A LIFESTYLE COMPANY

Goodwill, Net
Goodwill, net represents the excess of the purchase price over the fair value of assets acquired in business acquisitions
accounted for under the purchase method. Goodwill is presented net of related accumulated amortization of $88,922 and
$15,884 at December 31, 2000 and 1999, and is being amortized over lives ranging from 10 to 20 years.
Long-Lived Assets
The carrying values of intangible and other long-lived assets are reviewed quarterly to determine if any impairment indicators
are present. To date, no such impairment has been indicated. If it is determined that such indicators are present and the
review indicates that the assets will not be recoverable, based on undiscounted estimated cash flows over the remaining
amortization and depreciation period, their carrying values are reduced to estimated fair market value.
Accrued Royalties
The Company has various royalty agreements with instructors and artists requiring royalty payments of specified product
sales based upon unit sales, or upon a specified minimum royalty amount. Payments are made quarterly and semi-annually.
Income Taxes
The Company provides for income taxes pursuant to the liability method as prescribed in Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes. The liability method requires recognition of deferred income taxes
based on temporary differences between financial reporting and income tax bases of assets and liabilities, using currently
enacted income tax rates and regulations.
Revenues
The Company recognizes revenue at the time merchandise is shipped to the customer. Amounts billed to customers for
postage and handling charges, which approximate $3.5 million for 2000, $3.0 million for 1999 and $2.2 million for 1998,
are recognized as revenue at the time that the revenues on the product shipments are recognized. Postage and handling
costs, which approximate $3.3 million for 2000, $3.0 million for 1999, and $2.1 million for 1998, are included in selling and operating
expense along with other fulfillment costs incurred to warehouse, package and deliver products to customers. The Company provides a
reserve for expected future returns at the time the sale is recorded based upon historical experience.
PART II
The Company’s sales are attributable mainly to sales within the U.S., with a very small percentage, less than 1% of sales,
to international customers. No customer represented more than 5% of sales for any of the years ended December 31, 2000,
1999 and 1998. The Company generally does not require collateral.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, securities available-for-sale, accounts receivable,
payables and debt obligations. The carrying values of these financial instruments as reported in the accompanying balance
sheets are assumed to approximate their fair value.
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 amounts reported in our financial statements and accompanying notes
including the valuation of stated accounts receivable and inventory balances. Actual results could differ from those estimates.
Stock-Based Compensation
The Company accounts for its stock-based compensation arrangements under the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB No. 25") and related interpretations, including FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, rather than the alternative fair
value accounting allowed by SFAS No. 123, Accounting for Stock Based Compensation.
Defined Contribution Plan
In 1999, the Company adopted a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code,
which covers substantially all employees. Eligible employees may contribute amounts to the plan, via payroll withholding,
subject to certain limitations. The 401(k) plan permits, but does not require, additional matching contributions to the 401(k)
plan by the Company on behalf of all participants in the 401(k) plan. To date, the Company has not made any matching
contributions to the 401(k) plan.
42