances in the United 
States.  Previously, Mr. Becker was Chief Operating Officer of Lancaster 
Group USA and Executive Vice President for Finance and Administration for 
Lancaster Worldwide, a division of Benckiser, GmbH. Mr. Becker is a graduate 
of Frankfurt University, in Frankfurt, Germany.

     ROBERT J. CORSO,  Group Vice President and Chief Financial Officer, 
joined the Company on October 1, 1997.  Prior to joining the Company, Mr. 
Corso spent nineteen years with the accounting firm of Arthur Andersen.  He 
joined Arthur Andersen in 1978, was promoted to manager in 1983, 

                                       49

<PAGE>

and admitted to the partnership in 1989.  He was the audit partner with major 
multinational companies and also was the partner in charge of Arthur 
Anderson's outsourcing service in metro New York.  He has a Bachelor's degree 
from Fairfield University and is a Certified Public Accountant.

     SEAN E. GREENE, Group Vice President, President, Renaissance Sales, Vice 
Chairman and Director, joined the Company in June 1994. From 1991 to 1994, 
Mr. Greene served as Vice President of Sales of Quintessence, Inc., which was 
acquired by Benckiser, GmbH in 1991. In 1994, Mr. Greene became Senior Vice 
President of Sales for Coty, Inc., another Benckiser, GmbH subsidiary. Prior 
to joining Benckiser, GmbH, Mr. Greene was Senior Vice President of the Fine 
Fragrance Division of Faberge, Inc. and a Vice President of Mary Quant 
Cosmetics, an international cosmetics and fragrance company. Mr. Greene is a 
graduate of Belvedere College in Dublin, Ireland.

     JOHN R. JACKSON, Group Vice President, Corporate Development and Human 
Resources,  and Secretary, joined the Company in June 1995. From 1994 to 
1995, Mr. Jackson was the Vice President of Acquisitions, General Counsel and 
Secretary of Brothers Gourmet Coffees, Inc.  From 1983 to 1988, he was 
engaged in the practice of law at the Denver office of Kirkland and Ellis.  
From 1988 to 1994, Mr. Jackson was engaged in the practice of law at the 
Denver office of the firm of Ballard Spahr Andrews & Ingersoll, where he 
became a partner in 1990. While engaged in private practice, Mr. Jackson 
focused on merger and acquisition transactions and private and public 
financing. Mr. Jackson taught Business Planning as an adjunct professor of 
law at the University of Denver Law School. He holds a B.A. degree from 
Davidson College and a J.D. degree from Vanderbilt Law School.

     ANNE E. LEETS, General Manager, Cosmar Corporation, joined the Company 
in October 1995 as Vice President, Sales of Cosmar.  Previously, she held 
senior sales and marketing positions with Revlon, L'Oreal, Almay and 
1-800-FLOWERS. These positions included Vice President, Retail Sales and 
Marketing at 1-800-FLOWERS (from 1994 to 1995), Vice President, National 
Account Sales at Revlon (from 1992 to 1994), Director, National Account Sales 
at L'Oreal (from 1986 to 1987) and Director, New Product Marketing at Almay 
(from 1982 to 1984).

     NICHOLAS LONGANO, Group Vice President, Marketing, joined the Company in 
April 1997 as the Vice President of Marketing for Cosmar Corporation.  He was 
promoted to Group Vice President, Marketing, effective March 1, 1998.  Prior 
to joining the Company, Mr. Longano was Director of Marketing for Revlon for 
three years, working on cosmetics and fragrances.  From 1990-1994, Mr. 
Longano worked for L'Oreal marketing hair care products.  He began his career 
with Cadbury Schweppes in Melbourne, Australia.

     ANTHONY J. WESLEY, Vice President, Treasurer, and Chief Financial 
Officer, International, joined the Company in February 1997.  From 1990 to 
1997, Mr. Wesley was a founder and shareholder in Wesley Mills and Company, 
an accountancy practice in Cleveland, Ohio.  Prior thereto, he spent six 
years as the Manager, Tax Planning, of Cole National Corporation, a leading 
specialty retailer.  Mr. Wesley holds a B.B.A. from the University of Notre 
Dame and is a Certified Public Accountant.

                                       50

<PAGE>

     KURT L. KAMM, Director, was elected  a director in October 1994. In 
1979, Mr. Kamm joined Lineberger Kidd Kamm & Company. He helped to establish 
Kidd, Kamm & Company in 1987. Mr. Kamm is a director of Wright Medical 
Technology, Inc., a manufacturer and marketer of orthopedic implant devices. 
In January 1997, Mr. Kamm formed a separate entity for future investments, 
Kamm Theodore, LLC.

     WILLIAM J. KIDD, Director, was elected a director in May 1994. In 1974, 
Mr. Kidd helped to form and became a principal of Lineberger, Kidd & Company 
which, in turn, became Lineberger Kidd Kamm & Company in 1979. In 1987, Mr. 
Kidd helped to establish Kidd, Kamm & Company. Mr. Kidd is a director of 
Wright Medical Technology, Inc., a manufacturer and marketer of orthopedic 
implant devices. In January 1997, Mr. Kidd formed a separate entity for 
future investments, Kidd & Company, LLC.

     RICHARD NEVINS, Director, was elected  a director in March 1998.   Since 
1992, Mr. Nevins has served as the President of Richard Nevins & Associates, 
a financial advisory firm.  Mr. Nevins was elected a director of Fruehauf 
Trailer Corporation ("Fruehauf") in 1995, and was elected as Chairman of 
Fruehauf's executive committee in August 1996.  On October 7, 1996, Fruehauf 
filed for relief under Chapter 11 of the Bankruptcy Code.  Together with the 
other members of the Fruehauf board who had been elected by the shareholders, 
Mr. Nevins resigned his positions with Fruehauf effective October 9, 1996.  
During 1996, Mr. Nevins served as acting Chief Operating Officer and Chief 
Restructuring Officer for Sun World International, a California agricultural 
firm, following the filing of a petition in bankruptcy by Sun World 
International.  Since November 1996, Mr. Nevins has been a director of Kevco, 
Inc.  From December 1997 to June 1998, Mr. Nevins served as a director of 
ERLY Industries; from 1995 to 1996, he served as a director of Ampex 
Corporation; and from 1993 to 1995, he served as a director of The Actava 
Group (now Metromedia International Group). Mr. Nevins is the designee of the 
holders of the Holding Company's 10% Preferred Stock pursuant to the right 
granted to such holders under the Company's Restated Certificate of 
Incorporation to elect one director.

     TERRY M. THEODORE, Chairman and Director, was elected a director in May 
1994 and was appointed Chairman in July 1997.  Mr. Theodore is a principal in 
Kamm Theodore & Company, L.L.C., which was formed in January 1997.  Prior to 
that time, Mr. Theodore was a partner at Kidd Kamm & Company, and served  in 
the Financial Institutions Group of Bear, Stearns & Co. from 1988 to 1989. 

VOTING ARRANGEMENTS WITH RESPECT TO DIRECTORS

     Under the Company's Restated Certificate of Incorporation, the holders 
of the outstanding shares of the Holding Company's 10% Preferred Stock have 
the right to elect one member of the Company's Board of Directors. Mr. Nevins 
was elected pursuant to this right.  

     Holders of the Series C Preferred Stock (acting together with the 
holders of the Series B Preferred Stock, as a single class) have the right to 
nominate three candidates for consideration for the Holding Company's Board 
of Directors.  The Holding Company is obligated to use all reasonable 
commercial efforts to cause the election of one of such nominees selected by 
the holders of the Series C Preferred Stock (the "Series C Preferred 
Nominee").  No Series C Preferred Nominee has been elected to 

                                       51

<PAGE>

replace the last Series C Preferred Nominee, who resigned from the Board in 
March, 1998.  Pursuant to the Securities Purchase Agreement, dated as of 
September 27, 1996, between the Holding Company and Bastion Capital Fund, 
L.P. ("Bastion"), the Holding Company has agreed that, in the event Bastion 
is not entitled to designate the Series C Preferred Nominee, the Holding 
Company will include one person selected by Bastion in its nominations for 
the Holding Company's Board of Directors and to use all reasonable commercial 
efforts to cause the election of such person to the Board, so long as Bastion 
owns 75% (in value) of (1) the shares of common stock purchased by Bastion 
and (2) the units purchased by Bastion pursuant to the Series B Preferred 
Stock offering (the "Minimum Share Amount").  Pursuant to a Voting Agreement 
dated September 27, 1996, KKEP agreed that, in the event Bastion is not 
entitled to designate the Series C Preferred Nominee, it will vote its shares 
of common stock in favor of a nominee designated by Bastion for election to 
the Holding Company's Board of Directors provided that Bastion has the 
Minimum Share Amount.

     Pursuant to two Shareholder Acknowledgments, KKEP, as the owner of the 
majority of the issued and outstanding shares of the Company's Common Stock, 
agreed to vote (or give a written consent with respect to) all of the KKEP 
shares in favor of the election of Norbert Becker and Sean Greene to the 
Board of Directors.  Such Acknowledgments were executed in connection with 
the execution of employment agreements by Messrs. Becker and Greene.  See 
Part III, Item 11. Executive Compensation, "Employment Agreements" below.

COMPENSATION OF DIRECTORS

     In November 1997, the Board approved the payment of $12,500 per month 
(starting in October, 1997) to Mr. Theodore for rendering services to the 
Company as Chairman of the Board.  Kidd Kam agreed that the accrual of annual 
fees owed to it under the Management Agreement entered into between the 
Company and Kidd Kamm August 16, 1994 would be reduced by the fees to be paid 
to Mr. Theodore.  See Part III, Item 13. Certain Relationships and Related 
Transactions, "Management Agreement" below. 
 
     With the exception of the compensation to Mr. Theodore for his role as 
Chairman, directors of the Company are not compensated for their services as 
directors. All non-employee directors of the Company are reimbursed for 
ordinary and necessary expenses incurred in attending Board or committee 
meetings.

COMMITTEES OF THE BOARD

     There are three committees of the Board.  

     The Audit Committee consists of Messrs. Theodore, Kidd and Becker.  The 
Audit Committee held five meetings during Fiscal 1997.  The Audit Committee 
recommends selection of the Company's independent auditors and is primarily 
responsible for reviewing recommendations made by the Company's independent 
auditors, evaluating the Company's adoption of such recommendations and 
evaluating, and making recommendations with respect to, the Company's 
internal audit functions.

                                       52

<PAGE>

     The Compensation Committee consists of Messrs. Theodore, Kidd and 
Becker. The Compensation Committee held three meetings during Fiscal 1997.  
The purpose of the Compensation Committee is to review and make 
recommendations to the Board on officer and employee compensation issues.  

     The Financial Affairs Committee consists of Messrs. Theodore and Kidd. 
The Financial Affairs Committee held two meetings during Fiscal 1997. The 
purpose of the Financial Affairs Committee is to evaluate and make 
recommendations regarding the Company's debt and equity structure.  

ITEM 11.  EXECUTIVE COMPENSATION 

EXECUTIVE COMPENSATION 

     The following table sets forth certain information with respect to the 
annual and long-term compensation for services rendered in all capacities 
earned by the Company's Chief Executive Officer and the four other most 
highly compensated executive officers (collectively, the "Named Executive 
Officers") during Fiscal 1995, Fiscal 1996 and Fiscal 1997.

                                       53

<PAGE>
<TABLE>
<CAPTION>
                          SUMMARY COMPENSATION TABLE

                                       ANNUAL COMPENSATION                  
                                                                               LONG-TERM   
                                                                              COMPENSATION 
                                                                                 SHARES    
NAME AND PRINCIPAL      FISCAL                               OTHER ANNUAL      UNDERLYING        ALL OTHER
POSITION                PERIOD      SALARY       BONUS       COMPENSATION   OPTIONS GRANTED     COMPENSATION
<S>                    <C>        <C>            <C>         <C>            <C>                 <C>
Thomas V.  Bonoma,     1997       $125,000     $  (1)             -                 -                 -
former Chairman and    1996        470,592      150,000           -                 -                 -
Chief Executive        1995        400,000         -              -                 -                 -
Officer                                                                         

Norbert Becker,        1997       $398,798     $   -              -                (3)                -
President and Chief    1996         N/A           N/A            N/A               N/A               N/A
Executive Officer(2)   1995         N/A           N/A            N/A               N/A               N/A

Sean E. Greene, Group  1997       $305,250     $   -              -                 -                 -
Vice President         1996        275,000      125,000           -                 -                 -
President, Renaissance 1995        250,000         -              -                 -                 -
Sales and Vice                                                                           
Chairman

Albert E. DeChellis,   1997       $250,008     $   -              -                 -                 -
former Group Vice      1996        244,094      80,000            -                 -                 -
President and          1995        225,000         -              -                 -                 -
President,                                         
International                                                                  

Marc Rovner former     1997       $190,000     $194,981           -                 -                 -
Group Vice President   1996         N/A           N/A            N/A               N/A               N/A
and President,         1995         N/A           N/A            N/A               N/A               N/A
Fragrance(4)                                                                    

Ronald D. Bowen,       1997       $214,871     $   -              -                 -                 -
former Group Vice      1996        206,960      120,000           -                 -                 -
President, Corporate   1995        166,667        -               -                 -                 -
Production and                                                               
Operations                      
</TABLE>
(1)  Pursuant to the Employment Agreement between the Company and Dr. Bonoma,
     the Company is obligated to pay to Dr. Bonoma's estate a bonus equal to
     $93,750 (75% of his Base Salary pro rated for the part of Fiscal 1997 to
     the date of his death).  The Board anticipates making this payment during
     the quarter ending September 30, 1998.  

(2)  Mr. Becker was appointed Chief Executive Officer effective May 28, 1997. 
     He was not a Named Executive Officer prior to that date.

                                       54

<PAGE>

(3)  The Board approved a grant of options to purchase 40,682 shares of   
     Common Stock to Mr. Becker in August 1997; however, the grant date 
     was dependent on the Board setting a new exercise price for options, 
     which, in the case of incentive options, shall not to be less than the 
     fair market value of the Common Stock on the grant date.  No new 
     exercise price has been set.

(4)  Mr. Rovner was not a Named Executive Officer prior to Fiscal 1997.


STOCK OPTION GRANTS 
     
     No stock options were exercised during Fiscal 1997 by the Named 
Executive Officers. See note 3 under the Summary Compensation Table above 
regarding stock option grants to Named Executive Officers.

STOCK OPTION PLAN

     The Holding Company's Stock Option Plan (together with all amendments, 
the "Plan") was approved by the Board and stockholders in January 1995.  In 
February 1997, the Board approved an amendment to the Plan increasing the 
number of shares of Common Stock eligible for stock option grants under the 
Plan (and the number of shares of Common Stock reserved for issuance upon the 
exercise of stock options granted under the Plan) to 136,320.  The amendment 
was approved as of February 6, 1998, by the written consent of a majority of 
the holders of the Common Stock.  Options granted under the Plan may include 
those qualified as incentive stock options under Section 422 of the Internal 
Revenue Code of 1986, as amended, and non-qualified stock options.  The Plan 
is administered by the Board which has wide latitude in determining the 
recipients of options and numerous other terms and conditions of the Options. 
All of the Company's regular employees and all directors are eligible to 
receive Option grants under the Plan.  Non-employees may receive only 
nonqualified options.  Options become exercisable in such amounts and at such 
intervals as the Board provides for in the applicable Option agreement(s). As 
of March 31, 1998, there were outstanding Options under the Plan with respect 
to 86,260 shares of Common Stock, 1,237 Options had been exercised and 48,823 
shares were available for Option grants.  The majority of the options become 
exercisable with respect to 25% of their shares in each of the four years 
1995 through 1998, and expire in January 2005.

     The exercise price for the shares purchased upon exercise of all Options 
granted under the Plan is determined by the Board. The exercise price of an 
incentive stock option must be at least equal to the fair market value of the 
Common Stock on the date such option is granted (110% of the fair market 
value for stockholders who, at the time the option is granted, own more than 
10% of the total combined classes of stock of the Holding Company or any 
subsidiary).

     No option may have a term of more than ten years (five years for 
incentive stock options granted to 10% or greater stockholders). Options 
generally may be exercised only if the option holder remains continuously 
associated with the Holding Company or a subsidiary from the date of grant to 
the date of exercise. However, Options may be exercised within certain 
specified periods following 

                                       55

<PAGE>

termination of employment or ceasing to be a director by reason of death, 
disability or retirement of the optionee or any reason other than termination 
of employment for cause or without the consent of the Company. The Board may 
cancel, by giving an optionee written notice, any Option that remains 
unexercised upon the date of the consummation of a merger, consolidated 
reorganization, liquidation or dissolution in which the Company does not 
survive or a sale, lease exchange or other disposition of all or 
substantially all of the property and assets of the Company.

EMPLOYMENT AGREEMENTS

     DR. BONOMA.  The Company entered into an employment agreement, dated as 
of August 6, 1996, with Dr. Bonoma, pursuant to which Dr. Bonoma was employed 
as the Chief Executive Officer of the Holding Company and each of its present 
and future subsidiaries.  Dr. Bonoma received a base salary of $500,000 per 
year.  Upon Dr. Bonoma's death, his estate became entitled to receive his 
unpaid salary through the date of his death and a bonus of 75% of his base 
salary pro rated for the part of the year to the date of his death.

     MR. BECKER.  The Company entered into an employment agreement, dated as 
of August 27, 1997, with Norbert Becker (his "Employment Agreement") pursuant 
to which the Company agreed to continue to employ Mr. Becker as President 
and Chief Executive Officer of the Holding Company and each of its present 
and future subsidiaries for the period commencing on July 1, 1997 and ending 
on June 30, 2000, unless terminated earlier in accordance with its terms.

     Pursuant to his Employment Agreement, Mr. Becker's base salary for the 
fiscal year ended March 31, 1998, was $360,000 (on an annualized basis), and 
his base salary for the fiscal years ending March 31, 1999 and March 31, 2000 
(and the portion of the following fiscal year to the expiration of the 
Employment Agreement) will be $390,000 and $450,000, respectively.  In 
addition,  Mr. Becker is eligible to receive an annual bonus of 100% (or 
greater, if applicable) of his base salary based on certain objectives 
(including factors such as annual EBITDA targets and targets related to 
return on assets and return on capital) to be established by the Board.

