UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: July 1, 2004 COMMISSION FILE NO. 0-22810
(Date of earliest event reported)
MACE SECURITY INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 03-0311630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Crawford Place, Suite 400, Mt. Laurel, NJ 08054
(Address of Principal Executive Offices)
Registrant's Telephone No., including area code: (856) 778-2300
Item 2. Acquisition of Assets of Industrial Vision Source and SecurityandMore(R)
------------------------------------------------------------------------
On July 1, 2004, Mace Security International, Inc., a Delaware corporation
(the "Company" or "Registrant"), through its wholly owned subsidiary, Mace
Security Products, Inc., acquired substantially all of the operating assets of
two operating divisions, namely, Industrial Vision Source(R)("IVS") and
SecurityandMore(R)("S&M"), of MDI Operating, L.P., a wholly owned subsidiary of
American Building Control, Inc. The asset acquisition was pursuant to the terms
of an Agreement for Purchase and Sale of Assets dated June 21, 2004 ( the
"Agreement"), by and among the Registrant, MDI Operating, L.P., and American
Building Control, Inc. (collectively the "Sellers").
The assets (the "Purchased Assets") include substantially all of the assets
of the Sellers used in the business of operating S&M and IVS, which are a
supplier of "do-it-yourself" video surveillance and security equipment and a
distributor of technologically advanced imaging components and video equipment,
respectively.
The Sellers are neither affiliated with the Registrant nor with any of the
Registrant's subsidiaries, affiliates, directors, officers, or any associates of
any director or officer. The description of the acquisition transaction set
forth herein is qualified in its entirety by reference to the Agreement which is
incorporated by reference as Exhibit 2.1.
Pursuant to the Agreement, Registrant purchased the assets for cash
consideration of $5,621,000, subject to final adjustment as set forth in the
Agreement. The source of funds used by the Registrant to acquire the Purchased
Assets was the operating capital of the Registrant. The acquisition will be
accounted for as a business combination in accordance with Statement of
Financial Accounting Standards No. 141, "Business Combinations."
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Report of Independent Registered Public Accounting Firm
Balance Sheets as of December 31, 2003 and March 31, 2004 (Unaudited).
Statements of Operations for the Year Ended December 31, 2003 and the
Three Months Ended March 31, 2004 (Unaudited).
Statements of Cash Flow for the Year Ended December 31, 2003 and the
Three Months Ended March 31, 2004 (Unaudited).
Notes to Financial Statements (Data related to 2004 is unaudited).
(b) Pro Forma Financial Information.
Pro forma Consolidated Statement of Operations for the Year Ended
December 31, 2003 (Unaudited)
Pro forma Consolidated Statement of Operations for the Three Months
Ended March 31, 2004 (Unaudited)
Pro forma Consolidated Balance Sheet as of March 31, 2004 (Unaudited)
Notes to Pro Forma Financial Information
(c) The following Exhibits are hereby filed as part of this Current
Report on Form 8-K/A.
* 2.1 Agreement for Purchase and Sale of Assets by and among MDI
Operating, L.P., American Building Control, Inc. and Mace
Security Products, Inc.
* 99 Press Release dated July 6, 2004.
23.1 Consent of Grant Thornton LLP
________________________________________________________________________________
* Incorporated by reference
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MACE SECURITY INTERNATIONAL, INC.
By: /s/ Gregory M. Krzemien
Gregory M. Krzemien
Chief Financial Officer and Treasurer
Date: August 2, 2004
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
American Building Control, Inc.
We have audited the accompanying balance sheet of the SecurityandMore and
Industrial Vision Source divisions (collectively the "DSG Businesses") of
American Building Control, Inc., as of December 31, 2003, and the related
statements of operations and cash flows for the year then ended. These financial
statements are the responsibility of the DSG Businesses' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). 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 includes
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 assets acquired and liabilities assumed of the DSG
Businesses as of December 31, 2003, and the results of their operations and cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ Grant Thornton LLP
Dallas, Texas
July 13, 2004
THE SECURITYANDMORE AND INDUSTRIAL VISION SOURCE DIVISIONS OF
AMERICAN BUILDING CONTROL, INC.
