SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                 FORM 10-K
[   ]     Annual Report Pursuant to Section 13 or 15(d)
          of the  Securities  Exchange  Act of 1934 [Fee Required]

                                          or

[X] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                                     Act of 1934

          For the transition period from April 1, 1996 to December 31, 1996

                            Commission file number 1-12271

================================================================================
                                     CARSON, INC.
================================================================================
                (Exact name of registrant as specified in its charter)

            DELAWARE                                  06-1428605
(State or other jurisdiction of incorporation
            or organization)                    (I.R.S. Employer Identification
                                                             Number)

                        64 Ross Road, Savannah Industrial Park
                               Savannah, Georgia 31405
            (Address, including zip code, of principal executive offices)

          Registrant's telephone number, including area code: (912) 651-3400

             Securities Registered Pursuant to Section 12 (b) of the Act:

Title of Each Class:                       Name of Exchange On Which Registered:
Common Stock - Class A, $0.01 Par Value             New York Stock Exchange

     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

          Securities Registered Pursuant to Section 12 (g) of the Act: None

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. [ ]

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant,  computed by  reference  to the closing  price on The New York Stock
Exchange on February 28, 1997 was: $90,248,064

Indicate the number of shares  outstanding of each of the registrant's  classes,
as of the latest practicable date.

                   Title of Each Class: Outstanding at February 28,
                                        1997:
Common Stock - Class A, $0.01 Par Value                    4,996,568 shares
Common Stock - Class B, $0.01 Par Value                    1,859,677 shares
Common Stock - Class C, $0.01 Par Value                    8,127,937 shares

                         Documents incorporated by reference:
1996 Annual Report to Shareholders -- Part II, Exhibit 13.
Definitive Proxy Statement for the 1997 Annual Meeting of Shareholders on May 9,
1997 -- Part III.


<PAGE>
                                         Part I.

Item 1.  Business

Forward Looking Statements

     This transition  report on Form 10-K for the nine months ended December 31,
1996 as well as other public  documents of the Company  contain  forward-looking
statements  which involve risks and  uncertainties,  including (i) the Company's
plans to introduce  new products and product  enhancements,  (ii) the  Company's
plans  to  expand  its  international  operations  in  Africa,  Brazil,  and the
Caribbean,  (iii) the  Company's  plans to enter the  ethnic  cosmetics  product
category,  (iv) the Company's plans to enter the U.S.  professional salon market
for  ethnic  hair  care  products,  (v) the  Company's  plans to make  selective
acquisitions,  and (vi) the Company's marketing,  distribution and manufacturing
expansion plans.  The Company's actual results may differ  materially from those
discussed  in such  forward-looking  statements.  When  used  herein  and in the
Company's future filings, the terms "expects", "plans", "intends",  "estimates",
"projects",  or  "anticipates"  or similar  expressions are intended to identify
forward-looking  statements (within the meaning of Section 21E of the Securities
Exchange Act of 1934,  as amended  (the  "Exchange  Act")).  In addition to risk
factors that may be described in the Company's  filings with the  Securities and
Exchange Commission (the "Commission")  (including this filing and the Company's
prospectus dated October 14, 1996),  actual results could differ materially from
those  expressed  in  any  forward-looking   statements  made  by  the  Company.
Additional risk factors include, but are not limited to, the following:  (a) the
Company's success in implementing its growth strategy,  including its success in
obtaining financing where required, (b) difficulties or delays in developing and
introducing  new  products  or the  failure of  consumers  to accept new product
offerings,  (c)  changes in consumer  preferences,  including  reduced  consumer
demand for the Company's current  products,  (d) the nature and extent of future
competition  in the Company's  principal  marketing  areas,  and (e)  political,
economic and demographic  developments in the United States, Africa, Brazil, the
Caribbean,  Europe  and other  countries  where the  Company  now does or in the
future may do business.

Organization and Business

Carson, Inc. (formerly DNL Savannah Holding Corp. and also referred to herein as
the "Company") was  established in May 1995 and until August 1995 its operations
were de minimus. On August 23, 1995, the Company acquired all of the outstanding
stock  of  Aminco,  Inc.  (also  referred  to as  the  "Predecessor").  Aminco's
operations were  principally  conducted by its wholly owned  subsidiary,  Carson
Products  Company.  Subsequent to the  acquisition  of Aminco,  Carson  Products
Company was merged into Aminco; the surviving entity was renamed Carson Products
Company.  The  accompanying  financial  statements  of the  Company  include the
operating  results  of Carson  Products  Company  ("Carson  Products")  from the
acquisition date.
     The Company's  acquisition of the Predecessor for approximately $95 million
in cash (including $6 million for fees and other costs directly  associated with
the acquisition) was initially  financed with long-term  borrowings  aggregating
approximately  $68.0  million  and has been  accounted  for as a  purchase  (the
"Acquisition").  Accordingly,  the  purchase  price  has been  allocated  to the
Predecessor's  identifiable  assets and liabilities  based on the fair values at
the  acquisition  date.  The excess of the purchase price over the fair value of
the Predecessor's identifiable net assets has been classified as goodwill.
     In July 1996, the Company's South African subsidiary sold 25% of its shares
in an initial public offering on the Johannesburg Stock Exchange. The subsidiary
received  net  proceeds  of  approximately  $4.2  million  from this sale (which
resulted  in a gain to the  Company  of  approximately  $2.8  million  which was
recorded in paid in capital).  In  conjunction  with this public  offering,  the
Company  entered  into an  amendment  to its  license  agreement  with its South
African  subsidiary  which provides that  commencing on April 1, 1998, its South
African  subsidiary  will pay the Company a royalty in the amount of 3.0% of the
net sales price of all licensed products. The amount of the royalty increases to
3.5% on April 1, 1999 and 4.0% on April 1, 2000  until  the  termination  of the
agreement.  The initial term of the agreement expires on April 1, 1999; however,
the agreement continues indefinitely thereafter until terminated by either party
upon 12 months written notice.

<PAGE>

General

Carson, Inc. is a leading  manufacturer and marketer in the United States retail
ethnic hair care market for  African-Americans.  The Company believes that it is
one of the  leading  global  manufacturers  and  marketers  of ethnic  hair care
products for persons of African descent.  The Company's  flagship brand,  Dark &
Lovely,  is the most widely  recognized  ethnic brand name in the United  States
retail ethnic hair care market.  The Company  currently  sells over 70 different
products under five  principal  brand names,  including Dark & Lovely,  Excelle,
Beautiful  Beginnings,  Dark & Natural and Magic.  The majority of the Company's
sales are  derived  from four  categories  of the ethnic  health and beauty aids
market:  hair relaxers and  texturizers,  which are used to chemically treat and
straighten hair (constituting approximately 50% of the Company's sales in 1996),
hair color, shaving products and hair care maintenance  products.  The Company's
products  are  specifically  formulated  to  address  the  unique  physiological
characteristics  of hair of persons of African descent,  which typically include
curliness  and dryness.  The Company  believes that it has the number one United
States retail market  position in three of the four ethnic hair care  categories
in which it competes  (hair  relaxers  and  texturizers,  hair color and shaving
products).   In  addition,  the  Company  believes  that  the  strength  of  its
competitive position in the ethnic hair care industry is attributable,  in part,
to its  heritage  of  technological  innovation  and its  focused  Research  and
Development  effort.  The Company markets its products in the United States with
its own  experienced  direct sales  force.  The Company  currently   markets its
products in over  60 countries  outside of the United States, primarily  through
local  distributors.  In the nine months ended December 31, 1996,  approximately
28.5% of the Company's net sales were derived from sales within these countries.

