U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A1
Registration Statement on Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
NORTHPORT INDUSTRIES, INC.
--------------------------
(Name of Small Business Issuer as specified in its charter)
NEVADA 93-0947269
------ ----------
(State or other jurisdiction of (I.R.S. incorporation or
organization) Employer I.D. No.)
Spur 239 & Alderete Road
Del Rio, Texas 78840
P. O. Box 1428
Del Rio, Texas 78841
---------------------------
(Address of Principal Executive Office)
Issuer's Telephone Number, including Area Code: (830) 775-0734
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
$0.001 par value common stock
-------------------------------
Title of Class
DOCUMENTS INCORPORATED BY REFERENCE: None.
<PAGE>
PART F/S
Index to Financial Statements
Report of Certified Public Accountants
Financial Statements*
- --------------------
Audited Financial Statements for the year ended December 31, 1998 and
1997
----
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Board of Directors
Northport Industries, Inc.
(formerly Versatech Manufacturing, Inc.,
Hawk Systems, Inc., and Environmental Pyrogenics, Inc.)
Del Rio, Texas
We have audited the accompanying consolidated balance sheet of Northport
Industries, Inc. and subsidiary as of December 31, 1998, and the related
consolidated statements of income, stockholders equity and cash flows for the
two years then ended. These consolidated financial statements are the
responsibility of the Company s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Northport
Industries, Inc. and subsidiaries as of December 31, 1998, and the results of
their operations and their cash flows for the periods then ended in conformity
with generally accepted accounting principles.
Malone & Bailey, PLLC
Houston, Texas
March 19, 1999
<TABLE>
NORTHPORT INDUSTRIES, INC.
(Formerly Versatech Manufacturing, Inc.,
Hawk Systems, Inc., and Environmental Pyrogenics, Inc.)
CONSOLIDATED BALANCE SHEET
December 31, 1998
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash $ 12,038
Accounts receivable 216,254
Inventory 337,799
Prepaid expenses 7,527
Total Current Assets 573,618
Property and Equipment, net of $106,730
and $41,427 accumulated depreciation 637,965
Patent, net of $20,578 accumulated amortization 308,669
Deposits 48,664
TOTAL ASSETS $1,568,915
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Current portion of installment debt $ 16,054
Bank credit line payable 68,096
Accounts payable 339,778
Accrued expenses 57,642
Income taxes payable 4,751
Total Current Liabilities 486,321
Long-Term Debt
Due to related parties 61,999
Installment debt 27,243
Total Liabilities 575,563
Redeemable common stock 181,513
Stockholders Equity
Redeemable preferred stock, $.25 par value,
12,500,000 shares authorized, 405,921 shares
issued and outstanding 1,542
Common stock, $.001 par value, 25,000,000
shares authorized, 5,194,169 and 5,000,000
shares issued and outstanding, respectively 5,194
Paid in capital 1,539,199
Retained <deficit> ( 734,096)
Total Stockholders Equity 811,839
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $1,568,915
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
<TABLE>
NORTHPORT INDUSTRIES, INC.
(Formerly Versatech Manufacturing, Inc.,
Hawk Systems, Inc., and Environmental Pyrogenics, Inc.)
CONSOLIDATED INCOME STATEMENTS
Years Ended December 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C> <C>
Revenues, net of returns and allowances
of $0 and $120,000, respectively $3,766,930 $1,740,902
Cost of sales 2,954,604 2,151,379
Gross Margin (Deficit) 812,325 ( 410,477)
Operating Expenses
Selling 80,387 32,030
General and administrative 580,983 281,131
Patent amortization 20,578
Interest 34,656 62,522
Bad debts (recovery) ( 11,225) 50,130
705,379 425,813
Net income before income taxes 106,946 106,946
Income taxes ( 4,752)
Net income (loss) $ 102,194 $( 836,290)
Net income (loss) per common share $ .02 $(0.28)
Weighted average common shares
outstanding 5,078,347 3,038,356
</TABLE>
<TABLE>
NORTHPORT INDUSTRIES, INC.