STATEMENTS OF OPERATIONS
(in thousands)
Quarter Ended March 31, Year Ended December 31,
2004 2003
------------------------ ------------------------
(Unaudited)
Net sales $ 5,091 $ 21,473
Cost of sales 3,998 16,792
------------------------ ------------------------
Gross profit 1,093 4,681
Selling, general and administrative expenses 1,028 3,722
------------------------ ------------------------
Operating income 65 959
Other expense - (8)
------------------------ ------------------------
Income before income taxes 65 951
Allocated income tax expense 24 361
------------------------ ------------------------
Net Income $ 41 $ 590
======================== ========================
The accompanying notes are an integral part of these statements.
THE SECURITYANDMORE AND INDUSTRIAL VISION SOURCE DIVISIONS OF
AMERICAN BUILDING CONTROL, INC.
BALANCE SHEETS
(in thousands)
March 31, 2004 December 31, 2003
------------------------ ------------------------
ASSETS (Unaudited)
Current assets:
Trade accounts receivable, net $ 1,260 $ 1,533
Inventories, net 3,315 2,811
------------------------ ------------------------
Total current assets 4,575 4,344
Property and equipment, net 94 107
Goodwill 729 729
------------------------ ------------------------
Total assets $ 5,398 $ 5,180
======================== ========================
LIABILITIES
Current liabilities:
Trade accounts payable $ 2,161 $ 1,111
Accrued compensation 132 135
Other current liabilities 276 513
------------------------ ------------------------
Total current liabilities 2,569 1,759
DIVISIONAL SURPLUS 2,829 3,421
------------------------ ------------------------
Total liabilities and divisional surplus $ 5,398 $ 5,180
======================== ========================
The accompanying notes are an integral part of these statements.
THE SECURITYANDMORE AND INDUSTRIAL VISION SOURCE DIVISIONS OF
AMERICAN BUILDING CONTROL, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
March 31, 2004 December 31, 2003
------------------------ ------------------------
Operating Activities: (Unaudited)
Net income $ 41 $ 590
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 15 158
Provision for losses on accounts receivable 12 321
Inventory write downs 9 17
Changes in operating assets and liabilities
Trade accounts receivable 261 (179)
Inventories (513) 135
Trade accounts payable 1,050 84
Other current liabilities (237) 40
Accrued compensation (3) (98)
------------------------ ------------------------
Net cash provided by operating activities 635 1,068
Investing activities
Purchases of property and equipment (2) (146)
Financing activities
Allocated borrowings to Company (633) (922)
------------------------ ------------------------
Net increase in cash 0 0
Cash, beginning of period 0 0
------------------------ ------------------------
Cash, end of period $ 0 $ 0
======================== ========================
The accompanying notes are an integral part of these statements.
THE SECURITYANDMORE AND INDUSTRIAL VISION SOURCE DIVISIONS OF
AMERICAN BUILDING CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
(Data related to 2004 is unaudited)
Note 1: Basis of Presentation of the Acquired Businesses
On July 1, 2004, (the "Closing Date"), Mace Security Products, Inc.
("Mace"), a wholly owned subsidiary of Mace Security International, Inc.,
consummated the acquisition of the consumer/do-it-yourself business
("SecurityandMore"(R)) and the industrial vision business (Industrial Vision
Source, or "IVSTM"), (collectively the "DSG Businesses"), of American Building
Control, Inc., (the "Company"), pursuant to a purchase agreement (the "Purchase
Agreement"), dated June 21, 2004, between the Company and Mace (the
"Acquisition").
The consideration paid in the Acquisition (which was determined as a result
of arms'-length negotiations) consisted of cash in the amount of $5,620,834.
The Company has two operating segments: the Professional Security Group
("PSG"), whose primary focus is access control and alarm management products and
the Diversified Sales Group ("DSG"), which includes products sold to the
consumer/do-it-yourself channel and its industrial video businesses. The DSG
segment is primarily comprised of the DSG Businesses.
The accompanying carve-out balance sheets, statements of operations, and
statements of cash flows have been prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission. These
financial statements have been prepared on a historical cost basis from the
books and records maintained by the Company, on the basis of established
accounting methods, practices and procedures and policies (see Note 2) and the
accounting judgments and estimation methodologies used by the Company, of which
the DSG Businesses represented specific business units. The DSG Businesses never
operated as separate entities, but rather were integrated parts of the Company's
consolidated operations.
The carve-out financial statements include the direct revenue and direct
operating expenses that relate to the DSG Businesses. Direct operating expenses
include salaries and wages, fringe benefits, materials, depreciation, and other
expenses solely attributable to the DSG Businesses. In addition, the carve-out
financial statements also include allocations of corporate expenses incurred by
the Company that are associated with the revenue-producing activities of the DSG
Businesses and are therefore indirectly attributable to the DSG Businesses. Such
allocated costs include sales and marketing costs, corporate overhead such as
finance, accounting, human resources, information systems costs, and occupancy
and procurement costs, which have been allocated using allocation factors such
as square footage, headcount and workload.