     Mr. Becker's Employment Agreement provides for other fringe benefits, 
including participation in retirement and other employee welfare and benefit 
(both pre- and post- retirement) plans available to the Company's executives 
generally, and use of a car leased by the Company.  In addition, the Company 
purchased for Mr. Becker (who is the owner) a $5 million life insurance 
policy and a disability policy.

     The Company has the right to terminate Mr. Becker's employment at any 
time for "cause," as defined in his Employment Agreement.  Upon the 
occurrence of any such termination, and upon termination by Mr. Becker of his 
employment with the Company for any reason other than "good reason," as 
defined in his Employment Agreement, Mr. Becker will be entitled to receive 
only accrued but unpaid base salary and other benefits to which he is 
entitled to the date of termination, plus unreimbursed expenses incurred 
through the date of termination.  

     In the event the Company terminates Mr. Becker's employment without 
"cause" or Mr. Becker terminates his employment with "good reason," Mr. 
Becker (or his estate, in the event of his death) will be entitled to receive 
(1) the amount of any accrued but unpaid base salary and other 

                                       56

<PAGE>

benefits to which Mr. Becker is entitled through the date of termination, 
plus (2) the greater of (a) the applicable base salary for each year (pro 
rated for any part thereof) through the end of the term of his Employment 
Agreement or (b) one year's base salary (as in effect in the year of 
termination) (in each case, net of any severance payments paid to Mr. Becker 
under any severance policy then in effect), plus (3) a bonus amount as 
defined in the his Employment Agreement ((2) and (3) together are referred to 
as the "Severance Payments").  The Severance Payments are to be made monthly. 
During the period he is receiving Severance Payments, Mr. Becker (or his 
estate) will also be entitled to receive the full fringe benefits he was 
receiving immediately prior to termination.  

     At all times while he is employed by the Company, Mr. Becker is 
prohibited from competing with the Company in the mass market fragrance, 
color cosmetics, or artificial or natural nail products business.  The scope 
of the non-compete is worldwide.  Upon expiration of Mr. Becker's Employment 
Agreement or termination of Mr. Becker's employment for any reason, the 
Company may elect to require Mr. Becker to comply with the non-compete for a 
period of one or two years from the date of termination.  In the event Mr. 
Becker's Employment Agreement expires or Mr. Becker's employment is 
terminated (1) by the Company without cause or (2) by Mr. Becker for any 
reason, and the Company elects to enforce the non-compete provision, the 
Company is obligated to pay Mr. Becker $500,000 per year for each year (one 
or two) that the non-compete will be enforced. 

     MR. GREENE.  The Company entered into an employment agreement, dated as 
of November 1, 1997, with Sean Greene  (his "Employment Agreement") pursuant 
to which the Company agreed to continue to employ Mr. Greene as Group Vice 
President and President, Renaissance Sales, for the period commencing on 
November 1, 1997 and ending on October 31, 2000, unless terminated earlier in 
accordance with its terms.

     Pursuant to his Employment Agreement, Mr. Greene receives an annual base 
salary of $350,000, subject to annual review, and possible increase, in the 
discretion of the Board of Directors.  In addition, Mr. Greene is entitled to 
participate in the Company's senior executive annual bonus program, on terms 
to be determined by the Board.

     Mr. Greene's Employment Agreement provides for other fringe benefits, 
including insurance  and retirement benefits, use of a car leased by the 
Company and all other benefits generally available to the Company's executive 
employees as in effect from time to time.  In addition, his Employment 
Agreement provides that Mr. Greene shall be entitled to participate in any 
retention program adopted by the Board of Directors at the same level as the 
Chief Executive Officer.  See Part III, Item 11.  Executive Compensation, 
"Retention Programs" below.

     The Company has the right to terminate Mr. Greene's employment at any 
time for "cause," as defined in his Employment Agreement.  Upon the 
occurrence of any such termination, and upon termination by Mr. Greene of his 
employment with the Company for any reason other than "good reason," as 
defined in his Employment Agreement, Mr. Greene will be entitled to receive 
only accrued but unpaid base salary and other benefits to which he is 
entitled to the date of termination, plus unreimbursed expenses incurred 
through the date of termination.  

     In the event the Company terminates Mr. Greene's employment without 
"cause," or Mr. Greene terminates his employment with "good reason," Mr. 
Greene (or his estate, in the event of his 

                                       57

<PAGE>

death) will be entitled to receive (1) the amount of any accrued by unpaid 
base salary and other benefits to which he is entitled through the date of 
termination, and unreimbursed expenses incurred through the date of 
termination, plus (2) one year's base salary (net of any severance benefits 
paid to him under the Company's severance policy as may then be in effect) 
(the "Severance Payments").  In addition, in the event the executives 
participating in the senior executive bonus program receive a bonus for the 
fiscal year in which his employment is terminated, Mr. Greene will receive 
the full amount of the bonus he would have been entitled to receive but for 
the termination of his employment without "cause " or for "good reason." The 
Severance Payments are payable monthly.  During the time he is receiving 
Severance Payments, Mr. Greene is also entitled to receive all fringe 
benefits he was receiving immediately prior to his termination.

     At all times while he is employed by the Company, and, if applicable, 
for so long as he is receiving Severance Payments as described above, Mr. 
Greene is prohibited from engaging in any business, or directly or indirectly 
owning, managing controlling, participating in, consulting with or rendering 
any services to, any enterprise competing with any business of the Company 
conducted or proposed (during the term of his Employment Agreement or on the 
termination date) to be conducted within any geographical are in which the 
Company engages or plans (during the term of his Employment Agreement or on 
the termination date) to engage in such business.

SEVERANCE AGREEMENTS 

     Three of the Named Executive Officers of the Company, Ron Bowen, Al 
DeChellis and Marc Rovner, received substantially similar severance 
arrangements in connection with the termination of their employment with the 
Company during May 1998.  Each will be paid his normal salary for a period of 
twelve (12) months following his termination.  These payments will be made 
monthly.  During the period they are receiving such payments, they will be 
entitled to continue to participate in the medical and dental insurance 
programs and the 401K plan offered by the Company to its employees during 
such period.  Ownership of the cars that each was using as of the termination 
dates  was transferred to them as of the termination dates (the Company has 
the option of continuing to make the lease payments on the cars and 
transferring title at the end of the term of the leases).  In exchange for 
the benefits described above, each of the executives waived and released  all 
statutory and common law claims against the Company, to the fullest extent 
permitted by law.

CONSULTING AGREEMENTS 

     The Company entered into a consulting agreement with Mr. Bowen for a 
two-month consulting term commencing on May 15, 1998.  Mr. Bowen will receive 
a monthly fee in the same amount as his monthly salary prior to the 
termination of his employment for his consulting services.  The severance 
payments  payable to Mr. Bowen under the severance agreement discussed above 
will commence after the termination of the consulting term. 

BONUS PLANS

     INCENTIVE BONUS PLANS.  The Company adopted an incentive bonus plan for 
Fiscal 1997 (the "1997 Bonus Plan") under which eligible employees of the 
Company (including the Named Executive Officers) who are actively employed on 
the day the bonus is paid would be entitled to 

                                       58

<PAGE>

receive cash bonuses as a percentage of their base salaries depending upon 
whether a combination of EBITDA and working capital management targets 
(established by the Board) were achieved in Fiscal 1997.  The amount of the 
bonus varied from 10% to 100% of an employee's Fiscal 1997 base salary, 
depending on the employee's position with the Company.  The base target level 
would be earned if the Company achieved the base targets.  Thereafter, 
increasing percentages of the target award would be payable until 100% of the 
established EBITDA and working capital management targets were achieved.  
Final award payments are subject to the approval of the Chairman. 
 
     In connection with the MEM Acquisition, the Company established the MEM 
Employee Stay Bonus Program for twenty-nine employees of MEM in order to 
encourage them to remain in the employ of the Company following the closing. 
On the closing date of the MEM Acquisition, $207,932 was deposited in an 
escrow account.  As of March 31, 1998, all amounts owed pursuant to the MEM 
Employee Stay Bonus Program have been paid and the escrow  account has been 
closed.

RETENTION PROGRAMS  

     The Company has adopted two management retention programs, one for 
senior management and another for middle management.     

     SENIOR MANAGEMENT PROGRAM.  At its October 22, 1997 meeting, the Board 
approved a retention program for senior management personnel (the "Senior 
Management Program").  The purpose of the Senior Management Program is to 
foster the continuous employment of key management personnel of the Company 
and to alleviate concerns of management that may arise as a result of the 
Company's current restructuring. Each of the Named Executive Officers 
participates in the Senior Management Program.  Under the Senior Management 
Program, the Named Executive Officers are eligible to receive the following 
amounts (or such greater amounts as the Company, in its sole discretion, 
determines) (the "Retention Payments"): (1) Mr. Becker may receive $379,620, 
(2) Mr. Greene may receive $379,620, (3) Mr. DeChellis may receive $206,400, 
(4) Mr. Bowen may receive $206,400, and (5) Mr. Rovner may receive $316,350.  
Retention Payments will be made under the Senior Management Program only if a 
"significant transaction," as defined in the letter agreements executed in 
connection with the Senior Management Program (the "Senior Management  
Program Agreements"), is consummated by December 31, 2004 (or a definitive 
agreement to consummate a significant transaction is entered into on or prior 
to December 31, 2004 and such transaction is ultimately consummated) and the 
executive is still employed on the date of the consummation of the 
transaction, or ceased to be employed prior to such date due to the 
executive's death or disability (as defined in the Senior Management Program 
Agreement) or termination by the Company without "cause," as defined in the 
Senior Management Program Agreement.  Messrs.  DeChellis, Bowen, and Rovner 
were terminated in May 1998 "without cause" for this purpose.  In addition to 
the Named Executive Officers, five other executive officers of the Company 
participate in the Senior Management Program under substantially the same 
terms as the Named Executive Officers.  If paid in full, the payments to 
these five officers would aggregate approximately $1.4 million.

                                       59

<PAGE>

     MIDDLE MANAGEMENT PROGRAM.  At its February 12, 1998 meeting, the Board 
approved a retention program for middle management personnel (the "Middle 
Management Program"), designed for the same purpose as the Senior Management 
Program.  As of June 15 1998, approximately 30 personnel participate in the 
Middle Management Program, with individual payments ranging from $5,000 to 
$50,000, which, if paid in full, would aggregate approximately $620,000.   
The right to receive payments  under the Middle Management Program vests on 
two dates, the "First Payment Date" and the "Second Payment Date," as defined 
in the letter agreements executed in connection with the Middle Management 
Program (the "Agreements"), provided that the participant is either still 
employed by the Company as of such date or ceases to be employed due to a 
Qualifying Termination (as defined in the Agreements). 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The members of the Compensation Committee during Fiscal 1997 were 
Messrs. Theodore, Kidd and Becker.  None of the executive officers of the 
Company serves or served on the compensation committee of another entity or 
on any other committee of the board of directors of another entity performing 
similar functions during Fiscal 1997, and no executive officer of the Company 
serves or served as a director of another entity who has or had an executive 
officer serving on the Board.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of March 31, 1998, information with 
respect to the beneficial ownership of shares of the Company's Common Stock 
by (1) each stockholder known by the Company to be the beneficial owner of 
more than 5% of such shares, (2) each director of the Company, the Company's 
Chief Executive Officer and each of the other Named Executive Officers in the 
Summary Compensation Table contained herein and (3) directors and executive 
officers of the Company as a group.
<TABLE>
<CAPTION>
         Name of Stockholder      Number of Shares        Percent*
         -------------------      ----------------        --------
         <S>                      <C>                     <C>
         Terry M. Theodore(1)          605,286             73.4% 
         Kurt L. Kamm(1)               605,286             73.4% 
         William J. Kidd(1)            605,286             73.4% 
         KKEP(1)                       605,286             73.4% 
         c/o Kidd, Kamm & Company                                
         Three Pickwick Plaza                                    
         Greenwich, CT 06830           
         Norbert Becker                   0                  **    
         Ronald D. Bowen                 3,632               **    
         Albert E. DeChellis             6,053               **    
         Sean E. Greene                  8,070              1.0% 

                                       60

<PAGE>
<CAPTION>
         Name of Stockholder        Number of Shares        Percent* 
         -------------------        ----------------        -------- 
         <S>                        <C>                     <C>      
         Marc Rovner                        0                  **        
         Richard Nevins                     0                  **        
         Triumph-Connecticut Limited      59,825               6.8%      
          Partnership(2)                                                  
         60 State Street, 21st Flr                                       
         Boston, AM 02109                                                
         Bastion(3)                       95,766              11.0%      
         Suite 2960                                                      
         1999 Avenue of the Stars                                        
         Los Angeles, CA 90067                                           
         CIBC WG Argosy Merchant Fund     51,959              6.3%                                   
          2, L.L.C.(4)                                                                                
         c/o CIBC Wood Gundy Securities                                  
          Corp.                                                           
         425 Lexington Avenue                                            
         New York, NY 10017                                              
         All Directors and Executive     810,914             87.3%       
          Officers as a group           
</TABLE>
------------
*    The percentages in this column have been calculated pursuant to Rule 
     13d-3(d)(1) of the Exchange Act and do not give effect to options and 
     warrants, except for options and warrants of the person for whom the 
     percentage is being calculated that are exercisable within 60 days.

**   Less than 1%. 

(1)  William J. Kidd, Kurt L. Kamm, and Terry M. Theodore are affiliates of KKEP
     and for purposes of this report may be deemed to beneficially own the
     shares owned of record by KKEP.

(2)  Represents shares issuable upon exercise of Common Stock purchase 
     warrants      acquired by Triumph-Connecticut Limited Partnership 
     ("Triumph-Connecticut") in connection with the purchase by that entity 
     of shares of the Holding Company's 10% Preferred Stock. Does not include 
     175 shares issuable upon exercise of warrants held by Jeffrey Lane and 
     Meri Lane (collectively, the "Lanes"), as trustees of a trust that is 
     not affiliated with Triumph-Connecticut. Jeffrey Lane is affiliated with 
     Triumph-Connecticut.  As of March 31, 1998, Triumph-Connecticut and the 
     Lanes also held approximately 14,516 shares and approximately 51 shares, 
     respectively, of the 10% Preferred Stock.

(3)  Represents 51,959 shares of Common Stock acquired by Bastion in  the Equity
     Financing in August and September 1996 and includes 43,807 shares of Common
     Stock issuable upon 

                                       61

<PAGE>

     exercise of Common Stock warrants acquired by Bastion in the Series B 
     Preferred Stock Offering. 

(4)  The Initial Purchaser (as defined below under the caption "Financing
     Fees"), an affiliate of the CIBC Fund, may from time to time hold a
     position in the Company's Series B Warrants.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MANAGEMENT AGREEMENT  

     On August 16, 1994 the Company entered into a Management Agreement (the 
"Management Agreement") with Kidd Kamm. Pursuant to the Management Agreement, 
Kidd Kamm received a fee of $675,000 upon the closing of the Cosmar 
Acquisition and, subject to certain restrictions contained in the Indenture 
governing the Company's 1997 Senior Notes and in the 1997 Credit Facility, is 
entitled to receive an annual management fee of $675,000 subject to increases 
as determined by the Board, plus out-of-pocket expenses incurred for 
management, consulting and related services to be rendered to the Company. 
Kidd Kamm agreed that the accrual of annual fees owed under the Management 
Agreement would be reduced by the $12,500 per month payments received by Mr. 
Theodore for his services to the Company as Chairman of the Board.   At the 
closing of the offering of the 1997 Senior Notes, Kidd Kamm received fees 
equal to $1.35 million.  Principals of Kidd Kamm organized KKEP which is the 
owner of 73.4% of the currently outstanding Common Stock.

     In November 1996, the partners of Kidd Kamm agreed to a division of the 
firm and its operations in relation to future investments.  The firm's two 
founding partners, William J. Kidd and Kurt L. Kamm, formed separate entities 
for future investments. The ongoing support and management provided to the 
Company under the Management Agreement will not be affected by the 
aforementioned changes in Kidd Kamm. Members of the investment firms formed 
by the founding partners of Kidd Kamm who were primarily responsible for 
providing support and assistance to the Company as employees of Kidd Kamm 
will continue to provide such services throughout the term of the Management 
Agreement.

STOCKHOLDERS AGREEMENT  

     Management, Kidd Kamm and certain other equity holders have entered into 
a stockholders agreement dated August 18, 1994 with the Holding Company (the 
"Stockholders Agreement"), whereby such equity holders of the Company are 
restricted in the transfer of their shares of Common Stock for a period of 
eight years from that date unless such transfer is made in accordance with 
the Stockholders Agreement.  In addition, each person granted options under 
the Plan enters into a stockholders agreement with substantially the same 
terms and conditions as the Stockholders Agreement.

                                       62

<PAGE>

CONSULTING AGREEMENT

     Prior to the effective date of the termination of Ron Bowen's employment 
with the Company, the Company and Mr. Bowen entered into a two-month 
consulting agreement, commencing on May 15, 1998.  See Part III, Item 11. 
Executive Compensation, "Consulting Agreement" above.

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

(a) AND (d)    FINANCIAL STATEMENTS AND SCHEDULE

     Information called for by this item is set forth in the financial      
statements on pages F-1 through F-32 hereof.

(b)  REPORTS ON FORM 8-K
     
     Form 8-K with respect to operating results for the third fiscal quarter 
     ended December 31, 1997, filed with the SEC on February 3, 1998.

     Form 8-K with respect to certain 1997 Credit Agreement and 1997 Senior 
     Notes issues, filed with the SEC on February 13, 1998.

     Form 8-K with respect to retaining Wasserstein, Perella & Co., Inc., as 
     financial advisor, filed with the SEC on March 31, 1998.

(c)  EXHIBITS

     See the Exhibit Index on pages 64 through 73 hereof.  


