-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tdem+066qUReIjZc8jKn5bKAJTX0DPOVrOj1oO5cCxeDG1ibCDrc50bLJdV/CMtY WYUTSZ+MW+h5HokAg2TjPg== 0000897101-97-001077.txt : 19971016 0000897101-97-001077.hdr.sgml : 19971016 ACCESSION NUMBER: 0000897101-97-001077 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970815 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GROW BIZ INTERNATIONAL INC CENTRAL INDEX KEY: 0000908315 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS RETAIL [5900] IRS NUMBER: 411622691 STATE OF INCORPORATION: MN FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-22012 FILM NUMBER: 97696081 BUSINESS ADDRESS: STREET 1: 4200 DAHLBERG DR CITY: GOLDEN VALLEY STATE: MN ZIP: 55422-4837 BUSINESS PHONE: 6125208500 8-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) August 15, 1997 GROW BIZ INTERNATIONAL, INC. (Exact Name of Issuer as Specified in Charter) Minnesota 0-22012 41-1622691 (State or Other Jurisdiction or (Commission File (I.R.S. Employer Incorporation or Organization) Number) Identification Number) 4200 Dahlberg Drive, Golden Valley, MN 55422-4837 (Address of Principal Executive Offices) (612) 520-8500 (Registrant's Telephone Number, Including Area Code) ITEM 2. Acquisition or Disposition of Assets On August 15, 1997, Grow Biz Games, Inc. a wholly-owned subsidiary of Grow Biz International, Inc. ("Registrant") acquired certain assets and franchising rights of Video Game Exchange, Inc. ("VGE") of Cleveland, Ohio. VGE operates 40 retail stores in Ohio, Pennsylvania, Kentucky, Georgia and Maryland. These stores buy, sell and trade used and new video games and equipment and will become the nucleus of the sixth business concept under the title It's About Games(TM). The Registrant intends to market and franchise the concept throughout the United States and Canada. The purchase consideration paid to the former shareholders of VGE was $4,579,700 cash and a $2,000,000 two year promissory note payable in twenty-four equal monthly installments beginning September 1, 1997 and bears interest at the prime rate plus 1/2%. The acquisition has been accounted for under the purchase method of accounting. The source of cash utilized in the purchase was from a $4,500,000 bank term loan from TCF Bank Minnesota fsb payable in sixty equal monthly principal payments beginning October 10, 1997 plus accrued interest at prime plus 1/2%. The cost in excess of net assets acquired is approximately $4,500,000 and will be amortized over a 25 year period. The purchase consideration paid by the Registrant was determined by negotiations between and among the representatives of the Registrant and VGE. Prior to the purchase, no material relationship existed between VGE and the Registrant or any of its affiliates, any director or officer of the Registrant, or any associate of any such director or officer. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial statements of business acquired Independent Auditor's Report Audited Balance Sheet, December 31, 1996 Audited Statement of Income and Retained Earnings, December 31, 1996 Audited Statement of Cash Flows, December 31, 1996 Audited Notes to Financial Statements, December 31, 1996 Unaudited Balance Sheet, June 30, 1997 Unaudited Statements of Income and Retained Earnings, June 30, 1997 and June 30, 1996 Unaudited Statements of Cash Flows, June 30, 1997 and June 30, 1996 (b) Pro forma financial information Unaudited Pro forma Condensed Consolidated Statements of Operations for the Year Ended December 28, 1996 Unaudited Pro forma Condensed Consolidated Statements of Operations for the Six Months Ended June 28, 1997. Unaudited Pro forma Condensed Consolidated Balance Sheet as of June 28, 1997 (c) Exhibits 10.1 Asset Purchase Agreement, dated August 15, 1997 (1) 10.2 First Amendment to Credit Agreement and Revolving Note, dated August 8, 1997 (1) 10.3 Term Note, TCF, dated August 8, 1997 (1) 10.4 Non-Negotiable Promissory Note, Video Game Exchange, Inc., dated August 15, 1997 (1) 23.1 Consent of Zion, Smorag & Associates (1) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on August 19, 1997. 