EXHIBIT 7.3
FORTUNE DIVERSIFIED INDUSTRIES, INC AND SUBSIDIARIES
Pro Forma Consolidated Financial Statements
FORTUNED DIVERSIFIED INDUSTRIES, INC AND SUBSIDIARIES
TABLE OF CONTENTS
Basis of Preparation.....................................................Page 1
Financial Statements
Pro forma consolidated statement of operations that assumes the
combination occurred on August 31, 2001.............................. 2
Pro forma consolidated statement of operations for the twelve
months ended August 31, 2001, which combines FDVI's results of
operations for the twelve months ended August 31, 2001, with KSC's
results of operations for the fiscal year ended December 31, 2001.... 3
Pro forma consolidated statement of operations for the nine months
ended May 31, 2002 that combines the unaudited results of operations
of FDVI from the nine-month period of September 1, 2001 to
May 31, 2002 with KSC's results of operations for the nine-month
period of October 1, 2001 to June 30, 2002........................... 4
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PREPARATION
The following unaudited pro forma consolidated financial statements give effect
to the purchase by Fortune Diversified Industries, Inc. and Subsidiaries
("FDVI") of Kingston Sales Corporation ("KSC"). Pro forma adjustments related to
the pro forma consolidated balance sheet are computed assuming the combination
was consummated at May 31, 2002. However, the purchase price effect resulting
from the adjustments to the KSC December 31, 2001 and 2000 audited financial
statements have yet to be determined by both, FDVI and KSC. Consequently, the
purchase adjusting entry has not been recorded, and is not reflected in the pro
forma adjustments herein. The pro forma consolidated balance sheet combines
FDVI's unaudited balance sheet as of May 31, 2002 with KSC's balance sheet as of
June 30, 2002. The pro forma consolidated statement of operations assumes that
the combination occurred on August 31, 2001. The pro forma consolidated
statement of operations for the twelve months ended August 31, 2001 combines
FDVI's results of operations for the twelve months ended August 31, 2001, with
KSC's results of operations for the fiscal year ended December 31, 2001. The pro
forma consolidated statement of operations for the nine months ended May 31,
2002 combines the unaudited results of operations of FDVI from the nine-month
period of September 1, 2001 to May 31, 2002 with KSC's results of operations for
the nine-month period of October 1, 2001 to June 30, 2002.
The pro forma consolidated statements of operations are not necessarily
indicative of operating results that would have been achieved had the
combination been consummated as of the beginning of the periods presented and
should not be construed as representative of future operations. Further, interim
results are not necessarily indicative of results to be realized for a full year
due to the effects of, among other things, seasonality.
These pro forma consolidated financial statements should be read in conjunction
with the historical consolidated financial statements and the related notes
thereto of FDVI, which are included in FDVI's Annual Report on Form 10-K, and
the historical financial statements and the related notes thereto of KSC
included herein.
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
Fortune Kingston
May 31, June 30, Proforma Proforma
2002 2002 Adjustments Combined
CURRENT ASSETS
Cash and equivalents $ 120,000 $ (120,000) -- $ --
Accounts receivable, net 366,000 1,921,000 -- 2,287,000
Inventory, net -- 659,000 -- 659,000
Other current assets 63,000 -- -- 63,000
----------- ----------- ----------- -----------
Total Current Assets 549,000 2,460,000 -- 3,009,000
----------- ----------- ----------- -----------
OTHER ASSETS
Notes receivable 30,000 -- -- 30,000
Investment in land development 6,000 -- -- 6,000
Investment in marketable securities 434,000 -- -- 434,000
Property and equipment, net 201,000 346,000 -- 547,000
----------- ----------- ----------- -----------
Total Other Assets 671,000 346,000 -- 1,017,000
----------- ----------- ----------- -----------