Note 2: Summary of Significant Accounting Policies
Trade Accounts Receivable
The DSG Businesses estimate the collectibility of trade accounts
receivable. In order to assess the collectibility of these receivables, the DSG
Businesses monitor the current creditworthiness of each customer and analyze the
aging of related past due balances. These evaluations may indicate a situation
in which a customer cannot meet its financial obligations due to deterioration
of its financial viability, credit ratings or bankruptcy. The allowance
requirements are based on current facts and are reevaluated and adjusted as
additional information is received. Trade accounts receivable are reserved when
it is determined the receivable may not be collected.
Use of Estimates
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, the DSG Businesses'
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities on the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Inventories
Inventories are comprised primarily of goods held for resale and are stated
at the lower of cost (first-in, first-out) or market through the use of an
inventory valuation allowance. In order to assess the ultimate realization of
inventories, the DSG Businesses are required to make judgments as to future
demand requirements compared to current or committed inventory levels. Allowance
requirements generally increase as the projected demand requirement decreases
due to market conditions and technological or product life cycle changes.
Goodwill
The DSG Businesses adopted Statement of Financial Accounting Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets, on January 1, 2002. In
performing the impairment analysis required by SFAS No. 142, the DSG Businesses
complete a two step process to determine the amount of any impairment as of
December 31st of each year. The first step involves comparison of the fair value
of the reporting unit to its carrying value to determine if an impairment may
exist. The second step involves comparison of the fair value of the goodwill to
the carrying value of the goodwill. Any excess of the carrying value over the
fair value is recorded as an impairment charge. In calculating an impairment
charge, the fair value of a reporting unit is estimated using discounted cash
flow methodology or other valuation methods.
In connection with the DSG Businesses' annual impairment analysis as of
December 31, 2003, no impairment was necessary based on the estimated proceeds
to be received from the anticipated sale of the DSG Businesses.
Income Taxes
Operating results of the DSG Businesses are included in the consolidated
income tax returns of the Company. The Company has significant net operating
loss carryforwards and has provided a full valuation allowance against its net
deferred tax assets. Accordingly, the consolidated financial statements of the
Company contain no provision for income taxes. The income tax expense presented
in these financial statements has been determined on a standalone basis for the
DSG Businesses assuming an effective tax rate equivalent to that of the Company
prior to the valuation allowance for deferred taxes and is not necessarily
reflective of actual tax expense that may have been attributable to the DSG
Businesses.
Revenue Recognition
Revenue is recognized when a firm sales agreement is in place, the price is
fixed and determinable, delivery has occurred and collectibility is probable.
Warranty Reserves
Reserves are provided for estimated warranty costs when revenue is
recognized. The costs of warranty obligations are estimated based on the
Company's warranty policy or applicable contractual warranty, historical
experience of known product failure rates and use of materials and service
delivery charges incurred in correcting product failures. Specific warranty
accruals may be made if unforeseen technical problems arise. If actual
experience, relative to these factors, adversely differs from these estimates,
additional warranty expense may be required.
The table below shows the roll forward of warranty reserves for the year
ended December 31, 2003, and three months ended March 31, 2004 (in thousands):
Three Months Ended Twelve Months Ended
------------------ -------------------
March 31, 2004 December 31, 2003
-------------- -----------------
Beginning balance $ 112 $ 62
Charged to expense 7 50
Usage (5) (0)
-------------- -----------------
Closing balance $ 114 $ 112
============== =================
Statements of Cash Flows
During the three months ended March 31, 2004, and year ended December 31,
2003, the funding requirements of the DSG Businesses and the Company were
combined. As the DSG Businesses have historically been managed as a part of the
operations of the Company, outstanding cash balances have not been reflected on
the accompanying financial statements.
