In addition, these forward-looking statements necessarily depend upon assumptions, estimates and dates that may be incorrect or imprecise
`and involve known and unknown risks, uncertainties and other factors. Accordingly, any forward-looking statements included in this report do
`55 aa
`not purport to be predictions offuture events or circumstances and may not be realized. Forward-looking statements can be identified by, among
`:7 aa
`77 aa
`7: aa
`other things, the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “pro forma,
`anticipates,”
`“intends,” “continues.
`could,” “estimates,
`plans,
`potential,” “predicts,” “goal,” “objective,” or the negative of any ofthese terms, or
`comparable terminology, or by discussions of our outlook, plans, goals, strategy or intentions. Forward-looking statements speak only as of the
`date made. Except as required by applicable law, including the securities laws ofthe Ifnited States and the rules and regulations ofthe Securities
`and Exchange Commission, we assume no obligation to update any of these forward-looking statements to reflect actual results, changes in
`assumptions or changes in other factors affecting these forward-looking statements.
`
`Item 7A. Quantitative and Qualitative Disclosures About Market Risk
`
`We are exposed to market risk from changes in interest rates. We have 11ot entered into any market risk sensitive instruments for trading
`purposes. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes ir1 market interest rates.
`The range of changes presented refleets our view of changes that are reasonably possible over a one-year period.
`
`As of September 30, 2006, we had cash, cash equivalents and short-term investments of $28.3 million, which include money market accounts
`and auction rate securities that bear interest at variable rates. A change in market interest rates earned on the cash, cash equivalents and short-
`term investments impacts the interest income and cash flows. but does not significantly impact the fair market value of the financial instruments.
`Due to the average maturity and conservative nature of our investment portfolio, we believe a sudden change in interest rates would not have a
`material effect on the value of our investment portfolio.
`
`As of September 30, 2006, the principal components of our debt portfolio were the $l l 5.0 million principal amount ofSenior Notes due 20l0
`and the $60.0 million Credit Facility, both of which are denominated ir1 U.S. dollars. The fair value of the debt portfolio is referred to as the “debt
`value.” The Senior Notes bear interest at a fixed rate of 1 l 1/4%. Although a change in market interest rates would not affect the interest incurred or
`cash flow related to this fixed rate portion of the debt portfolio, the debt value would be affected.
`
`Our Credit Facility carries a variable interest rate that is tied to market indices. As of September 30, 2006, we had no direct borrowings and $8.5
`million of letters of credit outstanding under our Credit Facility. Borrowings under the Credit Facility would have borne interest at a rate of between
`approximately 6.57% and 8.25% per annum, as of September 30, 2006. Any future borrowings under the Credit Facility would, to the extent of
`outstanding borrowings, be alfected by changes in market interest rates. A change in market interest rates on the variable portion ofthe debt
`portfolio impacts the interest incurred and cash flows, but does not impact the value of the financial instrument.
`
`The sensitivity analysis as it relates to the fixed rate portion of our debt portfolio assumes an instantaneous 100 basis point move in interest
`rates from their levels as of September 30, 2006, with all other variables held constant. A 100 basis point increase in market interest rates would
`result in a decrease in the value of the debt by approximately $3.5 million as of September 30, 2006. A 100 basis point decline in market interest rates
`would cause the debt value to increase by approximately $3.5 million as ofSeptember 30, 2006.
`Based on the variable rate debt included in our debt portfolio as ofSepte1nber 30, 2006, a 100 basis poi11t increase in interest rates would result
`in additional interest incurred for the year ofless than $0.l million. A l00 basis point decrease in interest rates would correspondingly lower our
`interest expense for the year by less than $0.1 million.
`
`43
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_043
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Other than as described above, we do not believe that the market risk exposure on other financial instruments is material.
`
`Item 8. Financial Statements and Supplementary Data
`
`Our Consolidated Financial Statements appear on pages F-1 through F-36, as set forth in Item 15.
`
`Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
`None.
`
`Item 9A. Controls and Procedures
`
`Disclosure Controls and Procedures
`
`Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that are filed or
`submitted under the Exchange Act is recorded, processed. summarized and reported within the time periods specified in the Securities and
`Exchange Commission’s rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that
`information required to be disclosed 11nder the Exchange Act is accumulated and communicated to our management on a timely basis to allow
`decisions regarding required disclosure. We evaluated the effectiveness ofthe design and operation of our disclosure controls and procedures as
`of September 30, 2006. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of
`September 30, 2006, these controls and procedures were effective.