(Formerly Versatech Manufacturing, Inc.
Hawk Systems, Inc., and Environmental Pyrogenics, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
Year Ended December 31, 1997
<CAPTION>
Preferred Stock Common Stock Paid In Accumulated
Shares Amount Shares Amount Capital (Deficit) Totals
<S> <C> <C> <C> <C> <C> <C> <C>
- - No activity prior to January 1, 1997 - -
Stock issued
for Initial
Contributions
- Cash 100 $ 100 $ 900 $ 1,000
Conversion to equity
of additional
amounts payable to
original
stockholders
- Cash 407,137 407,137
- Equipment 370,699 370,699
- Accrued loan
interest 56,606 56,606
Reverse merger with
EPI:
Existing EPI stock 5,921$1,542 50,000 50 (1,592)
Additional capital
contributions by
EPI shareholders
- Cash 350,000 350 49,650 50,000
- Services 1,600,000 1,600 158,400 160,000
Exchange of $1
par Company
stock for $.001
par EPI stock
- reversal of
$1 par (100) (100) 100
- issuance
of $.001 par 3,000,000 3,000 (3,000)
Less: costs of
issuance (160,000) (160,000)
Contribution of
services by officer 74,400 74,400
Imputed interest
on stockholder
cash advances 5,464 5,464
Net deficit $(836,290)(836,290)
Balances,
December 31, 1997 5,921 $1,542 5,000,000 $5,000 $958,764 $(836,290)$129,016
Stock contributed
by Fairfax (900,000) ( 900) 900
Conversion of
note payable to
stock 900,000 900 89,100 90,000
Patent purchase 80,400 80 164,543 164,623
Acquisition of
GTI shares 400,000 - 193,767 194 402,839 403,033
Sale of GTI
shares for Company
stock (367,500) ( 368)(402,665) (403,033)
Acquisition of
Gecamex assets 186,305 186,305
Stock sold for
cash 51,750 52 78,448 78,500
J. B. Marc
settlement 235,752 236 60,964 61,200
Net income $ 106,946 256,946
Balances, December
31, 1998 405,921 $1,542 5,194,169 $5,194$1,489,198$(679,344)$816,590
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
See accompanying summary of accounting policies
and notes to financial statements.
<TABLE>
NORTHPORT INDUSTRIES, INC.
(Formerly Versatech Manufacturing, Inc.,
Hawk Systems, Inc., and Environmental Pyrogenics, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C> <C>
Cash Flows Used By Operating Activities
Net income (loss) $ 102,194 $( 836,290)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 65,303 41,427
Patent amortization 20,578
Redeemable shares accretion 16,889
Expenses offset by contribution to equity
Stockholder salary 74,400
Stockholder loan interest 62,070
Stockholder services 15,583
Changes in net assets and liabilities
Accounts receivable (421,629) ( 248,929)
Inventory ( 58,333) ( 249,466)
Prepaid expenses 4,818 ( 12,345)
Accounts payable 119,074 220,705
Accrued expenses 31,003 38,639
Income taxes payable 4,752
Net Cash Used By Operating Activities (115,351) ( 894,205)
Cash Flows Used By Investing Activities
Purchases of property and equipment ( 76,745) ( 115,474)
Deposits made ( 48,664)
Net Cash Used By Investing Activities (125,409) ( 115,474)
Cash Flows From Financing Activities
Sale of common stock 139,700 1,000
Collections of stock subscriptions 20,000
Advances (net) on bank credit line 68,096
Proceeds from advances by stockholders 6,239 984,144
Proceeds from new installment debt 59,597
Payments of installment debt ( 15,033) ( 1,266)
Net Cash From Financing Activities 219,002 1,043,475
Net increase (decrease) in cash ( 21,758) 33,796
Cash Balance
- at beginning of year 33,796 0
- at end of year $ 12,038 $ 33,796
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
<PAGE>
NORTHPORT INDUSTRIES, INC.
