UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
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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
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GALES INDUSTRIES INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
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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)
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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))
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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
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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.
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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
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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
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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
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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
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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)
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Total Stockholders' Equity 6,869,698 1,928,082 7,325,578 16,123,358
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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
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Net Sales $ 33,044,996 $ 17,979,414 $ 51,024,410
Cost of Sales 28,002,942 12,822,494 40,825,436
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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
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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
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Pro Forma dividend attributable to preferred stockholders 347,945 (c) 347,945
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Pro Forma net earnings attribute to common stockholders $ 396,551
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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