Note 3: Trade Accounts Receivable
Supplemental information on net trade accounts receivable (in thousands):
March 31, 2004 December 31, 2003
--------------- -----------------
Gross trade accounts receivable $ 1,503 $ 1,940
Less: allowance for doubtful accounts (243) (407)
--------------- -----------------
$ 1,260 $ 1,533
=============== =================
Allowance for doubtful accounts (in thousands):
Deductions
Balance at From Balance at
Beginning Charged to Accounts End of
Of Period Operations Receivable Period
---------- ---------- ---------- ----------
Quarter ended March 31, 2004 $ 407 $ 12 $ 176 $ 243
Year ended December 31, 2003 $ 411 $ 321 $ 325 $ 407
Note 4: Property and Equipment
The components of property and equipment are as follows (in thousands):
Useful Lives March 31, December 31,
---------- ------------
2004 2003
---- ----
Machinery and equipment 3-7 years $ 268 $ 268
Furniture and fixtures 3-7 years 152 152
Internal software/computers 3-8 years 42 40
---------- ------------
462 460
Accumulated depreciation (368) (353)
---------- ------------
$ 94 $ 107
========== ============
Note 5: Inventories
Supplemental information on net inventories (in thousands):
March 31, 2004 December 31, 2003
---------------- -------------------
Gross inventories $ 3,756 $ 3,243
Less: inventory reserve (441) (432)
---------------- -------------------
Net inventories $ 3,315 $ 2,811
================ ===================
Note 6: Commitments and Contingencies
Operating Leases
The DSG Businesses lease a mailing machine under a long-term,
non-cancelable lease. The mailing machine lease terminates on December 31, 2007.
Minimum future rental payments are presented below (in thousands):
Years ending
December 31,
------------
2004 $ 6
2005 6
2006 6
2007 6
--------
$ 24
========
Note 7: Major Customers and Suppliers
Costco, a major national retailer, accounted for approximately 28% of the
DSG Businesses sales in 2003. For the three months ended March 31, 2004, Costco
represented 29% of sales. Loss of this customer would have a material adverse
effect on the DSG Businesses' operations.
Hitron, Inc., Sony, and Mitsubishi Digital were the DSG Businesses' major
suppliers for electronic video products during 2003,collectively representing
83% and 90% of purchases for 2003 and the three months ended March 31, 2004,
respectively. Loss of any of these suppliers could result in short-term supply
problems and a possible loss of sales.
Note 8: Segment Reporting
Operating information for each segment within the DSG Businesses is as
follows (in thousands):
Three months ended March 31, 2004 IVS SecurityandMore Total
--------------------------------------------- ---------- ----------------- ---------
Revenue from external customers $ 1,852 $ 3,239 $ 5,091
Gross profit $ 241 $ 852 $ 1,093
Selling, general and administrative expenses $ 246 $ 782 $ 1,028
Operating (loss) income $ (5) $ 70 $ 65
Year ended December 31, 2003
---------------------------------------------
Revenue from external customers $ 9,292 $ 12,181 $ 21,473
Gross profit $ 1,302 $ 3,379 $ 4,681
Selling, general and administrative expenses $ 912 $ 2,810 $ 3,722
Operating income $ 390 $ 569 $ 959
A reconciliation of total assets per segment to the consolidated balance
sheet is as follows (in thousands):
March 31, 2004 December 31, 2003
---------------- -------------------
SecurityandMore $ 3,986 $ 3,472
IVS 1,412 1,708
---------------- -------------------
$ 5,398 $ 5,180
================ ===================
Note 9: Employee Benefit Plan and Option Plan Participation
Personnel that became employees of Mace as a result of the Acquisition
participated in a defined contribution employee benefit plan of the Company
prior to the Acquisition. As a result of the Acquisition, these employees are no
longer covered under the Company's benefit plan and these employees will be
eligible to participate in plans sponsored by Mace based on eligibility criteria
specified in the Purchase Agreement and the respective plan. Former DSG
Businesses' employees were also participants in various stock option plans
sponsored by the Company. The Purchase Agreement, did not provide for the
replacement or substitution of stock options held by former DSG Businesses
employees with similar instruments of Mace and the stock options were cancelled
by the Company without compensation subsequent to the Closing Date.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
AND THE THREE MONTHS ENDED MARCH 31, 2004
The following unaudited pro forma consolidated statements of operations for the
year ended December 31, 2003 and the three months ended March 31, 2004 give
effect to the acquisition of substantially all of the operating assets of two
operating divisions, namely, Industrial Vision Source(R) ("IVS") and
SecurityandMore(R) ("S&M"), of MDI Operating, L.P., a wholly owned subsidiary of
American Building Control, Inc. for cash consideration of $5,621,000.