(Formerly Versatech Manufacturing, Inc.,
Hawk Systems, Inc., and Environmental Pyrogenics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business. Northport Industries, Inc. (the Company ) originally
incorporated itself in Texas as Hawk Systems, Inc. on December 27, 1996. The
Company renamed itself Versatech Manufacturing, Inc. ( VMI ) in June, 1997.
On December 24, 1997, the Company entered into a reorganization with an
inactive 1933 Act public shell, Environmental Pyrogenics, Inc. ( EPI ), a
Nevada corporation, in a transaction accounted for as a reverse merger using
the purchase method of accounting. This transaction was accomplished by
exchanging all 100 outstanding shares (100%) of VMI for 3,000,000 shares (60%)
of EPI. As part of the merger Agreement, the Company renamed itself Northport
Industries, Inc. See Note 3.
The Company is the result of the evolution of a joint venture between a
wholly-owned subsidiary [Gecamex Industries, Inc. ( Gecamex )] of the Canadian
public company Versatech Industries, Inc. ( Versatech - Canada ), and Fairfax
Industries, Inc. ( Fairfax ), a Michigan corporation. The Company currently
operates a 20,000 square foot warehouse in Del Rio, Texas and a 40,000 square
foot maquiladora production plant in Acuna, Mexico, across the border from Del
Rio. The Company machine-sews golf bags, leather auto replacement parts and
child safety seats.
Beginning January 1999, the Company leased a 50,000 square foot plant in
Allende, Mexico - about 50 miles south of Acuna.
Principles of consolidation. The financial statements include the accounts of
the Company and its wholly-owned subsidiaries, Versatech Manufacturing, Inc.,
a (which was renamed VMI, Inc. in June 1998) and Gecamex S.A. de C.V., a
Mexican corporation. Significant intercompany transactions and balances have
been eliminated. The Company subcontracts all Mexican plant operations to a
nominee owner, Industrias Loving S.A. de C.V., in Mexico, through which the
Company substantially directs all such operations. All such costs are paid
weekly and included as manufacturing costs of the Company.
Estimates and assumptions. Preparing financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenue and expenses at the balance sheet date and for the period then ended.
Actual results could differ from these estimates.
Foreign currencies. All Mexican costs and expenses are paid as incurred in U.
S. dollars translated at the then-prevailing exchange rate. No assets or
liabilities exist at balance sheet date that are denominated in any foreign
currency. No funds are held in foreign currencies and no currency trading
gains or losses are recorded during the year.
Revenue recognition. Revenue is recognized when products are shipped. Bad
debts are written off as identified.
Cash and equivalents represent cash and short-term, highly liquid investments
with original maturities three months or less.
Inventory is stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method. A summary of inventory is as follows:
Finished goods - golf bags $ 78,251
Raw materials
- golf bags 131,662
- baby seats 22,004
- stitched leather auto parts 105,862 259,528
$337,779
Property and equipment are recorded at cost. Assets acquired from either of
the two original shareholders are recorded at their original cost.
Depreciation for financial reporting purposes is determined on a straight-line
basis with the following estimated useful lives, by class:
Production / warehouse equipment 10 years $642,252
Vehicles 5 60,940
Office furniture / equipment 3 - 10 41,503
$744,695
Income taxes. Mexican income taxes are reported by the nominee Mexican entity
on nominal earnings and are reimbursed by the Company. Such amounts are
considered immaterial and are included as a cost of goods sold. U. S. Income
taxes are filed on a consolidated basis, and there are no significant
deferrals. See Note 7 for a discussion of the Section 382 limitation.
