1
EXHIBIT B
ACTION INDUSTRIES INC. AND SUBSIDIARIES
PROFORMA COMBINED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
(In thousands)
ADJUSTMENTS
---------------------------- AS
ACTION GVS TOTAL DEBIT CREDIT ADJUSTED
------ --- ----- ----- ------ --------
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 59 $ 0 $ 59 $ 59
TRADE ACCOUNTS RECEIVABLE
NET OF ALLOWANCES 20 1,843 1,863 1,863
INVENTORIES 1,012 1,012 1,012
NOTES RECEIVABLE 3,147 3,147 a. 2,500 647
OTHER CURRENT ASSETS 100 45 145 145
-------- ------- -------- --------
TOTAL CURRENT ASSETS 179 6,047 6,226 3,726
-------- ------- -------- --------
PROPERTY, PLANT AND
EQUIPMENT, NET 0 722 722 722
-------- ------- -------- --------
OTHER ASSETS
NOTES RECEIVABLE 1,614 469 2,083 2,083
INVESTMENT IN SUBSIDIARY 5,198 806 6,004 b. 5,198 806
DEFERRED ACQUISITION COSTS 785 785 785
INTANGIBLE ASSETS, NET 502 502 502
GOODWILL, NET b. 2,970 2,970
OTHER 238 139 377 377
-------- ------- -------- --------
TOTAL OTHER ASSETS 7,050 2,701 9,751 7,523
-------- ------- -------- --------
TOTAL ASSETS $ 7,229 $ 9,470 $ 16,699 $ 11,971
======== ======= ======== ========
2
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
NOTES PAYABLE AND OTHER
DEBT CURRENTLY PAYABLE $ 115 $ 809 $ 924 $ 924
ACCOUNTS PAYABLE 492 1,473 1,965 1,965
ACCRUED EXPENSES 139 1,495 1,634 1,634
LOAN PAYABLE, BANK 439 439 439
INCOME TAXES PAYABLE (3) (3) (3)
OTHER CURRENT LIABILITIES 777 119 896 896
-------- ------- -------- --------
TOTAL CURRENT LIABILITIES 1,523 4,332 5,855 5,855
-------- ------- -------- --------
OTHER LIABILITIES
LONG TERM DEBT 0 586 586 586
CONVERTIBLE NOTES 3,701 0 3,701 3,701
NOTES PAYABLE 2,500 2,500 a. 2,500 0
DEFERRED EXPENSES 1,172 175 1,347 1,347
OTHER LIABILITIES 0 7 7 7
-------- ------- -------- --------
TOTAL OTHER LIABILITIES 7,373 768 8,141 5,641
-------- ------- -------- --------
TOTAL LIABILITIES 8,896 5,100 13,996 11,496
-------- ------- -------- --------
STOCKHOLDERS' EQUITY (DEFICIENCY)
COMMON STOCK, PAR VALUE $.10 719 6 725 b. 3 719
c. 3
PREFERRED STOCK, CLASS A 0
PREFERRED STOCK, CLASS B 0
0
CAPITAL IN EXCESS OF PAR 25,498 6,318 31,816 b. 3,222 25,498
c. 3,096
RETAINED EARNINGS (ACCUM. DEFICIT) (16,310) (1,346) (17,656) b. 687 (16,309)
c. 660
MINORITY INTEREST c. 2,141 2,141
-------- ------- -------- --------
9,907 4,978 14,885 12,049
LESS TREASURY STOCK, AT COST (11,574) (608) (12,182) b. 310 (11,574)
c. 298
-------- ------- -------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (1,667) 4,370 2,703 475
TOTAL LIABILITIES AND
-------- ------- -------- --------
STOCKHOLDERS' EQUITY (DEFICIENCY) $ 7,229 $ 9,470 $ 16,699 $ 11,971
======== ======= ======== ========
3
ACTION INDUSTRIES INC. AND SUBSIDIARIES
PROFORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
(In thousands, except per share data)
ADJUSTMENTS
---------------------------- AS
ACTION GVS TOTAL DEBIT CREDIT ADJUSTED
------ --- ----- ----- ------ --------
NET SALES $ 0 $11,799 $ 11,799 $ 11,799
COST OF SALES 5,278 5,278 5,278
0
-------- ------- -------- --------
GROSS PROFIT 0 6,521 6,521 6,521
-------- ------- -------- --------
OPERATING EXPENSES
SELLING, GENERAL AND ADMIN 575 6,992 7,567 e. 74 7,641
DISTRIBUTION OF STORE PROFITS 297 297 297
LOSS ON DISPOSAL OF LABORATORY 650 650 650
-------- ------- -------- --------
TOTAL OPERATING EXPENSES 575 7,939 8,514 8,588
-------- ------- -------- --------
OPERATING INCOME (LOSS) (575) (1,418) (1,993) (2,067)
-------- ------- -------- --------
OTHER INCOME (EXPENSE)
INTEREST EXPENSE (54) (274) (328) (328)
INTEREST INCOME 14 14 14
OTHER INCOME (EXPENSE) 295 (22) 273 273
GAIN ON SALE OF STORES 1 1 1
GAIN ON SALE OF STORE INTEREST 99 99 99
-------- ------- -------- --------
TOTAL OTHER INCOME (EXPENSE) 241 (182) 59 59
INCOME BEFORE INCOME TAXES
-------- ------- -------- --------
AND MINORITY INTEREST (334) (1,600) (1,934) (2,008)
INCOME TAX EXPENSE (BENEFIT) (266) (266) (266)
-------- ------- -------- --------
INCOME BEFORE MINORITY INTEREST (334) (1,334) (1,668) (1,742)
MINORITY INTEREST IN SUBSIDIARY (10) (10) e. 654 (664)
-------- ------- -------- --------
NET LOSS ($ 334) ($ 1,344) ($ 1,678) ($ 2,406)
======== ======= ======== ========
PER SHARE DATA
NET LOSS PER SHARE (BASIC AND DILUTED) ($ 0.43)
WEIGHTED AVERAGE SHARES OUTSTANDING 5,539
4
ACTION INDUSTRIES INC. AND SUBSIDIARIES
PROFORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(UNAUDITED)
(In thousands, except per share data)
ADJUSTMENTS
---------------------------- AS