`
`Internal Control over Financial Reporting
`
`('a)iManagement’s Annual Report on Internal Control over Financial Reporting
`
`The Company‘s management is responsible for establishing and maintaining adequate internal control over financial reporting to provide
`reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements for external
`purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and
`procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
`the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
`statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only
`in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or
`timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial
`statements.
`
`Management assessed the Company’s internal control over financial reporting as of September 30, 2006, the end of the Company’s fiscal
`year. Management based its assessment on criteria established in Internal Control—lntegrated Framework issued by the Committee of Sponsoring
`Organizations of the Treadway Commission. Management's assessment included evaluation of such elements as the design and operating
`effectiveness of key financial reporting controls, process documentation, accounting policies, and the Company’s overall control environment.
`
`Based on its assessment, management has concluded that the Company’s internal control over financial reporting was effective as of the end
`of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
`external reporting purposes in accordance with generally accepted accounting principles. The results of management’s assessment were reviewed
`with the Audit Committee of the Company’s Board of Directors.
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O44
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`KPMG LLP audited management’s assessment and independently assessed tl1e effectiveness of the Company’s internal control over
`financial reporting. KPMG HP has issued an attestation report concurring with management’s assessment, which is included below.
`
`(by) Report ofhzdependerzt Registered Public Accounting Firm
`The Board of Directors and Stockholders
`Mothers Work, Inc.:
`
`We have audited management’s assessment, included in Managemenfs Annual Report on Internal Control over Financial Reporting
`presented above, that Mothers Work, lnc. maintained effective internal control over financial reporting as of September 30, 2006, based on criteria
`established in Internal Control—Integrated Framework issued by the Connnittee of Sponsoring Organizations of the Treadway Connnission
`(COSO). Mothers Work, Inc.’s management is responsible for maintaining effective internal co11trol over financial reporting and for its assessment
`of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an
`opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
`
`We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
`standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
`reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
`evaluating managernent’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such
`other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
`
`A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
`financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
`A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
`reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
`that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
`principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
`of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
`the company’s assets that could have a material effect on the financial statements.
`Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
`evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
`the degree of compliance with the policies or procedures may deteriorate.
`In our opinion, managen1ent’s assessment that Mothers Work, Inc. maintained effective internal control over financial reporting as of
`September 30, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the
`Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Mothers Work, Inc. maintained, in all material
`respects, effective internal control over financial reporting as of September 30, 2006, based on criteria established in Internal Control—lntegrated
`Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
`
`We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
`consolidated balance sheets of Mothers Work, Inc. and subsidiaries as of
`
`45
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O45
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`September 30, 2006 and 2005, and the related consolidated statements ofoperations, stockholders’ equity and cash flows for each ofthe years in
`the three-year period ended September 30, 2006 and the related financial statement schedule, and our report dated December l3, 2006 expressed an
`unqualified opinion on those consolidated financial statements and the related financial statement schedule.
`
`/s/ KPMG LLP
`
`Philadelphia, Pennsylvania
`December 13, 2006
`
`(13,) Change in Internal Control over Financial Reporting
`There have been no changes in internal control over financial reporting identified in connection with management’s evaluation that occurred
`during the last fiscal quarter ended September 30, 2006, that have materially affected, or are reasonably likely to materially affect, o11r internal
`control over financial reporting.
`
`Item 9B. Other Information
`None.
`
`Item 10. Directors and Executive Ol‘l'1ce1‘s of the Registrant
`
`PART III.
`
`Information concerning directors, appearing under the captions “Election ofDirectors"’ and “Section l6(a) Beneficial Ownership Reporting
`Compliance” in our Proxy Statement (the “Proxy Statement”) will be filed with the Securities and Exchange Commission in connection with the
`Annual Meeting of Stockholders scheduled to be held on January 19, 2007, and information concerning executive officers, appearing under the
`caption “Item 1. Busincss—Executive Ofiiccrs of the Company” in Partl ofthis Form l0-K, is incorporated herein by reference in response to this
`Item l0.
`
`The Board of Directors has adopted a Code of Business Conduct and Ethics, which was filed as an exhibit to the fiscal 2003 Fonn 10-K. We
`intend to satisfy the amendment a11d waiver disclosure requirements under applicable securities regulations by posting any amendments of, or
`waivers to, the Code of Business Conduct and Ethics on our web site.