                                       63

<PAGE>

                             EXHIBIT INDEX

<TABLE>
                                                                 LOCATION OF 
                                                                  EXHIBIT IN 
                                                                  SEQUENTIAL 
                                                                   NUMBERING 
EXHIBIT NO.             DESCRIPTION OF DOCUMENT                      SYSTEM  
-----------             -----------------------                    ----------
<S>        <C>                                                   <C>
2.1 (6)    Stock Purchase Agreement among Cosmar Corporation,
           a Delaware corporation ("Cosmar Corporation"),
           Larry Pallini, Vincent Carbone and Great American
           Cosmetics, Inc., a New York corporation ("GAC"),
           entered into on June 27, 1996, providing for the
           acquisition by Cosmar Corporation of all of the
           capital stock of GAC.
          
2.2 (6)    Agreement and Plan of Merger, among Renaissance
           Cosmetics, Inc., a Delaware corporation ("RCI" or
           the "Company"), Renaissance Acquisition, Inc., a
           New York corporation ("RAI") and MEM Company,
           Inc., a New York corporation ("MEM"), dated as of
           August 6, 1996.

2.3 (13)   Asset Sale and Purchase by and among the Procter
           & Gamble Company (as Seller) and Dana Perfumes
           Corp. ("Dana") (as Buyer) and solely for purposes
           of Sections 4.6, 6.6 and 6.12 hereof of
           Renaissance Cosmetics, Inc. and Cosmar Corporation
           dated as of October 25, 1996.

2.4 (13)   Form of Asset Sale and Purchase Agreement among
           P&G foreign affiliate sellers and Dana, dated as
           of October 29, 1996.
          
3.1 (1)    Restated certificate of incorporation of RCI filed
           with the Secretary of State of the State of
           Delaware on August 17, 1994.
          
3.1.2 (8)  Certificate of Designation of Preferences and
           Rights of Senior Exchangeable Redeemable Preferred
           stock, Series A, of RCI, filed with the Secretary
           of State of the State of Delaware on May 29, 1996.

3.1.3 (7)  Certificate of Designation of Preferences and
           Rights of Senior Redeemable Preferred Stock,
           Series B, of RCI, filed with the Secretary of
           State of the State of Delaware on August 15, 1996.

3.1.4 (14) Certificate of Increase of Certificate of
           Designation of Preferences and Rights of Senior
           Redeemable Preferred Stock, Series B, of RCI,
           filed with the Secretary of State of the State of
           Delaware on September 27, 1996.

3.1.5 (14) Certificate of Designation of Preferences and
           Rights of Senior Redeemable Preferred Stock,
           Series C, par value $.01 per share, of RCI, filed
           with the Secretary of State of the State of
           Delaware on August 15, 1996.

3.1.6 (14) Certificate of Increase of Certificate of
           Designation of Preferences and Rights of Senior
           Redeemable Preferred Stock, Series C, of RCI,
           filed with the Secretary of State of the State of
           Delaware on September 27, 1996.

                                      64
<PAGE>
                                                                 LOCATION OF 
                                                                  EXHIBIT IN 
                                                                  SEQUENTIAL 
                                                                   NUMBERING 
EXHIBIT NO.             DESCRIPTION OF DOCUMENT                      SYSTEM  
-----------             -----------------------                    ----------

3.2         Amended and Restated By-laws of RCI

3.3 (16)    Certificate of Incorporation of Renaissance
            Guarantor, Inc. ("RGI") filed with the Secretary
            of State of the State of Delaware on February 6,
            1997.

3.4 (16)    By-laws of RGI.

4.1 (15)    Indenture, dated February 7, 1997, among RCI, as
            issuer, RGI, as guarantor, and United States Trust
            Company of New York, as trustee.

4.2 (15)    Escrow and Disbursement Agreement, dated
            February 7, 1997, among RCI, as issuer, RGI, as
            guarantor, United States Trust Company of New
            York, as trustee, and United States Trust Company
            of New York, as escrow agent.

4.3 (15)    Notes Registration Rights Agreement, dated
            February 7, 1997, between RCI, as issuer, and CIBC
            Wood Gundy Securities Corp., as initial purchaser.

10.1 (1)    License agreement (the "Houbigant U.S. License
            Agreement"), dated May 1994, between Houbigant
            Inc., a Delaware corporation ("Houbigant") and
            Parfums Parquet Incorporated (f.k.a. New Fragrance
            License Corp.) ("Parfums Parquet").

10.2 (2)    Amendment to the Houbigant U.S. License Agreement,
            dated May 12, 1994.

10.3 (2)    Amendment to the Houbigant U.S. License Agreement,
            dated June 1, 1994.

10.4 (1)    Amendment to the Houbigant U.S. License Agreement,
            dated June 24, 1994.

10.5 (1)    Three letter agreements relating to the Houbigant
            U.S. License Agreement, each dated July 1, 1994.

10.6 (1)    Letter of Agreement dated July 1, 1994, between
            Houbigant and Parfums Parquet relating to the
            Houbigant U.S. License Agreement.

10.7 (10)   Right of Last Refusal Agreement dated July 1, 1994
            among Houbigant, Luigi Massironi, Michael Sherman
            and Parfums Parquet relating to the Houbigant U.S.
            License Agreement.

10.8 (1)    Guaranty, dated July 1, 1994, by Cosmar in favor
            of Houbigant of all obligations of Parfums Parquet
            under the Houbigant U.S. License Agreement.

10.9 (10)   Security Agreement - Trademarks, dated July 1,
            1994, among Houbigant, Parfums Parquet, Chemical
            Bank New Jersey N.A. and National Westminster
            Bank, U.S.A.

                                      65
<PAGE>
                                                                 LOCATION OF 
                                                                  EXHIBIT IN 
                                                                  SEQUENTIAL 
                                                                   NUMBERING 
EXHIBIT NO.             DESCRIPTION OF DOCUMENT                      SYSTEM  
-----------             -----------------------                    ----------

10.10 (10)  Assignment for Security, dated July 1, 1994,
            between Houbigant and Parfums Parquet.

10.11 (1)   Letter agreement, dated August 18, 1994, between
            Parfums Parquet and Houbigant, with respect to
            Assumption and Assignment Agreement.

10.12 (2)   Restated and Amended License Agreement (the
            "Harby's License Agreement"), dated August 16,
            1994, between Harby's Corporation NV ("Harby's")
            and Houbigant.

10.13 (1)   Assumption and Assignment Agreement (the
            "Assumption and Assignment Agreement"), dated
            August 18, 1994, among Houbigant, Harby's and
            Parfums Parquet.

10.14 (1)   Amendment, dated September 19, 1994, to the
            Assumption and Assignment Agreement.

10.15 (1)   Letter Agreement, dated August 18, 1994, among
            Harby's, Houbigant and Parfums Parquet, regarding
            certain rights under the Harby's License
            Agreement.

10.16 (2)   License Agreement (the "Worldwide License
            Agreement"), dated August 10, 1994, by and between
            Houbigant, Houbigant GmbH and Parfums Parquet.

10.17 (2)   Amendment dated August 16, 1994 to the License
            Agreement dated August 10, 1994 between Houbigant,
            Houbigant GmbH and Parfums Parquet.

10.18 (2)   Amendment dated September 16, 1994 to the License
            Agreement dated August 10, 1994, between
            Houbigant, Houbigant GmbH and Parfums Parquet
            Incorporated.

10.19 (10)  Letter Agreement, dated February 14, 1995,
            relating to the License Agreement dated August 10,
            1994 between Houbigant and Parfums Parquet.

10.20 (10)  Right of Last Refusal Agreement, dated February
            14, 1995, among Houbigant, Luigi Massironi,
            Michael Sherman and Parfums Parquet relating to
            the Worldwide License Agreement.

10.21 (10)  Guaranty, dated February 28, 1995, by Cosmar in
            favor of Houbigant of all obligations of Parfums
            Parquet under the License Agreement dated
            August 10, 1994 between Houbigant, Houbigant GmbH
            and Parfums Parquet.

10.22 (10)  Security Agreement - Trademarks, dated February
            28, 1995, among Houbigant, Parfums Parquet,
            Chemical Bank New Jersey N.A. and National
            Westminster Bank, USA.

                                      66
<PAGE>
                                                                 LOCATION OF 
                                                                  EXHIBIT IN 
                                                                  SEQUENTIAL 
                                                                   NUMBERING 
EXHIBIT NO.             DESCRIPTION OF DOCUMENT                      SYSTEM  
-----------             -----------------------                    ----------

10.22.1 (10) Assignment for Security Agreement, dated February 14,
             1995, between Houbigant and Parfums Parquet.

10.23 (2)    Letter Agreement dated September 21, 1994 amending the
             Worldwide License Agreement, the Houbigant U.S. License
             Agreement and the Harby's License Agreement by and
             between Parfums Parquet Incorporated, Harby's,
             Houbigant, and Houbigant GmbH.

10.24 (11)   Amendment, Modification and Settlement Agreement, dated
             July 31, 1996, among Houbigant, Dana Perfumes Corp.
             (f.k.a. Parfums Parquet) ("Dana") and Houbigant (1995)
             Limitee amending the Worldwide License Agreement and
             the Houbigant U.S. License Agreement and providing for
             the execution of a new license agreement for Canada.

10.25 (11)   License Agreement (the "Canadian License"), dated July
             31, 1996, between Houbigant and Houbigant (1995)
             Limitee.

10.26 (11)   Letter Agreement, dated July 1996, among Houbigant,
             Dana and Houbigant (1995) Limitee, amending the
             provisions for royalty payments under the Worldwide
             License Agreement, the Houbigant U.S. License Agreement
             and the Canadian License Agreement.

10.27 (11)   Amendment No. I to License Agreements, dated July 31,
             1996, among Houbigant, Dana and Houbigant (1995)
             Limitee, amending the Worldwide License Agreement, the
             Houbigant U.S. License Agreement and the Canadian
             License Agreement.

10.28 (14)   Amendment No. I to Security Agreement - Trademarks,
             dated July 31, 1996, among Houbigant, Parfums Parquet,
             Chemical Bank New Jersey N.A. and NatWest Bank NA.

10.29(1)     Letter agreement, dated August 18, 1994, between RCI
             and Dr. Thomas V. Bonoma, granting Dr. Bonoma stock
             options.

10.30 (6)    Employment agreement, dated August 6, 1996, between RCI
             and Dr. Thomas V. Bonoma.

10.31 (1)    Stockholders agreement, dated August 18, 1994, among
             RCI and the stockholders listed in schedule 1 thereto.

10.32 (10)   Management Services Agreement, dated August 16, 1994,
             between Kidd, Kamm & Company and RCI.

10.33 (1)    Industrial building lease between Sparks Industrial
             Joint Venture and Precision Molded Plastics, Inc.,
             dated November 20, 1991, and a consent to assignment of
             that lease, dated June 7, 1994, executed by Precision
             Molded Plastics, Inc. and Sparks Industrial Joint
             Venture.

                                      67
<PAGE>
                                                                 LOCATION OF 
                                                                  EXHIBIT IN 
                                                                  SEQUENTIAL 
                                                                   NUMBERING 
EXHIBIT NO.             DESCRIPTION OF DOCUMENT                      SYSTEM  
-----------             -----------------------                    ----------

10.34 (10)   Agreement of Lease between Groupe Gestion Luger as
             Lessor and Houbigant Ltee as Lessee (the "Lessee"),
             relating to the immovable property situated at 1593 to
             1645 Cunard Street, City of Chomedey (Laval), Province
             of Quebec, dated June 25, 1979 and assignment of that
             lease, dated December 12, 1994, by the Lessee in favor
             of 3088766 Canada Limited.

10.35 (8)    Securities Purchase Agreement between the Company and
             CIBC WG Argosy Merchant Fund 2, L.L.C. (the "Fund"),
             dated as of May 29, 1996.  Amendment No. 1, dated as of
             June 21, 1996, to Securities Purchase Agreement, dated
             as of May 29, 1996, between Renaissance Cosmetics, Inc.
             and CIBC WG Argosy Merchant Fund 2, L.L.C.

10.36 (8)    Common Stock Registration Rights Agreement between RCI
             and the Fund, dated as of May 29, 1996.

10.37 (7)    Securities Purchase Agreement, dated as of August 8,
             1996, between RCI and CIBC Wood Gundy Securities Corp.

10.38 (7)    Registration Rights Agreement, dated as of August 15,
             1996, between RCI and CIBC Wood Gundy Securities Corp.

10.40 (7)    Common Stock Registration Rights Agreement, dated as of
             August 15, 1996, between RCI and CIBC Wood Gundy
             Securities Corp.
             
10.41 (10)   Subscription Agreement, dated August 15, 1996, between
             RCI and CIBC WG Argosy Merchant Fund 2, L.L.C.

10.42 (10)   Warrant Agreement, dated as of August 18, 1994, between
             RCI and American Bank National Association.

10.43 (7)    Warrant Agreement, dated as of August 15 1996, between
             RCI and Firstar Trust Company.

10.44 (10)   Letter Agreement, dated September 6, 1996, amending the
             Securities Purchase Agreement, dated as of August 8,
             1996, between CIBC Wood Gundy Securities Corp. and RCI.
             
10.45 (10)   First Amendment to the Warrant Agreement, dated as of
             September 27, 1996, between RCI and Firstar Trust
             Company as warrant agent.

10.46 (10)   First Amendment to the Registration Rights Agreement,
             dated as of September 27, 1996, between RCI and CIBC
             Wood Gundy Securities Corp.

10.47 (10)   First Amendment to the Common Stock Registration Rights
             Agreement, dated as of September 27, 1996, between RCI
             and CIBC Wood Gundy Securities Corp.

                                      68
<PAGE>
                                                                    LOCATION OF 
                                                                     EXHIBIT IN 
                                                                     SEQUENTIAL 
                                                                      NUMBERING 
EXHIBIT NO.             DESCRIPTION OF DOCUMENT                         SYSTEM  
-----------             -----------------------                       ----------

10.48 (14)   Securities Purchase Agreement, dated as of September
             27, 1996, between RCI and Bastion Capital Fund, L.P.

10.49 (14)   Common Stock Registration Rights Agreement, dated as of
             September 27, 1996, between RCI and Bastion Capital
             Fund, L.P.
             
10.50 (14)   Voting Agreement, dated as of September 27, 1996,
             between Kidd, Kamm Equity Partners, L.P. and Bastion
             Capital Fund, L.P.

10.51 (14)   Collective Bargaining Agreement between Dana Perfumes
             Corp.  and Oil, Chemical & Atomic Workers International
             Union AFL-CIO and its Local Union No.  8-782

10.52 (16)   Collective Labor Agreement of the Union of Workers in
             the Chemical, Pharmaceutical, Plastic and Related
             Industries of Sao Paulo and the Region and other Unions
             of Workers and the Federation of Industries of the
             State of Sao Paulo and Industry Unions affiliated
             therewith (English translation) (with Officer's
             Certificate certifying accuracy of translation from
             Portuguese into English).

10.53 (15)   Purchase Agreement, dated February 3, 1997, between
             Renaissance Cosmetics, Inc., as issuer, and CIBC Wood
             Gundy Securities Corp., as initial purchaser.

10.54 (16)   Credit Agreement, dated as of March 12, 1997, among
             Dana Perfumes Corp., as borrower, the other credit
             parties signatory thereto, as credit parties, the
             lenders signatory thereto from time to time, as
             lenders, and General Electric Capital Corporation, as
             agent and lender. 

10.55 (16)   Pledge Agreement, dated as of March 12, 1997, between
             General Electric Capital Corporation, as agent and
             lender, and the pledgors thereto.

10.56 (16)   Security Agreement, dated as of March 12, 1997, among
             General Electric Capital Corporation, as agent and
             lender, and the grantors thereto.

10.57 (16)   Guaranty, dated as of March 12, 1997, between General
             Electric Capital Corporation, as agent and lender, and
             the guarantors thereto.

10.58(17)    First Amended and Restated Stock Option Plan of RCI.

10.59(17)    Form of Indemnification Agreement.

10.60(17)    Form of Stockholder Agreement, as amended.

                                      69
<PAGE>
                                                                   LOCATION OF 
                                                                    EXHIBIT IN 
                                                                    SEQUENTIAL 
                                                                     NUMBERING 
EXHIBIT NO.             DESCRIPTION OF DOCUMENT                        SYSTEM  
-----------             -----------------------                      ----------

10.61(17)    Waiver and Amendment, dated as of June 27, 1997, among
             Dana Perfumes Corp., as borrower, the other Credit
             Parties to the Credit Agreement, General Electric
             Capital Corporation as agent and lender and the other
             Lenders party to the Credit Agreement.

10.62(17)    Letter Agreement, dated as of June 27, 1997, among Dana
             Perfumes Corp., as borrower, General Electric Capital
             Corporation, as agent and lender, and the other Lenders
             party to the Credit Agreement.

10.63(18)    Waiver and Amendment, dated as of June 27, 1997, among
             Dana Perfumes Corp., as borrower, the other Credit
             Parties to the Credit Agreement, General Electric
             Capital Corporation as agent and lender and the other
             Lenders party to the Credit Agreement.

10.64(18)    Letter Agreement, dated as of June 27, 1997, among Dana
             Perfumes Corp., as borrower, General Electric Capital
             Corporation, as agent and lender, and the other Lenders
             party to the Credit Agreement.

10.65(18)    Letter Agreement, dated as of July 25, 1997, among Dana
             Perfumes Corp., as borrower, General Electric Capital
             Corporation, as agent and lender, and the other lenders
             party to the Credit Agreement.

10.66(19)    Consent and Amendment, dated September 3, 1997, among
             RCI China, Inc., Dana Perfumes Corp., as borrower, the
             other Credit Parties to the Credit Agreement, General
             Electric Capital Corporation as agent and lender and
             the other Lenders party to the Credit Agreement.

10.67(19)    Pledge Amendment, dated September 3, 1997, executed by
             Dana Perfumes Corp.  and RCI China, Inc., in favor of
             General Electric Capital Corporation, as agent.

