-----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, Se3RaLXpZJwnvnNo4FrC2nJCrEr7t8WhY9MPul84B0ZGaMrztMiWVsigEBOb8onQ dB/P/AifHw0HMeSgCfQJxw== 0000918545-00-000015.txt : 20000418 0000918545-00-000015.hdr.sgml : 20000418 ACCESSION NUMBER: 0000918545-00-000015 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000202 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALTIC INTERNATIONAL USA INC CENTRAL INDEX KEY: 0000918545 STANDARD INDUSTRIAL CLASSIFICATION: ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO [4731] IRS NUMBER: 760336843 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-26558 FILM NUMBER: 603249 BUSINESS ADDRESS: STREET 1: 5151 SAN FELIPE STREET 2: SUITE 1661 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7139619299 MAIL ADDRESS: STREET 1: 5151 SAN FELIPE STREET 2: SUITE 1661 CITY: HOUSTON STATE: TX ZIP: 77056 8-K/A 1 U. S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 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): February 2, 2000 BALTIC INTERNATIONAL USA, INC. (Exact name of registrant as specified in its charter) TEXAS 0-26588 76-0336843 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 5151 San Felipe, Suite 1661, Houston, Texas 77056 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (713) 961-9299 2 Item 2 Acquisition of Assets On February 2, 2000, the Registrant purchased Advanced Reclamation Company, L.L.C. ("ARC") from the Nicol Family Partnership. Baltic purchased all of the units of ARC for cash of $400,000, a total of 500,000 Baltic common shares, a note payable to seller of an additional $400,000 and an earnout agreement. The earnout agreement provides for an equal split of ARC's annual profits in excess of $225,000 between the Company and the Nicol Family Partnership for a period of three years ending December 31, 2002. Item 7 Financial Statements and Exhibits (a) Financial statements of business acquired The audited financial statements of Advanced Reclamation Company, L.L.C. as of December 31, 1999 and the year then ended are attached hereto as an exhibit. (b) Pro forma financial information The required pro forma financial information relating to the Company acquisition of Advanced Reclamation Company, L.L.C. as of December 31, 1999 and the year then ended is attached hereto as an exhibit. (c) Exhibits 10.1 Unit Purchase Agreement (incorporated herein by reference as included as Exhibit 10.1 to Form 8-K filed on February 17, 2000, File No. 0-26588) 99.1 Audited Financial Statements of Advanced Reclamation Company, L.L.C. as of December 31, 1999 and the year then ended 99.2 Pro Forma Condensed Financial Statements of Baltic International USA, Inc. as of December 31, 1999 and the year then ended 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 hereunto duly authorized. BALTIC INTERNATIONAL USA, INC. By: /s/ David A. Grossman -------------------------------- DAVID A. GROSSMAN, President and Chief Financial Officer Dated: April 13, 2000 EXHIBITS Exhibit No. 10.1 Unit Purchase Agreement (incorporated herein by reference as included as Exhibit 10.1 to Form 8-K filed on February 17, 2000, File No. 0-26588) 99.1 Audited Financial Statements of Advanced Reclamation Company, L.L.C. as of December 31, 1999 and the year then ended 99.2 Pro Forma Condensed Financial Statements of Baltic International USA, Inc. as of December 31, 1999 and the year then ended EX-99 2 Exhibit 99.1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Managers Advanced Reclamation Company, L.L.C.: We have audited the accompanying balance sheet of Advanced Reclamation Company, L.L.C. as of December 31, 1999, and the related statements of operations, member's equity, and cash flows for the year ended December 31, 1999. 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 auditing standards generally accepted in the 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 financial position of Advanced Reclamation Company, L.L.C. as of December 31, 1999, and the results of their operations and their cash flows for the year ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. Arthur Andersen LLP Houston, Texas April 12, 2000 ADVANCED RECLAMATION COMPANY, L.L.C. Balance Sheet December 31, 1999 ASSETS CURRENT ASSETS Cash $ 3,721 Accounts receivable, net of allowance of $10,724 49,452 Inventory 15,870 Prepaids and deposits 16,943 ---------- Total current assets 85,986 PROPERTY AND EQUIPMENT, net 168,072 OTHER ASSETS 20,748 ---------- Total assets $ 274,806 ========== LIABILITIES AND MEMBER'S EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 112,044 Short-term debt and current portion of long-term debt 58,746 ---------- Total current liabilities 170,790 LONG-TERM DEBT, net 6,351 ---------- Total liabilities 177,141 ---------- COMMITMENTS AND CONTINGENCIES - MEMBER'S EQUITY 97,665 ---------- Total liabilities and member's equity $ 274,806 ========== See accompanying notes to financial