4141 Rockside Road Suite 150 Cleveland, Ohio 44131 ZION, SMORAG & ASSOCIATES Phone (216) 447-6006 Certified Public Accountants FAX (216) 447-6007 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Video Game Exchange, Inc. Cleveland, Ohio We have audited the accompanying balance sheet of VIDEO GAME EXCHANGE, INC. (an S Corporation) as of December 31, 1996, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit including examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of VIDEO GAME EXCHANGE, INC. as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Zion, Smorag & Associates Cleveland, Ohio March 19, 1997 VIDEO GAME EXCHANGE, INC. (AN S CORPORATION) BALANCE SHEET DECEMBER 31, 1996 ASSETS CURRENT ASSETS: Cash $ 1,135,318 Accounts receivable 154,287 Inventory 1,770,258 Prepaid expenses and other 85,313 ------------ TOTAL CURRENT ASSETS 3,145,176 PROPERTY AND EQUIPMENT: Furniture, fixtures and equipment 984,454 Leasehold improvements 405,596 Transportation equipment 138,802 ------------ Total, at cost 1,528,852 Accumulated depreciation 946,055 ------------ NET PROPERTY AND EQUIPMENT 582,797 OTHER ASSETS: Note receivable - related party 100,000 Deposits 58,171 ------------ TOTAL OTHER ASSETS 158,171 ------------ TOTAL ASSETS $ 3,886,144 ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 533,719 Accounts payable 59,524 Accrued sales taxes 158,447 Accrued payroll 104,000 Accrued and withheld payroll taxes 23,999 ------------ TOTAL CURRENT LIABILITIES 879,689 LONG-TERM LIABILITIES: Long-term debt, less current portion 2,453,528 TOTAL LIABILITIES 3,333,217 SHAREHOLDERS' EQUITY: Common Shares, no par value, stated value of $1.89 per share, 30,000 shares authorized, 26,455 shares issued and outstanding 50,000 Retained earnings 502,927 ------------ TOTAL SHAREHOLDERS' EQUITY 552,927 ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,886,144 ============ The accompanying notes are an integral part of these financial statements VIDEO GAME EXCHANGE, INC. (AN S CORPORATION) STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDING DECEMBER 31, 1996 NET SALES $ 14,207,025 100.00% COST OF SALES 9,018,739 63.48% ------------ ------------ GROSS MARGIN 5,188,286 36.52% OPERATING EXPENSES 4,107,244 28.91% ------------ ------------ INCOME FROM OPERATIONS 1,081,042 7.61% OTHER INCOME AND (EXPENSE): Miscellaneous - net 16,868 0.12% Interest income 41,055 0.29% Interest expense (371,508) -2.61% ------------ ------------ NET OTHER (EXPENSE) (313,585) -2.20% ------------ ------------ NET INCOME $ 767,457 5.41% ============ RETAINED DEFICIT - January 1, 1996 (264,530) ------------ RETAINED EARNINGS - DECEMBER 31, 1996 $ 502,927 ============ The accompanying notes are an integral part of these financial statements VIDEO GAME EXCHANGE, INC. (AN S CORPORATION) STATEMENT OF CASH FLOWS DECEMBER 31, 1996 INCREASE (DECREASE) IN CASH CASH FLOW FROM OPERATING ACTIVITIES: Net income $ 767,457 Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: Depreciation and amortization expense 219,048 (Increase) decrease in: Accounts receivable (130,478) Inventory (351,482) Prepaid expenses and other 38,536 Increase (decrease) in: Accounts payable 59,524 Accrued sales tax 30,560 Accrued payroll 23,000 Accrued and withheld payroll taxes (27,963) Accrued other expenses (422,128) ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 206,074 CASH FLOW FROM INVESTING ACTIVITIES: Note receivable - related party (100,000) Capital expenditures (66,105) ----------- NET CASH USED IN INVESTING ACTIVITIES (166,105) CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from sale of stock 50,000 Payments of long-term debt (8,663) ----------- NET