10.68(20)    Employment Agreement, dated as of August 26, 1997 and
             approved by the board of Directors on October 22, 1997,
             between RCI and Norbert Becker

10.69(20)    Employment Letter Agreement, dated as of August 28,
             1997 and approved by the Board of Directors on October
             22, 1997, between RCI and Robert Corso

10.70(20)    Shareholder Acknowledgment, dated as of November 1,
             1997, executed by Kidd Kamm Equity Partners, L.P., with
             respect to Norbert Becker

10.71(20)    Employment Letter Agreement, dated as of November 1,
             1997, between RCI and Sean Greene

                                      70
<PAGE>
                                                                   LOCATION OF 
                                                                    EXHIBIT IN 
                                                                    SEQUENTIAL 
                                                                     NUMBERING 
EXHIBIT NO.             DESCRIPTION OF DOCUMENT                        SYSTEM  
-----------             -----------------------                      ----------

10.72(20)    Shareholder Acknowledgment, dated as of November 1,
             1997, executed by Kidd Kamm Equity Partners, L.P., with
             respect to Sean Greene
             
10.73(20)    Amendment and Consent, dated as of November 12, 1997,
             among Renaissance International Export, Inc., Dana
             Perfumes Corp., as Borrower, the other Credit Parties
             to the Credit Agreement, General Electric Capital
             Corporation, as Agent and Lender, and the other Lenders
             to the Credit Agreement

10.74        Form of Retention Bonus Agreement - Middle Managment

10.75        Form of Retention Bonus Agreement - Senior Management

10.76        Form of Severance Agreement with Addendum - Senior
             Management

10.77        Consulting Letter Agreement, dated May 12, 1998, by and
             between Ron Bowen and RCI

10.78        Employment Agreement, dated May 15, 1998, by and
             between John Jackson and RCI

10.79        Waiver, Amendment and Consent, dated as of February 17,
             1998, among Dana Perfumes Corp., as Borrower, the other
             Credit Parties party to the Credit Agreement, General
             Electric Capital Corporation, as Agent and Lender, and
             the other Lenders party to the Credit Agreement

10.80        Waiver and Amendment, dated as of March 31, 1998, among
             Dana Perfumes Corp., as Borrower, the other Credit
             Parties party to the Credit Agreement, General Electric
             Capital Corporation, as Agent and Lender, and the other
             Lenders party to the Credit Agreement

10.81        Consent and Amendment, dated as of May 13, 1998, among
             Dana Perfumes Corp., as Borrower, the other Credit
             Parties party to the Credit Agreement, General Electric
             Capital Corporation, as Agent and Lender, and the other
             Lenders party to the Credit Agreement

10.82        Subordinated Promissory Note, dated August 18, 1994,
             executed by RCI in favor of Triumph-Connecticut Limited
             Partnership.
             
10.83        Amendment, Waiver and Consent, dated as of June 26,
             1998, among Dana Perfumes Corp., as Borrower, the other
             Credit Parties party to the Credit Agreement, General
             Electric Capital Corp., as Agent and Lender, and the
             other Lenders party to the Credit Agreement.

21.1         List of Subsidiaries.

27.1         Financial Data Schedule.
</TABLE>

                                      71
<PAGE>

-------------
Notes to Exhibit Index:

(1)  Filed with RCI's Registration Statement on Form S-4 filed with the
     Securities and Exchange Commission ("SEC") on December 12, 1994,
     Registration No. 33-87280, and incorporated herein by reference thereto.

(2)  Filed with Amendment No. I to RCI's Registration Statement on Form S-4
     filed with the SEC on January 27, 1995, Registration No. 33-87280, and
     incorporated herein by reference thereto.

(3)  Filed with Amendment No. 2 to RCI's Registration Statement on Form S-4
     filed with the SEC on February 9, 1995, Registration No. 33-87280, and
     incorporated herein by reference thereto.

(4)  Filed with RCI's Quarterly Report on Form 10-Q filed with the SEC on March
     27, 1995, and incorporated herein by reference thereto.

(5)  Intentionally omitted.

(6)  Filed with RCI's Quarterly Report on Form 10-Q filed with the SEC on August
     14, 1996, and incorporated herein by reference thereto.

(7)  Filed with RCI's Form 8-K filed with the SEC on August 8, 1996, and
     incorporated herein by reference thereto.

(8)  Filed with RCI's Annual Report on Form 10-K filed with the SEC for the
     fiscal year ended March 3 1, 1996, and incorporated herein by reference
     thereto.

(9)  Intentionally omitted.

(10) Filed with RCI's Registration Statement on Form S-4 filed with the SEC on
     October 1, 1996, Registration No. 333-13171, and incorporated herein by
     reference thereto.

(11) Filed with RCI's Quarterly Report on Form 10-Q filed with the SEC on
     November 14, 1996, and incorporated herein by reference thereto.

(12) Intentionally omitted.

(13) Filed with RCI's Form 8-K filed with the SEC on December 20, 1996, and
     incorporated herein by reference thereto.

(14) Filed with Amendment No. 1 to RCI's Registration Statement on Form S4 filed
     with the SEC on January 31, 1997, Registration No. 333-13171, and
     incorporated herein by reference thereto.

(15) Filed with RCI's Form 8-K filed with the SEC on February 20, 1997 and
     incorporated herein by reference thereto.

                                      72
<PAGE>

(16) Filed with RCI's Registration Statement on Form S4 filed with the SEC on
     March 24, 1997, Registration No. 333-23847, and with Amendment No. 1
     thereto, as filed with the SEC on May 2, 1997, and incorporated herein by
     reference thereto.

(17) Filed with RCI's Annual Report on Form 10-K filed with the SEC for the
     fiscal year ended March 31, 1997, and incorporated herein by reference
     thereto.

(18) Filed with RCI's Quarterly Report on Form 10-Q on August 14, 1997, and
     incorporate herein by reference thereto.

(19) Filed with RCI's Quarterly Report on Form 10-Q on November 14, 1997, and
     incorporated herein by reference thereto.

(20) Filed with RCI's Quarterly Report on Form 10-Q on February 17, 1998, and
     incorporated herein by reference thereto.
 




                                      73
<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, thereto duly authorized.


                              RENAISSANCE COSMETICS, INC. 



                              By: /s/Norbert Becker
                                   ------------------------------
                                   Norbert Becker
                                   Chief Executive Officer 


     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 date(s) indicated below.

         Signature                         Title                  Date
         ---------                         -----                  ----
/s/Norbert Becker                        
--------------------------        Chief Executive Officer      June 29, 1998
     NORBERT BECKER                (principal executive  
                                   officer) and Director 


/s/Robert J. Corso
--------------------------         Group Vice President        June 29, 1998
    ROBERT J. CORSO                 and Chief Financial   
                                    Officer (principal    
                                   financial officer and 
                                    principal accounting  
                                          officer)  


/s/Terry Theodore
--------------------------                Director             June 29, 1998
     TERRY THEODORE                           
                                              
                                              
/s/Kurt L. Kamm                                              
--------------------------                Director             June 29, 1998
      KURT L. KAMM                        
                                          
                                          
/s/William J. Kidd                                          
--------------------------                Director             June 29, 1998
     WILLIAM J. KIDD                      
                                          
                                          
/s/Sean Greene                                          
--------------------------                Director             June 29, 1998
       SEAN GREENE                        
                                          

/s/Richard Nevins
--------------------------                Director             June 29, 1998
     RICHARD NEVINS




                                      74
<PAGE>

RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>                                                                        <C>
                                                                           PAGE

INDEPENDENT AUDITORS' REPORT                                                F-2

CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 1998 AND 1997 AND FOR 
EACH OF THE THREE YEARS IN THE PERIOD THEN ENDED;

Consolidated Balance Sheets                                                 F-3

Consolidated Statements of Operations                                       F-4

Consolidated Statements of Stockholders' Equity (Deficiency)                F-5

Consolidated Statements of Cash Flows                                       F-6

Notes to Consolidated Financial Statements                           F-7 - F-32
</TABLE>

                                       F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Renaissance Cosmetics, Inc.

We have audited the accompanying consolidated balance sheets of Renaissance 
Cosmetics, Inc. and subsidiaries as of March 31, 1998 and 1997, and the 
related consolidated statements of operations, stockholders' deficiency, and 
cash flows for each of the three years in the period ended March 31, 1998. 
These financial statements are the responsibility of the Company's 
management. Our responsibility is to express an opinion on these financial 
statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all 
material respects, the financial position of Renaissance Cosmetics, Inc., and 
subsidiaries as of March 31, 1998 and 1997, and the results of its
operations, and its cash flows for each of the three years in the period 
ended March 31, 1998 in conformity with generally accepted accounting 
principles.

The accompanying consolidated financial statements for the year ended March 
31, 1998 have been prepared assuming that the Company will continue as a 
going concern. As discussed in Note 1 to the financial statements, the 
Company has been experiencing recurring net losses for the three years ended 
March 31, 1998, negative cash flows from operations, negative working capital 
and stockholders' deficiency. In addition, the Company is experiencing 
difficulty in generating sufficient cash flows to meet its obligations under 
its Senior Notes as discussed Note 1. Such conditions raise substantial doubt 
about its ability to continue as a going concern. Management's plans 
concerning these matters are also described in Note 1. The financial 
statements do not include any adjustments that might result from the outcome 
of this uncertainty.


Deloitte and Touche LLP
June 26, 1998
New York, New York


                                       F-2
<PAGE>

RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
--------------------------------------------------------------------------------------------------
                                                                   MARCH 31,             MARCH 31,
ASSETS                                                               1998                   1997
<S>                                                                <C>                   <C>
CURRENT ASSETS:
  Cash and cash equivalents                                        $   7,698             $     719
  Marketable securities                                                1,934                14,331
  Accounts receivable - net                                           32,995                48,837
  Inventories - net                                                   54,820                55,554
  Prepaid expenses and other current assets                            6,638                 7,827
                                                                   ---------             ---------
           Total current assets                                      104,085               127,268

PROPERTY, PLANT AND EQUIPMENT - Net                                   24,410                26,581

DEFERRED FINANCING COSTS - Net                                        11,525                12,748

MARKETABLE SECURITIES                                                      -                 8,468

OTHER ASSETS - Net                                                    12,050                12,141

INTANGIBLE ASSETS - Net                                               88,414               174,177
                                                                   ---------             ---------
TOTAL ASSETS                                                       $ 240,484             $ 361,383
                                                                   ---------             ---------
                                                                   ---------             ---------

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
  Accounts payable                                                 $  33,099             $  21,612
  Accrued expenses and other current liabilities                      46,006                40,322
  1997 Senior Notes                                                  200,000                     -
  Revolving Credit Facility                                           55,554                     -
                                                                   ---------             ---------
           Total current liabilities                                 334,659                61,934

LONG-TERM LIABILITIES:
  1997 Senior Notes                                                        -               200,000
  Subordinated Seller Notes                                            4,072                 3,877
  Minimum royalty obligation and other long term liabilities           8,229                 3,926
                                                                   ---------             ---------
           Total long-term liabilities                                12,301               207,803

TOTAL LIABILITIES                                                    346,960               269,737

COMMITMENTS AND CONTINGENCIES                                     

SERIES B AND C PREFERRED STOCK
  Par value $.01-authorized 350,000 shares; issued 
   141,763 shares at March 31, 1998 and
   123,381 shares at March 31, 1997
   (Liquidation  value-$144,344 at March 31, 1998 and 
   $127,041 at March 31, 1997)                                       109,925                86,660

10% PREFERRED STOCK
  Par value $.01-authorized 40,000 shares; issued 
   14,567 shares at March 31, 1998 and 12,798 shares 
   at March 31, 1997 
   (Liquidation  value-$14,390 at March 31, 1998 and 
   $13,517 at March 31, 1997)                                         14,333                13,167

COMMON STOCKHOLDERS' DEFICIENCY :
  Common stock, par value $.01-authorized 3,000,000 
   shares; issued 830,736 shares at
   March 31, 1998 and 1997                                                 8                     8
  Notes receivable from sale of common stock                            (518)                 (518)
  Additional paid-in capital                                          69,403                69,403
  Treasury stock, at cost  (4,413 shares at March 31, 
   1998 and 5,650 shares at March 31, 1997)                             (164)                 (210)
  Accumulated deficit                                               (297,233)              (75,450)
  Cumulative translation adjustment                                   (2,230)               (1,414)
                                                                   ---------             ---------
           Total common stockholders' deficiency                    (230,734)               (8,181)
                                                                   ---------             ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                     $ 240,484             $ 361,383
                                                                   ---------             ---------
                                                                   ---------             ---------
</TABLE>

See Notes to Consolidated Financial Statements.

                                                F-3
<PAGE>

RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
--------------------------------------------------------------------------------------------------------
                                                                    YEAR ENDED MARCH 31,
                                                             1998             1997            1996
<S>                                                       <C>               <C>             <C>
NET SALES                                                 $ 179,696         $174,612        $131,286

COST OF GOODS SOLD                                          115,724           69,723          51,317
                                                          ---------         --------        --------
GROSS PROFIT                                                 63,972          104,889          79,969
                                                          ---------         --------        --------
OPERATING  EXPENSES:
  Selling                                                    92,209           64,847          52,302
  General and administrative                                 38,981           25,705          14,009
  Restructuring costs                                           567                -               -
  Other severance costs and professional fees                 3,152                -               -
  Amortization of intangible and other assets                12,991            9,813           5,207
  Impairment of long lived assets                            85,419                -               -
                                                          ---------         --------        --------
           Total operating expenses                         233,319          100,365          71,518
                                                          ---------         --------        --------
OPERATING  INCOME (LOSS)                                   (169,347)           4,524           8,451

OTHER EXPENSE (INCOME):
  Interest expense                                           31,143           24,417          19,458
  Interest income                                            (1,464)          (1,928)           (255)
  Other expense (income)-net                                 (2,492)              93               -
                                                          ---------         --------        --------
          Total other expense-net                            27,187           22,582          19,203
                                                          ---------         --------        --------
LOSS BEFORE INCOME TAX PROVISION                           (196,534)         (18,058)        (10,752)

INCOME TAX PROVISION                                            912            1,322           1,305
                                                          ---------         --------        --------
LOSS BEFORE EXTRAORDINARY ITEM                             (197,446)         (19,380)        (12,057)

EXTRAORDINARY ITEM                                                -           22,438               -
                                                          ---------         --------        --------
NET LOSS                                                   (197,446)         (41,818)        (12,057)

PREFERRED STOCK DIVIDENDS                                    24,337           14,068           1,333
                                                          ---------         --------        --------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS                $(221,783)        $(55,886)       $(13,390)
                                                          ---------         --------        --------
                                                          ---------         --------        --------
BASIC LOSS PER COMMON SHARE                               $ (268.58)        $ (71.63)       $ (18.62)
                                                          ---------         --------        --------
                                                          ---------         --------        --------
WEIGHTED AVERAGE SHARES OUTSTANDING                         825,755          780,203         719,138
                                                          ---------         --------        --------
                                                          ---------         --------        --------
</TABLE>

See Notes to Consolidated Financial Statements.

                                                  F-4
<PAGE>

RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

(IN THOUSANDS EXCEPT SHARE AMOUNTS)

<TABLE>
----------------------------------------------------------------------------------------------------------------------------------

                                                  NOTES                                                                 TOTAL
                                                RECEIVABLE                                                              COMMON 
                                COMMON          FROM SALE   ADDITIONAL  TREASURY                        CUMULATIVE   STOCKHOLDERS'
                                 STOCK           OF COMMON   PAID-IN     STOCK            ACCUMULATED   TRANSLATION     EQUITY
                                SHARES   AMOUNT   STOCK      CAPITAL     SHARES   AMOUNT    DEFICIT      ADJUSTMENT  (DEFICIENCY)
<S>                            <C>         <C>    <C>        <C>         <C>      <C>      <C>            <C>         <C>
BALANCE, APRIL 1, 1996         726,818      7     $(518)     $26,787     6,725    $(250)   $(6,174)       $ 337       $20,189
                                                                         
  Accrued dividends and 
   accretion on redeemable 
   preferred stock                  -       -         -            -         -        -     (1,333)           -        (1,333)
                                                                         
  Purchase of treasury stock        -       -         -            -     3,632     (135)         -            -          (135)
                                                                         
  Sale of treasury stock            -       -         -            -    (4,707)     175          -            -           175
                                                                         
  Cumulative translation 
   adjustment                       -       -         -            -         -        -          -         (388)         (388)
                                                                         
Net loss                            -       -         -            -         -        -    (12,057)           -       (12,057)
                              -------     ---     -----      -------     -----    -----  ---------      -------     ---------
BALANCE, MARCH 31, 1996       726,818       7      (518)      26,787     5,650     (210)   (19,564)         (51)        6,451
                                                                         
Issuance of Common Stock      103,918       1                  9,749                                                    9,750
                                                                                                                          
Issuance of warrants in                                                                                                   
 conjunction with redeemable
 preferred stock                                              32,867                                                   32,867
                                                                                                                          
Accrued dividends and 
 accretion on redeemable                                                                                                  
 preferred stocks                                                                          (14,068)                   (14,068) 
                                                                                                                          
Cumulative translation 
 adjustment                                                                                              (1,363)       (1,363)
                                                                         
Net loss                            -       -         -            -         -        -    (41,818)           -       (41,818)
                              -------     ---     -----      -------     -----    -----  ---------      -------     ---------
BALANCE, MARCH 31, 1997       830,736       8      (518)      69,403     5,650     (210)   (75,450)      (1,414)       (8,181)

  Sale of treasury stock                                                (1,237)      46                                    46
 
  Accrued dividends and                                                                                                   
   accretion on redeemable
   preferred stocks                                                                        (24,337)                   (24,337)
                                                                                                                          
  Cumulative translation 
   adjustment                                                                                              (816)         (816)
                                                                         
  Net loss                          -       -         -            -         -        -   (197,446)           -      (197,446)
                              -------     ---     -----      -------     -----    -----  ---------      -------     ---------
BALANCE, MARCH 31, 1998       830,736       8     $(518)     $69,403     4,413    $(164) $(297,233)     $(2,230)    $(230,734)
                              -------     ---     -----      -------     -----    -----  ---------      -------     ---------
                              -------     ---     -----      -------     -----    -----  ---------      -------     ---------
</TABLE>

See Notes to Consolidated Financial Statements.

