Exhibit 99.3
Unaudited Pro Forma Consolidated Condensed Combined Financial Information
The unaudited pro forma consolidated condensed combined financial statement information of National Patent Development Corporation (the “Company”) set forth below is presented to reflect the pro forma effects of the following transaction (the “Transaction”) as if it occurred on the dates indicated.
On April 5, 2007, pursuant to the terms of a definitive asset purchase agreement, dated as of March 13, 2007 (the “Agreement”), with Right-Way Dealer Warehouse, Inc. (“Right-Way”), Five Star Products, Inc., a 58%-owned subsidiary of the Company, acquired substantially all the assets (except certain “Excluded Assets”, as defined in the Agreement) of Right-Way for approximately $3,200,000 in cash and assumed certain of the liabilities of Right-Way which have since been determined to amount to approximately $50,000. The assets consisted primarily of accounts receivable and inventory. The acquisition included all of Right-Way's Brooklyn Cash & Carry business and operations.
The unaudited pro forma consolidated condensed combined statement of income for the year ended December 31, 2006 gives effect to the Transaction as if it occurred on January 1, 2006. The unaudited pro forma consolidated condensed combined statement of income for the year ended December 31, 2006 was derived from:
| (i) | The Company’s historical audited consolidated statement of income for the year ended December 31, 2006, which is included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 filed with the United States Securities and Exchange Commission (the “SEC”) on April 3, 2007, as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on April 30, 2007; and |
| (ii) | Right-Way’s historical audited statement of operations for the year ended December 31, 2006, which is filed as Exhibit 99.2 to this Current Report on Form 8-K/A. |
The unaudited pro forma consolidated condensed combined statement of income for the three months ended March 31, 2007 gives effect to the Transaction as if it occurred on January 1, 2007. The unaudited pro forma consolidated condensed combined statement of income for the three months ended March 31, 2007 was derived from:
| (i) | The Company’s historical unaudited consolidated condensed statement of income for the three months ended March 31, 2007, which is included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 filed with the SEC on May 15, 2007; and |
| (ii) | Right-Way’s historical unaudited statement of operations for the three months ended March 31, 2007, which is filed as Exhibit 99.1 to this Current Report on Form 8-K/A, adjusted for the effect of the unaudited pro forma adjustments necessary to account for the Transaction. |
The unaudited pro forma consolidated condensed combined balance sheet as of March 31, 2007 has been prepared as if the Transaction occurred on March 31, 2007. The unaudited pro forma consolidated condensed combined balance sheet as of March 31, 2007 combines the Company’s historical unaudited consolidated condensed balance sheet as of March 31, 2007, which is included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 filed with the SEC on May 15, 2007, and Right-Way’s historical unaudited condensed balance sheet as of March 31, 2007, which is filed as Exhibit 99.1 to this Current Report on Form 8-K/A, adjusted for the effect of the unaudited pro forma adjustments necessary to account for the Transaction.
The Right-Way acquisition is being accounted for under the purchase method of accounting in accordance with accounting principles generally accepted in the United States. Accordingly, Right-Way’s operating results will be included in the Company’s operating results since the closing of the Transaction occurred on April 5, 2007.
The pro forma adjustments related to the Right-Way transaction are based on an analysis of inter-company transactions and associated costs, estimated interest expense and income taxes. In addition, the Company estimated the purchase price allocations by estimating the fair value of tangible assets, primarily inventory and accounts receivables. The Company also made adjustments to certain assets and liabilities. Differences between this preliminary allocation and final purchase price allocations could have a material impact on the accompanying unaudited pro forma consolidated condensed combined financial statement information and the Company’s future results of operations and financial position. A final determination of the purchase price allocation, which is still in progress, will be based on actual, tangible and identifiable intangible assets of Right-Way that existed on the date of acquisition.
The unaudited pro forma consolidated condensed combined financial statement information is based on, and should be read together with:
| (i) | The Company’s consolidated financial statements as of and for the year ended December 31, 2006, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC on April 3, 2007, as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on April 30, 2007 and the Company’s historical unaudited consolidated condensed financial statements as of and for the three months ended March 31, 2007, which is included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 filed with the SEC on May 15, 2007; and |
| (ii) | Right-Way’s financial statements as of and for the year ended December 31, 2006, which are filed as Exhibit 99.2 to this Current Report on Form 8-K/A, and Right-Way’s unaudited condensed financial statements as of and for the three months ended March 31, 2007, which are filed as Exhibit 99.1 to this Current Report on Form 8-K/A. |
The unaudited pro forma consolidated condensed combined financial statement information is presented for illustrative purposes only and is not necessarily indicative of the financial position or operating results that would have been achieved had the Transaction occurred on the dates indicated, or of the financial position or results of operations that may be attained by the combined company in the future.