The United  States  retail  ethnic hair care market,  principally  targeting the
distinct  hair  care  needs of  African-Americans,  was  estimated  to be a $1.2
billion  retail  business in 1995.  According to 1995 United  States Census Data
("Census  Data")  published by the United  States  Department  of Commerce,  the
African-American  population was  approximately 34 million and represented 12.7%
of the United States population.  This segment of the population is projected by
the United States Department of Commerce to grow  significantly  faster than the
general population  through the middle of the next century.  The personal income
of  African-Americans  doubled from 1980 to 1990 and their  combined  purchasing
power was estimated to be approximately  $260 billion in 1990,  according to the
Census  Data.  Moreover,  research  indicates  that  African-American  consumers
generally spend up to three times as much of their  disposable  income on health
and beauty products as Caucasian consumers.

<PAGE>

On a global scale, the Company currently  estimates that there are approximately
900 million people of African  descent  outside the United States,  including an
estimated 750 million  people on the African  continent,  100 million  people in
Brazil,  20 million people in the Caribbean,  10-15 million people in Europe and
10-13 million people in Central America.  The Company's experience in developing
regions such as South Africa,  the Caribbean and Brazil indicates the percentage
of women who patronize salons is dramatically higher in these developing markets
than in  developed  markets  such as the  United  States.  These  women  tend to
patronize salons because relaxer products are generally  unavailable on a retail
basis,  professionals have the expertise,  as well as ready access to hot water,
which is necessary for effective use of relaxer products, and the local salon is
often a social gathering place for its patrons. Although there is no independent
market  data to  support  the  size of the  international  market,  the  Company
believes that the international market is significant.  For example, the Company
estimates that in Southern Africa,  with a Black population of approximately 100
million,  manufacturers of ethnic hair care products generated approximately $40
million in sales in 1995.

Ethnic Market Leadership

The Company's  resources are focused primarily on satisfying the unique personal
care needs of individuals of African  descent  worldwide.  The Company  believes
that it has the number one United States retail market  position in three of the
four  ethnic  hair care  categories  in which it  competes  (hair  relaxers  and
texturizers,  hair color and  shaving  products).  The  Company  attributes  its
leading  market  position to its strong  brand names,  combined  with its direct
sales force,  broad  distribution,  R&D capabilities and experienced  management
team. Because of these strengths, the Company believes that it has a competitive
advantage over both the companies  specializing  in products for the ethnic hair
care market and the few general market companies that compete in the ethnic hair
care market but whose principal resources are targeted to the general health and
beauty aids market.


     Strong  Brands.  The  Company  currently  sells  its  products  under  five
principal brand names including Dark & Lovely,  Excelle,  Beautiful  Beginnings,
Dark & Natural and Magic. The Company's  flagship brand,  Dark & Lovely,  is the
most widely recognized ethnic brand name in the United States retail ethnic hair
care market for African-Americans.  The Company believes that its brand strength
is based upon product quality,  properly targeted  advertising,  package design,
reputation for  innovation and focused  commitment to the unique needs of ethnic
consumers.

     Experienced Sales Force and Broad Distribution.  In April 1995, the Company
established  a direct  sales force to enhance  its ability to further  penetrate
existing  markets  with both  current  and new  products.  The  sales  force has
significant  sales  experience  both with major consumer  product  companies and
ethnic hair care  competitors.  The Company believes that it now has the largest
direct sales force  serving the United  States  retail  ethnic hair care market.
Historically,  the Company used commissioned  sales brokers,  as is the industry
norm,  who tended to have  conflicting  brand  loyalties  and  provided  minimal
marketing and sell-through  support.  In the United States, the Company benefits
from  having its  extensive  product  line  distributed  broadly  through  three
principal  channels:  (i) multi-warehouse  chains,  including mass merchandisers
(e.g.,  Wal-Mart,  K-Mart),  major drug chains (e.g.,  Walgreens,  Revco),  food
chains (e.g.,  Winn Dixie,  Kroger) and discount  chains (e.g.,  Family  Dollar,
Dollar  General),  (ii)  Beauty  and  Barber  Supply  Stores  ("B&B's")  such as
Alberto-Culver  Company's  Sally's  Beauty  Supply  stores  and  members  of the
National   Beauty  Supply   Dealers   Association,   and  (iii)  ethnic  product
distributors.

     Research  and  Development.  The  Company  believes  that its  heritage  of
technological innovation and its focused R&D effort are important to maintaining
its market  leadership  position.  Three of the ethnic hair care industry's most
significant  innovations  were  introduced by the Company:  the first hair color
developed  exclusively for hair of persons of African descent (1972),  the first
no-lye relaxer,  which provided a safe relaxer product for home use (1978),  and
the recently patented Fail Safe technology for no-lye relaxers, which eliminates
problems  associated  with imprecise  mixing which can make no-lye  products too
weak, thereby impacting  straightening,  or too strong,  leading to hair damage.
One of the most  significant  sources of consumer  complaints in the industry is
inconsistent  results caused by mixing errors. The Company believes that its R&D
department,  led by two industry  experienced  chemists with Ph.Ds and including
nine other  researchers  and  technicians,  represents  the  largest  R&D effort
focused on the ethnic hair care market.

     Experienced  Management Team.  Carson's team of seasoned senior  executives
with extensive  experience in the ethnic market and consumer  products  industry
continue to build on the  Company's  strong  position in the global  ethnic hair
care market.  This management team has focused the Company's strategy to further
develop  the  ethnic   hair  care   market   both  in  the  United   States  and
internationally.

<PAGE>

Carson's Growth Strategy

The Company  believes  that it is well  positioned to grow both  internally  and
through  acquisitions,  in order to enhance  its market  position  in the ethnic
personal care market. The Company intends to achieve its goals by (i) increasing
its share of existing markets, (ii) increasing  international  expansion,  (iii)
leveraging  brands  into  new  categories,  (iv)  targeting  the  United  States
professional  salon  market  and  (v)  capitalizing  on  selective   acquisition
opportunities.

     Increase Share of Existing  Markets.  Using Carson's  90-year  research and
development  expertise in male  depilatories,  the Company expects to launch its
first  depilatory  for women,  Naturally  Soft,  in 1997.  The  Company has high
aspirations for this product as we believe the product  formulation  outperforms
any of the other female  depilatories  on the market.  In  addition,  we plan to
target the growing children's market with a newly patented  texturizer for boys,
a pre-teen female relaxer and a children's bubble bath and body lotion.

     The Company plans on supplementing its existing products with new additions
each year,  while at the same time  challenging R&D to improve  existing product
lines.  Since the Company has the largest R&D group in the ethnic  personal care
industry,  the Company  believes that it can protect our current position in our
existing  markets  by  constantly  upgrading  the  quality of our  products  and
simultaneously entering new and developing markets.

     Increase  International   Expansion.   The  primary  targets  for  Carson's
international expansion are Africa, Brazil and the Caribbean. For the nine-month
period ended December 31, 1996 compared to the nine-month  period ended December
31, 1995, international sales were up 31.9%.

     Southern  Africa has been the  largest  growth area for the  Company.  As a
result,  the Company is currently doubling the manufacturing and warehouse space
at its South Africa  facility  after less than one year of operation in order to
support the anticipated growth of the Company. In late 1996, we also purchased a
production  facility in Ghana located near the Ghanaian Coca-Cola bottling plant
which will enable the Company to better  service  the 200 million  Black  people
located in the region. The plant is projected to be operational by June 1997.

     In Kenya, East Africa, the Company anticipates having a similar facility to
the West  African  Ghanaian  plant which should be  operational  by late 1997 or
early 1998. Since East Africa has over 150 million Black people,  we believe the
Company has a similar opportunity for dramatic growth in this region.