                                                     F-5
<PAGE>

RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(IN THOUSANDS)

<TABLE>
----------------------------------------------------------------------------------------------------------------------------------

                                                                      YEAR ENDED               YEAR ENDED             YEAR ENDED
                                                                       MARCH 31,                MARCH 31,               MARCH 31,
                                                                         1998                     1997                   1996
<S>                                                                    <C>                     <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                      
  Net Loss                                                             $(197,446)              $ (41,818)              $(12,057)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Extraordinary Item                                                       -                    22,438                    -
    Deferred Taxes                                                            (4)                    (86)                    41
    Depreciation                                                           8,213                   4,896                  2,844
    Amortization of intangible assets                                      8,627                   5,528                  3,208
    Amortization of minimum royalty and other assets                       4,364                   4,285                  1,999
    Impairment of long-lived assets                                       85,419                     -                      -
    Amortization of deferred financing fees                                2,124                   3,202                  2,616
    Other non-cash interest expense                                        1,190                   1,820                  1,312
    Non-cash interest income                                                (209)                    -                      -

  Changes in operating assets and liabilities,
   net of effects of investments and acquisitions:
     Accounts receivable                                                  16,380                  (8,655)               (16,636)
     Inventories                                                          (1,482)                (11,070)                (7,561)
     Prepaid expenses and other assets                                       951                  (4,209)                (2,550)
     Accounts payable                                                     11,220                  (1,663)                 6,284
     Accrued expenses and other current liabilities                        3,284                  (6,240)                (3,288)
     Other                                                                 2,228                  (3,871)                  (388)
                                                                        --------               ---------               --------
           Net cash used in operating activities                         (55,141)                (35,443)               (24,176)
                                                                        --------               ---------               --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                                   (11,410)                 (9,330)                (8,166)
  Proceeds from sale of property                                           1,823                     -                      -
  Acquisition of businesses, net of cash acquired                            -                   (95,392)                 1,384
  Investment in joint venture, net of cash acquired                         (546)                    -                      -
  Purchase of marketable securities                                          -                   (22,625)                   -
  Sale of marketable securities                                           21,598                     -                      641
  Other investing activities                                                (919)                 (1,208)                   -
                                                                        --------               ---------               --------
           Net cash provided by / (used in) investing
            activities                                                    10,546                (128,555)                (6,141)
                                                                        --------               ---------               --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from Senior Secured Credit Facility                               -                   117,500                    -
  Repayment of Senior Secured Credit Facility                                -                  (117,500)                   -
  Issuance of Senior Notes                                                   -                   200,000                    -
  Proceeds from 1997 Credit Facility                                      73,470                     -                      -
  Repayments on 1997 Credit Facility                                     (17,916)                    -                      -
  Payment of minimum royalty obligations                                  (3,125)                 (2,148)                (1,259)
  Proceeds of issuance of Series A Preferred Stock                           -                    18,955                    -
  Redemption of Series A Preferred Stock                                     -                   (20,434)                   -
  Net proceeds of issuance of Series B Preferred Stock                       -                    75,451                    -
  Issuance of warrants                                                       -                    32,867                    -
  Net proceeds from issuance of common stock                                 -                     9,750                    -
  Net redemption of Old Senior Notes                                         -                   (65,000)                   -
  Early retirement of debt                                                   -                   (10,725)                   -
  Net proceeds (repayment) of Old Credit Facility                            -                   (57,000)                27,000
  Proceeds from sale of treasury stock                                        46                     -                      175
  Purchase of treasury stock                                                 -                       -                     (135)
  Payment of financing costs                                                (901)                (18,431)                (1,033)
                                                                        --------               ---------               --------
           Net cash provided by financing activities                      51,574                 163,285                 24,748
                                                                        --------               ---------               --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                  6,979                    (713)                (5,569)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                               719                   1,432                  7,001
                                                                        --------               ---------               --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                $  7,698               $     719               $  1,432
                                                                        --------               ---------               --------
                                                                        --------               ---------               --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest                                                            $ 27,197               $  12,800               $ 14,604
                                                                        --------               ---------               --------
                                                                        --------               ---------               --------
    Income taxes                                                        $  1,021               $   1,825               $    880
                                                                        --------               ---------               --------
                                                                        --------               ---------               --------
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
  TRANSACTIONS:
   Accrued dividends and accretion on redeemable 
    preferred stocks                                                      24,337                  14,068                  1,333
   Other liability - present value of minimum royalties                    4,342                   1,348                  1,398
</TABLE>

See Notes to Consolidated Financial Statements.

                                                      F-6
<PAGE>

RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


1.  CURRENT OPERATING ENVIRONMENT

Renaissance Cosmetics, Inc. (sometimes referred to herein as "Renaissance" or 
the "Holding Company") and its subsidiaries (sometimes referred to herein as 
the "operating subsidiaries") (collectively, the "Company") is reporting 
operating income for the year ended March 31, 1998 that is significantly lower 
than for the year ended March 31, 1997, primarily as a result of four factors.

The first factor relates to operational events, of which there are three 
primary components. First, management believes, based on the results of 
operations for the year ended March 31, 1998, that the mass market fragrance 
industry has undergone a permanent change. Second, profitability in the 
Fragrance Division was adversely affected in the year ended March 31, 1998 by 
higher than expected costs of goods sold and freight due to difficulties 
encountered in integrating the manufacturing of new brand products acquired 
in the MEM Acquisition (as defined in Note 3) and the P&G Brands Acquisition 
(as defined in Note 3) into the Company's manufacturing facility located in 
Mountain Top, Pennsylvania (the "Mountain Top Facility"). Third, the year 
ended March 31, 1998 results reflect lower sales and profitability of the 
Company's Cosmar branded artificial nail products as compared to the year 
ended March 31, 1997, which the Company attributes to increased competition 
from new entrants into the category resulting in loss of market share and 
higher product returns.

The second factor relates to the Company's decision to increase its reserves 
for the year ended March 31, 1998.  As a result of the operational events 
discussed above, during the year ended March 31, 1998, the Company reviewed 
its balance sheet and determined that it should make adjustments to estimates 
and reserves reflected on its balance sheet that were based, when made, on 
the Company's prior historical experience. Such review also included a 
reassessment of the assumptions that should be used to arrive at estimates 
and reserves in light of these changing market conditions. The Company 
reviewed its estimates for customer charge-backs, sales returns and holiday 
markdowns, accounts receivable, inventory and trade promotion, among other 
items. As a result of this review, the Company's results of operations for 
the year ended March 31, 1998 includes adjustments of approximately $23.1 
million to reflect actual costs that exceeded estimates and other changes to 
estimates that had been used in recording the prior years' results.

The third factor relates to the Company's decision to write-down certain of 
its long-lived assets. Based on the above developments during the year ended 
March 31, 1998, the Company conducted an evaluation of long-lived assets, 
including goodwill, based upon the Company's estimates of its current 
business plans for the Fragrance businesses within the Fragrance and 
International Divisions. As a result, during the year ended March 31, 1998, 
the Company recorded an impairment loss of $85.4 million relating to the 
write-down of such assets. (see Note 7)

The fourth factor relates to costs resulting from the Company's new business 
plan. In the year ended March 31, 1998, the Company recorded $35.1 million in 
costs relating to its new business plan, consisting of, among other things, 
additional sales returns, excess inventory, severance costs, facilities 
consolidation costs and professional fees. There can be no assurance that 
actual costs will not be greater than estimated. See the table below for a 
description of the costs recorded in the year ended March 31, 1998.

                                      F-7
<PAGE>

<TABLE>

      (dollars in millions)
<S>                                                              <C>
      Sales Returns and Markdown Provisions included 
       in Net Sales                                                     $ 19.5
      Incremental excess inventory provisions included 
      in Cost of Goods Sold                                               11.3
      Severance, Relocation and Recruiting                                 1.8
      Severance and asset write-offs relating to closing                   1.1
       businesses
      Professional fees                                                    1.4
                                                                 --------------
      Total                                                             $ 35.1
                                                                 --------------
</TABLE>

The Company is restructuring on two fronts.  Its operating subsidiaries are 
currently engaged in an operational restructuring of their respective 
businesses.  Renaissance is about to begin a financial 
restructuring of its capital structure. The two are, in certain respects, 
separate and distinct from each other.

The Company believes that its operating subsidiaries have viable core 
businesses and growth brands that have the potential for improved operating 
and financial performance in 1998 and beyond.  However, in order to improve 
their operating and financial performance, the operating subsidiaries must 
implement a costly operational restructuring in 1998, which will include 
numerous management and organizational changes and cost reduction programs. 
The operating subsidiaries have already (1) initiated many of these changes 
and (2) refocused their advertising and promotional programs to preserve and 
enhance the value of their growth brands.  There can be no assurances that 
the operating subsidiaries will be successful in implementing their 
operational restructuring.

At the same time that its operating subsidiaries are implementing their 
operational restructuring, management believes that the Holding Company must 
implement a financial restructuring.  To this end, the Holding Company 
intends to enter into negotiations with the holders of its Preferred Stock, 
Common Stock and 1997 Senior Notes to restructure these obligations with the 
goal of de-leveraging and strengthening its balance sheet.  There can be no 
assurances that the Holding Company will be successful in implementing its 
financial restructuring.

The accompanying financial statements have been prepared on a going concern 
basis, which contemplates the realization of assets and the satisfaction of 
liabilities in the normal course of business. As shown in the financial 
statements, the Company incurred recurring net losses and as of March 31, 
1998 has negative cash flows from operations, negative working capital, and a 
stockholders' deficiency. As discussed in Note 9, the Revolving Credit 
Lenders have agreed to waive compliance with the Maximum Leverage Ratio and 
the Minimum Interest Coverage Ratio through June 30, 1999 and the parties 
have revised the Minimum EBITDA covenant. As discussed in Note 9, the Company 
has an $11,750,000 interest payment due on the 1997 Senior Notes and has 
approximately $1,815,000 remaining in the Escrow Account toward such payment. 
These factors, among other things, may indicate that the Company will be 
unable to continue as a going concern for a reasonable period of time.

The financial statements do not include any adjustments to the recoverability 
and classification of liabilities that might be necessary should the Company 
be unable to continue as a going concern.  The Holding Company does not 
believe that it will be able to fund the interest payment from cash flows 
from operations. Additionally, the terms of the 1997 Credit Facility prohibit 
the payment of such interest payment. There can be no assurance that the 
Holding Company will be successful in negotiating a financial restructuring 
on terms that it will consider acceptable, or at all, or that the terms of 
such financial restructuring will not impair the Holding Company's ability to 
conduct its business in accordance with its current business plan. 
Additionally, the Holding Company's ability to continue as a going concern is 
dependent on the Holding Company's ability to achieve its business plan.

                                      F-8
<PAGE>

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS-The Company manufactures and sells its fragrance and 
cosmetic products principally through the mass-market or self-select 
distribution channel which includes drug stores, mass merchandisers, discount 
stores, supermarkets and combination supermarket/drug stores, primarily in 
the United States, Canada, Latin America and Europe.

PRINCIPLES OF CONSOLIDATION-The consolidated financial statements of the 
Company include the accounts of Renaissance and its subsidiaries from their 
respective dates of acquisition. All significant intercompany balances and 
transactions have been eliminated. Certain reclassifications were made to the 
March 31, 1997 and 1996 financial statements to conform to the current year's 
presentation.

USE OF ESTIMATES - The preparation of financial statements in conformity with 
generally accepted accounting principles requires management to make 
estimates and assumptions that affect the reported amounts of assets and 
liabilities, and the disclosures of contingent assets and liabilities at the 
date of the financial statements. Estimates are used for allowances for 
doubtful accounts, sales returns, markdowns and other allowances, excess 
inventory, trade promotion and other accruals. Actual results could 
differ from those estimates.

The Company's re-examination of its business and the change in business 
strategy discussed in Note 1 have caused the Company to use significant 
estimates when calculating the appropriate provisions for sales returns and 
excess inventory. There can be no assurance that actual results will not 
exceed those estimates.

CASH AND CASH EQUIVALENTS - For the purposes of the statement of cash flows, 
the Company considers all highly liquid debt instruments with an original 
maturity of three months or less to be cash equivalents.

MARKETABLE SECURITIES - The Company classifies its investments in debt and 
equity securities as available for sale. Unrealized holding gains and losses 
were not material in any period presented.

INVENTORIES - Inventories, as of March 31, 1998, are stated at the lower of 
cost on the first-in, first-out (FIFO) method or market. As of March 31, 
1997, a portion of the inventory was stated at the lower of cost on the 
last-in, first-out (LIFO) method or market (See Note 5).

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated at 
cost, and depreciation is computed primarily by the straight-line method over 
estimated service lives. Property, plant and equipment acquired through 
business combinations is stated at the estimated fair value at the date of 
purchase.

LONG-LIVED ASSETS -- During the year ended March 31, 1997, the Company 
adopted SFAS No. 121, "Accounting for Impairment of Long Lived Assets and for 
Long Lived Assets to be Disposed Of". Under the provisions of this statement, 
the Company has evaluated its long-lived assets for financial impairment, and 
will continue to evaluate them as events or changes in circumstances indicate 
that the carrying amount of such assets may not be fully recoverable (See 
Note 7).

DEFERRED FINANCING COSTS - Deferred financing costs represent direct costs 
relating to closing on outstanding debt. These costs are being amortized over 
the life of the related debt.

                                      F-9
<PAGE>

FOREIGN CURRENCY TRANSLATION - For the Company's international operations,
assets and liabilities are translated at year-end exchange rates and income
statement amounts are translated at average exchange rates prevailing during the
year. The cumulative translation adjustment represents principally the
cumulative effect of changes during the year in the rate of exchange at the
beginning and end of each month in translating net assets excluding certain
intercompany liabilities. Foreign currency transaction gains and losses are
included in other expense (income)-net.

REVENUE RECOGNITION - The Company recognizes revenue upon shipment to third 
parties. Net sales are gross sales less estimates for returns, markdowns and 
other allowances relating to shipments through the balance sheet date. These 
estimates are based upon historical experience and current estimates of 
products sold through to consumers.

INCOME TAXES - The Company uses an asset and liability approach to the 
computation of income taxes. Under the asset and liability method, deferred 
tax assets and liabilities are recognized for the estimated future tax 
consequences of temporary differences between the financial reporting and tax 
bases of assets and liabilities based upon enacted tax rates in effect when 
such amounts are expected to be realized or settled. The effects of changes 
in tax laws or rates on deferred tax assets and liabilities are recognized in 
the period that includes the enactment date.

EARNINGS PER COMMON SHARE - Basic earnings per common share is based on the 
weighted average number of common shares outstanding during the year. The 
effect of shares issuable upon exercise of warrants and stock options is 
anti-dilutive, therefore diluted earnings per share is not presented. The 
Company adopted the provisions of Statement of Financial Accounting Standards 
No. 128, "Earnings Per Share" ("SFAS 128") during the fiscal year ended March 
31, 1998. Adoption of such statement did not have a material effect on the 
calculation of earnings per common share.

NEW ACCOUNTING PRONOUNCEMENTS- SFAS No. 129, "Disclosure of Information about 
Capital Structure" issued in February 1997 is effective for periods ending 
after December 15, 1997 and establishes standards for disclosing information 
about an entity's capital structure by superceding and consolidating 
previously issued accounting standards. The financial statements of the 
Company are prepared in accordance with the requirements of SFAS No. 129.

SFAS No. 130, "Reporting Comprehensive Income" issued in June 1997, is 
effective for fiscal years beginning after December 15, 1997 and requires 
presentation of total non-owner changes in equity for all periods displayed. 
The Company does not believe adoption of this statement will have a material 
impact on financial position or results of operations.

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related 
Information" is required to be adopted for fiscal years beginning after 
December 15, 1997. SFAS No. 131 requires, among other things, that financial 
and descriptive information be provided about its reportable operating 
segments. Under this statement, operating segments are components of an 
enterprise about which separate financial information is available that is 
regularly evaluated by the enterprise chief operating decision maker in 
deciding how to allocate resources and assess performance. The Company is 
evaluating the effects of adoption of this standard but does not believe that 
adoption of this standard will have a material effect on financial condition 
or results of operations.

In April 1998, the American Institute of Certified Public Accountants 
("AICPA") issued Statement of Position ("SOP") No. 98-5, Reporting on the 
Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires that entities 
expense start-up costs and organization costs as they are incurred. In March 
1998, the AICPA 

                                      F-10
<PAGE>

issued SOP No. 98-1, Accounting for the Costs of Computer Software Developed 
or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 was issued to remedy the 
diversity in the approaches to accounting for internal-use software by 
providing guidance on expensing versus capitalization of costs, accounting 
for the costs incurred in the upgrading and amortization of capitalized cost 
software costs. These statements are effective for fiscal years beginning 
after December 15, 1998. The Company is currently evaluating the effect such 
accounting pronouncements will have on financial condition and results of 
operations.

3.  ACQUISITIONS-

A.-DANA BRAZIL-On December 31, 1995, Dana Perfumes Corp. ("Dana") a wholly 
owned subsidiary of Cosmar Corporation ("Cosmar"), exercised its option to 
purchase the assets and liabilities of Perfumes Dana do Brasil for $100,000. 
For the year ended March 31, 1996, pro forma net sales, pro forma net loss, 
and pro forma net loss per share was $140,741,000, $(12,645,000), and 
$(17.58), respectively, assuming that the acquisition of Dana Brazil occurred 
on April 1, 1995. Such pro forma results are not necessarily indicative of 
the operating results that would have occurred had the acquisition taken 
place as of the beginning of the period presented, nor necessarily indicative 
of results that may be achieved in the future.

B--GREAT AMERICAN COSMETICS COMPANY.- On August 21, 1996, Cosmar, a 
wholly-owned subsidiary of Renaissance, completed its acquisition of all of 
the issued and outstanding capital stock of Great American Cosmetics Company 
("GAC") (the "GAC Acquisition"). Through the purchase of GAC, Cosmar acquired 
the Nat Robbins brand name of cosmetics products. During the year ended March 
31, 1997, the operations of GAC were integrated into Cosmar. The cash 
consideration for the GAC acquisition was $15,250,000. Concurrent with the 
closing, Cosmar repaid $808,000 of GAC indebtedness.