Preferred stock has two classes. Regular preferred stock has a liquidation
preference of $39.44 per share, a cumulative dividend of 5%, and is
convertible by its holders at a rate of $1 per preferred share into common
stock at current market price. Series A preferred has a liquidation
preference of $1 per share, and all other features of the regular preferred
stock. Either preferred stock may be callable by the Company by payment of
Redemption Value ($151.45 per share) for regular preferred stock, or $1 per
share for the Series A preferred stock.
Earnings per share are computed on the basis of the weighted average number of
common shares outstanding, in accordance with FASB Statement 128. One
outstanding stock option existed at year-end, and was immaterial with respect
to this calculation. There were no stock-based compensation arrangements.
Reclassifications have been made to the 1997 financial statements to conform
to the categories used for 1998.
Cash flow statement disclosures include interest actually paid during 1998 and
1997 of $32957 and $452, respectively. Other non cash transactions include:
1998: Purchase of Joh license and patent for 80,400 shares of
common stock, 80,400 shares of redeemable common stock, and 400,000
shares of preferred stock convertible to common after three years,
valued collectively at $329,247
Receipt of $180,777 in manufacturing equipment and 100% of
the outstanding stock of the Mexican, Gecamex Industries S.A. de
C.V. as a contribution of capital by the former shareholder Gecamex
Industries, Inc. ( Gecamex ) (a Texas corporation), coupled with
the collection of $454,305 in trade receivables from Gecamex in
exchange for $458,833 in various debts owed, with the $4,528
balance included as a contribution of capital (Note 2).
1997: Contributions of $30,000 in inventory and $370,699 in
fixed assets by Gecamex
Exchange of services for stock by EPI consultants valued
at $160,000
Imputed officer salary of $74,400 and related party
imputed loan interest of $5,464 contributed to capital
Gecamex accrued interest contributed to capital of $56,606
Accrued stockholder consulting services of $15,583.
NOTE 2 - GECAMEX RELATIONSHIP
The Company is the result of the evolution of a joint venture between Gecamex
and its Mexican nominee Gecamex S.A. de C.V. ( Gecamex ) and Fairfax
Industries, Inc. ( Fairfax ). Gecamex is a subsidiary of Versatech Marketing,
Inc. of Canada. Gecamex was formed in 1991 to set up a maquiladora plant in
Piedras Negras, Mexico in a joint venture with Century Products, Inc., who
bought out Gecamex s share in 1996. This plant joint venture was managed by
Robert Michelini, a founder and one of two principal shareholders of Fairfax.
Mr. Michelini left in 1994 to pursue his Fairfax business exclusively.
Gecamex then set up a second facility by buying Twin Plant International, Inc.
( Twin Plant ) in Acuna in 1994.
In 1992, Greg Hykes formed TTM, Inc. ( TTM ), a maquiladora plant in Acuna,
which made toys and performed contract machine sewing.
Fairfax was formed in 1986 by Robert Michelini and Brad Osgood for the purpose
of machine sewing auto parts and sporting goods, plastic injection molding,
and making aerospace tools. Fairfax purchased Trim & Design, Inc. ( Trim &
Design ), a Michigan corporation which was formerly a wholly-owned subsidiary
of Versatech, in 1994. Trim & Design machine sewed marine seats and auto
parts. Fairfax then purchased the assets and customer base of
TTM in 1995 by assuming certain debts and issuing 20% of its outstanding stock
to Mr. Hykes. Fairfax shut down both Trim & Design and TTM in late 1996.
On January 2, 1997, Fairfax entered into an agreement with Gecamex to form the
Company, with $300,000 in fair value of sewing machines and related equipment
sold by Fairfax to the Company in exchange for a note payable to Fairfax, and
$300,000 in cash loaned by Gecamex. Fairfax received 1,470,000 shares for a
49% ownership interest and Gecamex received 1,530,000 shares, for a 51%
ownership. During 1997, Gecamex decided to reduce its ownership of its
maquiladora operations. On December 15, 1997, Gecamex and Fairfax entered
into a Stock Purchase and Settlement Agreement, whereby Gecamex (i) returned
1,162,500 shares to the Company, and (ii) contributed all monies advanced over
the original $300,000 agreed-upon note balance, including $373,512 in cash,
$26,392 in equipment, and $56,606 in accrued interest, to contributed capital.