CASH PROVIDED BY INVESTING ACTIVITIES 41,337 ----------- NET INCREASE IN CASH 81,306 CASH AT JANUARY 1, 1996 1,054,012 ----------- CASH AT DECEMBER 31, 1996 $ 1,135,318 =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 371,508 =========== The accompanying notes are an integral part of these financial statements VIDEO GAME EXCHANGE, INC. (AN S CORPORATION) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 Note 1 - Summary of Significant Accounting Policies Nature of Operations Video Game Exchange, Inc. (the Company) was incorporated in 1990 for the purpose of selling new and used video games, hardware and accessories. The Company distributes its products through its 40 retail locations in the states of Ohio, Pennsylvania, Maryland, Georgia, and Kentucky. The Company also distributes its products on a wholesale basis to other video game retailers. Inventories Inventories include video games, hardware and accessories and are stated at the lower of cost or market. Cost is determined using first in, first out (FIFO) method. Property and Equipment Property and equipment are stated at cost. Depreciation and amortization of property and equipment are provided using the straight-line method over the following estimated useful lives: Furniture, fixtures and equipment 5 to 7 years Leasehold improvements Initial lease term Transportation equipment 5 years Expenditures for maintenance and repairs are charged to expense as incurred. Store Opening Costs Non-capital expenditures incurred in preparation of the opening of a new store are charged to expense as incurred. Other Assets Other assets consist primarily of deposits on leases, and a loan to a related party in the amount of $100,000 (See Note 5). Statement of Cash Flows For purposes of the statement of cash flows, the Company considers short-term cash investments with maturity dates of less than three months or with maturity dates greater than three months that are not subject to withdrawal restrictions to be cash equivalents. The Company at times has cash balance in its operating account in excess of FDIC limits. VIDEO GAME EXCHANGE, INC. (AN S CORPORATION) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 Note 2 - Federal Income Taxes The Company has filed an election to be treated as an S Corporation, as defined by the Internal Revenue Code, for income tax purposes. As an S Corporation, items of income, deduction and credit pass through to the shareholders for inclusion in their individual tax returns. Accordingly, no provision for income taxes is required at the corporate level. Note 3 - Financing The following is a summary of notes payable as of December 31, 1996: An interest only note payable to a related party, in the original amount of $2,963,021 bearing interest at 1% above the bank prime rate (prime-8.25% at December 31, 1996) from August 8, 1995 through September 15, 1996. On September 16, 1996 the Company agreed to a revised interest rate of 20% and then renegotiated the note as a term note on December 31, 1996. Terms of the note include an initial balloon payment of $500,000, due February 1, 1997 with the remainder of the note totaling $2,463,021, payable in 180 equal monthly installments of $43,258 including interest at 20%. The note is unsecured. $ 2,963,021 A term note payable to a bank, dated February 4,1995 in the amount of $35,050 requiring monthly installments of $758 including interest at 10.75% through February 2000. The note is secured by the related equipment. 