C-MEM COMPANY, INC.- On December 4, 1996, Renaissance, through its 
wholly-owned subsidiary, Renaissance Acquisition, Inc. ("RAI"), completed its 
acquisition (the "MEM Acquisition") of MEM Company, Inc ("MEM"). The 
aggregate cash consideration paid to the equity holders of MEM in connection 
with the MEM Acquisition was $19,787,000. In addition, in connection with the 
MEM Acquisition, the Company repaid all of MEM's outstanding indebtedness in 
an amount equal to $17,975,000. The brand names acquired from MEM include 
such names as English Leather, British Sterling, Love's Baby Soft and other 
well known brands. The Company also acquired the Tinkerbell brand name for 
children's cosmetics. The domestic operations of MEM were integrated into 
Dana during the year ended March 31, 1997.

D- ACQUISITION OF P&G BRANDS -On December 6, 1996, Dana completed its 
acquisition from The Procter & Gamble Company ("P&G") of the worldwide rights 
to manufacture and market certain mass-market fragrances (the "P&G Brands 
Acquisition"). The cash consideration paid was $43,263,000. In addition, Dana 
assumed certain specified trade-related obligations of the P&G Brands, 
including liability for returns of products under the P&G Brands sold prior 
to the closing and liabilities under certain advertising and business 
development commitments. Concurrent with the P&G Brands Acquisition, Dana 
entered into transition service agreements under which P&G continued the 
foreign marketing of the P&G Brands through June 30, 1997. Such transition 
agreements expired on June 30, 1997, and Dana, through its UK subsidiary, 
began marketing the P&G Brands in the UK and in parts of Europe. The domestic 
sales of the P&G Brands were integrated into Dana.

                                      F-11
<PAGE>

The above acquisitions have been accounted for by the purchase method. The 
consolidated financial statements include the results of operations of these 
acquisitions subsequent to their respective dates of acquisition.

The GAC, MEM and P&G Brands acquisitions, if they had occurred at the 
beginning of each period, would have pro forma results as follows:

<TABLE>
                                                         PRO FORMA
                                           -------------------------------------
                                                YEAR ENDED        YEAR ENDED
                                                 MARCH 31,         MARCH 31,
                                                   1997              1996
                                          (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                        (UNAUDITED)

<S>                                              <C>            <C>
Net sales                                        $ 245,796      $ 240,774
                                                 ----------     ----------
                                                 ----------     ----------
Loss before extraordinary item applicable to
    common stockholders                          $ (42,620)     $ (36,318)
                                                 ----------     ----------
                                                 ----------     ----------
Loss before extraordinary item applicable to
    common stockholders per common share         $  (51.66)     $  (44.13)
                                                 ----------     ----------
                                                 ----------     ----------
</TABLE>

The above pro forma results are not necessarily indicative of the operating 
results that would have occurred had the acquisitions taken place as of the 
beginning of each period, nor necessarily indicative of results that may be 
achieved in the future. 

4.  MARKETABLE SECURITIES

Marketable securities consist of the following:

<TABLE>
                                                     MARCH 31,
                                                 1998        1997
                                                   (IN THOUSANDS)

<S>                                             <C>        <C>
  Short term:
  U.S. Treasury Notes                           $1,815     $ 9,331
  Certificate of deposit                             -       5,000
  Other                                            119           -
                                                ------     -------
     Total Short-Term Marketable Securities     $1,934     $14,331
                                                ------     -------
                                                ------     -------
  Long Term:
US Treasury Notes                               $    -     $ 8,468
                                                ------     -------
                                                ------     -------
</TABLE>

As discussed in Note 9, marketable securities of $1,815,000 and $17,799,000 
at March 31, 1998 and 1997, respectively were held in an escrow account for 
interest payments on the Senior Notes.

                                      F-12
<PAGE>

5.  INVENTORIES

The components of inventories are as follows:

<TABLE>
                                                   MARCH 31,
                                               1998        1997
                                                (IN THOUSANDS)
<S>                                          <C>         <C>
Raw materials and components                 $27,231     $30,453
Work in process                                1,287       2,413
Finished goods                                26,302      22,688
                                             -------     -------
                                             $54,820     $55,554
                                             -------     -------
                                             -------     -------
</TABLE>


At March 31, 1997 approximately 61.8% of the Company's inventories were stated
at the lower of LIFO cost or market. At March 31, 1997, the excess of current
replacement cost over the stated LIFO value was $0. Effective April 1, 1997, the
Company's inventories that were on the LIFO method of accounting converted to
the FIFO method of accounting. Adoption of this method of accounting did not
have a material effect on financial condition or results of operations.

6.  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
                                                   MARCH 31,
                                               1998        1997
                                                (IN THOUSANDS)
<S>                                          <C>         <C>
Land                                         $   477     $   531
Buildings                                     13,632      15,571
Machinery and equipment                       16,593      10,170
Computer equipment                             9,795       7,484
Leasehold improvements                         1,300       1,352
                                             -------     -------
                                              41,797      35,108
Accumulated depreciation                      17,387       8,527
                                             -------     -------
                                             $24,410     $26,581
                                             -------     -------
                                             -------     -------
</TABLE>


                                     F-13
<PAGE>

7.  INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
                                                   MARCH 31,
                                               1998       1997
                                                (IN THOUSANDS)
<S>                                          <C>        <C>
Trademarks                                   $53,255    $ 60,817
Goodwill                                      44,969     123,957
                                             -------    --------

                                              98,224     184,774
                                             -------    --------

Accumulated amortization                       9,810      10,597
                                             -------    --------

                                             $88,414    $174,177
                                             -------    --------
                                             -------    --------
</TABLE>


Trademarks, which consist primarily of those acquired through business
combinations, are being amortized on a straight-line basis, over their estimated
useful lives, which ranged from 20 to 40 years at March 31, 1997. Goodwill,
which represents the excess of the cost of purchased businesses over the fair
value of their net assets at date of their acquisition, is being amortized on a
straight-line basis, over various periods ranging from 5 to 25 years.

The Company evaluates the recoverability of long-lived assets not held for 
sale by measuring the carrying amount of the assets against the estimated 
undiscounted future cash flows associated with them. At the time such 
evaluations indicate that the future undiscounted cash flows of certain 
long-lived assets are not sufficient to recover the carrying value of such 
assets, the assets are adjusted to their fair values. Based on these 
evaluations there were no adjustments to the carrying value of long-lived 
assets during the year ended March 31, 1997. However, certain assets that 
were still in use, primarily intangible assets, including goodwill, met the 
test for impairment during the year ended March 31, 1998. The revised 
carrying values of such assets were calculated based on discounted estimated 
future cash flow and resulted in a pre-tax non-cash charge of $81,609,000 
(which included a write-down of the minimum royalty asset and other assets 
included in other assets of $2,837,000 and a write-down of fixed assets of 
$510,000). The write-off of such intangible assets was net of accumulated 
amortization of $9,383,000.

The Company evaluates the recoverability of long-lived assets held for sale by
comparing the asset's carrying amount with its fair value less cost to sell. In
March 1998, the Company recorded a charge of $3,810,000 relating to assets
(including fixed assets of $136,000) of certain foreign subsidiaries that the
Company intends to sell or close.

As a result of the SFAS 121 charge, depreciation and amortization expenses
related to certain assets will be reduced in future periods. In conjunction with
the review for impairment, the estimated useful lives of certain assets were
reviewed. This review resulted in the acceleration of amortization expense for
certain trademarks, thus changing the range of useful lives for trademarks to
19-25 years at March 31, 1998.


                                     F-14

<PAGE>

8.  ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
                                                                          MARCH 31,
                                                                      1998        1997
                                                                       (IN THOUSANDS)
<S>                                                                 <C>         <C>
Accrued costs relating to Company's business restructuring plan     $12,090     $   ---
Accrued trade promotion                                               8,905       6,129
Accrued interest payable                                              5,055       4,562
Accrued pension termination liability                                 4,693       4,900
Other liabilities from purchased businesses                           4,078       9,993
Current portion of minimum royalty obligation                         2,569       4,006
Accrued salaries and other employee benefits                          1,616       1,592
Other                                                                 7,000       9,140
                                                                    -------     -------
                                                                    $46,006     $40,322
                                                                    -------     -------
                                                                    -------     -------
</TABLE>

9.  DEBT

a. 1997 SENIOR NOTES: On February 7, 1997, the Holding Company completed the 
sale of $200,000,000 aggregate principal amount of its 11 3/4% Senior Notes 
due 2004 (the "Senior Notes"). Interest is payable semi-annually on August 15 
and February 15. The Senior Notes may be redeemed at the option of the Company 
on or after February 15, 2002, initially at 103.358, declining to 101.679 on 
or after February 15, 2003, together with accrued interest. Under certain 
circumstances as defined in the indenture agreement (the "Indenture"), the 
Senior Notes may be redeemed earlier at the option of the Holding Company. 
These Senior Notes were issued in an offering not registered or required to 
be registered under the Securities Act of 1933 (the "Act"). On March 24, 
1997, the Holding Company filed a Registration Statement on Form S-4 (which 
became effective on May 8, 1997) in order to register new notes (the "1997 
Senior Notes") under the provisions of the Act, to be issued in exchange for 
the Senior Notes. On June 8, 1997, the Holding Company completed the exchange 
of its entire outstanding principal amount of Senior Notes for a like amount 
of its 1997 Senior Notes which were registered under the Act. The proceeds 
from the Senior Notes were used to repay then outstanding indebtedness.

The 1997 Senior Notes are obligations exclusively of the Holding Company and 
are not guaranteed by any of the Holding Company's operating subsidiaries. In 
connection with the sale of the Senior Notes (prior to the exchange for the 
1997 Senior Notes), the Holding Company transferred $17,500,000 to a 
newly-formed, single-purpose wholly-owned subsidiary, Renaissance Guarantor, 
Inc., a Delaware corporation ("RGI"), in exchange for a limited guarantee by 
RGI of the Holding Company's obligations under the Senior Notes. RGI 
placed such amount into an escrow account (the "Escrow Account") which will 
be used for interest payments. The 1997 Senior Notes are general unsecured 
obligations of the Holding Company except to the extent that they are 
collateralized by a first priority security interest in the Escrow Account. 
There are no sinking fund requirements relating to the 1997 Senior Notes. 

Interest in the aggregate amount of $11,750,000 was due and payable on 
February 17, 1998. On February 13, 1998, the Holding Company requested that 
the trustee exercise its right to request the escrow agent to make available 
additional funds to pay the balance of the interest due to holders of the  
1997 Senior Notes. On February 17, 1998, pursuant to the request of the 
trustee, the escrow agent released funds held in the escrow account and paid 
the interest payment in full. As of March 31, 1998, $1,815,000 remains in the 
Escrow Account that can be used for the interest payment. Based on the 
Holding Company's current and expected level of operations, the Holding 
Company does not 

m
                                     F-15

<PAGE>

expect to be able to pay the installment of interest due on August 15, 1998 
from cash generated from operations. Additionally, the Holding Company is 
restricted from paying such interest payment by the terms of its 1997 Credit 
Facility. Therefore, the 1997 Senior Notes are classified as current 
liabilities at March 31, 1998. See discussion in Note 1 -Current operating 
environment for a discussion of the Holding Company's financial restructuring 
plans.

b.  1997 CREDIT FACILITY:

On March 12, 1997, Dana entered into its Revolving Credit Facility with 
General Electric Capital Corporation ("GECC") and the other lenders party 
thereto (collectively, the "Revolving Credit Lenders") (the "1997 Credit 
Facility"). The 1997 Credit Facility is guaranteed by each of the principal 
domestic operating subsidiaries and the Holding Company (which, together with 
Dana, are collectively referred to as the "Credit Parties").

The maximum borrowing amount under the 1997 Credit Facility, as amended on
June 26, 1998, is (1) $75 million, subject to a borrowing base calculation 
based upon eligible inventory and accounts receivable, plus (2) as part of the 
$75 million, an overadvance component in the amount of $30 million. The $30 
million overadvance component, which is a demand loan, is to be reduced to $15 
million at December 31, 1998 and to zero at June 30, 1999. As of March 31, 1998,
(1) $55.6 million was outstanding under the 1997 Credit Facility (including 
an overadvance of $0.6 million) and (3) $1.7 million of letters of credit 
were outstanding.  

Loans drawn under the 1997 Credit Facility bear interest at the Index Rate 
plus 2.00%.  Overadvances bear interest at (i) the Index Rate (i.e., the 
higher of the prime rate as the overnight Federal Funds rate plus 0.5%) plus 
4.00% through June 26, 1998, (ii) the Index Rate plus 5.5% through December 
31, 1998 and (iii) the Index Rate plus 6.5% through June 30, 1999.  For the 
year ended March 31, 1998, the Company's weighted average borrowing rate on 
the 1997 Credit Facility was 8.5%.

The 1997 Credit Facility is secured by all of the assets of the Credit 
Parties.  In addition, the Credit Parties pledged 66% of the stock of their 
principal first-tier operating foreign subsidiaries and 100% of the stock of 
their principal first-tier operating domestic subsidiaries as additional 
collateral for the loans under the 1997 Credit Facility.

The 1997 Credit Facility, as amended, contains a number of convenants that 
restrict the operation of the Company, including restrictions on, among other 
things, (1) certain mergers, acquisitions or sales of the Company's assets or 
stock (other than stock of the Holding Company), (2) cash dividends and other 
distributions to equity holders of the Company, (3) interest payments with 
respect to the Company's indebtedness, (4) payments in respect of 
subordinated debt, (5) certain transactions with affiliates, (6) indebtedness 
and liens and (7) Restricted Payments.  The 1997 Credit Facility also 
contains several financial covenants.  The Revolving Credit Lenders have 
agreed to waive compliance with the Maximum Leverage Ratio and Minimum 
Interest Coverage Ratio through June 30, 1999, and the parties have revised 
the minimum EBITDA covenant.  The Credit Parties have covenanted not to 
permit the outstanding amount of overadvances to exceed certain monthly set 
amounts.

The Revolving Credit Lenders have waived or consented to all of the Company's 
covenant violations since inception of the 1997 Credit Facility for all 
purposes thereunder except for purposes of the Restricted Payments covenant.  
As a result, the Holding Company is prohibited from making the following 
payments: (1) scheduled interest payments on the 1997 Senior Notes and 
Subordinated Seller Notes, (2) fees due and payable to Kidd Kamm pursuant to 
the Management Agreement between Kidd Kamm and the Holding Company, (3) 
payments to purchase, redeem or otherwise acquire the Common Stock (or 
options to acquire shares of Common Stock) held by former employees or their 
estates and (4) cash dividends on the Holding Company's 10% Preferred 
Stock.  

                                     F-16
<PAGE>

The Credit Parties have agreed to pay up to $1,000,000 in fees, of which 
$500,000 was paid on June 26, 1998. The amount and timing of payment of the 
balance will vary depending on certain circumstances. In addition, if there 
is a loan balance outstanding at December 31, 1998, the Credit Parties will 
pay an additional fee of $1,000,000, the timing of which is subject to 
certain circumstances.

The Company has classified its 1997 Credit Facility as current since the
overadvances are demand loans and continued funding is dependent on the Company
being able to meet its business plan. There can be no assurance that the Company
will be able to meet its business plan. See Note 1 for a discussion of the
Company's current operating environment.

c. SUBORDINATED SELLER NOTES: 

The Subordinated Seller Notes are subordinated promissory notes of the 
Holding Company with an aggregate principal amount of $5,000,000 and accruing 
interest at 8% initially and escalating to 11% over an eight-year period with 
a balloon payment of principal and accrued interest on August 15, 2002. These 
notes were recorded at a discount of $1,500,000, yielding an effective 
interest rate of 14.48%.

10.  PREFERRED STOCK

a. 10% PREFERRED STOCK-The Holding Company issued for $10,000,000, 10,000 
shares of cumulative exchangeable preferred stock (the "10% Preferred Stock") 
with a par value of $.01 per share. The proceeds from the sale of the 
redeemable preferred stock were reduced by the allocation of $350,000 to 
warrants issued with the preferred stock. The 10% Preferred Stock has an 
initial dividend of 10% per annum, and increases to 15% on August 15, 1999. 
Dividends are payable in cash, additional shares of 10% Preferred Stock or 
any combination thereof, at the option of the Holding Company, up to and 
including the August 15, 1997 dividend, and in cash thereafter. The dividend 
rate increases on August 15, 1997 for the period from August 15, 1997 to 
August 15, 1998 if cash dividends are not declared, to 12.5%, increasing 
again to 13 3/4% on August 15, 1998 for the period from August 15, 1998 to 
August 15, 1999 after which it increases to 15%. The payment of cash 
dividends is restricted by the 1997 Credit Facility, therefore dividend 
payments will continue in additional shares of stock and the Holding Company 
expects that such rate increases will occur.

The 10% Preferred Stock must be redeemed on August 15, 2002 for $10,000,000, 
plus all accumulated and unpaid dividends. The 10% Preferred Stock is 
exchangeable for an issue of the Holding Company's debt 

                                     F-17

<PAGE>

that has since been retired, under certain circumstances by the holders of 
the 10% Preferred Stock on or after August 15, 1997. Since the exchange did 
not occur before such debt was retired, such stock is not currently 
exchangeable.

b. SERIES B AND C PREFERRED STOCK- In August and September 1996, the Holding 
Company completed a private placement of 115,000 shares of the Holding 
Company's 14.0% Senior Redeemable Preferred Stock, Series B par value $0.01 
per share (the "Series B Preferred Stock"). The proceeds from issuance of the 
Series B Preferred Stock were reduced by an allocation of $32,867,000 to the 
warrants issued with the Series B preferred stock (see note 11), and by the 
payment of approximately $7,451,000 of financing fees.