     Brazil is another key international area for Carson.  With the magnitude of
the target  population  in Brazil,  estimated  at 100 million  people of African
descent,  which is almost three times the targeted  market of the United States,
the Company believes it has a tremendous  opportunity in this region. All of the
Company's products have been approved by the Brazilian authorities.  The Company
is in discussions  with a number of financial  institutions  and major Brazilian
corporations  to  establish  a bonded  warehouse  operation  which  will  ensure
consistent and timely delivery of its products and reduce its overall risk.

     In the Caribbean,  sales for the nine-month  period ended December 31, 1996
increased  by more than 120% above the same  period in 1995.  Our success in the
Caribbean reflects the Company's  decision in March 1996 to substantially  alter
its distribution  strategy and to assign direct responsibility to a Carson sales
manager  dedicated  exclusively  to this region.  The Company plans to acquire a
facility  in  Jamaica,  which will  enable the Company to produce in a Caribbean
Community and Common Market (CARICOM) nation, and thereby  substantially  reduce
the taxes and tariffs on its products.

     Leverage Brands into New Product Categories. The introduction of the Dark &
Lovely  Cosmetic Line is on target for launch in the second quarter of 1997. The
position  for the Dark & Lovely  Cosmetic  Line is "Class to Mass." The  Company
plans to leverage the same distribution  channels as its core business and offer
a  quality  line of  products  at an  affordable  price.  The  Company  plans to
introduce a complete line of cosmetics with 76 SKU's. Initially,  face products,
eye shadows,  lipsticks and nail enamels will be introduced.  In early 1998, the
Company plans to add accessory products such as pencils and mascaras.

     Target the United States  Professional Salon Market.  Carson is planning to
introduce a specially  formulated  50 SKU-line of  professional  products in the
fourth quarter of calendar 1997. Product formulation and development, along with
packaging  and  quantitatively  based  concept  testing have been  completed.  A
Professional   Salon   Design   Council   comprised   of   expert   professional
cosmetologists  has been assembled to provide input into the  development of the
professional  product line.  Their  preliminary  responses and evaluation of the
product  formulas have been very positive.  An experienced  management  team has
been put in place to direct the expansion into the professional  market.

     Capitalize  on  Selective  Acquisition  Opportunities.  Because  the ethnic
personal care market is a highly fragmented industry, the Company believes it is
properly positioned for pursuing strategic acquisitions. Carson has entered into
an agreement with a leading Wall Street firm to act as the Company's acquisition
financial  advisor.  The Company  believes it can strengthen its current product
categories  or enter  certain  market  segments  where it has had  little  or no
presence, with the correct acquisitions.

<PAGE>

Key Brands And Products

     The Company  manufactures and markets a variety of products worldwide.  The
following  table sets forth the Company's  principal  products,  by brand, as of
December 31, 1996.

<TABLE>
<S>                 <C>

Brand                               Products
Dark &Lovely        RELAXERS:  Cream Relaxer,  Regular  Strength;  Cream Relaxer Plus,
                    Super Strength Hair Care Maintenance  Products:  Corrective  Leave-in  Condition
                    Therapy;  Pro Therapy Protein Intensive  Conditioner;  Rich & Natural Hair Dress
                    Conditioner;  Silky Set Conditioning  Set &Wrap Lotion;  Quik Freeze Super Shine
                    Spritz; 3-N-1 Plus Detangling/Conditioning Shampoo; Deep Conditioning Treatment;
                    Restore &Repair  Reconstructive  Hair Therapy;  Quick Styling  Gel-Regular Hold;
                    Quick Styling Gel-Super Hold; Ultra Cholesterol Super Strengthening/Conditioning
                    Treatment; 24-hr. Therapy Moisture &Shine Replenisher; Ultra Strengthener Herbal
                    & Vitamin Hair Therapy;  Restorer Super Strengthening Hot Oil; Healthy Shine Oil
                    Sheen Spray; Color Care Shampoo;  Color Care Conditioner
                    HAIR COLOR:  Permanent: Jet Black; Natural Black; Brown Sable; Rich Auburn;  Sunset Auburn;  Autumn Red;
                    Light Brown;  Honey Blonde;  Golden Bronze;  Chestnut  Blonde;  Spicy  Cinnamon;
                    Midnight  Blue;   Black  Ruby;   Light  Golden  Blonde;   Deep  Copper
                    REVIVING COLORS HAIRCOLOR:  Semi-Permanent:  Radiant  Black;  Ebone Brown;  Spiced Auburn;
                    Passion Plum;  Natural Black;  Brown Cinnamon

Excelle             RELAXERS:  Cream Relaxer,
                    Regular Strength; Cream Relaxer Plus, Super Strength
                    HAIR CARE MAINTENANCE PRODUCTS: Silky Sensation Shampoo; 5-Minute Reconstructer;
                    Leave-In Conditioning Mist

Beautiful Beginnings
                    RELAXERS: Children's Relaxer
                    HAIR CARE MAINTENANCE PRODUCTS: Conditioning Shampoo Plus Detangler; Leave-In
                    Conditioner Plus Detangler; Natural Oil Moisturizer
                    Plus Detangler; Scalp Conditioner and Hair Dress

Dark & Natural      TEXTURIZERS: Texture Enhancer, Regular
                    Strength; Texture Enhancer, Extra Strength; Texture Enhancer for Short Hair
                    and Fades
                    HAIR CARE MAINTENANCE PRODUCTS: Moisturizing Shampoo; Dry Hair &Scalp
                    Moisturizer Conditioner; Wave Lotion; Wave & Style Gel
                    HAIR COLOR: Jet Black; Natural Black; Darkest Brown
                    MOUSTACHE &BEARD COLOR; Jet Black, Natural Black

Magic               SHAVING PRODUCTS: Shaving Powders: Gold,
                    Platinum, Blue and Red; Cream Shave: Regular & Mild and Pre-shave/After-shave
                    lotion

</TABLE>


<PAGE>

Marketing and Promotions

      The Company believes that  understanding the consumer,  meeting her or his
needs and  delivering  on product  promises  are  critical  in  maintaining  the
Company's competitive position. The Company spent an average of approximately 1%
of net sales for each of the last two fiscal years on market  research,  such as
in-home consumer product placements for new products,  tracking studies, concept
testing,  package  testing  and  advertising  testing  aimed  at  improving  its
understanding  of and  effectively  targeting  its  consumer.  The Company  also
maintains a  toll-free  telephone  number to answer  consumer  questions  and to
gather consumer feedback used to focus the Company's marketing programs.

     Over 15% of net sales in 1996 was  allocated  to  advertising  and consumer
promotions.  The Company  believes that is the leading  advertiser in the ethnic
hair care market, with most of its emphasis on television and print. The Company
regularly advertises in magazines aimed at consumers of African descent, such as
Essence,  Ebony,  Black  Enterprise and Jet, and in targeted spot advertising on
television and cable channels such as Black  Entertainment  Television (BET) and
engages in  promotional  activities  and  in-store  displays  to  introduce  new
products  or attract new  consumers.  The  Company  also uses its kit  packaging
format to conduct sampling programs for new products.

      In January  1996,  the  Company's  advertising  account was awarded to Don
Coleman & Associates,  Inc., considered by the Company to be in the forefront of
ethnic  advertising.  The previous agency had been in place for over 20 years. A
new  campaign  for  the  Company's  flagship  brand,  Dark &  Lovely,  including
television, print, and radio advertising was launched in late autumn of 1996.