`
`Item 11.Executive Compensation
`The information contained in the Proxy Statement from the section titled “Compensation Committee Report on Executive Compensation” up
`to, but not including, the section titled “Security Ownership of Certain Beneficial Owners and Managem ent,” with respect to executive
`compensation, and in the section titled “Compensation of Directors” with respect to director compensation, is incorporated herein by reference in
`response to this Item 11.
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_046
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
`The information contained in the section titled “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement,
`with respect to security ownership of certain beneficial owners and management, and in the section titled “Summary of All Existing Equity
`Compensation Plans,” with respect to securities authorized for issuance under equity compensation plans, is incorporated herein by reference i11
`response to this Item 12.
`
`Item 13. Certain Relationships and Related Transactions
`Not applicable.
`
`Item 14. Principal Accountant Fees and Services
`
`The information contained in the Proxy Statement in the section titled “Auditor Fees and Services" is incorporated herein by reference in
`response to this Item 14.
`
`Item 15. Exhibits, Financial Statement Schedules
`
`(a)(l) Financial Statements
`
`PART IV.
`
`The financial statements listed in the accompanying Index to Consolidated Financial Statements are filed as part of this Form l0-K
`commencing on page F-l.
`
`(2)Financial Statement Schedules
`Schedule II—Valuation and Qualifying Accounts.
`
`All other schedules are omitted because they are not applicable or not required, or because the required information is included in the
`consolidated financial statements or notes thereto.
`
`(3) Exhibits
`
`See following Index of Exhibits.
`
`47
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O47
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`INDEX OF EXIIIBITS
`
`Description
`Exhibit No.
`*3.l Am ended and Restated Certificate of Incorporation ofthe Company (effective March 10, 1993) (Exhibit 3.3 to the Company’s
`Registration Statement on Form S-1, Registration No. 33-57912, dated February 4, 1993).
`*3.2 By-Laws of the Company (as amended through October 9, 2005) (Exhibit 3.2 to the Company’s Current Report on Form 8-K dated
`October 9, 2005).
`*3.3 Amendment to the Amended a11d Restated Certificate of Incorporation of the Company dated February 11, 2003 (Exhibit 3.3 to the
`Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (the “March 2003 Form 10-Q”)).
`*3.4 Amendment to the Certificate of Designation of the Series B Junior Participating Preferred Stock of the Company dated February 11,
`2003 (Exhibit 3.4 to the Company's March 2003 10-Q).
`*4.l Specimen certificate representing shares of the Company’s common stock with legend regarding Preferred Stock Purchase Rights
`(Exhibit 4.2 to the Com pany’s Current Report on Form 8-K dated October 12, 1995).
`*4.2 Amended and Restated Rights Agreement, dated as of October 9, 2005, between Mothers Work, Inc. and StockTrans, Inc., which
`includes the Form of Series B Rights Certificate, the Certificate of Designation of the voting powers, designations, preferences, and
`relative, participating, optional or other special rights and qualifications, limitations and restrictions of the Series B Junior
`Participating Preferred Stock, and a Summary of Rights to Purchase Preferred Stock attached thereto as Exhibits A, 13 and C
`respectively (Exhibit 4.1 to the Company’s Current Report on Fonn 8-K dated October 9, 2005).
`*4.3 Indenture dated as of August 5, 2002, among the Company and Cave Springs, Inc., eSpecialty Brands, LLC, Dan Howard Industries,
`Inc., and Mother’s Stores, Inc., as guarantors, and J .P. Morgan Trust Company, National Association, a natio11al banking
`association, as Trustee (Exhibit 4.11 to thc C0mpany’s Quarterly Report on Form 10-Q for the quarter cndcd June 30. 2002).
`1994 Director Stock Option Plan (Exhibit 10.12 to the Company’s Annual Report on Fonn 10-K for the year ended September 30, 1994).
`'1‘*10.1
`*10.2 Loan Agreement dated September 1, 1995 between Philadelphia Authority For Industrial Development (“PAID”) and the Company
`(Exhibit 10.26 to the Company’s Registration Statement on Form S-1, Registration No. 33-97318, dated October 26, 1995 (the “1995
`Registration Statement”)).
`*10.3 Indenture of Trust dated September 1, 1995 between PAID and Society National Bank (Exhibit 10.29 to the Company’s 1995
`Registration Statement).
`*10.4 Variable/Fixed Rate Federally Taxable Economic Development Bond (Mothers Work, Inc.), Series of 1995, in the aggregate principal
`amount of $4,000,000 (Exhibit 10.30 to the Company’s 1995 Registration Statement).
