Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS OF WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES, RESTORERS, INC. AND J&P ACQUISTIIONS INC. AND SUBSIDIARY
The following unaudited pro forma condensed combined consolidated financial statements of Western Capital Resources, Inc. and subsidiaries (“Western Capital”), Restorers Acquisition, Inc. (“Restorers”) and J&P Park Acquisition Inc. and subsidiary (“JPPA”) give effect to the merger and contribution ofRestorers and JPPA pursuant to the Merger and Contribution Agreement (“Agreement”).
Western Capital completed its acquisition of the businesses and real estate operations ofRestorers and JPPAafter the close of business on June 30, 2015, pursuant to the Agreement entered into June 9, 2015, by and among Western Capital, WCRS Restorers Acquisition Co., a wholly owned subsidiary of Western Capital, Restorers, JPPA and other parties. Pursuant to the Agreement, the businesses of Restorers, acquired through a triangular merger, and JPPA, acquired through contributions of all ownership interests by their respective holders, were acquired in exchange for 3,500,000 shares of Western Capital common stock representing approximately 37% of the total issued and outstanding common stock of Western Capital after consummation of the acquisition.
Restorers owns the Van Dyke’s Restorers brand business, an online retailer of home and furniture restoration products and J&P Park Acquisitions owns and operates the Park Seed online seed store, Wayside Gardens online and Jackson & Perkins online. J&P Real Estate owns the real estate facilities which are the headquarters for Restorers and JPPA and a distribution center for J&P Park Acquisitions.
Western Capital, Restorers and JPPA were affiliated entities under common control prior to the acquisition. Accordingly, the assets and liabilities of the Restorers and JPPA are accounted for at their carrying amounts as of the date of transfer.
The unaudited pro forma condensed combined consolidated financial information has been prepared in accordance with SEC Regulation S-X Article 11. The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the consolidated operating results that would have been achieved if the merger and contribution transaction among Restorers, JPPA and Western Capital had been consummated as of the beginning of the period indicated, nor is it necessarily indicative of the results of future operations.
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WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES, J & P PARK ACQUSITIONS, INC. AND SUBSIDIARY AND RESTORERS ACQUISITION, INC. UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET As of June 30, 2015 (in Thousands) |
Western Capital | JPPA | Restorers | Pro Forma | Note 3 | Pro Forma Combined | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
CURRENT ASSETS | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 3,185 | $ | 2,082 | $ | — | $ | — | $ | 5,267 | ||||||||||||||
Loans receivable, net | 4,840 | — | — | 4,840 | ||||||||||||||||||||
Accounts receivable, net | 876 | 392 | 136 | 1,404 | ||||||||||||||||||||
Inventory | 2,910 | 1,096 | 2,074 | 6,080 | ||||||||||||||||||||
Prepaid expenses and other | 1,534 | — | 7 | (71 | ) | (a) | 1,470 | |||||||||||||||||
Deferred income taxes | 643 | — | 145 | 788 | ||||||||||||||||||||
TOTAL CURRENT ASSETS | 13,988 | 3,570 | 2,362 | (71 | ) | 19,849 | ||||||||||||||||||
FIXED ASSETS, Net | 1,947 | 6,557 | 34 | 8,538 | ||||||||||||||||||||
GOODWILL | 13,757 | 31 | — | 13,788 | ||||||||||||||||||||
INTANGIBLE ASSETS, Net | 8,147 | 104 | 17 | 8,268 | ||||||||||||||||||||
OTHER | 447 | 596 | 33 | 1,076 | ||||||||||||||||||||
TOTAL ASSETS | $ | 38,286 | $ | 10,858 | $ | 2,446 | $ | (71 | ) | $ | 51,519 | |||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 6,460 | $ | 1,401 | $ | 777 | $ | (71 | ) | (a) | $ | 8,567 | ||||||||||||
Line of credit | — | — | 120 | 120 | ||||||||||||||||||||
Income taxes payable | 209 | 486 | 61 | 756 | ||||||||||||||||||||
Merchandise credit and gift card liabilities | — | 390 | — | 390 | ||||||||||||||||||||
Current portion long-term debt | 4,500 | — | — | 4,500 | ||||||||||||||||||||
Current portion capital lease obligations | 32 | 400 | — | 432 | ||||||||||||||||||||