ACTION GVS TOTAL DEBIT CREDIT ADJUSTED
------ --- ----- ----- ------ --------
NET SALES $ 5,424 $22,551 $27,975 $ 27,975
COST OF SALES 3,654 9,286 12,940 12,940
0
-------- ------ ------ ------
GROSS PROFIT 1,770 13,265 15,035 15,035
-------- ------ ------ ------
OPERATING EXPENSES
SELLING, GENERAL AND ADMIN 4,430 11,934 16,364 d. 149 16,513
DISTRIBUTION OF STORE PROFITS 628 628 628
-------- ------ ------ ------
TOTAL OPERATING EXPENSES 4,430 12,562 16,992 17,141
-------- ------ ------ ------
OPERATING INCOME (LOSS) (2,660) 703 (1,957) (2,106)
-------- ------ ------ ------
OTHER INCOME (EXPENSE)
INTEREST EXPENSE (485) (353) (838) (838)
OTHER INCOME 1,583 174 1,757 1,757
-------- ------ ------ ------
TOTAL OTHER INCOME (EXPENSE) 1,098 (179) 919 919
-------- ------ ------ ------
OPERATING INCOME (LOSS) (1,562) 524 (1,038) (1,187)
INCOME TAXES 314 314 314
-------- ------ ------ ------
INCOME (LOSS) BEFORE MINORITY INTEREST (1,562) 210 (1,352) (1,501)
MINORITY INTEREST IN SUBSIDIARY (8) (8) e. 99 (107)
-------- ------ ------ ------
NET INCOME (LOSS) ($ 1,562) $ 202 ($1,360) ($1,394)
======== ====== ====== ======
PER SHARE DATA
NET LOSS PER SHARE (BASIC AND DILUTED) ($ 0.25)
WEIGHTED AVERAGE SHARES OUTSTANDING 5,539
5
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following Unaudited Pro Forma Combined Balance Sheet as of December 31, 1997
and the related Unaudited Pro Forma Combined Statements of Operations for the
year ended June 30, 1997 and the six months ended December 31, 1997, are based
on the Consolidated Financial Statements and the notes related thereto. The Pro
Forma Combined Balance Sheet is adjusted to give effect to the acquisition of
51% interest of GVS (the "Acquisition") as if the transaction had occurred on
December 31, 1997. The Unaudited Pro Forma Combined Statement of Operations for
the year ended June 30, 1997 is adjusted to give effect to the Acquisition as if
this transaction had occurred as of July 1, 1996. The Unaudited Pro Forma
Combined Statement of Operations for the six months ended December 31, 1997 is
adjusted to give effect to the Acquisition as if this transaction had occurred
as of July 1, 1997. The Unaudited Pro Forma Combined Statements of Operations
reflect the Acquisition of GVS prior to the date the Company made such
Acquisition, using the purchase method of accounting. The Statement of
Operations for GVS for the year ended June 30, 1997 includes the five months
ended November 30, 1996 (GVS's fiscal year end) and the seven months ended June
30, 1997. The Pro Forma operating results are not necessarily indicative of the
operating results that would have been achieved had the Acquisition actually
occurred at July 1, 1996, nor do they purport to indicate the results of future
operations.
The Unaudited Pro Forma Combined Financial Data is based on the assumptions set
forth in the notes to such statements and should be read in conjunction with the
related Consolidated Financial Statements and notes thereto included elsewhere
in FORM 8-K. The Pro Forma adjustments are based on the terms of the Stock
Purchase Agreement. In the opinion of the Company, all adjustments have been
made that are necessary to fairly present the Pro Forma data.
6
ACTION INDUSTRIES INC.
NOTES TO PROFORMA COMBINED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
a. To eliminate intercompany notes of $2.5 million owed by Action to GVS.
b. To record allocation of purchase price based on the estimated fair
value of net assets acquired and eliminate the 51% of GVS equity
accounts.
c. To record the 49% minority interest and eliminate the 49% of GVS equity
accounts.
d. To record amortization of goodwill over 20 years.
e. To record current period minority interest on statement of operations.
f. The Statement of Operations for GVS has combined the five months ended
November 30, 1996 plus the seven months ended June 30, 1997. GVS's
fiscal year ends on November 30 which differs from Action which ends on
June 30.
g. Action acquired 26,800,000 shares of newly issued GVS's common stock
which consists of 51% interest of GVS. The purchase price was
approximated $5.2 million which consists of the forgiveness of $2.7
million previously advanced to GVS and the issuance of a $2.5 million
promissory note due March 31, 2000 by Action to GVS. The acquisition
was accounted for as a purchase effective March 20, 1998 and the
purchase price has been allocated based upon the estimated fair market
value of assets acquired.