As consideration, Gecamex received debt totaling $400,000 and a 5% royalty on
certain revenues. Gecamex and the Company each had the option to require the
sale of
Gecamex s remaining 367,500 shares) to the Company anytime before December 31,
2002, based on a formula purchase price.
In early 1998, Gecamex shut its Twin Plant operation, and entered into
negotiations with the Company to assume all of its sewing and plastic
injection-molding operations.
On June 5, 1998 the Company entered into an agreement with an individual,
Guenter Joh ( Joh ) whereby (i) the Company issued 80,800 shares of common
stock, and another 80,800 common shares which are redeemable at $3 in June,
2000, in exchange for all North American rights to a U. S. patent for a
proprietary automotive power train sealing process using a plastic and rubber
compound, and (ii) the Company purchased Joh Rubber, Inc., whose sole asset
was 289,203 shares of Gecamex Technologies, Inc., ( GTI ) for 193,767 shares
of Company common stock. GTI is a subsidiary of Versatech and a portion of
GTI s shares are publicly traded on a Canadian stock exchange. The power
train sealing process rights are exclusive globally excepting Europe. The
transaction was valued at $329,247.
On June 22, 1998 the Company liquidated its remaining relationship with
Gecamex by trading assets and obligations which resulted in (i) Gecamex
selling the remainder of its Mexican operation equipment to the Company for
$180,777, (ii) Gecamex s parent Versatech - Canada returning its 367,500
shares of Company stock, (iii) Gecamex canceling $458,825 in debt owed by the
Company, (iv) the Company canceling $454,305 in debt owed it by Versatech, (v)
the Company turning over its 289,203 shares of GTI to Gecamex, and (vi) the
Company transferring non-exclusive rights to the Joh power train sealing
process to Gecamex. The transaction is valued at a net $186,305.
The Company inherited Gecamex s principal customer, Regal Plastics, Inc. in
this transaction. 1998 sales to Regal both directly and through Versatech and
Gecamex were $1,527,000, or 40.5% of total 1998 sales.
Stockholders equity was increased $350,929 and redeemable common stock by
$164,623 by the above two transactions.
NOTE 3 - REORGANIZATION
On December 24, 1997, the Company entered into a reorganization with an
inactive 1933 Act public shell, Environmental Pyrogenics, Inc. ( EPI ), in a
transaction accounted for as a reverse merger using the purchase method of
accounting. The Company exchanged all of its outstanding shares for 3,000,000
shares of EPI. EPI reduced its total outstanding shares from xxx to 2,000,000
shares by a reverse split of xx for 1. EPI then sold 350,000 shares to raise
$350,000 cash. Of this amount, $300,000 was kept by the EPI promoters,
$30,000 was transferred to the VMI bank account in December 1997 and $20,000
was collected and transferred in January 1998. EPI thus contributed cash of
$30,000 and stock subscriptions receivable of $20,000 in the reorganization.
The shares were valued at about $.105 per share, and the net value of the
services performed was recorded at $160,000, as a reduction of stockholders
equity. In connection with this reorganization, EPI renamed itself Northport
Industries, Inc. Versatech Manufacturing, Inc. remains a wholly-owned
subsidiary, although it also renamed itself as VMI, Inc. in connection with
the formal withdrawal from Mexico of its former parent, Gecamex (see Note 2).
A summary consolidating balance sheet (as restated per Note 4) as of December
31, 1997 follows:
<TABLE>
Northport
VMI EPI Adjust. Consol.