Deferred revenue & Other | 620 | 239 | — | 859 | ||||||||||||||||||||
TOTAL CURRENT LIABILITIES | 11,821 | 2,916 | 958 | (71 | ) | 15,624 | ||||||||||||||||||
LONG-TERM LIABILITIES | ||||||||||||||||||||||||
Note payable, net of current portion | 875 | 3,138 | — | 4,013 | ||||||||||||||||||||
Capital lease obligations, net of current portion | 20 | — | — | 20 | ||||||||||||||||||||
Deferred income taxes | 4,059 | 169 | — | 4,228 | ||||||||||||||||||||
Other | 106 | — | — | 106 | ||||||||||||||||||||
TOTAL LONG-TERM LIABILITIES | 5,060 | 3,307 | — | 8,367 | ||||||||||||||||||||
TOTAL LIABILITIES | 16,881 | 6,223 | 958 | (71 | ) | 23,991 | ||||||||||||||||||
EQUITY | ||||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Common stock/units | — | — | — | — | (b) | — | ||||||||||||||||||
Additional paid-in capital | 22,750 | — | 589 | 5,871 | (b) | 29,210 | ||||||||||||||||||
Retained earnings (Accumulated deficit) | (1,360 | ) | 2,743 | 899 | (3,979 | ) | (b) | (1,697 | ) | |||||||||||||||
TOTAL SHAREHOLDERS’ EQUITY | 21,390 | 2,743 | 1,488 | 1,892 | 27,513 | |||||||||||||||||||
NONCONTROLLING INTERESTS | 15 | 1,892 | — | (1,892 | ) | (b) | 15 | |||||||||||||||||
TOTAL EQUITY | 21,405 | 4,635 | 1,488 | — | 27,528 | |||||||||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | 38,286 | $ | 10,858 | $ | 2,446 | $ | (71 | ) | $ | 51,519 |
The accompanying notes are an integral part of these Unaudited Pro Forma Condensed Combined Consolidated Financial Statements
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WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES, J & P PARK ACQUSITIONS, INC. AND SUBSIDIARY AND RESTORERS ACQUISITION, INC. UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2015 (in Thousands except share outstanding amounts and net income per common share) |
Western Capital | JPPA | Restorers | Pro Forma | Note 3 | Pro Forma Combined | |||||||||||||||||||
REVENUES | ||||||||||||||||||||||||
Retail sales & associated fees | $ | 13,635 | $ | 19,194 | $ | 5,670 | $ | — | $ | 38,499 | ||||||||||||||
Financing fees and interest | 5,142 | — | — | — | 5,142 | |||||||||||||||||||
Royalty and franchise fees, net | 5,080 | — | — | — | 5,080 | |||||||||||||||||||
Other revenue | 3,381 | — | 9 | — | 3,390 | |||||||||||||||||||
27,238 | 19,194 | 5,679 | — | 52,111 | ||||||||||||||||||||
COST OF SALES | 9,313 | 8,842 | 2,789 | — | 20,944 | |||||||||||||||||||
GROSS PROFIT | 17,925 | 10,352 | 2,890 | — | 31,167 | |||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||||
Selling, general and administrative | 15,055 | 7,733 | 2,607 | (481 | ) | (c) | 24,914 | |||||||||||||||||
Depreciation and amortization | 428 | 181 | 13 | — | 622 | |||||||||||||||||||
15,483 | 7,914 | 2,620 | (481 | ) | 25,536 | |||||||||||||||||||
OPERATING INCOME | 2,442 | 2,438 | 270 | 481 | 5,631 | |||||||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||||||
Interest income | 2 | — | — | — | 2 | |||||||||||||||||||
Interest expense | (203 | ) | (94 | ) | (27 | ) | — | (324 | ) | |||||||||||||||
Other income (expense) | — | — | — | — | — | |||||||||||||||||||
(201 | ) | (94 | ) | (27 | ) | — | (322 | ) | ||||||||||||||||
INCOME BEFORE INCOME TAXES | 2,241 | 2,344 | 243 | 481 | 5,309 | |||||||||||||||||||
PROVISION FOR INCOME TAXES | 973 | 700 | 80 | 135 | (d) | 1,888 | ||||||||||||||||||
NET INCOME (LOSS) | 1,268 | 1,644 | 163 | 346 | 3,421 | |||||||||||||||||||
NET INCOME APPLICABLE TO NONCONTROLLING INTERESTS | (6 | ) | (331 | ) | — | 331 | (e) | (6 | ) | |||||||||||||||
NET INCOME ATTRIBUTABLE TO WCR SHAREHOLDERS | $ | 1,262 | $ | 1,313 | $ | 163 | $ | 677 | $ | 3,415 | ||||||||||||||
NET INCOME PER COMMON SHARE | ||||||||||||||||||||||||
Basic & Diluted | $ | 0.21 | $ | 0.36 | ||||||||||||||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||||||||||
Basic & Diluted | 5,997,588 | 3,500,000 | (f) | 9,497,588 |
The accompanying notes are an integral part of these Unaudited Pro Forma Condensed Combined Consolidated Financial Statements
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WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES, J & P PARK ACQUSITIONS, INC. AND SUBSIDIARY AND RESTORERS ACQUISITION, INC. UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 2014 (in Thousands except share outstanding amounts and net income per common share) |