      The  Company  is  actively  involved  in  numerous  public  relations  and
community relationship events. In 1996, the Company was involved in the Olympics
both in Savannah and Atlanta. In Atlanta, the Company was one of the sponsors of
La Maison Olympique Africaine,  The African Olympic House, providing the Company
with an  opportunity  to highlight its presence in the global  African  business
community.  The  Company's  commitment  to  the  African-American  community  is
demonstrated through several support programs including sponsorship of the Black
Family  Reunion  Program  and a Safe  Shelter  Program  for  homeless  women and
children and the establishment of the Carson Scholarship Program at historically
Black universities such as Dillard, Hampton and Fisk Universities.  From October
to  December  1996,   the  Company,   in   conjunction   with  several   leading
African-American  women's  organizations  and the Celebrating  Life  Foundation,
promoted awareness of breast cancer among  African-American  women. In addition,
the Company has  committed  to donate $0.10 from the sale of every Dark & Lovely
relaxer and hair color unit sold  during that  period,  up to  $150,000,  to the
Celebrating Life Foundation to help provide  education on breast cancer and make
screening available to African-American women unable to afford the examination.

<PAGE>

Distribution and Sales

      The  Company's   customers  can  be  categorized   into  three   principal
distribution channels in the U.S. retail ethnic hair care market, as follows:

           Multi-warehouse  Chains.  Multi-warehouse chains are groups of stores
           operating  under  the  same  name  that  have a number  of  different
           distribution  points,  warehouses  or shipping  points.  Chains which
           carry  the  Company's  products  include  mass  merchandisers   (e.g.
           Wal-Mart,  K-Mart),  drug chains (e.g.,  Walgreens,  Revco, CVS, Rite
           Aid,  Duane  Reade),  food chains  (e.g.,  Winn Dixie,  Kroger),  and
           discount chains (e.g.,  Family Dollar,  Dollar  General).  The chains
           generally  are an important  part of the  Company's  retail  business
           because  of  their  ability  to draw  ethnic  customers  from a large
           geographic  area. The Company's  multi-warehouse  chain customers may
           purchase the Company's products directly from the Company, through an
           ethnic product distributor, or both.

           Beauty & Barber  Supply  Stores.  The Beauty & Barber  Supply  Stores
           ("B&Bs") are  dominated  by the Sally's  Beauty  Supply  retail chain
           (Alberto-Culver  Company)  and the  National  Beauty  Supply  Dealers
           Association   (the   "NBSDA"),   a   large   group   of   independent
           family-controlled  retail outlets. B&Bs that are members of the NBSDA
           are prevalent in the African-American community,  typically in retail
           outlets in strip  shopping  malls.  B&Bs  generally  have  convenient
           locations,  low  everyday  prices,  and a wide  selection  of  ethnic
           products relative to retail chains.

           Ethnic  Product   Distributors.   Ethnic  product   distributors  are
           wholesalers  who either place  products  directly in stores or have a
           warehouse-to-warehouse  relationship with the major chains. K-Mart is
           an example of a chain that has a warehouse-to-warehouse  relationship
           in which  K-Mart  obtains the  Company's  products for certain of its
           stores  through a major ethnic product  distributor  in Detroit.  The
           overall  importance  of this  class of trade  has  gained  increasing
           significance in recent years.

The combination of multi-warehouse  chains, B&Bs and ethnic product distributors
accounted for approximately  87.0% of the Company's  domestic net sales in 1996.
The balance of the  Company's  net sales  during this period were  generated  by
general  market  distributors,   regional  chains  and  military  exchanges  and
commissaries.  No single Company customer  accounted for more than approximately
8.6% of the Company's net sales in the nine months ended December 31, 1996.

      As the  Company  develops  new stock  keeping  units  (SKUs) for  existing
product lines,  launches new products and enters new markets in the U.S.  ethnic
health and beauty aids  sector,  the Company  believes  that its strong,  direct
relationships with multi-warehouse  chains, B&Bs and ethnic product distributors
will play an increasingly  valuable role in maintaining  market share as well as
gaining  additional  shelf  space,   promotional/advertising   space  and  store
merchandising   coverage.   The  Company  has  been   selected  by  one  of  its
multi-warehouse chain customers to be the ethnic category manager for all ethnic
health and beauty aids products  carried by such  customer.  As ethnic  category
manager, the Company assists in the development of the customer's  merchandising
program for ethnic health and beauty aids products.

      The  Company's  strong  relationships  with its  customers  in the various
distribution  channels  are enhanced by its direct sales force which totals over
30 and is comprised of two  divisional  managers,  eight  regional  managers and
between three and six sales  merchandisers  per region,  covering the Northeast,
Mid-Atlantic,  Mideast  and Midwest  regions in the  Northern  Division  and the
Mid-South,  Southeast,  Southwest and Western regions in the Southern  Division.
The sales force in each region sells to all of the  distribution  channels doing
business in its market.

      The Company has established distributor relationships in various countries
in international  markets. In South Africa, the Company focuses its direct sales
efforts  primarily  on hair care  salons  which are  serviced  through  regional
distributors  and specialty  cash-and-carry  wholesale  outlets.  Retail product
distribution  in South  Africa is  currently  being  expanded  to  include  mass
merchandisers and other large retail chains.

<PAGE>

Research and Development and Quality Control

      The Company believes that the strength of its competitive  position in the
ethnic  hair  care  industry  is  attributable,  in  part,  to its  heritage  of
technological  innovation  and its focused R&D effort.  Three of the ethnic hair
care industry's most significant innovations were introduced by the Company: the
first hair color developed  exclusively for  African-American  hair (1972),  the
first no-lye relaxer, which provided a safe relaxer product for home use (1978),
and the  recently  patented  Fail Safe  technology  for no-lye  relaxers,  which
eliminates problems associated with mixing no-lye relaxer products to obtain the
correct  strength.  The Company  believes  that its R&D  department,  led by two
industry  experienced  chemists with Ph.D.s and including nine other researchers
and  technicians,  represents  the largest R&D effort focused on the ethnic hair
care market. In 1996, the Company's R&D department  finalized the development of
several  product  innovations,  including  the Fail Safe and DL2000 hair relaxer
technologies, as well as a full line of hair care maintenance products.

     The R&D department pursues an aggressive product  development  schedule and
intends to maintain its  leadership  in product  innovations  and  technological
improvements.  In particular,  the R&D department intends to: (i) facilitate the
Company's entry into the U.S. professional salon market with a line of specially
formulated  products;  (ii)  expand the rapidly  growing  line of Dark & Natural
products;  (iii) develop new and innovative hair care maintenance products; (iv)
strengthen the Company's hair color  products;  (v) and develop more  effective,
milder  depilatories for both men and women.  The R&D  department's  agenda also
includes the continued review and evaluation of various  packaging  alternatives
to  ensure  that the  Company's  products  are  delivered  in safe,  secure  and
cost-effective   containers.  The  Company's  R&D  costs  (principally  for  new
products)  for the years ended March 31, 1994,  1995 and 1996 was $0.4  million,
$0.3 million and $0.4 million,  respectively. For the nine months ended December
31, 1996,  the Company's R&D costs were $0.3  million.  The Company's  estimated
budget for R&D costs for 1997 is $0.6  million.  These  amounts  do not  include
amounts spent on quality control,  analytical chemistry,  microbiology,  package
testing and consumer products testing.

      The R&D department  also  supervises  the Quality  Control staff of 13 who
perform extensive safety and quality tests on the Company's products,  including
analytical  chemistry,  microbiology and package testing.  The Company tests its
new products with the aid of its four in-house  cosmetology  technicians  at its
on-site salon.

