SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
May 14, 1998
Date of Report (Date of earliest event reported)
FIDELITY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada 00029182 11-3292094
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
80-02 Kew Gardens Road, Kew Gardens, NY 11415
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): 718/520-6500
<PAGE>
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
1. Unaudited pro forma combined statement of operations for the
three months ended March 31, 1998 and unaudited pro forma combined balance
sheet as of March 31, 1998.
-2-
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PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined statements of operations and
balance sheets are based on the unaudited historical financial statements of
Fidelity Holdings, Inc. and Subsidiaries (the "Company" or "Fidelity"), and on
the unaudited combined historical financial statements of the Major Automotive
Group ("Major" and "Major Chevrolet, Inc. and Affiliates"). The unaudited
combined pro forma balance sheet at March 31, 1998 has been adjusted to give
effect to the merger as if it had occurred on that date. The unaudited combined
pro forma statement of operations for the three months ended March 31, 1998 has
been adjusted to give effect to the merger as if it had occurred on January 1,
1998. In the opinion of management, the unaudited financial statements of the
Company and Major include all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for the period.
These statements are based on available information and certain
assumptions which management believes are reasonable. The pro forma combined
statement of operations is not necessarily indicative of future operating
results or what the Company's results of operations would have been had the
combination occurred on January 1, 1998 and, therefore, should not be construed
as being representative of future operating results. The pro forma combined
statement of operations and balance sheet should be read in conjunction with the
audited historical financial statements of the Company and of Major.
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Fidelity Major Adjustments Combined
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Computer products and
telecommunications equipment $ 331,128 $ $ 331,128
Automobile dealers 33,004,567 33,004,567
Leasing income 165,152 165,152
---------- ----------- --------- -----------
Total revenues 496,280 33,004,567 33,500,847
---------- ----------- --------- -----------
Operating expenses:
Cost of products sold 116,698 28,539,651 28,656,349
Selling, general and
administrative expenses
Products 219,803 219,803
Leasing 140,490 140,490
Automobile dealers 3,513,087 9,375 (a) 3,522,462
Amortization of intangible assets 84,738 140,465 (b) 225,203
---------- ----------- --------- -----------
561,729 32,052,738 149,840 32,764,307
---------- ----------- --------- -----------
Operating income(loss) (65,449) 951,829 (149,840) 736,540
Other income (expense)
Interest expense (26,223) (202,455) (184,513)(c) (413,191)
Interest income 2,100 -- 2,100
Other 22,747 22,747
Income on joint venture -- --
---------- ----------- --------- -----------
Income before provision for taxes (89,572) 772,121 (334,353) 348,197
Provision for taxes (21,000) 34,400 141,000 (d) 154,400
---------- ----------- --------- -----------
Net income $ (68,572) $ 737,721 $(475,353) $ 193,797
========== =========== ========= ===========
Net income per common share
Basic $ (0.01) $ 0.02
========== ===========
Diluted $ (0.01) $ 0.02
========== ===========
Weighted average number of shares used
in computing earnings per share
Basic 6,895,700 (e) 8,695,700
========== ===========
Diluted 6,895,700 (e) 9,791,896
========== ===========
</TABLE>
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FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
March 31, 1998
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Fidelity Major Adjustments Combined
----------- ----------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 153,415 $ 2,322,529 $ 7,500,000 (c) $ 2,475,944
(7,500,000)(a)
Net investment in direct financing leases, current 1,758,429 1,758,429
Notes receivable - officer shareholder 150,500 745,738 896,238
Accounts receivable 1,807,037 4,420,452 6,227,489
Inventories 118,778 14,879,091 14,997,869
Other current assets 420,975 222,527 643,502
----------- ----------- ----------- -----------
Total current assets 4,409,134 22,590,337 -- 26,999,471
Net investment in direct financing leases,
net of current portion 606,632 606,632
Property and equipment, net 1,154,456 686,704 3,000,000 (a) 4,841,160
Goodwill 2,663,102 2,250,054 (b) 4,913,156
Other intangible assets 419,642 6,125,000 (b) 6,544,642
Other assets 91,061 702,455 793,516
----------- ----------- ----------- -----------
Total assets $ 9,344,027 $23,979,496 $11,375,054 $44,698,577
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY --
Current Liabilities:
Accounts payable and customer deposits $ 649,943 $ 3,189,287 $ $ 3,839,230
Accrued expenses 172,717 1,128,947 1,301,664