23,794 Other 432 ------------ Total 2,987,247 Less current maturities 533,719 Long-term portion $ 2,453,528 ============ Annual maturities of long-term debt are as follows: Year ending December 31: ------------------------ 1997 $ 533,719 1998 42,506 1999 51,017 2000 52,577 2001 63,195 Thereafter 2,244,233 ------------ TOTAL $ 2,987,247 ============ VIDEO GAME EXCHANGE, INC. (AN S CORPORATION) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 Note 4 - Lease Obligations The Company has various operating lease obligations for store and warehouse facilities with initial lease terms of three to five years. The leases are generally renewable at the option of the Company. The leases generally require the Company to pay insurance, utilities, real estate taxes, and maintenance expenses. Future minimum lease payments under these operating leases were as follows at December 31, 1996: 1997 $ 738,352 1998 545,945 1999 219,840 2000 61,630 2001 18,904 ------------ Total $ 1,584,671 ============ Rent expense for the year ended December 31, 1996 totaled $904,230. Note 5 - Related Parties The Company transacts business with two companies related through common ownership and management. On June 24, 1996 the Company made a loan for $100,000 to one of these companies. The note calls for annual interest payments at 7% per annum to be paid each anniversary of the above date, with the entire principal amount due June 2001. Accrued interest income, totaling $3,625, was included in the accompanying financial statements. The note is unsecured. As of December 31, 1996 the Company had a term note payable totaling $2,963,020 to a related party (See Note 3). Interest paid on this note during the year totaled $363,052. Note 6 - Bankruptcy and Reorganization Bankruptcy On February 16, 1995, the Company filed for bankruptcy protection under Chapter 11, in The United States Bankruptcy Court For The Northern District of Ohio Eastern Division for protection from its creditors. The decision for the Company to enter into Chapter 11, was due to unfavorable economic conditions in the industry, declining profits and difficulty in maintaining financing arrangements. Subsequent to the filing, as debtor-in-possession, management decided to close over forty unprofitable retail locations and consolidate its remaining operations. Many of the locations had multiple year lease commitments and a motion was filed with and ultimately accepted by the Court to reject these leases. On October 16, 1995 the Company filed a first amended disclosure statement with the Court that outlined the Company's plan of reorganization. The Court and the Creditor's Committee accepted the Company's plan of reorganization on December 28, 1995 and the final decree was signed July 31, 1996, evidencing the emergence of the Company from the Chapter 11 proceedings. VIDEO GAME EXCHANGE, INC. (AN S CORPORATION) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 Note 6 - Bankruptcy and Reorganization (continued) Reorganization Under the disclosure statement that was filed with the Court, the Company's equity section was restructured, and a new issue of common stock took place on January 2, 1996. For financial reporting purposes, as a result of the reorganization, the deficit as of December 31, 1995 has been partially extinguished by a charge to paid-in-capital in excess of par and cancellation and retirement of the original common stock, contemporaneously, with the new issue of the Company's securities totaling $50,000. Note 7 - Major Suppliers During the year, the Company purchased products from one vendor totaling approximately $2,320,000. Note 8 - Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK. VIDEO GAME EXCHANGE, INC. (AN S CORPORATION) BALANCE SHEET (UNAUDITED) ------------- JUNE 30, 1997 ------------- ASSETS CURRENT ASSETS: Cash $ 595,100 Accounts receivable 4,400 Inventory 1,674,800 Prepaid expenses and other 81,700 ----------- TOTAL CURRENT ASSETS 2,356,000 PROPERTY AND EQUIPMENT: Furniture, fixtures and equipment 996,800 Leasehold improvements 419,800 Transportation equipment 138,800 ----------- Total, at cost 1,555,400 Accumulated depreciation (1,058,600) ----------- NET PROPERTY AND EQUIPMENT 496,800 OTHER ASSETS: Note receivable - related party 390,600 Deposits 58,200 ----------- TOTAL OTHER ASSETS 448,800 ----------- TOTAL ASSETS $ 3,301,600 =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 533,300 Accounts payable 434,300 Accrued sales taxes 62,500 Accrued expenses 39,800 ----------- TOTAL CURRENT LIABILITIES 1,069,900 LONG-TERM LIABILITIES: Long-term debt, less current portion 1,938,800 TOTAL LIABILITIES 3,008,700 SHAREHOLDERS' EQUITY: Common shares 50,000 Dividend distributions (727,100) Retained earnings 970,000 TOTAL SHAREHOLDERS' EQUITY 292,900 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,301,600 =========== VIDEO GAME EXCHANGE, INC. (AN S CORPORATION) STATEMENT OF INCOME AND RETAINED EARNINGS (UNAUDITED) --------------------------------- SIX MONTHS ENDED JUNE 30, 1997 JUNE 30, 1996 ------------- ------------- NET SALES $ 7,408,900 $ 5,626,300 COST OF SALES 4,567,200 3,560,600 ----------- ----------- GROSS MARGIN 2,841,700 2,065,700 OPERATING EXPENSES 2,151,400 1,934,000 ----------- ----------- INCOME FROM OPERATIONS 690,300 131,700 OTHER INCOME AND (EXPENSE): Restructuring expense -- (85,600) Interest income 34,000 21,100 Interest expense (257,200) (120,300) ----------- ----------- NET OTHER (EXPENSE) (223,200) (184,800) ----------- ----------- NET INCOME $ 467,100 $ (53,100) RETAINED DEFICIT - Beginning 502,900 (264,500) ----------- ----------- RETAINED EARNINGS - ENDING $ 970,000 $ (317,600) =========== =========== VIDEO GAME EXCHANGE, INC. (AN S CORPORATION) STATEMENT OF CASH FLOWS (UNAUDITED)
---------------------------------- JUNE 30, 1997 JUNE 30, 1996 ------------- ------------- CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 467,100 $ (53,100) Adjustments to Reconcile Net Income to Net Cash Provided By (Used For) Operating Activities: Depreciation and amortization expense 112,600 104,700 (Increase) decrease in: Accounts receivable 149,900 (101,400) Inventory 95,400 1,700 Prepaid expenses and other 103,600 (300) Accounts payable 260,800 158,000 Accrued expenses (70,100) (355,700) ----------- ----------- NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 1,119,300 (246,100) CASH FLOW FROM INVESTING ACTIVITIES: Note receivable - related party (390,600) -- Capital expenditures (26,600) (40,300) ----------- ----------- NET CASH USED FOR INVESTING ACTIVITIES (417,200) (40,300) CASH FLOW FROM FINANCING ACTIVITIES: Dividend distributions (727,100) -- Proceeds from sale of stock -- 50,000 Payments of debt (515,200) (4,200) ----------- ----------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (1,242,300) 45,800 NET DECREASE IN CASH (540,200) (240,600) BEGINNING CASH 1,135,300 1,054,000 ----------- ----------- ENDING CASH $ 595,100 $ 813,400 =========== ===========
GROW BIZ INTERNATIONAL, INC. INTRODUCTION TO PRO FORMA UNAUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 28, 1996 AND THE SIX MONTH PERIOD ENDED JUNE 28, 1997 The following unaudited pro forma consolidated financial information consists of pro forma unaudited consolidated statements of operations of the Company for the fiscal year ended December 28, 1996 and for the six month period ended June 28, 1997 and a pro forma consolidated balance sheet of the Company as of June 28, 1997. The unaudited pro forma consolidated financial statements give effect to the August 15, 1997 acquisition of certain assets of Video Game Exchange, Inc. The pro forma unaudited consolidated statements of operations give effect to the acquisition as if it had occurred on December 30, 1995. The pro forma unaudited consolidated balance sheet give effect to the acquisition as if it had occurred on June 28, 1997. The unaudited pro forma consolidated statement of operations for the year ended December 28, 1996 reflects the audited historical consolidated statements of operations of the Company for the year ended December 28, 1996, and the audited statement of income and retained earnings of Video Game Exchange, Inc. for