statements. ADVANCED RECLAMATION COMPANY, L.L.C. Statement of Operations Year Ended December 31, 1999 NET REVENUES $ 805,736 COST OF SALES 432,284 ---------- Gross profit 373,452 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 421,823 ---------- LOSS FROM OPERATIONS (48,371) ---------- OTHER EXPENSE - Interest expense (2,709) ---------- NET LOSS $ (51,080) ========== Statement of Member's Equity Year Ended December 31, 1999 MEMBER'S EQUITY at January 1, 1999 $ 75,362 Equity contributions 173,650 Distributions (100,267) Net loss (51,080) ---------- MEMBER'S EQUITY at December 31, 1999 $ 97,665 ========== See accompanying notes to financial statements. ADVANCED RECLAMATION COMPANY, L.L.C. Statement of Cash Flows Year Ended December 31, 1999 Cash flows from operating activities: Net loss $ (51,080) Noncash adjustments: Depreciation and amortization 20,197 Increase/decrease in current assets and liabilities: Accounts receivable 34,665 Inventory 1,011 Prepaid and other assets (20,609) Accounts payable and accrued liabilities (16,014) ---------- Net cash used by operating activities (31,830) ---------- Cash flows from investing activities: Acquisition of property and equipment (86,787) ---------- Net cash used by investing activities (86,787) ---------- Cash flows from financing activities: Borrowings of debt 50,882 Repayment of debt and long-term obligations (9,427) Equity contributions 173,600 Distributions (94,400) ---------- Net cash provided by financing activities 120,655 ---------- Net increase in cash and cash equivalents 2,088 Cash and cash equivalents, beginning of period 1,633 ---------- Cash and cash equivalents, end of period $ 3,721 ========== See accompanying notes to financial statements. ADVANCED RECLAMATION COMPANY, L.L.C. Notes to Financial Statements NOTE 1 - BUSINESS OPERATIONS Advanced Reclamation Company, L.L.C. (the "Company") is a limited liability company formed under the laws of Texas in 1996. The period of duration of the Company is 30 years until May 2, 2026. The Company was wholly owned by the Nicol Family Partnership ("NFP") until January 1, 2000. The Company was sold to Baltic International USA, Inc. ("Baltic") as discussed in Note 9. The Company is primarily engaged in the recovery and reclamation of used refrigerants. These services are performed at the Company's facility and at customer sites and consist of system decontamination to remove moisture, oils and other contaminants and recovery and reclamation of the refrigerants used in commercial air conditioning and refrigeration systems. Most of the off-site services are provided to the petrochemical industry throughout South Texas. The Company operates as a single segment. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue recognition Sales are recorded by the Company when products are shipped to customers or services are performed. Expenses are recognized when the goods and services are acquired or provided. Cash equivalents The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Inventories Inventories are stated at the lower of cost or market. Cost is determined using the weighted average cost method. Property and equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Costs of maintenance and repairs are charged to expense when incurred. Long-lived assets The Company periodically evaluates the carrying value of long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Income taxes The Company files a partnership tax return and is not a taxable entity for federal income tax purposes. Such taxes are liabilities of the individual members. Accordingly, there is no provision for income taxes in the accompanying financial statements. Use of estimates In conformity with generally accepted accounting principles, management of the Company has made a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses to prepare the Company's financial statements. Actual results could differ from these estimates. Credit concentration Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and trade receivables. The Company considers such risk in placing its cash and cash equivalents in financial institutions and other instruments. The Company performs ongoing credit evaluations of its customers' financial condition. The Company had three customers that accounted for 15%, 13% and 12%, respectively, of total net sales in 1999. Contingencies Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. New accounting pronouncement In June 1998, the Financial Accountings Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities", which establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. Changes in the derivative's fair value will be accounted for based upon their intended use and designation. Since the Company's holdings in such instruments are minimal, adoption of this standard is not expected to have a material effect on the financial statements. The Company is required to adopt SFAS