Current maturities of long-term debt 496,350 500,000 (c) 996,350
Deferred revenue 48,113 48,113
Due to affiliates 99,342 99,342
Notes payable to bank and floor plan liability 250,000 16,345,449 16,595,449
Other current liabilities 23,274 23,274
----------- ----------- ----------- -----------
Total current liabilities 1,716,465 20,686,957 500,000 22,903,422
Long-term debt, less current maturities 518,521 7,000,000 (c) 7,518,521
Income taxes - deferred 562,000 562,000
Other 90,808 1,167,593 1,258,401
----------- ----------- ----------- -----------
Total liabilities 2,887,794 21,854,550 7,500,000 32,242,344
Stockholders' equity Preferred stock, $.01 par value:
2,000,000 shares authorized
250,000 shares issued and outstanding 2,500 2,500
Preferred stock - 1997-MAJOR, $.01 par value: 9,000 (a) 9,000
Common stock, $.01 par value
50,000,000 shares authorized
6,895,700 shares issued and outstanding 68,957 68,957
Common stock - Major, net 730,100 (730,100)(a)
Additional paid in capital 5,414,293 176,700 (176,700)(a) 11,405,293
5,991,000 (a)
Cumulative translation adjustment 367 367
Retained earnings 970,116 858,146 (858,146)(a) 970,116
----------- ----------- ----------- -----------
Total stockholders' equity 6,456,233 1,764,946 4,235,054 12,456,233
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 9,344,027 $23,619,496 $11,735,054 $44,698,577
=========== =========== =========== ===========
</TABLE>
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS
Assumptions Used and Adjustments Made
(a) The merger transaction, which was accounted for as a purchase pursuant to
Accounting Principles Board Opinion Number 16, was accomplished by payment
of $7,000,000 in cash, the incurrence of $500,000 in merger-related
expenses and the issuance of 900,000 shares of the Company's Convertible
Preferred Stock ("1997-MAJOR Preferred"). Such shares are convertible, by
their terms, into 1,800,000 shares of the Company's Common Stock. Such
common shares were valued at $3.33 per share at the time the transaction
was agreed to. The valuation was based on fair market value of the
Company's freely trading shares and considered such factors as
restrictions and blockage. The number of shares was determined, in
accordance with the acquisition agreement, as the greater of (i) 1,800,000
shares and (ii) that number of shares of Common Stock that had a market
value of $6,000,000. Together, the cash payment plus the 1997-MAJOR
Preferred stock and the $500,000 of merger-related expenses, represent a
purchase price of $13.5 million. The assets and liabilities of Major were
recorded at their historical book value. Since the preponderance of such
assets and liabilities are current, primarily cash, receivables,
inventories and related liabilities, management believes such book value
($2,124,946 at March 31, 1998) approximates fair market value. The real
property, acquired from the principals of Major as part of the
transaction, was recorded at its actual cash cost of $3 million. The pro
forma statements reflect an assumption that land comprises half of the
acquired property and the buildings are being depreciated over their
estimated useful lives of forty years.
(b) The excess of cost over net assets acquired of $8,375,054 has been
allocated, on a pro forma basis, to customer lists ($2.5 million),
franchise rights ($2.2 million) and a long-term favorable lease ($1.7
million), which are being amortized over periods of between seven and
thirty years. The balance of the excess of cost over net assets acquired
($2,250,054) has been allocated to goodwill, which is being amortized over
twenty-five years. A professional appraisal will be made and, based
thereon, the excess of cost over net assets acquired will be reallocated
to tangible and intangible assets, if any, and they will be appropriately
depreciated and amortized over their estimated useful lives.
(c) The transaction has been financed by Falcon Financial LLC through a loan
payable over fifteen years with an interest rate (10.18%) fixed at
closing. The pro forma financial statements assume that three monthly
payments of principal and interest have been made through March 31, 1998.
(d) Taxes have been provided for the Company at historic rates. Major has
historically operated as a Subchapter S Corporation under the provisions
of the Internal Revenue Code, wherein the stockholders are required to
report taxable income or loss on their personal tax returns and no such
taxes are reflected on Major's financial statements. Pro forma taxes have
been provided for Major at an estimated effective rate of approximately
35%.
(e) Earnings per share has been calculated based on the weighted average
numbers of shares used to calculate Fidelity's historical earnings per
share as adjusted for the assumed conversion of the 900,000 shares of
1997-MAJOR Preferred Stock into 1,800,000 shares of Fidelity's Common
Stock as of January 1, 1998.
<PAGE>
SIGNATURE
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 hereunto duly authorized.
FIDELITY HOLDINGS, INC.
(Registrant)
/s/ Bruce Bendell
----------------------------------
Bruce Bendell, President
Dated: June 18, 1998