`*10.5 Note dated as of February 14, 1996 from the Company to PIDC Local Development Corporation (Exhibit 10.29 to the Company’s
`Annual Report on Form 10-K for the year ended September 30, 1996 (the “1996 Form 10-K”)).
`*10.6 Installment Sale Agreement dated as of April 4, 1996 by and between PIDC Financing Corporation and the Company (Exhibit 10.30 to
`the 1.996 FQIII1 10-K).
`
`Source: DESTIN»'¥l'ION Fr’|ATERNITY CORR, 10~K, 123/5151-/2036
`
`| Powered by Intelligize
`
`DMC Exhibit 2038_O48
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`*10.7 Open-ended Mortgage dated as of April 4, 1996 between PIDC Financing Corporation and the Pennsylvania Industrial Development
`Authority (“PIDA”) (Exhibit 10.31 to the 1996 Form 10-K).
`*10.8 Loan Agreement dated as of April 4, 1996 by and between PIDC Financing Corporation and PIDA (Exhibit 10.32 to the 1996 Form 10-
`K).
`*l0.9 Amended and Restated Loan and Security Agreement dated as ofOctober 15, 2004 by and among Mothers V\7ork, Inc., Cave Springs,
`Inc., Mothers Work Canada, Inc., and Fleet Retail Group, Inc. (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
`October 15, 2004).
`T*10.10 1987 Stock Option l’lan (as amcndcd and restated) (Exhibit 4.1 to the Company’s Registration Statement on Form S-8, Registration .\I o.
`333-59529, dated July 21, 1998).
`T*10.11 Amendment to the Company’s 1987 Stock Option Plan, as amended and restated, effective as of November 13, 2002 (Exhibit 10.25 to
`the Company’s March 2003 Form 10-Q).
`T*10.12 Form of Non-Qualified Stock Option Agreement under the Company’s 1987 Stock Option Plan (Exhibit 10.18 to the Company’s
`Annual Report on F01111 l0-K for the year ended September 30, 2004 (the “2004 Fonn l0-K”)).
`T*l0.l3 Form ol‘Non-Qualified Stock Option Agreement under the Company’s 1994 Director Stock Option Plan (Exhibit 10.19 to the 2004 Form
`10-K).
`T*10.14 Amended and Restated Employment Agreement dated as of April 28, 2005, between Mothers Work, Inc. and Da11 W. Matthias
`(Exhibit 10.20 to the Company’s Current Report on Form 8-K dated April 26, 2005 (the “April 26, 2005 Fonn 8-K”)).
`'l‘*l0.l5 Amended and Restated En1ployn1e11t Agreement dated as of April 28, 2005, between Mothers Work, I11c. a11d Rebecca C. Matthias
`(Exhibit 10.21 to the April 26, 2005 Form 8-K).
`T*10.16 Amended and Restated Employment Agreement dated as of April 26, 2005, between Mothers Work, Inc. and Edward M. Krell (Exhibit
`10.22 to the April 26, 2005 Form 8-K).
`‘l‘*l0.l7 Description of the Company’s Non-Employee Directors Compensation Policy (Exhibit 10.1 to the Company’s Quarterly Report on
`Form 10-Q for the quarter ended March 31, 2005).
`*10.18 First Modification Agreement dated as of September 26, 2005 by and among Mothers Work, I11c., Cave Springs, Inc., Mothers Work
`Canada, Inc., a11d Fleet Retail Group, LLC. (Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the year ended September
`30, 2005).
`T*l0.l9 Amendment to Amended and Restated Employment Agreement dated as of December 29, 2005, between Mothers Work, Inc. and Dan
`W. Matthias (Exhibit 10.19 to the Company’s Current Report on Form 8-K dated December 29, 2005 (the “December 29, 2005 Form 8-
`K”)).
`T*10.20 Amendment to Amcndcd and Restated Employmcnt Agrccmcnt dated as of Dcccmbcr 29, 2005, bctwccn Mothcrs Work, Inc. and
`Rebecca C. Matthias (Exhibit 10.20 to the December 29, 2005 Form 8-K).
`T*10.21 Form of Waiver of Rights Under Company’s 1987 Stock Option Plan and 1994 Director Stock Option Plan executed by each of the
`Company’s Non—Management Directors (Exhibit 10.21 to the December 29, 2005 Form 8-K).
`T*10.22 Form of Waiver of Rights Under Company’s 1987 Stock Option Plan executed by certain of the Company’s executive ofiicers (Exhibit
`10.22 to the December 29, 2005 Fom1 8-K).