On April 28, 1997, the Holding Company completed an offer to exchange shares 
of 14.0% Senior Redeemable Preferred Stock, Series C (the "Series C Preferred 
Stock") which are registered under the Securities Act of 1933 for outstanding 
shares of its Series B Preferred Stock, which are subject to certain transfer 
restrictions, on a share for share basis. The Series C Preferred Stock has 
substantially the same terms as the Series B Preferred Stock but is not 
subject to transfer restrictions. Following the exchange, there were 775 
shares of Series B Preferred Stock outstanding and 126,916 shares of Series C 
Preferred Stock Outstanding. Shares of Series B Preferred Stock and Series C 
Preferred Stock are together referred to as "Series B and C Preferred Stock" 
on the consolidated balance sheet as of March 31, 1998.

According to the terms of the Series B and C Preferred Stock, if the Holding 
Company does not pay cash dividends after November 17, 1997, the per annum 
dividend rate is increased by 0.25% during each quarter on which such 
non-cash dividend payment occurs, unless such non-cash payment has occurred 
during more than four quarters, in which case the per annum dividend rate 
will be increased by 0.5% in each quarterly period in which such non-cash 
payment occurs, to a maximum rate of 17% per annum. Thus, the effective 
quarterly dividend rate for the Series B and C Preferred Stock was 3.5625% 
for the period ended February 17, 1998 and was 3.625% for the period ended 
May 15, 1998. The Holding Company does not currently expect to pay cash 
dividends on the Senior Redeemable Preferred Stock and accordingly the 
effective quarterly dividend rate thereon will be increased as described.

c. SERIES A PREFERRED STOCK- In May and June 1996, the Holding Company issued 
$20,000,000 aggregate value of Series A Senior Redeemable Exchangeable 
Preferred Stock ("Series A Preferred Stock"). Such Series A Preferred Stock 
was retired on December 4, 1996.

11.  OPTIONS AND WARRANTS

a. STOCK OPTION PLAN - The 1994 Stock Option Plan was approved by the Holding 
Company's Board of Directors and stockholders in January 1995. At March 31, 
1998, the Holding Company had reserved 136,320 shares of Common Stock under 
the plan. The plan provides for incentive and non-qualified stock options for 
employees. All options have been granted at exercise prices at or above fair 
market value at the date of grant and vest ratably over a four-year period. 
The Holding Company has adopted the disclosure only provisions of Statement 
of Financial Accounting Standards No. 123, "Accounting for Stock Based 
Compensation" ("SFAS 123"). Accordingly, no compensation cost has been 
recognized for the stock option plans. Determining compensation cost for the 
Holding Company's stock option plan based on the fair value at the grant date 
for awards during the years ended March 31, 1998, 1997 and 1996 consistent 
with the provisions of SFAS 123, would not have had a material effect on the 
Company's net loss and net loss per share.

At March 31, 1998, 48,823 shares were available for future grants under the 
stock option plan.

                                     F-18

<PAGE>

The following table summarizes the activity of options in the stock option plan.

<TABLE>
                                                           WEIGHTED AVERAGE
                                               SHARES       EXERCISE PRICE
<S>                                           <C>          <C>
Options outstanding, March 31, 1995            65,863           $37.17

Granted                                        23,877           $37.17
Canceled                                      (13,512)          $37.17
                                              -------
Options outstanding, March 31, 1996            76,228           $37.17

Granted                                        40,736           $81.77
Canceled                                      (10,659)          $37.17
                                              -------

Options outstanding, March 31, 1997           106,305           $54.26
Granted                                        12,550           $96.23
Exercised                                      (1,237)          $37.17
Canceled                                      (31,358)          $56.80
                                              -------
Options outstanding, March 31, 1998            86,260           $63.27
                                              -------
                                              -------

Options exercisable, March 31, 1996            14,832           $37.17
                                              -------
                                              -------
Options exercisable, March 31, 1997            25,571           $37.17
                                              -------
                                              -------
Options exercisable, March 31, 1998            38,182           $47.06
                                              -------
                                              -------
</TABLE>

The following table summarizes information about the Holding Company's stock 
options outstanding and exercisable as of March 31, 1998.

<TABLE>
                              OPTIONS OUTSTANDING
                              -------------------
OUTSTANDING    WEIGHTED AVERAGE               WEIGHTED AVERAGE
SHARES         REMAINING CONTRACTUAL LIFE     REMAINING EXERCISE PRICE
<S>            <C>                            <C>
  46,974               1.2 years                      $ 37.17
  17,236               2.5 years                      $ 90.00
  17,050               3.5 years                      $ 96.23
   5,000               2.8 years                      $104.00
  ------
  86,260
  ------
  ------

                              OPTIONS EXERCISABLE
                              -------------------
OUTSTANDING    WEIGHTED AVERAGE               WEIGHTED AVERAGE
SHARES         REMAINING CONTRACTUAL LIFE     REMAINING EXERCISE PRICE
<S>            <C>                            <C>
  31,498               1.1 years                      $ 37.17
   4,309               2.5 years                      $ 90.00
   1,250               2.5 years                      $ 96.23
   1,125               2.8 years                      $104.00
  ------
  38,182               
  ------
  ------
</TABLE>

At March 31, 1998, because of Renaissance's financial restructuring plans, 
the Company believes that the fair value of the outstanding stock options is 
at or near $0.

                                     F-19

<PAGE>

b. OTHER EMPLOYEE STOCK OPTIONS - Dr. Bonoma had been granted stock options 
holding he had the right to acquire a total of 93,182 shares of common stock 
of the Holding Company. The earliest date on which these options could have 
become exercisable, generally was August 18, 1997, based on the value of the 
Holding Company's equity reaching certain thresholds; however, the valuation 
date is accelerated prior to that date (and if the thresholds are reached the 
options become exercisable) upon a sale or merger of the Holding Company or a 
public offering of the Holding Company's common Stock. Notwithstanding 
whether the earnings of the Holding Company meet any of the tests enunciated 
in the stock option agreement, Dr. Bonoma's estate will be entitled to 
exercise these options commencing on August 18, 2000. The above stock options 
had been authorized by the Holding Company's Board of Directors and granted 
outside of the Company's stock option plan. The exercise price for each 
purchasable share under this stock option is $37.17237.

c. STOCK PURCHASE WARRANTS- In 1994, the Holding Company issued 130,000 
warrants in connection with an issue of its debt that has since been retired 
and 50,000 warrants in connection with its 10% Preferred Stock. Such warrants 
were detached in December 1994 and remain outstanding at March 31, 1998. The 
value allocated to the warrants aggregated $1,260,000. The warrants are 
exercisable and outstanding and expire on August 15, 2001. The exercise price 
of the warrants is $.01 per share.

In connection with the issuance of the Series B and C Preferred Stock, the 
Holding Company issued 115,000 warrants to purchase 341,550 shares of the 
Holding Company's common stock. The value allocated to the warrants was 
$32,867,000. The warrants are exercisable at any time and expire on August 
15, 2001. These warrants have an exercise price of $.01 per share

12.  INCOME TAXES

The Company records deferred tax liabilities and assets for estimated future tax
consequences attributable to temporary differences. Such temporary differences
exist when the tax basis differs from the financial reporting amount of assets
or liabilities. A valuation allowance is recorded to reduce deferred tax assets
to amounts, which, in management's judgment, are more likely than not to be
realized.

The income tax provision (benefit) is composed of the following:







                                     F-20
<PAGE>

<TABLE>
                            YEAR ENDED     YEAR ENDED    YEAR ENDED
                             MARCH 31,      MARCH 31,     MARCH 31,
                               1998          1997          1996
<S>                         <C>            <C>           <C>
Current:
  Federal                    $      -      $      -       $   (279)
  State                           (24)          269            412
  Foreign                         940         1,139          1,112
                             --------      --------       --------  
                                  916         1,408          1,245
                             --------      --------       --------  
Deferred:
  Federal                           -             -              -
  State                             -             -           (100)
  Foreign                          (4)          (86)           160
                             --------      --------       --------  
                                   (4)          (86)            60
                             --------      --------       --------  
Total income tax provision   $    912      $  1,322       $  1,305
                             --------      --------       --------  
                             --------      --------       --------  
</TABLE>


                                    F-21

<PAGE>

There is no Federal tax liability as a result of Federal tax operating losses in
the amount of approximately $134,123,000. Such losses expire in accordance with
provisions of applicable tax law and expire beginning in 2006 as follows:

<TABLE>
                        AMOUNT                       DATE
               (dollars in thousands)
               <S>                                   <C>
                     $      679                      2006
                          3,834                      2007
                          1,703                      2008
                            625                      2009
                          6,400                      2010
                         13,035                      2011
                         43,058                      2012
                         64,789                      2013
</TABLE>


The future utilization of certain net operating loss carryforwards is subject to
the provisions of Section 382 of the Internal Revenue Code in connection with
changes in ownership. Net operating loss carryforwards of approximately
$23,000,000 are subject to an annual Section 382 limitation of $5,600,000 and
approximately $13,000,000 of net operating loss carryforwards are subject to an
annual Section 382 limitation of $1,100,000.

The following reconciles the income tax provision computed at the Federal
statutory income tax rate to the benefit recorded in the statement of
operations:

<TABLE>
                                                                YEAR ENDED
                                                                 MARCH 31,
                                                    1998           1997           1996
                                                        (dollars in thousands)
<S>                                             <C>            <C>             <C>
Federal benefit at statutory rate               $  (66,821)    $  (13,768)     $  (3,656)
Limitation of utilization of tax benefits           32,773         14,328          5,166
Benefit of carryback not previously recorded             -              -           (279)
State income taxes                                     (24)           269            311
Foreign income                                      13,617           (593)        (1,508)
Foreign taxes                                          936          1,053          1,271
Amortization                                        21,703
Life Insurance Proceeds                             (1,700)
Other                                                  428             33
                                                ----------     ----------      ---------  
                                                $      912     $    1,322      $   1,305
                                                ----------     ----------      ---------  
                                                ----------     ----------      ---------  
</TABLE>


                                    F-22

<PAGE>

The significant components of the Company's deferred tax liabilities and assets
are as follows:

<TABLE>
                                                             MARCH 31,
                                                          1998        1997
                                                        (dollars in thousands)
<S>                                                    <C>           <C>
Current deferred income tax assets (liabilities):
    Allowance for sales returns                        $   14,908    $    4,962
  Inventory reserves                                        7,121         5,924
  Other non-deductible reserves                             9,365        13,567
  Royalties                                                   373         1,302
  Other, net                                                  (95)           42
                                                       ----------    ---------- 
                                                           31,672        25,797
  Less valuation allowance                                (31,672)      (25,797)
                                                       ----------    ---------- 
                                                                -             -
                                                       ----------    ---------- 
Non-current deferred income tax assets (liabilities):
  Depreciation                                               (935)       (1,967)
  Amortization of intangible assets                        (2,281)       (1,555)
  Federal net operating loss carryforwards                 45,602        20,255
  State net operating loss carryforwards                    9,381         2,524
  Foreign tax credit carryforwards                          2,660         1,860
                                                       ----------    ---------- 
                                                           54,427        21,117
  Less valuation allowance                                (54,427)      (21,117)
                                                       ----------    ---------- 
                                                       $        -    $        -
                                                       ----------    ---------- 
                                                       ----------    ---------- 
Deferred foreign tax liability                         $      154    $      158
                                                       ----------    ---------- 
                                                       ----------    ---------- 
</TABLE>


Foreign pretax income (loss) was $(36,961,000), $1,746,000, and $4,447,000 for
the years ended March 31, 1998, 1997, and 1996, respectively.

13.  COMMITMENTS AND CONTINGENCIES

a. LEASES - The Company leases certain warehouses, office facilities, and
automobiles, under operating lease agreements, certain of which are subject to
escalation, expiring at various dates.


                                    F-23

<PAGE>


Future minimum lease payments under noncancelable operating leases as of March
31, 1998 are as follows:

<TABLE>

        MARCH 31,             AMOUNT
                       (dollars in thousands)
        <S>             <C>
          1999               $  2,728
          2000                  2,350
          2001                  1,746
          2002                  1,006
          2003                    317
          Thereafter            1,156
</TABLE>


Rent expense associated with operating leases for the years ended March 31,
1998,1997 and 1996 was $2,818,000, $2,007,000 and $1,999,000, respectively.

B. TERMINATED PENSION PLAN- On February 7, 1997, the Company closed the
Northvale, New Jersey and Boucherville, Quebec facilities of MEM and Tom Fields
Ltd. (a division of MEM) and terminated substantially all of the employees
working at such facilities. The union employees in the Northvale facilities had
been covered by a collective bargaining arrangement which included participation
in the local union pension fund (the "Fund"). Closure of such plants and
termination of the employees triggered an automatic withdrawal from the Fund In
connection with such withdrawal the Company will incur an ERISA withdrawal
liability, which has been estimated by the Fund's actuary at approximately
$3,800,000. The actual payments may be made either in a lump-sum, or in equal
quarterly installments over a period not to exceed twenty years, as calculated
under a statutory formula. During the year ended March 31, 1998, the Company
received an assessment from the Fund and began making quarterly payments of
$69,000 on September 1, 1997.

The Fund's actuary also informed the Company that for several years the Fund has
not received the minimum annual level of contributions required by ERISA. The
Fund is in the process of seeking to obtain certain waivers under ERISA and the
Internal Revenue Code so that the participating employers will not have to pay
any penalties for the Fund's failure to receive such minimum levels of
contributions. The Fund's actuary has estimated the Company's liability, if such
waivers are not obtained, to be approximately $1,100,000. Furthermore, the
Company's ERISA withdrawal liability may be recalculated if the Fund terminates
within three years of the Company's withdrawal, which may significantly increase
the amount of the liability. The amount of the additional ERISA withdrawal
liability in the event of the Fund's termination cannot be estimated at this
time.

As of March 31, 1998 the remaining accrued but unpaid pension liability is
$4,693,000.


                                    F-24

<PAGE>

C. HOUBIGANT AND OTHER LICENSE AGREEMENTS The Company, Houbigant Inc. 
("Houbigant") and other parties entered into license and sublicense 
agreements in 1994, as amended, ("the Houbigant License Agreements"), whereby 
the Company obtained certain exclusive rights to manufacture and sell on a 
worldwide basis certain fragrance products owned and licensed by Houbigant 
for initial periods of five and seven years. In connection with the Houbigant 
License Agreements, the Company paid Houbigant Inc. $5,000,000 as a 
prepayment of advance royalties that could be used to reduce future royalty 
payments when certain conditions are met. The Company has the option to renew 
the Houbigant License Agreements for up to seven successive five year 
periods. Pursuant to the Houbigant License Agreement , the Company is 
obligated to pay certain minimum annual royalties. During each renewal 
period, annual minimum royalties are adjusted based on increases in the 
Consumer Price Index.

The Company and Houbigant entered into a License Modification Agreement, dated
March 20, 1998, pursuant to which Houbigant agreed, absent any defaults under
the License Modification Agreement, to forbear, for a period of one year from
March 20, 1998, from taking any action with respect to certain disputes and
alleged defaults under the license agreements existing as of March 20, 1998 or
any defaults which might occur during the forbearance period, with the exception
of certain specified defaults. In consideration of this forbearance, (1) the
first renewal period of five (5) years was bifurcated into two (2) sub-terms of
two and one-half (2-1/2) years each, (2) the Company agreed to an early renewal
of the License for the first 2-1/2 year sub-term (from July 1, 2001 through
December 31, 2003), (3) the amount deemed to have been a prepayment of the
royalties was reduced from $5,000,000 to $2,500,000 (with Houbigant retaining
$2,500,000), and (4) the Company and Houbigant agreed on the allocation of the
remaining $2,500,000 of prepaid royalties as credits against future royalties.
The amendment to the agreement caused an increase in the minimum royalty asset
of $4,592,000, and an increase in the minimum royalty liability of $4,342,000,
with a reduction in current year amortization of $250,000. Additionally, the
minimum royalty asset was among the long-lived assets reviewed for impairment in
accordance with SFAS 121 (see Note 7)

Additionally, Cosmar has certain license agreements through which it is
obligated to pay minimum royalty payments.

Future minimum royalty payments are as follows:

<TABLE>
                                      YEAR ENDING
                                        MARCH 31,            AMOUNT
                                                    (dollars in thousands)
                                      <S>            <C>
                                          1999                3,121
                                          2000                2,585
                                          2001                2,616
                                          2002                2,702
                                          2003                2,681
                                       Thereafter             1,999 
                                                         ---------
Total minimum royalty payments                               15,704 
Less: Amounts representing interest                           5,061 
                                                         ---------
Present value of minimum royalty payments                    10,643
Current portion                                               2,569 
                                                         ---------
Long-term portion                                             8,074
                                                         ---------
                                                         ---------
</TABLE>


                                    F-25

<PAGE>

Royalty expense pursuant to minimum royalty agreements totaled $2,911,000,
$2,848,000, and $1,931,000 for the years ended March 31, 1998, 1997 and 1996,
respectively.

As of March 31, 1998, the balance of the minimum royalty asset relating to the
Houbigant royalties and the Cosmar minimum royalties (included within other
assets) was $9,269,000.

14.  EMPLOYMENT AGREEMENTS

The Company has employment agreements with certain of its executive officers, 
the terms of which expire at various times through October 31, 2000. Such 
agreements, which have been revised from time to time, provide for minimum 
salary levels, adjusted annually for cost-of-living changes, as well as for 
incentive bonuses that are payable if specified management goals are 
attained. The employment agreements also provide for severance benefits, 
disability and death benefits and as to one director, a life insurance policy 
in his name. The aggregate minimum commitment for future salaries at March 
31, 1998, excluding bonuses, was approximately $3,123,000. Additionally, as 
part of two employment agreements, options were reserved for issuance but 
have not been granted.

In connection with an employment agreement with Dr. Thomas V. Bonoma at March 
31, 1997 the Company has a liability for $93,000, representing a bonus owed 
to his estate.