<S> <C> <C> <C> <C>
Cash $ 3,796 $30,000 (2) $ 33,796
Stock subscriptions receivable 20,000 (2) 20,000
Other assets 985,486 985,486
TOTAL ASSETS $ 989,282 $ 0 $1,039,282
Liabilities $1,010,266 - $1,010,266
Stockholders equity
Common stock, $1 par,
1,000,000 shares authorized,
100 issued and outstanding 100 ( 100)(1)
Preferred stock, $.25 par
value, 12,500,000 shares
authorized, 5,921 shares
issued and outstanding 233,542 (232,000)(1) 1,542
Common stock, $.001 par value,
25,000 shares authorized,
7,888,334 shares issued and
outstanding 7,888 ( 7,888)(1)
Common stock, $.001 par value,
25,000,000 shares authorized,
5,000,000 shares issued and
outstanding 4,650 (1)
350 (2) 5,000
Paid in capital 915,206 (131,144) 125,052 (1)
49,650 (2) 958,764
Retained (deficit) ( 936,290) (110,286) 109,936 (1) (936,290)
Total Stockholders Equity ( 20,984) 0 27,474
TOTAL LIABILITIES & EQUITY $ 989,282 $ 0 $1,039,282
</TABLE>
(1) Reorganization achieved by exchanging all the outstanding stock of
VMI
for 3,000,000 shares of EPI, after EPI reduced its total outstanding
shares to 2,000,000. A summary of EPI shares issued and outstanding
after the 157.71:1 reverse split and immediately prior to issuing
shares to VMI shareholders is as follows:
Original EPI shareholders 50,000
Issued for services in conjunction
with the reorganization 1,600,000
Issued for cash at $1 per share 350,000
2,000,000
(2) $30,000 cash and $20,000 subscriptions receivable contributed by EPI
in the reorganization.
NOTE 4 - BANK CREDIT LINE
The Company secured a revolving credit line from Del Rio National Bank on
October 27, 1998. This line bears interest at prime + 3%, matures April 25,
1999, and allows the Company to borrow up to 100% of major customer accounts
receivable less than 60 days old. The Company is in discussions to expand
this credit line availability.
NOTE 5 - INSTALLMENT DEBT
A summary as of December 31, 1998 is as follows:
Two notes payable to GMAC, payable in 24
remaining equal monthly installments of $1,056,
including interest at 9.6% APR, collateralized
by two 1997 Chevrolet vans $ 31,490
Note payable to Clark Credit, payable in 21
remaining equal monthly installments of $573,
including interest at 10.4% APR, collateralized
by a forklift 11,807
Less: amounts due in 1999 (16,054)
Net long-term portion due $ 27,243
All long-term debt is due in 2000.
NOTE 6 - RELATED PARTY DEBT
Related party debt consists of advances of $33,528 to Fairfax and $28,471 to
Robert Michelini.
NOTE 7 - FEDERAL INCOME TAXES
Under Internal Revenue Code Section 382, losses are limited whenever Company
ownership changes more than 50% within any 36-month period. The Company
experienced a 63% ownership change as of February 1998 and therefore 1997
losses of $836,290 offset by 1998 profits through February of $55,804 allow
prior operating losses to offset 1998 income by $80,270 and $29,183 per year
for 1999 - 2018. The maximum Net Operating Loss available in these future
years is $639,464.
NOTE 8 - REDEEMABLE COMMON SHARES
In connection with its purchase of the Joh patent in June 1998, the Company
issued 80,800 shares of common stock, redeemable at $3 per share in June 2000.
The Company has applied a risk-adjusted discount factor of 20.5% to record
these shares in June 1998 for $164,623. This component was recorded as a
liability since redemption is beyond Company control. 1998 interest of
$16,889 was recorded as accretion of this obligation.
NOTE 9 - J. B. MARC & ASSOCIATES, INC.
In 1998, the Company hired an investment banker, J. B. Marc & Associates, Inc.
( J. B. Marc ), to sell its common stock. Through a stock offering exempt
from registration under Rule 504, J. B. Marc sold shares for $61,200. A
dispute arose regarding performance and compensation and the contract was
canceled. Total consideration paid to J. B. Marc, including stock distributed
to the buyers for this effort was 235,752 shares.