Manufacturing
      The Company uses a batching  process in its  manufacturing  operations for
virtually  all of its  products.  The  batching  process  begins  with  chemical
ingredients  being  mixed in kettles in batch sizes  ranging  from 2,000 lbs. to
21,000 lbs. The kettles heat, cool, homogenize and blend each batch of materials
according to standard operating procedures (SOPs). The SOPs for each product are
established by the Company's R&D and Quality Control staff and are  periodically
reviewed and improved to ensure  uniformity and  batch-to-batch  conformity with
the manufacturing specifications for the product.

      The product is then  transferred  from the kettles  into a holding tank or
another type of storage  device  until it is pumped into a filling  machine that
volumetrically  fills the liquid or cream into plastic jars,  tubes,  bottles or
packets. Each container (i.e., jar, tube, bottle or packet) is coded to identify
or track a specific  batch.  Hair care  maintenance  products are then packed in
shipping  boxes and sent to the finished goods  warehouse  ready for shipment to
the Company's  customers.  Certain other products are filled,  capped,  labeled,
coded and stored  temporarily  until they are  assembled  as  components  in the
relaxer, texturizer or hair color kits.

      The  Company  emphasizes  quality  and  adherence  to  Good  Manufacturing
Practices  (according to FDA  guidelines)  throughout the production  operation.
Each batch of finished  product is tested by Quality  Control staff before it is
packaged and shipped.  The  Company's  quality  control  measures and  standards
include testing raw materials and packaging materials.

      The Company purchases raw materials,  packaging, and components throughout
the world and reviews the efficiency  and quality of its  purchasing  contracts.
Except as  described  below,  the Company  believes  that  alternate  sources of
supplies  exist  and  does not  anticipate  any  significant  shortages  of,  or
difficulty in obtaining, such supplies.

      Guanidine carbonate is an essential raw material used in the manufacturing
of no-lye  relaxer  products  and has been  purchased by the Company for over 15
years from the one principal  supplier to all  manufacturers of no-lye relaxers,
located in Austria.  The Company maintains a stock of guanidine carbonate at its
Savannah facility which would satisfy its requirements for approximately four to
six months of future production.  The Company believes that guanidine  carbonate
of comparable quality could be made available within this time period from other
suppliers on comparable terms.

<PAGE>

Competition

      The U.S.  retail  ethnic  hair  care  market  is  competitive  and  highly
fragmented with a number of market  participants that focus specifically on this
market. Six companies generated approximately 50% of industry sales in 1995 with
the remainder being generated by a number of smaller companies, according to the
Towne-Oller  Report.  Some of the larger companies,  such as Soft Sheen,  Luster
Products and Pro-Line Corp., are  privately-owned and compete only in the ethnic
market, as does the Johnson Products  subsidiary of IVAX, Inc., a New York Stock
Exchange  traded  company.  However,  a few general  market  companies,  such as
Revlon,  Inc.  and  Alberto-Culver  Company,  also  produce  a  limited  line of
specialized  products for the ethnic  consumer.  In certain product  categories,
such as shampoos and hair color,  competition  also arises from  general  market
manufacturers  such as the  Procter & Gamble  Company and  Bristol-Myers  Squibb
Company's  Clairol  division.  Such general market companies are larger and have
substantially   greater   financial  and  other   resources  than  the  Company.
Internationally,  the Company's  competitors  differ from market to market,  and
include Revlon, Soft Sheen and several regionally based foreign companies.

      The Company primarily competes on the basis of brand recognition,  product
quality,   performance  and  price.  Advertising,   promotions,   merchandising,
packaging and the timing of new product  introductions  and line extensions also
have a significant  impact on buying  decisions and the structure and quality of
the sales force affect product reception,  in-store position,  display space and
inventory levels in retail outlets.

Trademarks and Patents

      The Company owns all of the trademark  rights used in connection  with its
principal  brands both in the United States and in the other  countries in which
its  products are  principally  sold.  Significant  trademarks  include:  Dark &
Lovely, Dark & Lovely Excelle,  Beautiful Beginnings,  Dark & Natural and Magic.
The  Company  utilizes  certain  proprietary  or  patented  technologies  in the
formulation  or manufacture  of a number of its products;  however,  the loss of
such  proprietary  rights  would  not  have a  material  adverse  effect  on the
business, results of operations or financial condition of the Company.

Consumer Laws, Government and Industry Regulations

      The Company is subject to the Food,  Drug and Cosmetics  Act, the Consumer
Product Safety Act, the Federal Hazardous  Substance Act and to the jurisdiction
of the Consumer  Product  Safety  Commission  as well as product  safety laws in
foreign  jurisdictions.  Such regulations subject the Company to the possibility
of  requirements  of repurchase or recall of products  found to be defective and
the possibility of fines or penalties.  The Food and Drug Administration ("FDA")
has promulgated  certain  regulations  concerning product  ingredients,  product
labeling and product claims. In addition,  the FTC regulates product claims. The
Company is subject to consumer laws in foreign  countries where its products are
sold, for example,  bilingual  packaging  requirements  (Canada) and new product
registration  requirements  (Brazil).  Existing  and future FDA, FTC and foreign
regulations  could  impact  distribution  and sales of certain of the  Company's
products.

      The Company  operates under the FDA's Good  Manufacturing  Practices (GMP)
guidelines  and is  regulated by the FDA,  although its product  formulas do not
have to be approved in advance by the FDA. Coloring agents used in the Company's
products may be either  Food,  Drug & Cosmetic  (FD&C) or Drug & Cosmetic  (D&C)
classified.   Additionally,  as  a  member  of  the  Cosmetics,  Toiletries  and
Fragrances  Association  ("CTFA"),  the  Company  agrees to  adhere  to  Quality
Assurance  Guidelines as promulgated  by CTFA.  The Company  believes that it is
substantially  in compliance  with such  guidelines and uses such  guidelines as
standards for its operational activities. The Company is also subject to various
other Federal,  state, local and foreign regulations.  Federal,  State and local
regulations  in the United States that are designed to protect  customers or the
environment  have had an increasing  influence on product  claims,  contents and
packaging.  The Company believes that it is in substantial  compliance with such
regulations.

<PAGE>

Employees

      The Company is organized into seven departments--Marketing, R&D (including
Quality  Control),  Sales,  Operations  (Production  and Materials  Management),
Finance,  Administration  and Human  Resources.  As of December  31,  1996,  the
Company  employed  approximately  281  persons  in  Georgia,  an  additional  31
elsewhere in the United States and 90 internationally. In the United States, 214
were hourly personnel and 98 were salaried employees.  The Company also utilizes
temporary workers as needed,  primarily in manufacturing.  Approximately 90 such
temporary  workers were utilized on a daily basis by the Company during the nine
months ended  December 31, 1996.  The Company is non-union and believes that its
relationship with employees is good.

Environmental Matters

      The  Company  is  subject to various  Federal,  state,  local and  foreign
environmental requirements, including those relating to discharges to air, water
and land, the handling and disposal of solid and hazardous waste and the cleanup
of properties affected by hazardous substances. Certain environmental laws, such
as the Comprehensive Environmental Response, Compensation, and Liability Act, as
amended ("CERCLA"), impose strict, retroactive, joint and several liability upon
persons responsible for releases of hazardous substances.

      The Company is not aware of any  liabilities  arising under  environmental
requirements,  except as would not be expected to have a material adverse effect
on the  Company's  business,  results  of  operations  or  financial  condition.
However,  some risk of environmental  liability is inherent in the nature of the
Company's  current and former  businesses  and the  Company  might in the future
incur material costs to meet current or more  stringent  compliance,  cleanup or
other obligations pursuant to environmental requirements.