the year ended December 31, 1996. The unaudited pro forma consolidated financial statements as of June 28, 1997 and for the six months then ended, reflect the unaudited consolidated financial statements of the Company as of and for the six months ended June 28, 1997 and the unaudited financial statements of Video Game Exchange, Inc. as of and for the six months ended June 30, 1997. The pro forma unaudited consolidated financial statements and accompanying notes should be read in conjunction with the historical consolidated financial statements and notes thereto appearing elsewhere or incorporated by reference in this Current Report. GROW BIZ INTERNATIONAL, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 28, 1997
-------------------------------------------------------------------- Grow Biz Video Game International Exchange Adjustments Pro Forma -------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 1,676,600 $ 595,100 $ (79,700)(1) $ 1,608,800 (583,200)(2) Trade receivables 12,629,900 4,400 -- 12,634,300 Inventories 2,704,800 1,674,800 (124,100)(2) 4,255,500 Prepaid expenses and other 1,580,900 81,700 (38,500)(2) 1,624,100 Deferred income taxes 1,726,400 -- -- 1,726,400 ----------- ---------- ------------ ------------ Total current assets 20,318,600 2,356,000 (825,500) 21,849,100 Notes receivable 431,000 390,600 (390,600)(2) 431,000 Property and equipment, net 5,166,300 496,800 75,000 (3) 5,738,100 Other assets, net 2,698,800 58,200 4,339,500 (3) 7,096,500 ----------- ---------- ------------ ------------ $28,614,700 $3,301,600 $ 3,198,400 $ 35,114,700 =========== ========== ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable 5,663,700 496,800 (496,800)(2) 5,663,700 Accrued liabilities 1,010,300 39,800 (39,800)(2) 1,010,300 Current maturities of long-term debt 231,200 533,300 (533,300)(2) 231,200 Deferred franchise fee revenue 4,685,500 -- -- 4,685,500 ----------- ---------- ------------ ------------ Total current liabilities 11,590,700 1,069,900 (1,069,900) 11,590,700 Long-Term Debt 226,600 1,938,800 (1,938,800)(2) 6,726,600 6,500,000 (3) Shareholder's Equity: Common stock 8,513,500 50,000 (50,000)(2) 8,513,500 Retained earnings 8,283,900 242,900 (242,900)(2) 8,283,900 ----------- ---------- ------------ ------------ Total shareholders' equity 16,797,400 292,900 (292,900) 16,797,400 ----------- ---------- ------------ ------------ $28,614,700 $3,301,600 $ 3,198,400 $ 35,114,700 =========== ========== ============ ============
The accompanying notes are an integral part of these financial statements GROW BIZ INTERNATIONAL, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 28, 1996
---------------------------------------------------------------------- Grow Biz Video Game International Exchange Adjustments Pro Forma ---------------------------------------------------------------------- REVENUE: Merchandise sales $ 71,736,800 $ 14,207,000 $ -- $ 85,943,800 Royalties 14,964,800 -- -- 14,964,800 Franchise fees 4,161,600 -- -- 4,161,600 Advertising and other 686,400 -- -- 686,400 ------------ ------------ --------- ------------- Total revenue 91,549,600 14,207,000 -- 105,756,600 COST OF MERCHANDISE SOLD 63,855,600 9,018,700 -- 72,874,300 SELLING, GENERAL AND 23,636,200 4,090,400 173,600 (4) 27,868,700 ADMINISTRATIVE EXPENSES 25,000 (5) (56,500)(6) ------------ ------------ --------- ------------- Income from operations 4,057,800 1,097,900 (142,100) 5,013,600 INTEREST EXPENSE (56,900) (371,500) 371,500 (7) (555,500) (498,600)(8) INTEREST INCOME 251,600 41,100 (41,100)(7) 251,600 ------------ ------------ --------- ------------- Income before income taxes 4,252,500 767,500 (310,300) 4,709,700 PROVISION FOR INCOME TAXES 1,667,000 300,900 (121,600)(9) 1,846,300 ------------ ------------ --------- ------------- NET INCOME $ 2,585,500 $ 466,600 $(188,700) $ 2,863,400 ============ ============ ========= ============= NET INCOME PER COMMON SHARE $ .40 $ .44 ============ ============= WEIGHTED AVERAGE SHARES OUTSTANDING 6,516,000 6,516,000 ============ =============
