8-K/A 1 e602258_8k-gales.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------------------------------------------------------- FORM 8-K/A -------------------------------------------------------------------------------- CURRENT REPORT (Amendment No. 2) Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): April 24, 2007 -------------------------------------------------------------------------------- GALES INDUSTRIES INCORPORATED (Exact Name of Registrant as Specified in its Charter) -------------------------------------------------------------------------------- Delaware 000-29245 20-4458244 State of Incorporation Commission File Number IRS Employer I.D. Number 1479 North Clinton Avenue Bayshore, New York 11706 Address of principal executive offices Registrant's telephone number: (631) 968-5000 (Former Name or Former Address, if Changed Since Last Report) -------------------------------------------------------------------------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Explanatory Note This amendment corrects a typographical error in the unaudited pro forma consolidated comparative condensed balance sheet at December 31, 2006 included in the Current Report on Form 8-K/A (Amendment No.1) filed by Gales Industries Incorporated ("we," "our," "us," "Gales" or the "Company") with the Securities and Exchange Commission on June 8, 2007, relating to our acquisition of all the outstanding capital stock of Sigma Metals, Inc. The line item "Due to Sellers -- Sigma -- Net of Current Portion" under "Long term liabilities" in the amount of $257,000 was mistakenly placed in the Gales column rather than the column headed "Sigma." Item 9.01 Financial Statements and Exhibits Financial Statements. (b) Unaudited Pro Forma Condensed Consolidated Financial Information and Notes -------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to its Current Report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: June 11, 2007 GALES INDUSTRIES INCORPORATED. By: /s/ Louis A.Giusto. -------------------------------------------- Name: Louis A.Giusto. Title: Vice Chairman and Chief Financial Officer UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma condensed consolidated financial statements and related notes are presented to show the pro forma effects of the acquisition of Sigma Metals, Inc. and the issuance of Series B Convertible Preferred Stock having an initial liquidation value of $8,023,000. The pro forma condensed consolidated statement of operations for the year ended December 31, 2006 is presented to show income from continuing operations as if the acquisition of Sigma Metals, Inc. and the issuance of the Series B Convertible Preferred Stock had occurred as of the beginning of the period. The pro forma condensed consolidated balance sheet is based on the assumption that the acquisition of Sigma Metals, Inc. and the issuance of the Series B Convertible Preferred Stock had occurred effective December 31, 2006. Pro forma data are based on assumptions and include adjustments as explained in the notes to the unaudited pro forma condensed consolidated financial statements. The pro forma data are not necessarily indicative of the financial results that would have been attained had the acquisition of Sigma Metals, Inc. and the issuance of the Series B Convertible Preferred Stock occurred on the dates referenced above and should not be viewed as indicative of operations in future periods. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the notes thereto, our consolidated financial statements as of and for the year ended December 31, 2006 included in our Annual Report on Form 10-KSB for the year ended December 31, 2006 and the consolidated financial statements as of and for the years ended December 31, 2006 and 2005 of Sigma Metals, Inc. filed here with. Gales Industries Incorporated Unaudited Pro Forma Consolidated Comparative Condensed Balance Sheet December 31, 2006
Gales Gales Sigma Industries Sigma Adjustments Consolidated ---------- ----- ----------- ------------ ASSETS Current Assets Cash and Cash Equivalents $ -- $ 44,798 $ 3,004,342 (a) $ 3,049,140 Accounts Receivable (Net of Allowance for Doubtful Accounts of $176,458 for Gales and $25,000 for Sigma@ 12/31/2006) 3,508,957 2,392,947 -- 5,901,904 Inventory 15,257,641 2,812,873 -- 18,070,514 Prepaid Expenses and Other Current Assets 232,749 27,818 260,567 Deposits 180,456 -- -- 180,456 ----------------------------------------- ------------ Total Current Assets 19,179,803 5,278,436 3,004,342 27,462,581 Property, Plant, and Equipment, net 3,565,316 131,995 -- 3,697,311 Deferred Financing Costs 369,048 -- -- 369,048 Other Assets 63,522 851 -- 64,373 Goodwill 1,265,963 -- 5,405,447 (b) 6,671,410 Deposits 448,530 22,763 -- 471,293 ----------------------------------------- ------------ ----------------------------------------- ------------ TOTAL ASSETS $ 24,892,182 $ 5,434,045 $ 8,409,789 $ 38,736,016 ========================================= ============ Current Liabilities Accounts Payable and Accrued Expenses $ 7,648,426 $ 2,317,622 $ -- $ 9,966,048 Notes Payable Current Portion 127,776 33,541 (33,541)(c) 127,776 Notes Payable - Revolver 5,027,463 897,800 (897,800)(c) 5,027,463 Notes Payable - Sellers AIM - Current Portion 192,400 -- 361,404 (d) 553,804 Capital Lease Obligations - Current Portion 407,228 -- -- 407,228 Due to Sellers AIM 53,694 -- -- 53,694 Dividends Payable 120,003 -- -- 120,003 Deferred Gain on Sale - Current Portion 38,033 -- -- 38,033 Income Taxes Payable 653,426 -- 653,426 653,426 ----------------------------------------- ------------ Total current liabilities 14,268,449 3,248,963 (569,937) 16,947,475 Long term liabilities Due to Sellers - Sigma - Net of Current Portion 257,000 (257,000)(c) -- Notes Payable - Net of Current Portion 645,458 -- 1,188,341 (c) 1,833,799 Notes Payable - Sellers AIM - Net of Current Portion 1,290,562 -- 1,290,562 Notes Payable - Sellers Sigma - Net of Current Portion -- -- 722,807 (d) 722,807 Capital Lease Obligations - Net of Current Portion 552,589 -- -- 552,589 Deferred Tax Liability 512,937 -- -- 512,937 Deferred Gain on Sale - Net of Current Portion 713,118 -- -- 713,118 Deferred Rent 39,371 -- -- 39,371 ----------------------------------------- ------------ TOTAL LIABILITIES $ 18,022,484 $ 3,505,963 $ 1,804,211 $ 22,612,658 Series B Convertible Preferred - $.001 Par value, 2,000,000 $ -- $ -- $ 8,023 (e) $ 8,023 Shares Authorized, 802,300 Shares Issued and Outstanding with an initial liquidation value of $8,023,000 -- '(Authorized, Issued and Oustanding for the Proforma December 31, 2006) Common Stock - $.001 Par value, 120,055,746 Shares Authorized, 57,269 30,000 (21,955)(f) 65,314 57,269,301 Shares Issued and Outstanding as of December 31, 2006 on a pro forma basis 65,314,694 Shares Issued and Outstanding as of December 31,2006 Additional Paid-In Capital 7,898,702 -- -- 7,898,702 Additional Paid-In Capital Series B Preferred 7,345,637 (g) 7,345,637 Additional Paid-In Capital: Sigma Shares 1,891,955 (h) 1,891,955 Retained Earnings (Accumulated Deficit) (1,086,273) 1,898,082 (1,898,082)(i) (1,086,273) ----------------------------------------- ------------ Total Stockholders' Equity 6,869,698 1,928,082 7,325,578 16,123,358 ----------------------------------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,892,182 $ 5,434,045 $ 8,409,789 $ 38,738,016 ========================================= ============ 0 0 0 0
Notes to Unaudited Pro Forma Consolidated Comparative Condensed Balance Sheet (a) Represents the net cash from sale of Series B Convertible Preferred Stock remaining after using a portion of the proceeds for the purchase of the stock of Sigma Metals, Inc. and paying soft costs associated with the acquisition. (b) Represents the goodwill resulting from the excess of the purchase price paid for the stock of Sigma over the value of the assets acquired less the liabilities assumed. (c) Represents the revolving loan facility put in place to pay the amounts due third parties and the former Officers of Sigma for borrowed money. (d) Represents the current and long term portions of the notes issued by Gales Industries as part of the purchase price for the stock of Sigma. (e) Represents the par value of the shares of Gales Industries Series B Convertible Preferred stock issued, in part, to finance the purchase of the stock of Sigma. (f) Represents the elimination of Sigma's Stockholders' Equity ($30,000) partially offset by the par value ($8,045) of the 8,045,393 shares issued to the sellers as part of the purchase price for the stock of Sigma. (g) Represents the excess of amounts paid by investors over the par value of shares of Gales Industries Series B Convertible Preferred stock net of the soft costs associated with the issuance of such shares. (h) Represents the excess over par value of the fair value of the common stock issued as part of the purchase price for the stock of Sigma. (i) Represents the eliminations of Sigma's accumulated surplus. Gales Industries Incorporated Pro Forma Combined Satement Of Income For the Year Ended December 31, 2006
Gales Gales Sigma Industries Sigma Adjustments Consolidated ---------- ----- ----------- ------------ Net Sales $ 33,044,996 $ 17,979,414 $ 51,024,410 Cost of Sales 28,002,942 12,822,494 40,825,436 ------------ ------------ ------------ ------------ Gross Profit 5,042,054 5,156,920 -- 10,198,974 Operating costs and expenses Selling and marketing 601,011 923,847 1,524,858 General and administrative 3,789,587 2,218,053 6,007,640 ------------ ------------ ------------ ------------ Income (Loss) from operations 651,456 2,015,020 0 2,666,476 Other (income) and expenses: Interest & financing costs 1,040,108 129,490 61,094 (b) 1,230,692 Gain on Sale of Life Insurance Policy (53,047) -- (53,047) Gain on Sale of Real Estate (300,037) -- (300,037) Other Income (435,627) -- (435,627) Other Expenses 246,659 425 247,084 ------------ ------------ ------------ ------------ Net Income (Loss) before provision for income taxes 153,400 1,885,105 (61,094) 1,977,411 Provision for income taxes 489,969 767,396 (a) (24,450) 1,232,915 ------------ ------------ ------------ ------------ Net Income (Loss) $ (336,569) $ 1,130,686 $ (36,644) $ 744,496 ------------ ------------ ------------ ------------ Pro Forma dividend attributable to preferred stockholders 347,945 (c) 347,945 ------------ Pro Forma net earnings attribute to common stockholders $ 396,551 ============
Notes to Pro Forma Combined Statement Of Income (a) Represents the pro forma income tax expense for Sigma, as if it were taxable as a "C" not an "S" corp. (b) Represents one year's interest expense on $1,084,213 of notes issued as part of purchase price for Sigma stock, being amortizing monthly with an interest rate of 7%. (c) Represents the 8% preferred stock dividend for the $4,349,318 portion of the $8,023,000 Series B Convertible Preferred Stock used to purchase Sigma. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to its Current Report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: June 8, 2007 GALES INDUSTRIES INCORPORATED By: /s/ Peter D. Rettaliata Name: Peter D. Rettaliata Title: Chief Executive Officer