      The  Company  has had  difficulty  meeting  its permit  levels for various
parameters for its wastewater  discharge to the City of Savannah's  sewer system
resulting  in the issuance of notices of violation to the Company by the City of
Savannah. In response, the Company installed pretreatment  equipment,  which has
reduced the concentrations of many of the constituents of concern.  However, the
Company   continues  to  experience   difficulty   meeting   certain   discharge
limitations. If the Company cannot either improve the reliability of its present
treatment system, or obtain modifications to its discharge limits from the sewer
authorities,  it may be required to install additional treatment equipment.  The
Company is working cooperatively with the City of Savannah to address this issue
and has not  been nor does it  expect  to be  fined.  However,  there  can be no
guarantee  that the  Company  will not incur  future  costs,  including  but not
limited  to,  fines in  connection  with waste water  compliance.  The costs for
installing  additional  treatment could be as much as $0.5 million.  The Company
does not  currently  expect  the  costs of  environmental  compliance  to have a
material  adverse  effect on its  business,  results of  operations or financial
condition.

Item 2. Properties

      The Company  owns and  occupies  six  buildings  on a  11.6-acre  tract in
Savannah. The plant,  warehouses and offices encompass approximately 225,000 sq.
ft. on seven acres of the property,  with the  remaining 4.6 acres  undeveloped.
Four of the  buildings  are used  primarily  for  warehousing  and storage.  The
largest building (more than 120,000 sq. ft.) houses the manufacturing  equipment
for substantially all of the Company's products,  shipping, quality control, the
R&D  laboratories,  customer  research and a professional hair salon which tests
new products.  The  manufacturing  and warehousing space has been expanded seven
times since it was  originally  built in 1954.  The Company is in the process of
reconfiguring  its production lines and expanding its physical space in order to
increase the capacity of the Savannah  facility.  Following the planned capacity
increase,  the Company believes that the capacity in the Savannah  facility will
be adequate for its needs in the reasonably foreseeable future.

      The Company's  South African  subsidiary owns and occupies one building on
4.5  acres in  Midrand,  South  Africa,  15 miles  north  of  Johannesburg  in a
developing industrial park located on the major highway between Johannesburg and
Pretoria.  The property  was  previously  occupied by Pfizer as a  manufacturing
facility and was easily  converted  to suit the  Company's  needs.  The building
encompasses  approximately 40,000 sq. ft. and houses the manufacturing equipment
for all  products,  shipping and  receiving,  raw  material  and finished  goods
storage,  an R&D  laboratory  and  executive  office  space.  Ample  acreage  is
available for expansion of the facility.  The Company  believes that capacity in
the  South  African  facility  is  adequate  for  its  needs  in the  reasonably
foreseeable future.

      In late 1996, the Company purchased a production facility in Ghana located
near the  Ghanaian  Coca-Cola  bottling  plant  which will enable the Company to
better service the 200 million Black people located in the region.  The plant is
expected to be  operational  by June 1997.  In Kenya,  East Africa,  the Company
anticipates  having a similar  facility to the West African Ghanaian plant which
should be operational by late 1997 or early 1998. Since East Africa has over 150
million  Black people,  the Company  believes it has a similar  opportunity  for
dramatic growth in this region.

<PAGE>

Item 3.  Legal Proceedings

      The Company is involved in various routine legal  proceedings  incident to
the ordinary course of its business and believes that the outcome of all pending
legal proceedings,  in the aggregate, will not have a material adverse effect on
the business, results of operations or financial condition of the Company.

Item 4.  Submission of Matters to Vote of Security Holders

          Not applicable.

Executive Officers of the Registrant

--------------------------------------------------------------------------------
  Name                   Age       Position
--------------------------------------------------------------------------------
  Dr. LeRoy Keith        57        Chairman of the Board and Chief Executive
                                   Officer
--------------------------------------------------------------------------------
  Joyce M. Roche         49        President and Chief Operating Officer
 -------------------------------------------------------------------------------
  Dennis E. Smith        49        Executive Vice President, Sales
 -------------------------------------------------------------------------------
  Bill Bradley           48        Executive Vice President, Worldwide
                                   Operations
 -------------------------------------------------------------------------------
  Miriam Muley           42        Executive Vice President, Marketing
 -------------------------------------------------------------------------------
  Bradford N. Creswell   37        Executive Vice President, Finance and Chief
                                   Financial Officer
 -------------------------------------------------------------------------------

      Officers of the Company are elected annually by the Board of Directors.

      Dr.  Keith  became  Chairman  and  Chief  Executive  Officer  of  Carson
Products  concurrent with the Acquisition in August 1995 and a Director of the
Company upon its  inception in May 1995,  and served as Vice  President  until
1996.  Dr. Keith became  Chairman and Chief  Executive  Officer of the Company
in August  1996.  Dr.  Keith has served as Chairman of the Board of  Directors
of AM  Cosmetics  since June 1996.  He served on the Board of Directors of the
Predecessor  from  June  1994 to  August  1995.  Prior to that,  he  served as
President  of Morehouse  College  from 1987 to 1994.  Dr. Keith is a member of
the Board of Directors of Keystone  Investment  Group,  the Mutual Funds Board
of Phoenix Home Life Insurance Company,  One to One Partnership,  Inc. and the
National Committee for the Performing Arts of the John F. Kennedy Center.

      Ms. Roche became President and Chief Operating  Officer of Carson Products
in July 1996 and President,  Chief Operating Officer and Director of the Company
in August 1996.  Prior to July 1996,  she held the  position of  Executive  Vice
President of Global  Marketing  and Director  since joining  Carson  Products in
August 1995.  Before  joining Carson  Products,  Ms. Roche was employed by Avon,
Inc.  for 19 years  where  she held the  titles  of  Senior  Vice  President  of
Marketing from 1991 to 1993 and Vice President of Global  Marketing from 1993 to
1994.

     Mr.  Smith became  Executive  Vice  President  of Sales of Carson  Products
concurrent  with the  Acquisition  in August  1995 and of the  Company in August
1996. Mr. Smith became a Director of Carson Products in December 1995.  Prior to
August 1995, he held the position of Vice President of Sales of Carson  Products
from 1990 to 1995.

      Ms. Muley became  Executive Vice President of Marketing of Carson Products
in July 1996 and of the Company in August 1996. Prior to July 1996, she held the
position of Vice  President,  Marketing  since joining Carson  Products in April
1996. She was previously  employed by Avon from 1992 to 1996 as General Manager,
African-American Business Unit and by Bristol-Myers Squibb's Clairol division as
Product Manager from 1990 to 1992.

      Mr.  Creswell  became  Executive  Vice  President  of  Finance  and  Chief
Financial  Officer of Carson Products  concurrent with the Acquisition in August
1995 and of the Company in August 1996. He also served as President of Northwest
Capital, Inc. since 1992. Prior to that time, he was employed as Vice President,
Investment Banking with Bankers Trust Company from 1987 to 1992.

<PAGE>

                                   PART II

Item 5. Market for the  Registrant's  Common  Stock and Related  Shareholder
Matters

      The high and low sales prices for the  Company's  common stock as reported
by the New York Stock  Exchange  since the time of the Company's  initial public
offering through December 31, 1996 are as follows:

            High                    16 5/8
            Low                     13 3/4

     At February 28, 1996,  there were  approximately  1,252 holers of record of
the Company's common stock. Since the Acquisition,  the Company has not declared
or paid any cash or other  dividends  on its Common Stock and does not expect to
pay dividends for the forseeable  future.  The Company  anticipates that for the
forseeable  future,  earnings  will be reinvested in the business to finance its
growth and development.  The declaration and payment of dividends by the Company
are subject to the  discretion  of the Board of  Directors  of the Company  (the
"Board").  The Company  entered into a new bank credit  facility which restricts
the ability of the  Company or any  subsidiary  of the Company  from paying cash
dividends  other than  dividends or  distributions  payable in shares of capital
stock.  Any future  determination  to pay dividends will depend on the Company's
results of operations,  financial condition,  capital requirements,  contractual
restrictions and other factors deemed relevant by the Board.