No. 133 not later than the first quarter of 2001. NOTE 3 - INVENTORIES Inventories at December 31, 1999 consist of the following: Refrigerants $ 6,839 Cylinders and drums 9,031 ---------- Total inventories $ 15,870 ========== NOTE 4 - PROPERTY AND EQUIPMENT, NET Property and equipment at December 31, 1999 is summarized as follows: Depreciable lives Amount Machinery and equipment 5-15 years $ 99,040 Vehicles 5-10 years 100,689 Office furniture and equipment 3-10 years 14,161 ---------- Gross property and equipment 213,890 Accumulated depreciation (45,818) ---------- Property and equipment, net $ 168,072 ========== NOTE 5 - NOTES PAYABLE Notes payable consists of the following: December 31, 1999 Note payable to a bank, secured by a vehicle, interest rate of 7.5%, due on September 21, 2001 and a U.S. Treasury Note with a principal balance of $250,000 owned by the member $ 14,286 Note payable to a bank, secured by a vehicle, interest rate of 8.5%, due on September 10, 2000 48,811 Note payable to a company owned by the member, unsecured, noninterest bearing, due on demand 2,000 ---------- Total debt 65,097 Less current portion and short-term debt, net (58,746) ---------- Long-term debt, net $ 6,351 ========== All of the Company's long-term debt is due in 2001. NOTE 6 - SUPPLEMENTAL CASH FLOW DISCLOSURES During 1999, the Company distributed a vehicle to the member as an equity distribution. The book value of the vehicle was $5,867 at the date of distribution. During 1999, cash paid for interest and income taxes was $2,441 and $0, respectively. NOTE 7 - COMMITMENTS AND CONTINGENCIES The Company leases its office and warehouse facilities pursuant to an operating lease expiring in 2002. The following is a schedule of future minimum rental payments under operating leases: Year Amount 2000 $ 40,800 2001 40,800 2002 13,600 ---------- Total $ 95,200 ========== Total rental expense was $68,172 for the year ended December 31, 1999. The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position, results of operations or liquidity. Some of the Company's products and services are regulated by the Federal Clean Air Act (the "Clean Air Act") and the regulations promulgated thereunder by the Environmental Protection Agency ("EPA"), as well as certain state environmental regulations. As such, the Company's business is affected by the requirements of the Clean Air Act, the EPA and other regulations and the degree of enforcement thereof. NOTE 8 - RELATED PARTY TRANSACTIONS The Company paid administrative costs to a company owned by NFP for record keeping and other administrative activities. The Company paid $5,800 of such expense for the year ended December 31, 1999. At December 31, 1999, the Company had $15,000 of accrued distributions payable to NFP. NOTE 9 - SUBSEQUENT EVENT In February 2000, NFP sold the Company to Baltic effective January 1, 2000 for $400,000 in cash, a total of 500,000 common shares of Baltic, a note payable to NFP for an additional $400,000 and an earnout agreement. The note payable matures on January 1, 2005, has an interest rate of 10% with interest due quarterly and is collateralized by the fixed assets of the Company. The note payable has a prepayment provision such that prepayments of principal are to be made equal to the Company's annual pretax profits in excess of $225,000. However, the prepayments are not to exceed $120,000 for any year. The earnout agreement provides for an equal split of the Company's annual pretax profits in excess of $225,000 between Baltic and NFP for a period of three years ending December 31, 2002. EX-99 3 Exhibit 99.2 UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS The following unaudited pro forma condensed financial statements are based upon our historical consolidated financial statements and those of Advanced Reclamation Company, L.L.C. ("ARC"). You should read this pro forma financial information in connection with the historical financial statements. With respect to our acquisition of ARC, the unaudited pro forma condensed financial statements give effect to our acquisition of ARC applying the purchase method of accounting and adjustments that are directly attributable to the ARC acquisition and are anticipated to have a continuing impact. We have prepared the unaudited pro forma condensed financial statements based upon currently available information and assumptions that we have deemed appropriate. This pro forma information may not be indicative of what actual results would have been, nor does the data purport to represent our and ARC's combined financial results for future periods. We are currently in the process of allocating the purchase price among the assets acquired and the liabilities assumed. The allocation of the purchase price to the assets and liabilities acquired reflected in this pro forma financial data is preliminary. The final purchase price and its allocation are expected to be completed within one year following the ARC acquisition. Accordingly, the actual financial position and results of operations may differ from these pro forma amounts. Condensed financial information for the unaudited pro forma consolidated balance sheet as of December 31, 1999 assuming this transaction occurred on December 31, 1999 is as follows:
Actual ARC Pro Forma December 31, December 31, Pro Forma December 31, 1999 1999 Adjustments 1999 ASSETS CURRENT ASSETS Cash and cash equivalents $ 868,522 $ 3,721 $ (400,000) (a) $ 472,243 Accounts receivable 45,825 49,452 - 5,277 Note receivable 89,100 - - 89,100 Inventory 50,638 15,870 - 66,508 Prepaids and deposits 10,352 16,943 (1,220) (b) 26,075 ------------ ------------ ------------ ------------ Total current assets 1,064,437 85,986 (401,220) 749,203 PROPERTY AND EQUIPMENT, net 14,229 168,072 - 182,301 INVESTMENTS IN AND ADVANCES TO JOINT OPERATIONS 1,500 - - 1,500 GOODWILL - - 761,555 (c) 761,555 OTHER ASSETS 33,524 20,748 - 54,272 ------------ ------------ ------------ ------------ Total assets $ 1,113,690 $ 274,806 $ 360,335 $ 1,748,831 ============ ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 270,076 $ 112,044 $ - $ 382,120 Dividends payable 388,632 - - 388,632 Short-term debt, net - 58,746 (2,000) (b) 56,746 ------------ ------------ ------------ ------------ Total current liabilities 658,708 170,790 (2,000) 827,498 LONG-TERM DEBT - 6,351 400,000 (a) 406,351 ------------ ------------ ------------ ------------ Total liabilities 658,708 177,141 398,000 1,233,849 ------------ ------------ ------------ ------------ SHAREHOLDERS' EQUITY Warrants 252,793 - - 252,793 Preferred stock: Series A 1,230,000 - - 1,230,000 Series B 350,000 - - 350,000 Common stock 156,292 - - 156,292 Additional paid-in capital 12,763,943 - (11,160) (a) 12,752,783 Accumulated deficit (13,419,467) - - (13,419,467) Treasury stock, at cost (878,579) - 71,160 (a) (807,419) Member's equity - 97,665 (97,665) (d) - ------------ ------------ ------------ ------------ Total shareholders' equity 454,982 97,665 (37,665) 514,982 ------------ ------------ ------------ ------------ Total liabilities and shareholders' equity $ 1,113,690 $ 274,806 $ 360,335 $ 1,748,831 ============ ============ ============ ============
Condensed financial information for the unaudited pro forma consolidated income statement for the year ended December 31, 1999 assuming this transaction occurred on January 1, 1999 is as follows:
Actual ARC Pro Forma December 31, December 31, Pro Forma December 31, 1999 1999 Adjustments 1999 REVENUES: Beverage distribution $ 238,039 $ - $ - $ 238,039 Refrigerant revenue - 805,736 - 805,736 General sales agency revenue 23,661 - - 23,661 ------------ ------------ ------------ ------------ Total operating revenues 261,700 805,736 - 1,067,436 ------------ ------------ ------------ ------------ OPERATING EXPENSES: Cost of revenue 233,301 432,284 - 665,585 Personnel and consulting 214,375 164,566 - 378,941 Legal and professional 85,675 401 - 86,076 Other general and administrative 178,698 256,856 (52,468) (e) 383,086 ------------ ------------ ------------ ------------ Total operating expenses 712,049 854,107 (52,468) 1,513,688 ------------ ------------ ------------ ------------ INCOME (LOSS) FROM OPERATIONS (450,349) (48,371) 52,468 (446,252) ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest expense (25,800) (2,709) (40,000) (f) (68,509) Interest income 10,360 - - 10,360 Other income (expense) (23,377) - - (23,377) ------------ ------------ ------------ ------------ Total other income (expense) (38,817) (2,709) (40,000) (81,526) ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS (489,166) (51,080) 12,468 (527,778) INCOME TAX EXPENSE - - - - DISCONTINUED OPERATIONS 1,258,303 - - 1,258,303 ------------ ------------ ------------ ------------ NET INCOME $ 769,137 $ (51,080) $ 12,468 $ 730,525 ============ ============ ============ ============ INCOME PER SHARE AMOUNTS: Basic and diluted $ 0.05 $ 0.05
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS The following pro forma adjustments have been made to the unaudited pro forma financial statements: (a) Reflects the purchase of ARC for cash of $400,000, a total of 500,000 Baltic common shares and a note payable to seller of an additional $400,000. (b) Reflects the elimination of receivables from and payables to related parties of ARC that were eliminated as part of the acquisition of ARC. (c) Reflects the goodwill for the purchase of ARC. (d) Reflects the elimination of ARC's equity account. (e) Reflects the impact of goodwill amortization of $38,078 for the year less the elimination of $5,800 of administrative costs reimbursed to a related party of the former owner and $84,746 of personal expenses incurred by the former owner. (f) Reflects the interest expense accrual for the loan used to purchase ARC. -----END PRIVACY-ENHANCED MESSAGE-----