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O49
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`T*10.23 Second Amendment to Amended and Restated Employment Agreement dated as of May 8, 2006, between Mothers Work, Inc. and
`Dan W. Matthias (Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (the “March
`2006 Form 10—Q”)).
`T*10.24 Second Amendment to Amended and Restated Employment Agreement dated as of May 8. 2006, between Mothers Work. Inc. and
`Rebecca C. Matthias (Exhibit 10.5 to the March 2006 Form 10-Q).
`T*10.25 Letter Agreement dated as of November 14, 2006 between Mothers Work, Inc. and Dan W. Matthias (Exhibit 10.19 to the Company’s
`Current Report on Form 8-K dated November 14. 2006 (the “November 14, 2006 Form 8—K”)).
`T*10.26 Lcttcr Agreement dated as of November 14, 2006 bctwccn Mothers Work, Inc. and Rcbccca C. Matthias (Exhibit 10.20 to thc
`November 14, 2006 Form 8-K).
`‘$10.27 Company’s 2005 Equity Incentive Plan (as amended through October 9, 2006)
`110.28 Form of Restricted Stock Award Agreement under the Company’s 2005 Equity Incentive Plan.
`T1029 Form of Non-Qualified Stock Option Agreement under thc Company’s 2005 Equity Incentive Plan.
`*14 Code of Business Conduct and Ethics (Exhibit 14 to the Company’s Annual Report on Form 10-K for the year ended September 30,
`2003 (the “2003 Fonn 10-K”)).
`*21 Subsidiaries of the Company (Exhibit 21 to the 2003 Form 10—K).
`Z} Consent ofKPNlG LLP.
`
`31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
`31.2 Certification of the Executive Vice President—Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
`32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
`Oxlcy Act of2002.
`32.2 Certification of the Executive Vice President—Chief Financial Ofiicer Pursuant to 18 U.S.C. Section 13 50, as Adopted Pursuant to
`Section 906 of the Sarbanes-Oxley Act of 2002.
`
`* Incorporated by reference.
`Tl\/Ianagement contract or compensatory plan or arrangement.
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_050
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Pursuant to the requirements of Section 13 or 1 5(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to he
`signed on its behalf by tl1e undersigned, thereunto duly authorized, in the City of Philadelphia, Connnonwealth of Pennsylvania, on December l3,
`2006.
`
`SIGNATI RES
`
`MOTHERS WORK, INC.
`
`By:
`
`By:
`
`/s/ DAN W. MATTI-llAS
`Dan W. Matthias
`Clzazrmcm ofthe Board and ChzefExeculzve Officer (Prmczpal
`Executzve Ofiicer)
`
`/ s/ EDWARD M. KRELL
`Edward M. Krell
`Fxecutive Vzce PrexideI1t—Ch[efF'imJI1c[a1 Ofificer (P/‘mcipal
`Financial and/wlccoztrztirzg Ofiicer)
`
`Pursuant to the requirements of the Securities Exchange Act of l 934, this Report has been signed hy the following persons on December 13,
`2006, in the capacities indicated:
`
`/s/ DAN W. MATTHIAS
`Dan W. Matthias
`
`Chairman of t11c Board, ChicfEXccutivc Ofiiccr and Dircctor
`(Principal Executive Ofiicer)
`
`/s/ REBECCA C. MATTI IIAS
`Rebecca C. Matthias
`
`/ s/ EDWARD M. KRELL
`Edward M. Krell
`
`/ s/ JOSEPII A. GOLDBLUM
`Joseph A. Goldblum
`
`/ s/ ELAM M. IIITCI INER, III
`Elam M. Hitchner, III
`
`/5.’ ANNE T. KAVANAGH
`Anne T. Kavanagh
`
`/ s/ DAVID SCI-Il ESSINGER
`David Schlessinger
`
`/s/ Wll.l.lAl\/I A. SCHWARTZ, JR.
`William A. Schwartz, Jr.