Item 6.  Selected Financial Data

      This  information  is set forth on page 1 of Exhibit 13 under the  caption
"Selected Historical Consolidated Financial Data."


Item 7.  Management's  Discussion  and  Analysis of Financial  Condition  and
Results of Operations

     This information is set forth on pages 2-7 of Exhibit 13 to this report and
is incorporated herein by reference.

Item 8.  Financial Statements and Supplementary Data

     This  information  is set forth on pages 8-24 of Exhibit 13 to this  report
and is incorporated herein by reference.

Item 9.  Disagreements on Accounting and Financial Disclosure

      None.



<PAGE>



                                   PART III

Item 10.  Directors and Executive Officers of the Registrant

     Information  concerning directors is incorporated by reference to "Proposal
Number 1 - Election of Directors" on pages 8-10 of the Company's Proxy Statement
to be filed for its 1997 Annual Meeting of Stockholders.  Reference is also made
to Item 4(A),  Part I of this report,  "Executive  Officers of the  Registrant,"
which information is incorporated herein.
      Section  16(a) of the Exchange act  requires  the  directors,  executive
officers  and persons  who own  beneficially  more than 10% of certain  equity
securites  of the Company to file reports of  ownership  with the  Commission.
Copies of all such  reports  are  required  to be  furnished  to the  Company.
Based on the reports  received by the Company (and on written  representations
from the reporting  persons),  the Company believes that each of the Company's
directors,  officers  and 10%  beneficial  owners of its Class A Common  Stock
failed  to  file  on a  timely  basis  the  required  Form 3 at the  time  the
Company's  registration statement for its initial public offering was declared
effective by the Commission.  In addition,  the following insider filings were
delinquent:  Lawrence  Bathgate,  Form 4 and 5 with respect to one transaction
not filed on a timely basis; Bradford N. Creswell,  Form 4 with respect to one
transaction  not filed on a timely  basis;  Arthur P. Gnann,  III, Form 4 with
respect  to one  transaction  not filed on a timely  basis;  James L.  Hudson,
Form 4 with respect to one transaction  not filed on a timely basis;  Joyce M.
Roche,  Form 4 with respect to one  transaction  not filed on a timely  basis;
Vincent  A.  Wasik,  Form 4 with  respect  to one  transaction  not filed on a
timely basis.

Item 11.  Executive Compensation

      This information is incorporated  herein by reference to "Compensation and
Other  Transactions  with Executive  Officers and Directors - Executive  Officer
Compensation" on pages 15-20 of the Company's Proxy Statement to be
filed for its 1997 Annual Meeting of Stockholders.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     This  information  is  incorporated   herein  by  reference  to  "Principal
Stockholders" and "Stock Ownership of Directors and Executive Officers" on pages
2-4 and 13,  respectively,  of the Company's Proxy Statement to be filed for its
1997 Annual Meeting of Stockholders.

Item 13.  Certain Relationships and Related Transactions

     This   information  is   incorporated   herein  by  reference  to  "Certain
Relationships  and Related  Transactions" on pages 5-7 of the Proxy Statement to
be filed for its 1997 Annual Meeting of Shareholders.




<PAGE>

                                   PART IV

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

(a) The following documents are incorporated by reference herein:

      1.    Financial Statements


     Exhibit  13, a copy of which is filed  with this Form  10-K,  contains  the
Balance Sheet as of December 31, 1996 and March 31, 1996, the related statements
of  operations,  shareholders'  investment  and  cash  flows  for the  following
periods:  Company  April 1, 1996 through  December 31, 1996,  Unaudited  Company
August 23, 1995 to December  31, 1995,  Predecessor  April 1, 1995 to August 22,
1995, Company August 23, 1995 to March 31, 1996 and Predecessor year ended March
31, 1995 and the related  reports of  Deloitte  Touche LLP and Price  Waterhouse
LLP. The financial  statements and the reports of Deloitte  Touche LLP and Price
Waterhouse LLP are incorporated  herein by reference.  The financial  statements
included herein include the following:

                         Balance  Sheets --  December  31,  1996 and March 31,
                 1996

                         Statements  of Operations  for the  following  periods:
                 April 1, 1996 to December 31, 1996; August 23, 1995 to December
                 31, 1995 (unaudited);  April 1, 1995 to August 22, 1995; August
                 23, 1995 to March 31, 1996; and April 1, 1994 to March 31, 1995

                         Statement  of  Shareholders'  Equity for the  following
                 periods: April 1, 1996 to December 31, 1996; August 23, 1995 to
                 March 31, 1996;  April 1, 1995 to August 22, 1995; and April 1,
                 1994 to March 31, 1995

                         Statements  of Cash  Flows for the  following  periods:
                 April 1, 1996 to December 31, 1996; August 23, 1995 to December
                 31, 1995 (unaudited);  April 1, 1995 to August 22, 1995; August
                 23, 1995 to March 31, 1996; and April 1, 1994 to March 31, 1995

      2.  Financial Statement Schedule

                         Schedule II -- Valuation  and  Qualifying  Accounts for
                 the  following  periods:  Nine months ended  December 31, 1996,
                 August 23, 1995 to March 31, 1996,  April 1, 1995 to August 22,
                 1995 and April 1, 1994 to March 31, 1995.