The accompanying notes are an integral part of these financial statements GROW BIZ INTERNATIONAL, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 28, 1997
---------------------------------------------------------------------- Grow Biz Video Game International Exchange Adjustments Pro Forma ---------------------------------------------------------------------- REVENUE: Merchandise sales $ 29,578,400 $ 7,408,900 $ -- $ 36,987,300 Royalties 8,256,400 -- -- 8,256,400 Franchise fees 1,607,700 -- -- 1,607,700 Advertising and other 345,900 -- -- 345,900 ------------ ----------- ----------- ------------ Total revenue 39,788,400 7,408,900 -- 47,197,300 COST OF MERCHANDISE SOLD 26,064,500 4,567,200 -- 30,631,700 SELLING, GENERAL AND 11,307,900 2,151,400 86,800 (4) 13,530,300 ADMINISTRATIVE EXPENSES 12,500 (5) (28,300)(6) ------------ ----------- ----------- ------------ Income from operations 2,416,000 690,300 (71,000) 3,035,300 INTEREST EXPENSE (11,900) (257,200) 257,200 (7) (205,200) (193,300)(8) INTEREST INCOME 127,600 34,000 (34,000)(7) 127,600 ------------ ----------- ----------- ------------ Income before income taxes 2,531,700 467,100 (41,100) 2,957,700 PROVISION FOR INCOME TAXES 992,400 180,700 (16,100)(9) 1,157,000 ------------ ----------- ----------- ------------ NET INCOME $ 1,539,300 $ 286,400 $ (25,000) $ 1,800,700 ============ =========== =========== ============ NET INCOME PER COMMON SHARE $ .25 $ .29 ============ ============ WEIGHTED AVERAGE SHARES OUTSTANDING 6,281,300 6,281,300 ============ ============
The accompanying notes are an integral part of these financial statements GROW BIZ INTERNATIONAL, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 28, 1997 1) Reflects $79,700 of non-financed cash paid to Video Game Exchange, Inc. (VGE) as part of the acquisition. 2) Reflects the elimination of assets, liabilities and equity of VGE which were not acquired or assumed by the Company. 3) Reflects the effects of purchase accounting for the acquisition of VGE including adjusting property and equipment to its fair market value and the recording of goodwill and acquisition debt. 4) Reflects the amortization of $4.3 of goodwill and covenants not to compete over 25 years arising from the acquisition of VGE. 5) Reflects the net change in depreciation expense associated with the write-up to fair market value of certain assets acquired from VGE. 6) Reflects the elimination of certain VGE salary costs which will not recur. 7) Reflects the elimination of VGE interest expenses and income derived from certain assets and liabilities which were not acquired or assumed by the Company. 8) Reflects the interest expense related to the acquisition debt. 9) Reflects pro forma provision for income taxes as if VGE was taxed as a C Corporation as of the beginning of the period. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GROW BIZ INTERNATIONAL, INC. Date: October 14, 1997 By: /s/ Ronald G. Olson ---------------------- Ronald G. Olson President and Chief Executive Officer Date: October 14, 1997 By: /s/ David J. Osdoba, Jr. -------------------------- David J. Osdoba, Jr. Vice President of Finance and Chief Financial Officer EX-23.1 2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 4141 Rockside Road Suite 150 Cleveland, Ohio 44131 ZION, SMORAG & ASSOCIATES Phone (216) 447-6006 Certified Public Accountants FAX (216) 447-6007 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated March 19, 1997 into this Form 8-K and into the Company's previously filed Registration Statements, File Numbers 33-85972, 33-85960, 33-85956, 33-79176, 33-71772, 333-3236, 333-3068 and 333-3066. /s/ Zion, Smorag & Associates Cleveland, Ohio October 8, 1997 -----END PRIVACY-ENHANCED MESSAGE-----