`
`President. Chief Operating Ofiicer and Director
`
`Executive Vice Pre sident—Chief Financial Ofiicer
`(Principal Financial a11d Accounting Ofiicer)
`
`Director
`
`Director
`
`Director
`
`Director
`
`Director
`
`Source: DESTINATION MATERNITY CORR,
`
`‘10~K, 12/'14/2086 | Powered by Intelligize
`
`DMC Exhibit 2038_O51
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`MOTHERS WORK, INC. AND SI IRSIDIARIES
`INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
`AND FINANCIAL STATEMENT SCHEDULE
`
`Report of Independent Reuistered Public Accounting Firm
`Consolidated Balance Sheets
`
`Consolidated Statements of Ogerations
`Consolidated Statements of Stockholders’ Eguifl
`Consolidated Statements of Cash Flows
`Notes to Consolidated Financial Statements
`
`Schedule Supporting the Consolidated Financial Statements:
`Valuation and Qualifying Accounts
`
`F—l
`
`F—2
`F-3
`
`F-4
`F-5
`F—6
`F-7 to F-36
`
`F-37
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O52
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`REPORT OF INDEPENDENT REGISTERED PI IBIJC ACCOUNTING FIRM
`
`The Board of Directors and Stockholders
`Mothers Work, Ir1c.:
`
`We have audited tl1e accompanying consolidated balance sheets of Mothers Work, I11c. and subsidiaries as of September 30, 2006 and 2005,
`and tl1e related consolidated statements of operations, stockholders’ equity and casl1 [lows for each of the years in the three-year period ended
`September 30, 2006. In connection with our audits of the consolidated financial statements, we also have audited the related financial statement
`schedule, Valuation and Qualifying Accounts. These consolidated financial statements and financial statement schedule are the responsibility of
`the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement
`schedule based 011 o11r audits.
`
`We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). These
`standards require that we plan and perfor111 tl1e audit to obtai11 reasonable assurance about whether the financial statements are fiee of material
`misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fnancial statements. An audit
`also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
`statement presentation. We believe that our audits provide a reasonable basis for our opinion.
`In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mothers
`Work, Inc. and subsidiaries as ofSeptcmbcr 30, 2006 and 2005, and the results oftheir operations and their cash flows for each of the years in the
`three-year period ended September 30, 2006, in conformity with U.S generally accepted accounting principles. Also in our opinion, the related
`financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all
`material respects, the information set forth therein.
`
`As discussed in Note 2, the Company adopted SFAS No. l23(R), “Share-Based Payment,” effective October 1, 2005 using the modified
`prospective method.
`
`We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
`effectiveness of Mothers Work, Inc.’s internal control over financial reporting as of September 30, 2006, based on criteria established in Internal
`Control—lntegratcd Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated
`December 13, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial
`reporting.
`
`/s/' KPMG LLP
`
`Philadelphia, Pennsylvania
`December 13, 2006
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_053
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`MOTHERS VVORK, INC. AND SUBSIDIARIES
`CONSOLIDATED BALANCE SHEETS
`
`(in thousands, except share and per share amounts)
`
`ASSETS
`Current assets
`Cash and cash equivalents
`Sl1ort-term investments
`Trade receivables
`Inventories
`Deferred income taxes
`Prepaid expenses and other current assets
`Total current assets
`Property, plant and equipment, net
`Assets held for sale
`Other assets
`Goodwill
`Deferred financing costs, net of accumulated amortization of $1,927 and $1,379
`Othcr intangiblc asscts, nct of accumulated amortization of $2,413 and $2,481
`Deferred income taxes
`Other non—current assets
`Total other assets
`Total assets
`
`LIABILITIES AND STOCIGIOLDERS’ EQUITY
`Current liabilities
`Line of credit borrowings
`Current portion of long-term debt
`Accounts payable
`Accrued expenses a11d other current liabilities
`Total current liabilities
`Long-term debt
`Deferred rent and other non—current liabilities
`Total liabilities
`Commitments and contingencies (Note 14)
`Stockholders’ equity
`Preferred stock. 2,000,000 shares authorized
`Series A cumulative convertible preferred stock, $.01 par value, 41,000 shares
`authorized, none outstanding
`Scrics B junior participating prcfcrrcd stock, $.01 par value; 300,000 shares
`authorized, none outstanding
`Common stock, $.01 par value; 20,000,000 shares authorized, 5,624,374 and 5,268,535
`shares issued a11d outstanding, respectively
`Additional paid—in capital
`Retained earnings
`Total stockholders’ equity
`Total liabilities and stockholders’ equity
`
`September 30.
`2006
`2005
`
`$
`
`18,904
`9,425
`11,631
`94,259
`6,018
`8,395
`148,632
`71,430
`700
`
`$
`
`3,037
`—
`7,681
`105,911
`6,015
`4,816
`127,460
`76,173
`925
`
`50,389
`2,795
`726
`12,543
`521
`66,974
`51% 287,736
`
`50,389
`3,69