TOTAL ASSETS $ 1,220,000 $ 2,806,000 $ -- $ 4,026,000
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ -- $ 619,000 -- $ 619,000
Accounts payable 42,000 192,000 -- $ 234,000
Current maturities of long-term debt -- 16,000 -- 16,000
Accrued payroll and related expenses 38,000 7,000 -- 45,000
Deferred revenue -- 260,000 -- 260,000
Accrued expenses 58,000 63,000 -- 121,000
----------- ----------- ----------- -----------
Total Current Liabilities 138,000 1,157,000 -- 1,295,000
----------- ----------- ----------- -----------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities -- 14,000 -- 14,000
----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common stock 695,000 1,000 -- 696,000
Additional paid-in capital and warrants outstanding 6,441,000 110,000 -- 6,551,000
Retained earnings (accumulated deficit) (5,512,000) 1,524,000 -- (3,988,000)
Accumulated other comprehensive income (loss) (502,000) -- -- (502,000)
----------- ----------- ----------- -----------
1,122,000 1,635,000 -- 2,757,000
Less: Treasury stock at cost (40,000) -- -- (40,000)
----------- ----------- ----------- -----------
Total Stockholders' Equity 1,082,000 1,635,000 -- 2,717,000
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,220,000 $ 2,806,000 $ -- $ 4,026,000
=========== =========== =========== ===========
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PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
AUGUST 31, 2001
(UNAUDITED)
Proforma Proforma
Fortune Kingston Adjustments Combined
NET REVENUE $ 425,000 $ 13,220,000 $-- $ 13,645,000
COST OF REVENUE 5,381,000 11,111,000 -- 16,492,000
------------ ------------ --- ------------
GROSS PROFIT (LOSS) (4,956,000) 2,109,000 -- (2,847,000)
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 2,009,000 1,133,000 -- 3,142,000
------------ ------------ --- ------------
Operating Income (Loss) (6,965,000) 976,000 -- (5,989,000)
OTHER INCOME (EXPENSE)
Interest income 20,000 7,000 -- 27,000
Interest expense (180,000) (63,000) -- (243,000)
Gains on investments in marketable securities, net -- -- -- --
Net loss on sale of equipment -- (18,000) -- (18,000)
Other income -- 37,000 -- 37,000
------------ ------------ --- ------------
Total Other Income (Expense) (160,000) (37,000) -- (197,000)
------------ ------------ --- ------------
EXTRAORDINARY CREDIT-EXTINGUISHMENT OF DEBT 4,174,000 -- -- 4,174,000
------------ ------------ --- ------------
Net Income (Loss) before Provision for Income Taxes (2,951,000) 939,000 -- (2,012,000)
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ --- ------------
NET INCOME (LOSS) $ (2,951,000) $ 939,000 $-- $ (2,012,000)
============ ============ === ============
BASIC LOSS PER SHARE $ (0.03)
============
DILUTED LOSS PER SHARE $ (0.03)
============
3
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MAY 31, 2002
(UNAUDITED)
Proforma Proforma
Fortune Kingston Adjustments Combined
NET REVENUE $ 485,000 $ 8,706,238 $-- $ 9,191,238
COST OF REVENUE 593,000 7,206,217 -- 7,799,217
----------- ----------- --- -----------
GROSS PROFIT (LOSS) (108,000) 1,500,021 -- 1,392,021
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 1,037,000 1,200,386 -- 2,237,386
----------- ----------- --- -----------
Operating Income (Loss) (1,145,000) 299,635 -- (845,365)
OTHER INCOME (EXPENSE)
Interest income 50,000 252 -- 50,252
Interest expense (5,000) (22,038) -- (27,038)
Gains on investments in marketable securities, net 168,000 -- -- 168,000
Net loss on sale of equipment (23,000) 198 -- (22,802)
Other income (26,000) 41,450 -- 15,450
----------- ----------- --- -----------
Total Other Income (Expense) 164,000 19,863 -- 183,863
----------- --- -----------
EXTRAORDINARY CREDIT-EXTINGUISHMENT OF DEBT -- -- -- --
----------- ----------- --- -----------
Net Income (Loss) before Provision for Income Taxes (981,000) 319,498 -- (661,503)
PROVISION FOR INCOME TAXES -- -- -- --
----------- ----------- --- -----------
NET INCOME (LOSS) $ (981,000) $ 319,498 $-- $ (661,503)
=========== =========== === ===========
BASIC LOSS PER SHARE $ (0.01)
===========
DILUTED LOSS PER SHARE $ (0.01)
===========
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