Western | Pro Forma | Pro Forma | ||||||||||||||||||||||
Capital | JPPA | Restorers | Adjustments | Note 3 | Combined | |||||||||||||||||||
REVENUES | ||||||||||||||||||||||||
Retail sales & associated fees | $ | 22,535 | $ | 32,307 | $ | 11,315 | $ | $ | 66,157 | |||||||||||||||
Financing fees and interest | 11,124 | — | — | 11,124 | ||||||||||||||||||||
Royalty and franchise fees, net | 2,814 | — | — | 2,814 | ||||||||||||||||||||
Other revenue | 4,286 | — | — | 4,286 | ||||||||||||||||||||
40,759 | 32,307 | 11,315 | — | 84,381 | ||||||||||||||||||||
COST OF SALES | 14,701 | 14,844 | 6,360 | 35,905 | ||||||||||||||||||||
GROSS PROFIT | 26,058 | 17,463 | 4,955 | — | 48,476 | |||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||||
Selling, general and administrative | 21,231 | 14,645 | 4,975 | 40,851 | ||||||||||||||||||||
Depreciation and amortization | 556 | 334 | 28 | 918 | ||||||||||||||||||||
21,787 | 14,979 | 5,003 | — | 41,769 | ||||||||||||||||||||
OPERATING INCOME | 4,271 | 2,484 | (48 | ) | — | 6,707 | ||||||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||||||
Interest income | 2 | — | — | 2 | ||||||||||||||||||||
Interest expense | (316 | ) | (255 | ) | (55 | ) | (626 | ) | ||||||||||||||||
Other income (expense) | — | — | 23 | 23 | ||||||||||||||||||||
(314 | ) | (255 | ) | (32 | ) | — | (601 | ) | ||||||||||||||||
INCOME BEFORE INCOME TAXES | 3,957 | 2,229 | (80 | ) | 6,106 | |||||||||||||||||||
PROVISION FOR INCOME TAXES | 1,546 | 568 | (26 | ) | 191 | (d) | 2,279 | |||||||||||||||||
NET INCOME (LOSS) | 2,411 | 1,661 | (54 | ) | (191 | ) | 3,827 | |||||||||||||||||
NET INCOME APPLICABLE TO NON-CONTROLLING INTERESTS | (5 | ) | (511 | ) | — | 511 | (e) | (5 | ) | |||||||||||||||
NET INCOME ATTRIBUTABLE TO WCR SHAREHOLDERS | $ | 2,406 | 1,150 | (54 | ) | 320 | 3,822 | |||||||||||||||||
NET INCOME PER COMMON SHARE | ||||||||||||||||||||||||
Basic & Diluted | $ | 0.64 | $ | 0.53 | ||||||||||||||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||||||||||
Basic & Diluted | 3,763,726 | 3,500,000 | (f) | 7,263,726 |
The accompanying notes are an integral part of these Unaudited Pro Forma Condensed Combined Consolidated Financial Statements
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS OF WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES, RESTORERS, INC. AND J&P ACQUISTIIONS INC. AND SUBSIDIARY
Note 1. Description of the Transaction
Western Capital Resources, Inc. (“Western Capital”) completed its acquisition of the businesses and real estate operations of Restorers Acquisition, Inc. (“Restorers”), J&P Acquisitions, Inc. and J&P Real Estate LLC after the close of business on June 30, 2015, pursuant to the Merger and Contribution Agreement (“Agreement”) entered into June 9, 2015. Pursuant to the Agreement, the businesses of Restorers, acquired through a triangular merger, J&P Acquisitions, Inc. and J&P Real Estate LLC (collectively “JPPA”), acquired through contributions of all ownership interests by their respective holders, were acquired in exchange for 3.5 million shares of Western Capital common stock representing approximately 37% of the total issued and outstanding common stock of Western Capital after consummation of the acquisition.
Note 2. Basis of Pro Forma Presentation
The unaudited pro forma condensed combined consolidated balance sheet represents the combined financial position of Western Capital, Restorers and JPPA as of June 30, 2015 as if the merger and contribution was consummated on June 30, 2015. The unaudited pro forma condensed combined consolidated statements of operations give effect to the merger of and contribution into Western Capital of Restorers and JPPA as if it had been consummated on January 1, 2014, the latter of the beginning of the earliest pro forma period presented and the date of common control.
The unaudited pro forma condensed combined consolidated financial statements have been derived from the historical consolidated financial statements of Western Capital, Restorers and JPPA. Assumptions and estimates underlying the pro forma adjustments are described in these notes, which should be read in conjunction with the pro forma condensed combined consolidated financial statements.