NATIONAL PATENT DEVELOPMENT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED COMBINED
STATEMENT OF OPERATIONS
For the year ended December 31, 2006
(in thousands, except per share data)
| | Historical | | Historical | | | | | Pro | |
| | NPDC | | Right-Way | | Adjustments | | | Forma | |
| Sales | $ | 117,084 | | $ | 39,474 | | | | | $ | 156,558 | |
| Cost of sales | | 97,605 | | | 37,236 | | | | | | 134,841 | |
| Gross margin | | 19,479 | | | 2,238 | | | | | | 21,717 | |
| Selling, general and administrative expenses | | (18,678 | ) | | (4,321 | ) | | | | | (22,999 | ) |
| Operating profit (loss) | | 801 | | | (2,083 | ) | | | | | (1,282 | ) |
| Interest expense | | (1,565 | ) | | (600 | ) | $ | (267 | ) | (f) | | (2,432 | ) |
| Investment and other income (loss) | | (13 | ) | | | | | | | | | (13 | ) |
Loss before income taxes and minority interest | | (777 | ) | | (2,683 | ) | | (267 | ) | | | (3,727 | ) |
| Income tax (expense) benefit | | (327 | ) | | 27 | | | 1,138 | | (g) | | 838 | |
| Loss before minority interest | | (1,104 | ) | | (2,656 | ) | | 871 | | | | (2,889 | ) |
| Minority interest | | (103 | ) | | | | | 643 | | (h) | | 540 | |
| Net loss | $ | (1,207 | ) | $ | (2,656 | ) | $ | 1,514 | | | $ | (2,349 | ) |
| Net loss per share | | | | | | | | | | | | | |
| Basic and diluted | $ | (.07 | ) | | | | | | | | $ | (.13 | ) |
| | | | | | | | | | | | | | |
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED COMBINED
STATEMENT OF OPERATIONS
For the three months ended March 31, 2007
(in thousands, except per share data)
| | Historical | | Historical | | | | | | Pro | |
| | NPDC | | Right-Way | | | Adjustments | | | Forma | |
| Sales | $ | 31,931 | | $ | 4,934 | | | $ | (600 | ) | (e) | | 36,265 | |
| Cost of sales | | 26,841 | | | 5,169 | | | | (645 | ) | (e) | | 31,365 | |
| Gross margin | | 5,090 | | | (235 | ) | | | 45 | | | | 4,900 | |
| | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | (4,702 | ) | | (675 | ) | | | | | | | (5,377 | ) |
| | | | | | | | | | | | | | | |
| Operating profit (loss) | | 388 | | | (910 | ) | | | 45 | | | | (477 | ) |
| | | | | | | | | | | | | | | |
| Interest expense | | (326 | ) | | (136 | ) | | | (69 | ) | (f) | | (531 | ) |
Investment and other income | | 66 | | | 0 | | | | 0 | | | | 66 | |
| | | | | | | | | | | | | | | |
| Income (loss) before income taxes and minority interest | | 128 | | | (1,046 | ) | | | (24 | ) | | | (942 | ) |
| | | | | | | | | | | | | | | |
| Income tax (expense) benefit | | (360 | ) | | (6 | ) | | | 441 | | (g) | | 120 | |
| | | | | | | | | | | | | | | |
| Loss before minority interest | | (232 | ) | | (1,052 | ) | | | 417 | | | | (867 | ) |
| | | | | | | | | | | | | | | |
| Minority interest | | (195 | ) | | 0 | | | | 269 | | (h) | | 74 | |
| | | | | | | | | | | | | | | |
| Net loss | $ | (427 | ) | $ | (1,052 | ) | | $ | 686 | | | $ | (793 | ) |
| | | | | | | | | | | | | | | |
| Net loss per share | | | | | | | | | | | | | | |
| Basic and diluted | $ | (0.02 | ) | | | | | | | | | $ | (0.04 | ) |
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED COMBINED
BALANCE SHEET
As of March 31, 2007
(in thousands)
| | | Historical | | | Historical | | | | | Pro | |
| | | NPDC | | | Right-Way | | Adjustments | | | Forma | |
Assets | | | | | | | | | | | |
Current assets | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 4,094 | | | $ | 1,152 | | $ | (1,152 | ) | (a) | $ | 4,094 | |
Accounts receivable, less allowance for doubtful
accounts of $355 | | | 19,515 | | | | 1,849 | | | (240 | ) | (b) | | 21,124 | |
| Receivable from GP Strategies Corporation | | | 66 | | | | | | | | | | | 66 | |
