Liquidation World ("LQW") purchases...

Liquidation World ("LQW") purchases-at distress prices-new, first quality, consumer merchandise that arises gone out of distress situations and then markets these performances through a chain of retail exits Sources of distress situations include:

retailers who experience bankruptcy, a receivership, store close-out etc proper to poor economic times or management;

manufacturers who have exces retail inventory resulting from production over-run performance discontinuations, cancelled orders, etc.; and,

insurers who take possession of piouss as the result of earthquakes, storms and other natural disasters

Each company egress carries hundreds of different items (furniture, paint, household religiouss clothing, food, etc.) with the specific proceeds mix varying depending upon the nature of the distressed situations happening locally and elsewhere in the company's area of operations.

The $4 billion liquidation industry in Canada is highly fragmented with greatest in quantity cities and regions having united or more firms in the business of doing liquidations. Unlike traditional liquidators who acquire and barter goods in one or pair areas, Liquidation World acquires and liquidates results throughout its chain of 52 vents with 17 in Alberta, 14 in British Columbia, 8 in Ontario, 5 in Saskatchewan, 7 in Washington and 1 in Idaho. This geographical 'reach' allows the company to vend large quantities of products at attractive prices without saturating any single market area. In addition, the reach assists the company in finding distress yields to purchase. Revenues are generated in Canada (93%) and in the United States (7%) In weight hundreds of different liquidations take place simultaneously in the company's stores each day.

The company also escorts auctions to sell commercial/industrial consequences Typically the company purchases merchandise for cash.

Mr Dale Gillespie, sink President and CEO owns approximately 11% of the company's shares; an estimated 4060% of the shares are allowed by institutional investors. Shares trade in succession the TSE "LQW" and forward NASDAQ "LIQWF."

PROSPECTS FOR coming GROWTH IN REVENUES

The starting point for developing senses about a company's future return growth is an understanding of the reasons for its historical sprouting Data for the current fiscal year ending September 30 have been estimated.

Historical receipts Growth

During the close attention period (1988-1997) revenues grew at a mix rate of approximately 49%. During the last half of the period incomes grew at approximately 40%. In keeping with interim outcomes for the first two quarters of fiscal 1997 estimated receiptss for fiscal 1997 are delineate ed at $95 million which shows a 31% increase over 1996 be deriveds

Chart 1: During the reflection period Liquidation World has retained all of its earnings. These retentions and the sale of additional shares in 1993 and 1996 have reduc the company's use of misdoing to finance asset expansion-while creating unused fault capacity. Currently the company has no long-term debit Typically the company borrows to expand the number of stores (and inventory) and, from time-to-time barters shares to pay down the due Between 1990 and 1997, assets increased from $4 million to an estimated $27 million-principally inventories and cash.

Since 1990 each $100 of assets has generated between $275-$350 of incomes per year.

Generally, historical pullulation in revenues has been achieved from opening more stores and generating more income per square foot. Outlets are "destination" prototype stores which are independent of casual walk in traffic. clan travel to the outlets to check prices there first; while in an egress `great deals' on other liquidations frequently lead to impulse purchases. The company progressively discounts its inventory above a period to ensure a full liquidation (e.g. 10% off, then 20% off40% off)

In keeping with the company's cultivation of always getting a 'great deal' forward anything it purchases, Liquidation World acquires real estate for store locations and nothing else under favourable circumstances (e.g. former Consumer Distributing space, former food-store space, former...) which makes store openings difficult to cast with confidence. The company make opened 14 new stores in fiscal 1997 (10 in 1996) Typical stores keep 20,000 to 25,000 sq.ft., although they range in size from 7000 to 70000 sq ft

Consumer awareness of stores is created between the sides of regular newspaper advertisements and regional flyer The company advertises sometimes onward radio and television when special rates are available. Sales staff are typically former employee of other retailing firms who have experience in, say, furniture sales.

Project income Growth

Continued growth is look forward toed from increased revenue per square base at existing stores and from additional store openings. An increased number of stores has better inventory with a smaller quantity of any common item-but a larger range of items. The company's increased financial resources to purchase larger liquidations is anticipateed to generate the inventory to support continued growing in sales. However, the availability of suitably priced real estate is a potential constraint upon future store openings and income growth.