The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2015 includes Restorers’ and JPPA’s results of operations for the six months ended June 30, 2015 and June 27, 2015, respectively, which results have been derived from Restorers’ and JPPA’s unaudited internal financial records. The unaudited pro forma condensed combined consolidated statement of operations for the year ended December 31, 2014 include Restorers’ audited statement of operations for the year ended December 31, 2014 and JPPA’s audited consolidated statement of income for the year ended December 27, 2014. The unaudited pro forma condensed combined consolidated balance sheet as of June 30, 2015 includes Restorers’ condensed balance sheet as of June 30, 2015 and JPPA’s condensed consolidated balance sheet as of June 27, 2015, which have been derived from unaudited internal financial records.
Demand for products sold by JPPA is cyclical in nature, sensitive to seasonal growing patterns, general weather conditions, holiday sales patterns and competitive influences. As such, JPPA’s results of operations, financial condition, cash flows and availability of credit could fluctuate significantly from period to period. The majority of JPPA revenues are derived in three selling periods, spring, fall, and the December holiday season, while the summer season accounts for a small portion of sales. Due to the lower revenues in the summer months and compounded by fixed overhead costs, JPPA historically incurs a loss in the third quarter leaving only the fourth quarter to offset it. Consequently, JPPA’s full year financial results cannot be predicted based on interim results.
The merger and contribution transaction into Western Capital is reflected in the unaudited pro forma condensed combined consolidated financial statements as an acquisition of entities under common control in accordance with Accounting Standards Codification Topic 805, “Business Combinations”. Under these accounting standards, Western Capital, as the acquirer, recognized the assets and liabilities of the Restorers and JPPA at their historical values as of the date of transfer.
Estimated transaction costs have been excluded from the unaudited pro forma condensed combined consolidated statements of operations as they reflect expenses directly related to Restorers and JPPA transaction that do not have a continuing impact. Except for payment of certain common expenses (see Note 3(a) below) there were not additional related party transactions requiring elimination in consolidation.
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Note 3. Adjustments to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements
The unaudited adjustments included in the unaudited pro forma condensed combined consolidated financial statements are as follows:
Adjustments to Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet
(a) | Elimination of Due to/from related party. Certain common expenses are paid by one party and later reimbursed to the payer by the other party. The resulting related party due to/from balance between Restorers and JPPA has been eliminated from the unaudited pro forma condensed combined consolidated balance sheet. | |
(b) | Stockholders’ equity. The unaudited pro forma condensed combined consolidated balance sheet reflects the issuance of 3.5 million share of Western Capital no par value common stock upon the closing of the merger and contribution transaction and the replacement of Restorers’ and JPPA’s historical equity balances and JPPA’s noncontrolling interests with an increase to paid in capital equal to the net equity value and noncontrolling interests of Restorers and JPPA as of the date of the merger. |
Adjustments to Unaudited Pro Forma Condensed Combined Consolidated Statements of Operations
(c) | Elimination of transaction costs. Total Western Capital, Restorers and JPPA transaction costs related to the purchase and sale, estimated to be $256,000, $32,000 and $193,000, respectively, have been recorded as a selling, general and administrative expense within the unaudited pro forma condensed combined consolidated statements of operations for the six months ended June 30, 2015. These costs have been eliminated from selling, general and administrative expenses with this adjustment for the six months ended June 30, 2015 as these costs relate directly to the transaction and do not have an ongoing impact. | |
(d) | Provision for Income Taxes. Prior to the transaction J&P Real Estate, LLC was a limited liability company treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the members. As such, no recognition of federal or state income taxes for the Company that are organized as limited liability companies were provided for. The adjustment to income tax expense reflects the total pre-tax net pro forma adjustments to operating results of J&P Real Estate, LLC multiplied by the estimated effective income tax rate of 37.3%. | |
(e) | Net income applicable to noncontrolling interests. J&P Real Estate, LLC was a variable interest entity consolidated with J&P Park Acquisition Inc. and as such J&P Real Estate, LLC’s net income was reported as income attributable to noncontrolling interests. The adjustment to net income applicable to noncontrolling interests reflects the elimination of net income applicable to J&P Real Estate, LLC’s equity holders, resulting in 100% of J&P Real Estate, LLC’s net income being allocated to Western Capital shareholders. | |
(f) | Shares outstanding. The unaudited pro forma weighted average number of basic and diluted shares outstanding is calculated for each period presented by adding Western Capital’s weighted average number of basic and diluted shares outstanding for that period and the number of Western Capital shares that would have been issued to Restorers and JPPA equity holders as a result of the Restorers and JPPA merger and contribution transaction. There were no dilutive securities as of June 30, 2015 and December 31, 2014. |
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