The following unaudited pro forma consolidated statements of operations for the
year ended December 31, 2003 and the three months ended March 31, 2004 give
effect to the aforementioned transaction as if the transaction had occurred on
the first day of each period presented. The following unaudited pro forma
financial data may not be indicative of what the results of operations or
financial position of Mace Security International, Inc. would have been, had the
transaction to which such data gives effect been completed on the date assumed,
nor are such data necessarily indicative of the results of operations or
financial position of Mace Security International, Inc. that may exist in the
future. The following unaudited pro forma information should be read in
conjunction with the notes thereto, the other pro forma financial statements and
notes thereto, and the consolidated financial statements and notes of Mace
Security International, Inc. as of December 31, 2003 and for each of the three
years in the period then ended appearing in the Company's Form 10-K and the
historical financial statements of the SecurityandMore and Industrial Vision
Source Divisions of American Building Control, Inc. appearing elsewhere in this
filing.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2003
(In thousands, except share and per share data)
SecurityandMore
Mace Security and Pro Forma Pro Forma
International, Inc. Industrial Vision Source Adjustments Consolidated
------------------- ------------------------ -------------- ---------------
Revenues $ 48,996 $ 21,473 $ - $ 70,469
Cost of revenues 35,812 16,792 - 52,604
Selling, general and administrative 9,486 3,564 (151) (2) 12,899
Depreciation and amortization 1,958 158 42 (1) 2,158
Goodwill and asset impairment charges 3,798 - - 3,798
------------------- ------------------------ -------------- ---------------
Operating (loss) income (2,058) 959 109 (990)
Interest expense, net (1,963) - - (1,963)
Other income 438 (8) - 430
------------------- ------------------------ -------------- ---------------
(Loss) income from operations before
income tax expense (3,583) 951 109 (2,523)
Income tax benefit (expense) 50 (361) (19) (3) (330)
------------------- ------------------------ -------------- ---------------
Net (loss) income $ (3,533) $ 590 $ 90 $ (2,853)
=================== ======================== ============== ===============
Net loss per common share (basic and
dilutive): $ (0.28) $ (0.23)
=================== ===============
Weighted average number of
common shares outstanding:
Basic 12,414,816 12,414,816
=================== ===============
Diluted 12,414,816 12,414,816
=================== ===============
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2004
(In thousands, except share and per share data)
Mace
Security SecurityandMore
International, and Pro Forma Pro Forma
Inc. Industrial Vision Source Adjustments Consolidated
------------------- ------------------------ -------------- ---------------
Revenues $ 12,675 $ 5,091 $ - $ 17,766
Cost of revenues 8,998 3,998 - 12,996
Selling, general and administrative
expenses 2,471 1,013 (17) (2) 3,467
Depreciation and amortization 500 15 35 (1) 550
------------------- ------------------------ -------------- ---------------
Operating income 706 65 (18) 753
Interest expense, net (479) - - (479)
Other income 112 - - 112
------------------- ------------------------ -------------- ---------------
Income(loss) before income tax expense 339 65 (18) 386
Income tax (expense) benefit (122) (24) 7 (3) (139)
------------------- ------------------------ -------------- ---------------
Net income(loss) $ 217 $ 41 $ (11) $ 247
=================== ======================== ============== ===============
Net income per common share (basic and
dilutive) $ 0.02 $ 0.02
=================== ===============
Weighted average number of
common shares outstanding: -
Basic 12,461,029 12,461,029
=================== ================
Diluted 12,618,837 12,618,837
=================== ================
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of March 31, 2004
(In thousands)
SecurityandMore
Mace Security and Pro Forma Pro Forma
International, Inc. Industrial Vision Source Adjustments Consolidated
------------------- ------------------------ -------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,651 $ - $ (5,621) (1) $ (1,970)
Accounts receivable, net 1,555 1,260 110 (1) 2,925
Inventories 3,295 3,315 (1,455) (1) 5,155
Deferred income taxes 265 - - 265
Prepaid expenses and other 2,089 - - 2,089
------------------- ------------------------ -------------- ---------------
Total current assets 10,855 4,575 (6,966) 8,464
Property and equipment, net 65,796 94 6 (1) 65,896
Goodwill 10,623 729 (361) (1) 10,991
Other Intangibles, net 1,006 - 2,173 (1) 3,179
Other assets 1,851 - - 1,851
------------------- ------------------------ -------------- ---------------
Total Assets $ 90,131 $ 5,398 $ (5,148) $ 90,381
=================== ======================== ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long term debt 5,404 - - 5,404
Accounts payable $ 2,055 $ 2,161 $ (2,161) (1) $ 2,055
Accrued expenses and
Other current liablities 2,969 408 (158) (1) 3,219
------------------- ------------------------ -------------- ---------------
Total current liabilties 10,428 2,569 (2,319) 10,678
- -
Long term debt, less current portion 25,223 - - 25,223
Other long term liabilities 12 - - 12
------------------- ------------------------ -------------- ---------------
Total liabilities 35,663 2,569 (2,319) 35,913
Stockholders' equity:
Common stock 125 - - 125
Additional paid-in capital 69,824 - - 69,824
(Accumulated deficit) retained earnings (15,481) 2,829 (2,829) (1) (15,481)
------------------- ------------------------ -------------- ---------------
Total stockholders' equity 54,468 2,829 (2,829) 54,468
------------------- ------------------------ -------------- ---------------
Total liabilties and
stockholders' equity $ 90,131 $ 5,398 $ (5,148) $ 90,381
=================== ======================== ============== ===============
Notes to Unaudited Pro Forma Consolidated Statement of Operations Adjustments
The Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended
December 31, 2003 has been adjusted to reflect the following:
(1) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of S&M
and IVS had been completed on January 1, 2003, net of historical
depreciation and amortization expense of S&M and IVS.