      3.  Exhibits incorporated by reference or filed with this report

--------------------------------------------------------------------------------
Number            Description
--------------------------------------------------------------------------------
*3.1 ...........  Amended and Restated Articles of Incorporation
--------------------------------------------------------------------------------
*3.2 ...........  By-laws of Registrant
--------------------------------------------------------------------------------
*4 .............  Form of Commnon Stock Certificate
--------------------------------------------------------------------------------
*9 .............  Voting Trust Agreement
--------------------------------------------------------------------------------
*10.1 ..........  Employment Agreement dated as of August 23, 1995, as amended
                    as of July 31, 1996, between Carson Products Company and Dr.
                    Leroy Keith
--------------------------------------------------------------------------------
*10.2 ..........  Employment Agreement dated as of July 7, 1995, as amended as
                    of July 31, 1996, between Carson Products Company and Joyce
                    M. Roche
--------------------------------------------------------------------------------
*10.3 ..........  Employment Agreement dated as of June 7, 1995, as amended as
                    of July 31, 1996, between Carson Products Company and Dennis
                    E. Smith
--------------------------------------------------------------------------------
*10.4 ..........  Employment Agreement dated as of April 1, 1996, as amended as
                    of July 31, 1996, between Carson Products Company and Sharon
                    A. Davis
--------------------------------------------------------------------------------
*10.5 ..........  Employment Agreement dated as of June 7, 1995, as amended as
                    of July 31, 1996, between Carson Products Company and John
                    P. Brown, Jr.
--------------------------------------------------------------------------------
*10.6 ..........  Employment Agreement dated as of June 22, 1995, as amended as
                    of July 31, 1996, between Carson Products Company and Dr.
                    Donald Cowser
--------------------------------------------------------------------------------
*10.7 ..........  Employment Agreement dated as of September 1, 1995, as amended
                     as of July 31, 1996, between Carson Products Company and
                     Arthur P. Gnann III
--------------------------------------------------------------------------------
*10.8 ..........  Employment Agreement dated as of September 1, 1995, as amended
                  as of July 31,  1996,  between  Carson  Products  Company  and
                  Allena Lee-Brown
--------------------------------------------------------------------------------
*10.9 ..........  Employment Agreement dated as of March 11, 1996, as amended as
                  of July 31, 1996,  between Carson Products  Company and Miriam
                  Muley
--------------------------------------------------------------------------------
*10.10 .........  Management Assistance Agreement dated as of August 23, 1995
                    between Carson Products Company and Morningside Captial
                    Group L.L.C.
--------------------------------------------------------------------------------
*10.11 .........  Management  Agreement  dated  as of June  26,  1996  between
                    Carson Products Company and AM Cosmetics, Inc.
--------------------------------------------------------------------------------
*10.12 .........  Subscription  Agreement  dated  as of June  26,  1996  between
                  Carson Products Company and Morningside AM Acquisition Corp.
--------------------------------------------------------------------------------
*10.13 .........  Carson, Inc. 1996 Long-term Incentive Plan
--------------------------------------------------------------------------------
*10.14 .........  Carson, Inc. 1996 Non-Employee Directors Equity Incentive
                    Program
--------------------------------------------------------------------------------
*10.15 .........  Subscription Agreement dated as of August 23, 1995 by and
                    among the Registrant and Investors set forth in Schedule I
--------------------------------------------------------------------------------
*10.16 .........  Subscription Agreement dated as of August 23, 1995 by and
                    among the Registrant and DNL Partners,Limited Partnership
--------------------------------------------------------------------------------
*10.17 .........  Subscription  Agreement  dated as of  August  23,  1995 by and
                  among the Registrant, Indosuez Carson Partners and Indosuez CM
                  II, Inc.
--------------------------------------------------------------------------------
*10.18 .........  Subscription Agreement dated as of August 15, 1996 by and
                    among the Registrant and the indivudials (outside directors)
                    named therein
--------------------------------------------------------------------------------
*10.19 .........  Subscription Agreement dated as of August 15, 1995 by and
                    among the Registrant and the individuals (members of
                    senior management) named  therein
--------------------------------------------------------------------------------
*10.20 .........  Licensing Agreement dated April 7, 1994, as amended May 14,
                    1996, between Carson Products Company and Carson Products
                    Company S.A. (Proprietary) Limited
--------------------------------------------------------------------------------
*10.21 .........  Distribution Agreement dated May 14, 1996 between Carson
                    Products Company and Carson Products Company S.A.
                    (Proprietary) Limited
--------------------------------------------------------------------------------
*10.22 .........  Promissory note between Joyce Roche and the Registrant
--------------------------------------------------------------------------------
*10.23 .........  Promissory note between John P. Brown and the Registrant
--------------------------------------------------------------------------------
*10.24 .........  Promissory note between Dennis Smith and the Registrant
--------------------------------------------------------------------------------
*10.25 .........  Promissory note between Donald Cowsar and the Registrant
--------------------------------------------------------------------------------
*10.26 .........  Promissory note between Arthur P. Gnann, III and the
                    Registrant
--------------------------------------------------------------------------------
*10.27 .........  Promissory note between Sharon A. Davis and the Registrant
--------------------------------------------------------------------------------
*10.28 .........  Pledge agreement dated August 13, 1996 between Arthur P.
                    Gnann, III and the Registrant
--------------------------------------------------------------------------------
*10.29 ......... Pledge agreement dated August 13, 1996 between Sharon A. Davis
                     and the Registrant
--------------------------------------------------------------------------------
*10.30 ......... Pledge agreement dated August 13, 1996 between Dr. Donald
                    Cowser and the Registrant
--------------------------------------------------------------------------------
*10.31 ......... Pledge agreement dated August 13, 1996 between John P. Brown
                    and the Registrant
--------------------------------------------------------------------------------
*10.32 .........  Pledge agreement dated August 13, 1996 between Miriam Muley
                    and the Registrant
--------------------------------------------------------------------------------
*10.33 .........  Pledge agreement dated August 13, 1996 between Joyce Roche and
                    the Registrant
--------------------------------------------------------------------------------
*10.34 .........  Pledge agreement dated August 13, 1996 between Dennis Smith
                    and the Registrant
--------------------------------------------------------------------------------
10.35 ..........  New Senior Bank Facility (including exhibits) dated as of
                    October 18, 1996
<PAGE>
--------------------------------------------------------------------------------
13 ..............  Annual Report to Shareholders for the nine months ended
                    December 31, 1996
--------------------------------------------------------------------------------
*16 .............  Letter regarding Change in Certifying Accountant from Price
                    Waterhouse LLP
--------------------------------------------------------------------------------
*21 .............  Subsidiaries of the Registrant
--------------------------------------------------------------------------------
23 ..............  Consent of Deloitee Touche LLP
--------------------------------------------------------------------------------
23.1 ............  Consent of Price Waterhouse LLP
--------------------------------------------------------------------------------
27 ..............  Financial Data Schedule
--------------------------------------------------------------------------------

* Incorporated herein by reference to the Registrant's Registration Statement on
Form S-1 filed with the Securities  and Exchange  Commission on October 14, 1996
[File No. 333-10191] and the amendments thereto.




<PAGE>



SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registration  has duly  caused  this  report to be  signed on its  behalf by the
undersigned, thereunto duly authorized.

                                          CARSON, INC.

Date: March 26, 1997                      By: /s/  Dr. Leroy Keith
                                          Dr. LeRoy Keith
                                          Chairman,  Chief  Executive  Officer
                                          and Director


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


Date: March 26, 1997                      By: /s/ Dr. Leroy Keith
                                          Dr. LeRoy Keith
                                          Chairman,  Chief  Executive  Officer
                                          and Director

Date: March 26, 1997                      By: /s/ Joyce M. Roche
                                          Joyce M. Roche
                                          President   and   Chief    Operating
                                          Officer and Director

Date: March 26, 1997                      By: /s/ Dennis E. Smith
                                          Dennis E. Smith
                                          Executive Vice President,  Sales and
                                          Director

Date: March 26, 1997                      By: /s/ Lawrence E. Bathgate, II
                                          Lawrence E. Bathgate, II
                                          Director

Date: March 26, 1997                      By: Abbey J. Butler
                                          Abbey J. Butler
                                          Director

Date: March 26, 1997                      By: /s/  Suzanne de Passe
                                          Suzanne de Passe
                                          Director

Date: March 26, 1997                      By: /s/ Melvyn J. Estrin
                                          Melvin J. Estrin
                                          Director

Date: March 26, 1997                      By: /s/ James L. Hudson
                                          James L. Hudson
                                          Director


Date: March 26, 1997                      By: /s/ Jack Kemp
                                          Jack Kemp
                                          Director

Date: March 26, 1997                      By: /s/ John L. Sabre
                                          John L. Sabre
                                          Director

Date: March 26, 1997                      By: /s/ Vincent A. Wasik
                                          Vincent A. Wasik
                                          Director

Date: March 26, 1997                      By: /s/ Bradford N. Creswell
                                          Bradforn N. Creswell
                                          Chief Financial Officer

<PAGE>

Carson, Inc.
Valuation and Qualifying Accounts
For the Nine Months Ended December 31, 1996

(in thousands)

<TABLE>
                                                                                                  Schedule II

<S>                                                         <C>              <C>               <C>                   <C>
                                                                            ----------Twelve months---------
                                                          Predecessor      Predecessor         Company               Company
                                                                             Period            Period                  Nine
                                                              Year             From              From                 Months
                                                             Ended       April 1, 1995 to  August 23, 1995 to         Ended
                                                         March 31, 1995  August 22, 1995    March 31, 1996       December 31, 1996
Allowance for doubtful accounts:

  Balance, beginning of period                              $206             $242              $358                  $531
  Addition - provisions charged to income                    629              158               329                   112
  Deduction - accounts written off as uncollectible         (593)             (42)             (156)                  (29)
  Balance, end of period                                    $242             $358              $531                  $614

</TABLE>