15.  LEGAL PROCEEDINGS

PREMIER SALES GROUP LITIGATION. The Holding Company, GAC and Cosmar were sued 
in the District Court of Jefferson County, Texas in August 1997 by Premier 
Sales Group, Inc. and David Gosdin (together, "PSG"), a former sales 
representative for the Nat Robbins brand. The complaint alleged (1) breach of 
contract, (2) unjust enrichment, (3) failure to provide an accounting, (4) 
fraud, (5) interference with business relations and prospective advantage, 
(6) breach of duty of good faith and fair dealing and (7) violation of 
certain sections of the Texas Business and Commerce Code Sections 35.81, et 
seq., and sought actual, statutory, special, punitive and exemplary damages 
in amounts to be proven at trial. The Holding Company, Cosmar and GAC denied 
all the material allegations of the complaint, and filed a third party 
complaint against the sellers of GAC (the "Sellers") in November 1997 seeking 
damages for breach of representations and warranties in the Stock Purchase 
Agreement and indemnification pursuant to the terms of the Stock Purchase 
Agreement. In March 1998, PSG, the Holding Company, Cosmar, GAC and the 
Sellers entered into settlement agreements pursuant to which (a) $299,999.99 
of the $500,000 held in an escrow account set up under the Stock Purchase 
Agreement was released from the escrow account and delivered to PSG, (b) 
$30,000 of the amount remaining in the escrow account was delivered to the 
Holding Company, Cosmar and GAC to be applied against outstanding attorneys' 
fees for the litigation, (c) the balance of the escrow account was delivered 
to the Sellers, and (d) all parties signed mutual releases (except that the 
Holding Company, GAC and Cosmar did not release any claims arising under the 
existing consulting agreements with the Sellers). The litigation was 
dismissed with prejudice by order entered on March 13, 1998.

ORIGINAL ADDITIONS. In November 1997, Cosmar filed a AAA arbitration claim
against Original Additions (Beauty Products), Ltd. ("Original Additions"), a
former distributor of Cosmar products in the United Kingdom, seeking recovery of
approximately $130,000 owed to Cosmar pursuant to a distribution agreement
between the parties. On the same day, Original Additions filed a complaint in
Superior Court in Los Angeles County, California, against the Company, Cosmar
and Dana U.K. Limited ("Dana U.K."), another subsidiary 


                                    F-26

<PAGE>

of the Company. The complaint alleges (1) breach of contract, (2) 
interference with and conspiracy to interfere with contract, (3) unfair 
competition and conspiracy to unfairly compete and (4) fraud. Original 
Additions is seeking reformation of the original distribution agreement, 
declaratory relief with respect to its alleged right of set-off and 
compensatory and punitive damages in amounts to be proven. In April 1998, the 
parties executed an Agreement pursuant to which (a) they agreed to submit 
their claims to binding arbitration before a retired judge from the Los 
Angeles or Orange County Superior Court or the United States District Court 
for the Central District of California, (b) Cosmar agreed to withdraw its 
arbitration demand without prejudice and (c) Original Additions agreed to 
dismiss the litigation without prejudice. The parties have thirty days after 
the execution of the Agreement to serve their claims on each other and the 
arbitrator. The arbitration is to be commenced on or before December 31, 
1998, unless extended by mutual agreement of the parties. The Company does 
not believe that the outcome of this litigation will have a material effect 
on financial position or results of operations.

OTHER LITIGATION. The Company is involved from time to time in various legal
proceedings arising from the ordinary course of business. The Company believes
that the outcome of all pending legal proceedings in the aggregate will not have
a material effect on the financial condition or results of operations of the
Company.

16.  RETIREMENT PROGRAMS

The Company has a 401(k) Pension Plan for all U.S. employees, with the 
exception of Dana union members for which the Company maintains a separate 
401(k) plan. The Plans are available to all employees who have been employed 
continuously for at least six months. The participants contribution ceiling 
is 20% of their annual compensation, as defined, and a matching contribution 
is provided by the Company at 50% of the first 6% of the participants' salary 
for the non-union members and 12 1/2% of the first 6% of the participants' 
salary for the union plan. The participants become fully vested after four 
years of service. The contributions made by the Company during the years 
ended March 31, 1998, 1997 and 1996 were $242,000, $393,000, and $166,000, 
respectively. Certain of the administrative expenses are paid by the Company, 
the Plans' sponsor.

MEM had a defined benefit pension plan covering substantially all of its
non-union employees. The plan had been terminated prior to the acquisition.

17.  FAIR VALUE OF FINANCIAL INSTRUMENTS:

The following estimated fair value amounts have been determined using 
available market information and appropriate valuation methodologies. 
However, considerable judgement is required to interpret market data and to 
develop the estimates of fair value. Accordingly the estimates presented 
herein are not necessarily indicative of the amounts that the Holding Company 
could realize in a current market exchange.

The following methods and assumptions were used to estimate the fair value of 
each class of financial instruments for which it is practicable to estimate 
that value. The carrying values of cash and cash equivalents, accounts 
receivable and current liabilities (excluding the accrued interest on the 
Holding Company's Subordinated Seller Notes which are payable in 2002) 
approximate fair value because of the short-term maturities of those 
instruments. The fair values of the Holding Company's 1997 Senior Notes and 
Series B and C Preferred Stock and outstanding warrants, are estimated based 
upon quoted market prices. However, as there is not a very regular market for 
such securities, such quoted prices may vary depending on which broker is 
making the quote. The fair values of the Subordinated Seller Notes (and 
accrued interest thereon) and the 10% Preferred Stock are estimated based on 
rates currently available to the Holding Company for debt with similar terms 
and remaining maturities. The fair value of the 1997 Credit Facility is 
assumed to approximate cost at March 31, 1998.

                                    F-27

<PAGE>
<TABLE>
                                                        Year Ended March 31,
                                               1998                         1997
                                      Fair Value  Carrying Amount  Fair Value   Carrying Amount  
                                                    (dollars in thousands)
<S>                                   <C>             <C>           <C>            <C>
Cash & Cash Equivalents               $  7,698        $  7,698      $    719       $    719
Marketable Securities-Short Term         1,934           1,934        14,331         14,331
Marketable Securities-Long Term              -               -         8,468          8,468
Accounts Receivable                     32,995          32,995        48,837         48,837
Accounts Payable                        33,099          33,099        21,612         21,612
Accrued Expenses (a)                    44,358          44,358        39,202         39,202
1997  Credit Facility                   55,554          55,554             -              -
1997 Senior Notes                      108,000         200,000       201,000        200,000
Subordinated Seller Notes (b)            6,041           5,720         5,725          4,997
10% Preferred Stock                      8,070          14,333        11,539         13,167
Series B and C Preferred Stock           7,089         109,925        94,037         86,660
Warrants issued in 1994                      -               -        17,321              -
Warrants issued in 1996                      -          32,867        32,867         32,867
</TABLE>


(a)  Excluding accrued interest on Subordinated Seller Notes due in 2002

(b)  Carrying amount includes accrued interest of $1,648,000 and $1,120,000 that
     is included in accrued expenses at March 31, 1998 and 1997, respectively

18.  CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and trade accounts
receivable.

Credit risk with respect to trade accounts receivable is generally diversified
due to the large number of entities comprising the Company's customer base and
their dispersion throughout the United States. The Company generally does not
require collateral, and the majority of its trade receivables are unsecured. The
Company does, however, perform ongoing credit evaluations of its customers'
financial condition.

The Company sells a significant portion of its products through third-party drug
store and discount retailers and as a result, maintains individually significant
accounts receivable balances with major retailers. If the financial condition
and operation of these retailers deteriorate below critical levels, the
Company's operating results could be adversely affected. An allowance for
doubtful accounts and sales returns is maintained at a level which management
believes is sufficient to cover potential credit losses. The ten largest
accounts receivable balances collectively represented 50% and 66% of total
accounts receivable at March 31, 1998 and 1997, respectively. Sales to the top
ten customers represented 55%, 46% and 50% of gross revenues during the years
ended March 31, 1998, 1997 and 1996. One customer accounted for 13% and 12% of
the Company's gross revenues for the years ended March 31, 1998 and 1997,
respectively. No single customer accounted for greater than 10% of the Company's
gross revenues for the year ended March 31, 1996.


                                    F-28

<PAGE>

19.  RELATED PARTIES

The Company records fees payable to Kidd, Kamm & Company ("Kidd Kamm"), a
related party. Other (income) expense net for the year ended March 31, 1998
includes $675,000 of fees payable to Kidd Kamm. Approximately $356,000 were
paid. As of August 15, 1997, such payments were restricted by the terms of the
Company's 10% Preferred Stock. In connection with the closing of the
Senior Notes, the Company paid a fee of $1,350,000 to Kidd Kamm, which has been
reflected as deferred financing costs.

In December 1995, the holders of the Subordinated Seller Notes sold such notes
to a third party who is a holder of a substantial portion of the Company's
10% Preferred Stock (the "Holder"). In a related transaction, the Company
signed an agreement with the Holder, whereby in exchange for $225,000, the
Company agreed not to pursue any claims against the Holder relating to the
acquisition of Cosmar. All other terms and provisions of the sellers' note
remained the same.

20.  INFORMATION CONCERNING FINANCIAL REPORTING FOR SEGMENTS AND OPERATIONS IN
     GEOGRAPHIC AREAS

The Company, through its operating subsidiaries, is engaged in two main 
businesses, the manufacturing and marketing of fragrances and associated 
products and the manufacturing and marketing of cosmetics products.

Year ended March 31, 1998:

<TABLE>
                                  FRAGRANCES      COSMETIC     CORPORATE     ELIMINATIONS    CONSOLIDATED   
<S>                               <C>             <C>          <C>           <C>             <C>
Sales to unaffiliated customers   $  108,577      $  71,119            -      $       -       $  179,696    
  Intercompany sales                  14,739      $       -            -        (14,739)               -
                                  ----------      ---------    ---------      ---------       ----------    
                                  ----------      ---------    ---------      ---------       ----------    
      Net Sales                   $  123,316      $  71,119                   $ (14,739)      $  179,696    
                                  ----------      ---------                   ---------       ----------    
                                  ----------      ---------                   ---------       ----------    
Operating income (loss)           $ (139,875)     $ (12,587)   $ (16,633)     $    (252)      $ (169,347)   
                                  ----------      ---------    ---------      ---------       ----------    
                                  ----------      ---------    ---------      ---------       ----------    
Identifiable assets               $  120,520      $ 107,006    $  12,958      $       -       $  240,484    
                                  ----------      ---------    ---------      ---------       ----------    
                                  ----------      ---------    ---------      ---------       ----------    
Depreciation and amortization     $   13,579      $   6,815    $     558      $     252       $   21,204    
                                  ----------      ---------    ---------      ---------       ----------    
                                  ----------      ---------    ---------      ---------       ----------    
Capital expenditures              $    7,272      $   4,005    $     133      $       -       $   11,410    
                                  ----------      ---------    ---------      ---------       ----------    
                                  ----------      ---------    ---------      ---------       ----------    
</TABLE>


                                    F-29

<PAGE>

Year ended March 31, 1997:

<TABLE>
                                  FRAGRANCES      COSMETIC     CORPORATE     ELIMINATIONS    CONSOLIDATED   
<S>                               <C>             <C>          <C>           <C>             <C>
Sales to unaffiliated customers   $  110,662     $  63,950     $       -      $       -       $  174,612    
Intercompany sales                     2,536           322             -         (2,858)               -    
                                  ----------     ---------     ---------      ---------       ----------  
      Net Sales                   $  113,198     $  64,272                    $  (2,858)      $  174,612    
                                  ----------     ---------                    ---------       ----------  
                                  ----------     ---------                    ---------       ----------  
Operating income (loss)           $    5,360     $   9,803     $ (10,639)     $       -       $    4,524   
                                  ----------     ---------     ---------      ---------       ----------  
                                  ----------     ---------     ---------      ---------       ----------  
Identifiable assets               $  217,077     $ 108,229     $  36,077      $       -       $  361,383   
                                  ----------     ---------     ---------      ---------       ----------  
                                  ----------     ---------     ---------      ---------       ----------  
Depreciation and
  amortization                    $    9,307     $   4,841     $     561      $       -       $   14,709  
                                  ----------     ---------     ---------      ---------       ----------  
                                  ----------     ---------     ---------      ---------       ----------  
Capital expenditures              $    6,715     $   2,141     $     474      $       -       $    9,330  
                                  ----------     ---------     ---------      ---------       ----------  
                                  ----------     ---------     ---------      ---------       ----------  
</TABLE>

Year ended March 31, 1996:

<TABLE>
                          FRAGRANCES   COSMETIC   CORPORATE    CONSOLIDATED
<S>                       <C>          <C>        <C>          <C>
Net sales (A)               $83,153     $48,133    $      -      $131,286
                            -------     -------    --------      --------  
                            -------     -------    --------      --------  
Operating income (loss)     $ 7,609     $ 9,160    $ (8,318)     $  8,451
                            -------     -------    --------      --------  
                            -------     -------    --------      --------  
Identifiable assets         $90,709     $83,074    $ 10,836      $184,619
                            -------     -------    --------      --------  
                            -------     -------    --------      --------  
Depreciation and
  amortization              $ 4,535     $ 3,305    $    211      $  8,051
                            -------     -------    --------      --------  
                            -------     -------    --------      --------  
Capital expenditures        $ 4,339     $ 1,942    $  1,885      $  8,166
                            -------     -------    --------      --------  
                            -------     -------    --------      --------  
</TABLE>


There were no material intersegment sales during the year ended March 31, 1996.


                                    F-30

<PAGE>

Information related to the Company's operations in different geographic areas is
shown below: 

Year ended March 31, 1998:

<TABLE>
                                     UNITED                 LATIN     EUROPE, AFRICA
                                     STATES       CANADA   AMERICA   AND THE FAR EAST   ELIMINATIONS  CONSOLIDATED  
<S>                                 <C>         <C>        <C>       <C>                <C>           <C>
Sales to Unaffiliated Customers     $ 130,958   $  8,998   $16,242       $ 23,498        $       -     $ 179,696
  Intercompany Sales                   14,229        203         -            307          (14,739)            -
                                    ---------   --------   -------       --------        ---------     ---------
Net sales                           $ 145,187   $  9,201   $16,242       $ 23,805        $ (14,739)    $ 179,696
                                    ---------   --------   -------       --------        ---------     ---------
                                    ---------   --------   -------       --------        ---------     ---------
Net income (loss)                   $(160,405)  $(18,229)  $(3,556)      $(15,256)                     $(197,446)
                                    ---------   --------   -------       --------                      ---------  
                                    ---------   --------   -------       --------                      ---------  
Identifiable
  assets                            $ 212,596   $  4,253   $ 6,607       $ 17,028                      $ 240,484
                                    ---------   --------   -------       --------                      ---------  
                                    ---------   --------   -------       --------                      ---------  
</TABLE>


Year ended March 31, 1997:

<TABLE>
                                     UNITED                 LATIN     EUROPE, AFRICA
                                     STATES       CANADA   AMERICA   AND THE FAR EAST   ELIMINATIONS  CONSOLIDATED  
<S>                                 <C>         <C>        <C>       <C>                <C>           <C>
Sales to Unaffiliated Customers     $ 139,174   $10,609    $ 17,888     $  6,941         $      -      $174,612
  Intercompany Sales                    2,236       591           -           31           (2,858)            -
                                    ---------   --------   --------     --------         ---------     --------
Net sales                           $ 141,410   $ 11,200   $ 17,888     $  6,972         $  (2,858)    $174,612
                                    ---------   --------   --------     --------         ---------     --------
                                    ---------   --------   --------     --------         ---------     --------
Net income (loss)                   $ (42,428)  $    192   $  1,600     $ (1,182)                      $(41,818)
                                    ---------   --------   --------     --------                       --------
                                    ---------   --------   --------     --------                       --------
Identifiable
  assets                            $ 306,186   $ 15,759   $ 10,600     $ 28,838                       $361,383
                                    ---------   --------   --------     --------                       --------
                                    ---------   --------   --------     --------                       --------
</TABLE>

Year ended March 31, 1996:

<TABLE>
                   UNITED                  LATIN     EUROPE, AFRICA
                   STATES      CANADA     AMERICA   AND THE FAR EAST   CONSOLIDATED
<S>              <C>          <C>         <C>       <C>                <C>
Net sales(A)     $ 115,300    $  8,026    $  4,825     $   3,135        $ 131,286
                 ---------    --------    --------     ---------        --------- 
                 ---------    --------    --------     ---------        --------- 
Net income
  (loss)         $ (15,333)   $    260    $  1,436     $   1,580        $ (12,057)
                 ---------    --------    --------     ---------        --------- 
                 ---------    --------    --------     ---------        --------- 
Identifiable
  assets         $ 156,951    $  9,675    $  7,107     $  10,886        $ 184,619
                 ---------    --------    --------     ---------        --------- 
                 ---------    --------    --------     ---------        --------- 
</TABLE>


There were no material Intercompany sales between geographic areas during the
year ended March 31, 1996.

21.  EXTRAORDINARY ITEM

During the fourth quarter of Fiscal 1996, the Company recorded an extraordinary
loss of $22,438,000, or $28.76 per share, relating to the early extinguishment
of debt. The loss was composed of the redemption premiums on the Company's Old
Senior Notes of $10,725,000, the write-off of deferred financing fees relating
to the debt that was extinguished of $10,489,000, and the write-off of the
remaining unamortized discount on the Old Senior Notes of $1,224,000. No tax
benefit was recognized for the extraordinary item.


                                    F-31

<PAGE>

22.  RESTRUCTURING COSTS

Restructuring costs included in the statement of operations consists of the 
severance related to the Company's March 26, 1998 decision to close Parfums 
Dana SAIC in Argentina. Such costs totaled $567,000 of which $172,000 was 
unpaid at March 31, 1998.

23. OTHER SEVERANCE AND PROFESSIONAL FEES

<TABLE>
<S>                                                       <C>
(dollars in thousands)
Severance, Relocation and Recruiting                         $1,795
Professional fees                                             1,357
                                                          ----------
Total                                                        $3,152
                                                          ----------
                                                          ---------- 
</TABLE>


The severance relocation and recruiting mentioned above represent costs of
reorganizing the Company's management team. Professional fees included above
include fees paid to outside parties to assist in the development and
implementation of the Company's operational restructuring plan.

******


                                    F-32