(2) To eliminate intercompany administrative charges of $151,000 related
directly to cost sharing arrangements provided by S&M and IVS's prior
parent, which were terminated as a result of the purchase transaction.
Certain administrative services were absorbed by excess capacity of the
Registrant and the Registrant has not hired additional employees to perform
these administrative services.
(3) The Registrant's pro forma tax provision reflects an effective tax rate of
36% considering federal and state income taxes and the effect of certain
non-deductible costs principally related to the acquisitions consummated.
The Unaudited Pro Forma Consolidated Statement of Operations for the Three
Months Ended March 31, 2004 has been adjusted to reflect the following:
(1) To adjust depreciation and amortization expense for the change in the basis
of property and equipment and intangible assets as if the purchase of S&M
and IVS had been completed on January 1, 2004, net of historical
depreciation and amortization expense of S&M and IVS.
(2) To eliminate intercompany administrative charges of $17,000 related
directly to cost sharing arrangements provided by S&M and IVS's prior
parent, which were terminated as a result of the purchase transaction.
Certain administrative services were absorbed by excess capacity of the
Registrant and the Registrant has not hired additional employees to perform
these administrative services.
(3) The Registrant's pro forma tax provision reflects an effective tax rate of
36% considering federal and state income taxes and the effect of certain
non-deductible costs principally related to acquisitions consummated.
Notes to Unaudited Pro Forma Consolidated Balance Sheet Adjustments
The unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2004 has been
adjusted to reflect the following:
(1) On July 1, 2004, Mace Security International, Inc., a Delaware corporation
(the "Company" or "Registrant"), through its wholly owned subsidiary, Mace
Security Products, Inc., acquired substantially all of the operating assets
of two operating divisions, namely, Industrial Vision Source(R) ("IVS") and
SecurityandMore(R) ("S&M"), of MDI Operating, L.P., a wholly owned
subsidiary of American Building Control, Inc. The asset acquisition was
pursuant to the terms of an Agreement for Purchase and Sale of Assets dated
June 21, 2004 (collectively the "Agreement"), by and among the Registrant,
MDI Operating, L.P., and American Building Control, Inc. (the "Sellers").
The assets (the "Purchased Assets") include substantially all of the assets
of the Sellers used in the business of operating S&M and IVS, which are a
supplier of "do-it-yourself" video surveillance and security equipment and
a distributor of technological advanced imaging components and video
equipment, respectively. Pursuant to the Agreement, Registrant purchased
the assets for cash consideration totaling $5,621,000. The allocation of
the purchase price is preliminary. The actual allocation will be based on
management's final evaluation of the assets and liabilities acquired. For
purposes of these pro forma financial statements, the excess of the
purchase price over the fair value of the identifiable tangible and
intangible assets was allocated to goodwill; however, this excess may
ultimately be allocated to other specific tangible and intangible assets.
The final allocation of the purchase price and the resulting effect on
operations may differ significantly from the pro forma amounts included
herein. The preliminary allocation of the purchase price is as follows:
Current assets............................................. $3,230,000
Property and equipment...................................... 100,000
Goodwill.................................................... 368,000
Other intangible assets..................................... 2,173,000
Current liabilities assumed................................. ( 250,000)
-----------
$5,621,000
===========
EXHIBIT INDEX
================================================================================
Exhibit No. Description
----------- -----------
23.1 Consent of Grant Thornton LLP