EXHIBIT 7.3
FORTUNE DIVERSIFIED INDUSTRIES, INC AND SUBSIDIARIES
Pro Forma Consolidated Financial Statements
TABLE OF CONTENTS
Basis of Preparation...........................................................1
Financial Statements
Pro forma consolidated balance sheet that assumes the combination
occurred on August 31, 2003................................................2
Pro forma consolidated statement of operations for the twelve months
ended August 31, 2003, which combines FDVI's results of operations
for the twelve months ended August 31, 2003, with PSM's results of
operations for the twelve months ended August 31, 2003.....................3
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 Professional Staff Management, Inc., Professional Staff Management, Inc. II,
and Pro Staff, Inc. ("PSM"). Pro forma adjustments related to the pro forma
consolidated balance sheet are computed assuming the combination was consummated
at August 31, 2003. However, the purchase price effect resulting from the
adjustments to the PSM December 31, 2002 and 2001 audited financial statements
have yet to be determined by both, FDVI and PSM. Consequently, the purchase
adjusting entry has not been recorded, and is not reflected in the proforma
adjustments herein. The pro forma consolidated balance sheet combines FDVI's
audited balance sheet as of August 31, 2003 with PSM's combined balance sheet as
of September 30, 2003. The pro forma consolidated statement of operations
assumes that the combination occurred on August 31, 2003. The pro forma
consolidated statement of operations for the twelve months ended August 31, 2003
combines FDVI's results of operations for the twelve months ended August 31,
2003, with PSM's results of operations for the twelve months ended September 30,
2003. The pro forma consolidated statement of operations for the twelve months
ended August 31, 2003 also combines Nor-Cote International results of operations
for the twelve months ended August 31, 2003. FDVI acquired 100% of Nor-Cote
International common and preferred stock on July 1, 2003.
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.
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 PSM
included herein.
1
FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
Fortune PSM
August 31, September 30, Proforma Proforma
2003 2003 Adjustments Combined
CURRENT ASSETS
Cash and equivalents $ 885,000 $ 4,402,000 $ -- $ 5,287,000
Available for sale investments 337,000 -- -- 337,000
Restricted cash -- 246,000 246,000
Accounts receivable, net 4,306,000 656,000 -- 4,962,000
Inventory, net 1,856,000 -- -- 1,856,000
Recoverable income taxes 220,000 -- -- 220,000
Other current assets 443,000 217,000 -- 660,000
------------ ------------ ------------ ------------
Total Current Assets 8,047,000 5,521,000 -- 13,568,000
------------ ------------ ------------ ------------
OTHER ASSETS
Property, plant & equipment, net 2,703,000 20,000 -- 2,723,000
Loan origination fees, net 50,000 -- -- 50,000
Goodwill 2,206,000 -- -- 2,206,000
Other intangible assets, net 1,180,000 -- -- 1,180,000
Other long term assets 14,000 43,000 -- 57,000
------------ ------------ ------------ ------------
Total Other Assets 6,153,000 63,000 -- 6,216,000
------------ ------------ ------------ ------------
TOTAL ASSETS $ 14,200,000 $ 5,584,000 $ -- $ 19,784,000
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Lines of credit $ 1,038,000 $ -- -- 1,038,000
Accounts payable 1,062,000 119,000 -- 1,181,000
Due to related party 230,000 7,000 -- 237,000
Payroll taxes and withholdings -- 524,000 -- 524,000
Health and workers' compensation reserves -- 3,272,000 -- 3,272,000
Accrued worksite employee payroll cost -- 240,000 -- 240,000
Accrued compensation -- 545,000 -- 545,000
Accrued expenses 1,589,000 384,000 -- 1,973,000
Customer deposits -- 106,000 -- 106,000
Current maturities of long-term debt 861,000 4,000 -- 865,000
Current maturities of capital lease obligations 9,000 -- -- 9,000
------------ ------------ ------------ ------------
Total Current Liabilities 4,789,000 5,201,000 -- 9,990,000
------------ ------------ ------------ ------------
LONG-TERM LIABILITIES
Line of credit - related party 2,000,000 -- -- 2,000,000
Long-term debt, less current maturities 5,202,000 -- -- 5,202,000
Capital lease obligations, less current maturities 8,000 -- -- 8,000
------------ ------------ ------------ ------------
Total Long-term Liabilities 7,210,000 -- -- 7,210,000
------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY
Common stock 882,000 -- -- 882,000
Additional paid-in capital and warrants outstanding 7,873,000 5,000 -- 7,878,000
Retained earnings (6,491,000) 378,000 -- (6,113,000)
Accumulated other comprehensive loss (63,000) -- -- (63,000)
------------ ------------ ------------ ------------
Total Stockholders' Equity 2,201,000 383,000 -- 2,584,000
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,200,000 $ 5,584,000 $ -- $ 19,784,000
============ ============ ============ ============
2
FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
AUGUST 31, 2003
(UNAUDITED)
Nor-Cote
8/03 Fortune 10 months PSM
Includes 2 9-1-02 to 12 months Proforma Proforma
Months Nor-Cote 6-30-03 ended 8-31-03 Adjustments Combined
------------------------------------------------------------------------------
NET REVENUE $ 15,470,000 $ 8,789,000 $ 16,266,000 $ -- $ 40,525,000
COST OF REVENUE 11,178,000 4,731,000 13,504,000 -- 29,413,000
------------ ------------ ------------ ------------ ------------
GROSS PROFIT 4,292,000 4,058,000 2,762,000 -- 11,112,000
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 4,134,000 3,937,000 2,793,000 -- 10,864,000
------------ ------------ ------------ ------------ ------------
Operating Income (Loss) 158,000 121,000 (31,000) -- 248,000
OTHER INCOME (EXPENSE)
Interest income 15,000 5,000 71,000 -- 91,000
Interest expense (185,000) (153,000) -- -- (338,000)
Other income (expense) 127,000 25,000 (30,000) -- 122,000
------------ ------------ ------------ ------------ ------------
Total Other Income (Expense) (43,000) (123,000) 41,000 -- (125,000)
------------ ------------ ------------ ------------ ------------
Net Income (Loss) before Provision for Income Taxes 115,000 (2,000) 10,000 -- 123,000
PROVISION FOR INCOME TAXES -- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 115,000 $ (2,000) $ 10,000 $ -- $ 123,000
============ ============ ============ ============ ============
BASIC LOSS PER SHARE (based on 101,316,444 shares outstanding) $ 0.00
============
DILUTED INCOME PER SHARE (based on 102,216,444 shares outstanding) $ 0.00
============
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