| Inventories | | | 25,566 | | | | 1,986 | | | 228 | | (c) | | 27,780 | |
| Prepaid expenses and other current assets | | | 1,322 | | | | 300 | | | (300 | ) | (a) | | 1,322 | |
| Deferred tax asset | | | 842 | | | | 0 | | | 0 | | | | 842 | |
Total current assets | | | 51,405 | | | | 5,287 | | | (1,464 | ) | | | 55,228 | |
| | | | | | | | | | | | | | | | |
| Marketable securities available for sale | | | 354 | | | | | | | | | | | 354 | |
| Property, plant and equipment, net | | | 3,580 | | | | 276 | | | (276 | ) | (a) | | 3,580 | |
Investment in Valera, including available for sale
securities of $4,989 and $4,823 in 2007 and 2006 | | | 6,122 | | | | | | | | | | | 6,122 | |
| Other assets | | | 3,926 | | | | 309 | | | (309 | ) | (a) | | 3,926 | |
Total assets | | $ | 65,387 | | | $ | 5,872 | | $ | (2,049 | ) | | $ | 69,210 | |
(continued)
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED COMBINED
BALANCE SHEET (continued)
As of March 31, 2007
(in thousands)
| | | Historical | | | Historical | | | | | | | Pro | |
| | | NPDC | | | Right-Way | | | Adjustments | | | | Forma | |
Liabilities and stockholders’ equity | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | |
| Current maturities of long-term debt | | $ | 187 | | | $ | 206 | | | $ | (206 | ) | (a) | | $ | 187 | |
| Short term borrowings | | | 19,598 | | | | 3,749 | | | | (3,749 | ) | (a) (d) | | | 22,948 | |
Accounts payable and accrued expenses | | | 19,885 | | | | 163 0 | | | | (113 | ) | (a) (b) | | | 19,695 | |
Total current liabilities | | | 39,670 | | | | 4,118 | | | | (958 | ) | | | | 42,830 | |
| | | | | | | | | | | | | | | | | | |
| Liabilities subject to compromise | | | | | | | 5,218 | | | | (5,218 | ) | (a) | | | | |
| Long-term debt less current maturities | | | 1,544 | | | | | | | | | | | | | 1,544 | |
| Deferred tax liability | | | 279 | | | | | | | | | | | | | 279 | |
| Other liabilities | | | 259 | | | | | | | | | | | | | 259 | |
| | | | | | | | | | | | | | | | | | |
| Minority interest | | | 2,488 | | | | | | | | | | | | | 2,488 | |
| Common stock subject to exchange rights | | | 431 | | | | | | | | | | | | | 431 | |
| | | | | | | | | | | | | | | | | | |
Stockholders’ equity | | | | | | | | | | | | | | | | | |
| Common stock | | | 180 | | | | 51 | | | | (51 | ) | (a) | | | 180 | |
| Additional paid-in capital | | | 26,069 | | | | | | | | | | | | | 26,069 | |
| Accumulated deficit | | | (9,604 | ) | | | (2,665 | ) | | | 2,665 663 | | (a) (i) | | | (8,941 | ) |
| Treasury stock, at cost | | | (408 | ) | | | (850 | ) | | | 850 | | (a) | | | (408 | ) |
| Accumulated other comprehensive income | | | 4,479 | | | | 0 | | | | 0 | | | | | 4,479 | |
Total stockholders’ equity | | | 20,716 | | | | (3,464 | ) | | | 4,127 | | | | | 21,379 | |
Total liabilities and stockholders’ equity | | $ | 65,387 | | | $ | 5,872 | | | $ | (2,049 | ) | | | $ | 69,210 | |
Pro Forma Adjustments
| a) | To adjust for assets, stockholders’ equity not acquired and liabilities not assumed |
| b) | To eliminate amounts due to Right-Way at March 31, 2007, paid prior to the closing of the Transaction |
| c) | To adjust historical inventory to fair value |
| d) | To record increase in short-term borrowings to purchase assets |
| e) | To eliminate inter-company sales and related cost of sales |
| f) | To record interest expense on increased short-term borrowings |
| g) | To record effect of the Transaction on income tax expense |
| h) | To record minority interest |
| i) | Excess of value of inventory and receivables at March 31, 2007 over the cost of acquisition |
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