PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
CHILDROBICS, INC. AND SUBSIDIARIES
Effective September 30, 1996, Childrobics, Inc., ("Childrobics") signed a merger
agreement, (the "Merger") with Just Kiddie Rides, Inc., ("JKR"). In connection
therewith, JKR shareholders received 5,000,000 restricted shares of Childrobics
common stock and a note receivable from Childrobics for $750,000, in exchange
for all of the issued and outstanding shares of JKR common stock. In addition,
the Company's principal shareholder received $250,000 in cash for a covenant
not-to-compete for a period of 6 years.
In connection with the Merger, Childrobics entered into a financing agreement
with three entities (collectively referred to herein as the "Lenders") for an
aggregate of $1,500,000. Such financing is payable over five years with interest
only at 12% annually for the first two years and principal and interest
thereafter through maturity, (the "Financing Agreement"). Furthermore, in
exchange for such financing, Childrobics granted to the Lenders, for nominal
consideration, warrants representing the right to purchase 5,000,000 restricted
shares of common stock for an aggregate of $100. On October 4, 1996, the Lender
exercised such warrants.
The 10,000,000 shares of common stock referred to above have been valued at
$5,213,000, which represents a fair market value of $.52 per share. This
represents the average quoted market price for the two days prior to and after
the date of announcement of the Merger on October 8, 1996, net of an estimated
discount of 33% representing the decrease in the value ascribed to the
restrictions on the stock issued. A valuation of the common stock has not
been completed and such estimated fair market value of the shares may change.
In calculating the excess of cost over net assets acquired, Childrobics used the
book value of the net assets of JKR of $793,000 at the time of the merger.
Childrobics is in the process of appraising the fair market value of the assets
that were acquired, which will change the pro forma adjustments related to the
allocation of the purchase price between tangible assets and intangible assets.
The accompanying unaudited pro forma condensed combined financial statements
present, in columnar form, the condensed historical financial statements of
Childrobics and JKR, pro forma adjustments and the pro forma results. The
Childrobics' financial information represents the financial position and results
of operations of Childrobics as of and for the year ended June 30, 1996 as was
filed on form 10-KSB with the Securities and Exchange Commission. The JKR
financial information represents the financial position and results of
operations of JKR as of and for the year ended September 30, 1996. Accordingly,
the pro forma adjustments have accounted for the different fiscal years and
have adjusted the financial information accordingly based on the date of the
transaction.
The pro forma balance sheet is based on the historical information of
Childrobics and JKR, giving effect to the aforementioned transactions under the
purchase method of accounting as if the merger had taken place on the last day
the period.
The pro forma statement of operations accounts for these transactions as if
they had occurred at the beginning of the period presented.
The pro forma combined statements have been prepared based upon the historical
financial statements of Childrobics and JKR and these pro forma statements
may not be indicative of the results that actually would have occurred if the
combinations had been in effect on the dates indicated or which may be obtained
in the future. The pro forma financial statements should be read in conjunction
with the financial statements and notes of Childrobics as contained in the
annual report on form 10-KSB filed with the Securities and Exchange Commission
and the financial statements and notes of JKR included herein.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
CHILDROBICS, INC. AND SUBSIDIARIES
For the year ended June 30, 1996
(Unaudited)
Just
Childrobics, Inc. Kiddie Pro forma Pro forma
as reported Rides, Inc. Adjustments Combined
June 30, 1996 September 30, 1996
ASSETS:
- - - -------
Cash and cash equivalents - $78,062 $78,062
Certificate of deposit-restricted $100,000 100,000
Accounts receivable, net of
allowance for doubtful accounts 114,676 664,918 ($265,000) J 514,594
Inventory 234,866 40,081 11,000 J 285,947
Prepaid expenses 39,088 37,202 21,000 B 97,290
Loan receivable from shareholder 63,362 63,362
Net assets of discontinued
operations 525,000 525,000
------------------------------------------------ -----------
Total current assets 1,013,630 883,625 (233,000) 1,664,255
Property and equipment 3,491,235 3,139,546 6,630,781
Excess of purchase price over
net tangible assets acquired 2,600,000 A/J 2,600,000
Deferred Financing costs 2,606,000 B 2,606,000
Covenant not to compete 250,000 B 250,000
Other 111,778 35,576 147,354
----------------------------------------------- ----------
Total assets $4,616,643 $4,058,747 $5,223,000 $13,898,390
=============================================== ===========
LIABILITIES:
- - - ------------
Accounts payable $1,296,346 $38,755 ($476,000) B/J $859,101
Accrued expenses 1,392,821 597,142 (709,000) B 1,280,963
Short term line of credit 163,798 163,798
Current portion of notes payable 607,352 1,214,842 150,000 A 1,972,194
Accrued commissions 91,162 91,162
Current portion of
capitalized leases 7,040 7,040
Customer Deposits 60,932 60,932
Due to former officer 87,620 (78,000) B 9,620
------------------------------------------------ ----------
Total current liabilities 3,554,977 2,002,833 (1,113,000) 4,444,810
LONG TERM LIABILITIES:
- - - ----------------------
Notes payable, less current portion 30,671 1,263,147 2,100,000 C 3,393,818
Capitalized lease 8,595 8,595
----------------------------------------------- ----------
Total long-term liabilities 39,266 1,263,147 2,100,000 3,402,413
Commitments and contingencies
STOCKHOLDERS' EQUITY:
- - - ---------------------
Common stock - $.01 par value, 53,550 200 100,000 D 153,750
Additional paid-in capital 12,820,405 5,217,000 E 18,037,405
Accumulated deficit (11,851,555) 792,567 (1,029,000) F/J (12,087,988)