Additional common stock sold directly by the Company was 51,750 shares for
$78,500.
NOTE 10 - OPERATING LEASES
The Company currently leases its Del Rio warehouse under a month-to-month
arrangement for $1,650 per month. Its three Mexican facilities are leased
through its Mexican nominee company for $12,540 per month, expiring in 1999.
The new Allende facility was leased beginning January 1999 for a 14-month term
at $11,277 per month which includes a 15% VAT. Minimum lease payments due are
$265,064 in 1999 and $22,554 in 2000.
NOTE 11 - CONTINGENCIES
In addition to Mexican federal payroll taxes, Mexican law requires termination
pay for employees who are laid off. Such payment is based on a formula
including pay rate and years of service. Consistent with the practice of
other maquiladora plants, the Company has not set up a reserve for such
payments, contending they are unlikely to ever be due. If an employee quits,
he or she is not entitled to any such termination pay. The Company estimates
its maximum theoretical exposure to such a liability, as if all employees had
been laid off on December 31, 1998, of $150,000.
Many debts of TTM (see Note 2), incurred before its assets were purchased by a
predecessor of the Company on February 3, 1995, remain unpaid due to the
insolvency of TTM. While the Company claims priority creditor status due to
its filing of a lien in Texas for unpaid debts due by TTM to the Company, some
of these debts are from Mexico where Texas law regarding priority status of
secured creditors may not apply. In 1998, the Company wrote off its $30,000
reserve for claims set up in 1997, because no significant claims ever
occurred.
NOTE 12 - MAJOR CUSTOMERS AND VENDORS
Major customers during 1998 were:
Evenflo / Gerry Baby Products $2,087,819 or 55.4% of sales
Regal / Versatech 1,527,393 40.5
The Company transferred $1,737,840 to the Mexican corporation during 1998 to
pay for Mexican plant rent, salaries and other overhead. There were no other
vendors that accounted for 10% or more separately of the Company s cost of
goods sold.
PART III
Item 1. Index to Exhibits.
- ---------------------------
The following exhibits are filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
Exhibit
Number Description*
- ------ ------------
<S> <C>
27 Financial Data Schedule
SIGNATURES
In accordance with Section 12 of the Securities
Exchange Act of 1934, the Registrant has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
NORTHPORT INDUSTRIES, INC.
Date: 5/7/99 By:/s/Robert L. Michelini
------------------------
Robert L. Michelini, Director
and President
Date: 5/7/99 By:/s/Matt Baumgartner
------------------------
Matt Baumgartner, Director
Secretary
Date: 5/7/99 By:/s/Len Baker
---------------------------
Len Baker, Treasurer, Assistant
Secretary, Vice President and
Director
Date: 5/7/99 By:/s/Fernando Gonzales Garza
---------------------------
Fernando Gonzales Garza
Director
Date: 5/7/99 By:/s/Bradley D. Osgood
---------------------------
Bradley D. Osgood, Director
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 12038
<SECURITIES> 0
<RECEIVABLES> 216254
<ALLOWANCES> 0
<INVENTORY> 337799
<CURRENT-ASSETS> 573618
<PP&E> 744695
<DEPRECIATION> 106730
<TOTAL-ASSETS> 1568915
<CURRENT-LIABILITIES> 548320
<BONDS> 0
0
1542
<COMMON> 5194
<OTHER-SE> 805103
<TOTAL-LIABILITY-AND-EQUITY> 1568915
<SALES> 3766930
<TOTAL-REVENUES> 3766930
<CGS> 2954604
<TOTAL-COSTS> 2954604
<OTHER-EXPENSES> 670723
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34656
<INCOME-PRETAX> 106946
<INCOME-TAX> 4752
<INCOME-CONTINUING> 102194
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102194
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