----------------------------------------------- ------------
Subtotal 1,022,400 792,767 4,288,000 6,103,167
Unamortized deferred compensation
component of stock options (52,000) G (52,000)
----------------------------------------------- ------------
Total shareholders' equity 1,022,400 792,767 4,236,000 6,051,167
Total Liabilities and shareholders'
equity $4,616,643 $4,058,747 $5,223,000 $13,898,390
=============================================== ============
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
CHILDROBICS, INC. AND SUBSIDIARIES
For The Year Ended June 30, 1996
(Unaudited)
Just
Childrobics, Inc. Kiddie
as reported Rides, Inc. Pro Forma Pro Forma
June 30, 1996 September 30, 1996 Adjustments Combined
Revenues:
Operations 7,179,958 5,827,233 (52,000)J 12,955,191
Interest and other
income - 171,026 (115,000)J 56,026
------------------------------------------------------ ---------------
Total revenues 7,179,958 5,998,259 (167,000) 13,011,217
COSTS AND
EXPENSES:
Cost of revenues 6,470,934 3,991,350 (30,000)J 10,432,284
Selling, general
and administrative expenses 5,426,447 1,883,594 (1,591,000)H 5,719,041
Interest expense 65,848 149,719 1,014,000 I 1,229,567
------------------------------------------------------ ----------------
Total costs and expenses 11,963,229 6,024,663 (607,000) 17,380,892
LOSS BEFORE INCOME TAXES
FROM CONTINUING OPERATIONS (4,783,271) (26,404) 440,000 (4,369,675)
INCOME TAXES - - - 0
----------------------------------------------------- ----------------
NET LOSS FROM
CONTINUING OPERATIONS ($4,783,271) ($26,404) $440,000 ($4,369,675)
===================================================== ================
PER SHARE DATA:
NET LOSS FROM CONTINUING
OPERATIONS PER COMMON SHARE (1.04) (0.30)
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES
OUTSTANDING 4,620,753 10,000,000 14,620,753
CHILDROBICS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following pro forma items are reflected in the accompanying
unaudited pro forma combined balance sheet and statement of operations.
Pro Forma Adjustments:
A. The purchase price of JKR consisted of the following:
5,000,000 shares of Childrobics' common stock $2,606,000
Note payable to former shareholders of JKR payable
over 5 years with interest at the rate of 12% per
annum of which $150,000 is classified as current
portion of notes payable 750,000
----------
$3,356,000
==========
The excess of purchase price over net tangible assets acquired is
approximately $2,564,000. Childrobics has not yet completed the
appraisal of the fair value of the JKR assets as of the acquisition
date, and accordingly, has not yet recorded an allocation of the
purchase price to specific assets. Management believes that the average
amortization period of such assets and excess purchase price over the
net tangible assets acquired will approximate 15 years.
B. In connection with this acquisition, Childrobics entered into a
Financing Agreement with three financial institutions pursuant to which
the Lenders agreed to provide Childrobics with financing in the amount
of $1,500,000. In exchange for such financing, Childrobics granted to
the Lenders, for nominal consideration, warrants representing the right
to purchase 5,000,000 restricted shares of Common Stock for $100. The
Lenders exercised this right on October 4, 1996. The value ascribed to
this warrant is approximately $2,606,000, based on the estimated fair
value of the Company's common stock, discounted for the restrictions
related to the stock and is presented as a deferred financing cost on
the pro forma balance sheet, which will be amortized over the life of
the financing agreement of approximately 5 years.
The proceeds from the Financing Agreement were utilized as follows:
Prepaid interest $21,000
Payment of covenant not-to-compete 250,000
Accounts payable 442,000
Accrued expenses 709,000
Payment to former officer 78,000
----------
$1,500,000
==========
C. This adjustment reflects the long-term portions of the notes payable
to the former shareholders of JKR in connection with the Merger
Agreement and the long-term note as per the Financing Agreement.
D. This adjustment reflects both the issuance of 5,000,000 shares per
the Merger and the 5,000,000 shares which were issued in connection
with the Financing Agreement, less the elimination of the Common Stock
of JKR.
E. Additional paid-in capital results from the issuance of 5,000,000
shares per the Merger and 5,000,000 shares per the Financing Agreement
at a fair market value of $ .52 per share. In addition, additional
paid-in capital is increased for the fair value of $104,000 ascribed to
stock options granted to certain directors.
F. This adjustment eliminates the retained earnings of JKR as of the
date of the Merger Agreement and accounts for the immediate expensing
in the amount of $52,000 of the vested portion of stock options granted
to certain directors in connection with the Merger.
G. This adjustment reflects the unamortized compensation component of
the stock options granted to certain directors.
H. The adjustment to selling, general and administrative expenses is
comprised of the following:
Amortization of excess of cost over net assets acquired
over 15 years $173,000
Amortization of the covenant not to compete over 6 years 42,000
Reduction of officers' compensation who were terminated
in connection with the Merger Agreement, net of
compensation for new officers (2,114,000)
Compensation of directors appointed 138,000
Reimbursed expenses of newly appointed directors 108,000
Other 62,000
-----------
Net adjustment $(1,591,000)
===========
I. The adjustment to Interest is composed of the following:
Financing Agreement debt $ 180,000
Merger Agreement note 90,000
Amortization of deferred financing costs over 5 years 744,000
-----------
Net adjustment $1,014,000
===========
J. Elimination of transactions between JKR and Childrobics as follows:
Statement of Operations: Debit (Credit)
-------------
Sales 52,000
Other income 115,000
Cost of sales (30,000)
Selling general and administrative expenses 62,000
Balance Sheet:
Accounts receivable (265,000)
Inventory 11,000
Excess of purchase price over net tangible
assets acquired 36,000
Accounts payable 34,000
Accumulated deficit 184,000