UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
[x] Annual report pursuant to section 13 or 15(d) of The Securities Exchange Act
of 1934 ("Exchange Act") [Fee Required]
For the fiscal year ended June 30, 1998
[ ] Transition report pursuant to section 13 or 15(d) of The
Securities Exchange Act of 1934
For the transition period from _________ to __________
Commission file number 33-42408-NY
WESTBURY METALS GROUP, INC.
(Formerly Rosecap, Inc.)
(Name of small business issuer in its charter)
New York 11-3023099
(State or other jurisdiction (I.R.S. Employer of
incorporation or organization) Identification No.)
750 Shames Drive, Westbury, New York 11590
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (516) 997-8333
Securities Registered under Section 12(b) of the Exchange Act:
None
Securities Registered under Section 12(g) of the Exchange Act:
Title of Each Class: Common Stock, Par Value $.001
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x . No .
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. []
1
<PAGE>
The issuer's net revenues for its most recent fiscal were $2,031,033.
The aggregate market value of the issuer's voting stock held as of September 30,
1998 by non-affiliates of the issuer, based upon the average of the closing bid
and asked prices on that date was approximately $540,000.
As at September 30, 1998, 3,197,312 shares of the issuer's Common Stock, $.001
par value, were outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes . No X .
2
<PAGE>
This Form 10-KSB contains forward-looking statements. Additional written and
oral forward-looking statements may be made by the Company from time to time in
Securities and Exchange Commission ("SEC") filings and otherwise. The Company
cautions readers that results predicted by forward-looking Statements,
including, without limitation, those relating to the Company's future business
prospects, revenues, working capital, liquidity, capital needs and income are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those indicated in the forward-looking statements due to
risks and factors identified in this Form 10-KSB and as may be identified from
time to time in the Company's future filings with the SEC.
Item 1. Business
General
On June 18 1998, the Company name was changed from Rosecap, Inc. to Westbury
Metals Group, Inc.(the "Company"). On March 31, 1998 Rosecap, Inc. entered into
a merger between Westbury Acquisition Corp. ("WAC", a wholly owned subsidiary of
the Company, and Westbury Alloys, Inc., ("estbury" a Delaware Corporation, the
surviving entity. The merger is a reverse merger whereby the principals of
Westbury became the principals and the largest shareholders of the Company. The
Company commenced operating the business of Westbury after the consummation of
the merger. Prior to the merger, the Company, which was incorporated in 1990,
had not conducted any operations and reported as a development stage enterprise.
Products and Services
On March 30, 1998, West Tech, Inc. was formed as a subsidiary of the
Company for the manufacture and sale of silver in various forms and shapes,
plating salts as well as tin and tin-lead anodes used in manufacturing. In the
near future the Company anticipates a broader product line to include precious
metal casting grains, alloys, and mill products. In May,1998 the Company
acquired the registered trade name "Onic" for use in the manufacture and sale of
its high quality tin products.
From its facilities in Westbury, New York the Company provides a broad range of
processing, refining and financial services in connection with the reclamation
of precious and specialty metals from primary and secondary sources. The Company
reclaims principally gold, silver, platinum and palladium from scrap and
residues from the electronics, jewelry, petroleum, dental, chemical, automotive,
mining
1
<PAGE>
and aerospace industries. After controlled weighing, sampling, and assaying to
determine values and to settle with the customer, the Company either purchases
the precious metal or returns metal to the customer. Through its wholly 98%
owned Peruvian subsidiary Alloy Trading S.A., the Company imports metals for its
own use as well as for direct sales to third parties.
The Company has not encountered significant difficulties in purchasing scrap or
raw materials for its refining process. Management is constantly searching for
improved sources of materials and believes that if any one source of raw
materials becomes unavailable, alternative sources of supply can be found at
comparable prices, but there can be no assurance thereof.
On July 1, 1998 Westbury International, Inc., was formed to provide trading and
risk management services. Activities include metals leasing, inventory
financing, cash and forward purchases and sales for internal metals management
requirements and as a profit center dealing with third parties.
Research and Development
The Company is engaged in various research and development activities at its
Westbury, New York facility. The Company is researching and developing refining
and processing techniques that produce less environmental waste. The Company
researches and develops different preparations of precious and specialty metals
constantly upgrading equipment and processing capabilities. No assurance can be
given that the Company's research efforts will be successful.
Consultants
Under a five-year (5) consulting agreement dated July 22, 1996, Lawrence Raskin,
former president of the Company's predecessor, has agreed to serve as an advisor
in connection with the conduct of the business for an annual fee of $10,000. Mr.
Raskin has extensive knowledge of the precious and specialty metals industry and
knowledge of Westbury in particular.
From time to time the Company retains consultants to assist in specific
requirements of product development and plant operations as well as the
administrative areas of computer systems and business plan development.
Competition
The precious metals refining industry is highly competitive. Many of
the companies with which the Company currently competes or may
2
<PAGE>
compete in the future have greater financial, technical, marketing, sales and
customer support resources, as well as greater name recognition and better
access to customers. The precious metals refining industry is highly
competitive.
Environmental Matters
The Company's environmental concerns are central to its business. The refining
activities are subject to extensive and rigorous government regulations designed
to protect the environment from wastes, emissions and from hazardous substances,
particularly with respect to the emissions of air pollutants, the discharge of
cooling water, and the disposal and storage of hazardous substances.
The Company is in compliance with present federal, state and local air and water
pollution controls, and intends to remain so. However, evolving federal, state
and local air and water pollution control legislation and regulations will
continue to affect the Company's operations and long-range planning. During the
fiscal year the Company did not need to make any capital expenditures to comply
with environmental laws and regulations.
The Company cannot predict the direction of future laws or regulations designed
to protect the environment and control the discharge and disposal of hazardous
waste materials or their impact on the Company's operations. Consequently, the
Company is unable to predict with any certainty its total future expenditures
for installation of pollution control facilities or for legal and administrative
expenditures. New and expanding laws, regulations, administrative policies and
control levels, new pollution control technology and cost-benefit analysis based
on future market conditions are all factors which will affect future
expenditures.
Employees
As of September 30, 1998 the Company had 24 employees, seven (7) of whom were in
administration, six (6) of whom were in marketing and sales and eleven (11) of
whom were in operations. All employees are full-time. The Company's employees
are not unionized and the Company believes that its relations with its employees
are satisfactory.
Sales and Marketing
The Company maintains a highly experienced sales force for its customers who
require processing and refining services in connection
3
<PAGE>
with the reclamation of precious and specialty metals from secondary sources. An
expanding network of suppliers has been established to procure catalyst
materials from the automotive industry from which platinum and palladium are
recovered. The Company has entered into an exclusive agreement with Stillwater
Mining Corp. the largest miners of platinum group metals in the Northern
Hemisphere for the processing of these catalytic materials.
Item 2. Properties
The Company has a lease on its premises at 750 Shames Dr., Westbury, New York,
which expires July 31, 2003. The facility is approximately 10,200 square feet
and serves as the Corporate Headquarters. As part of this lease agreement the
Company has an option to renew the lease at a mutually agreeable rental at least
30 days prior to expiration. The Company also has the option to buy the premises
at the end of the lease term. The Company has no current intention to exercise
this option
The Company has purchased an approximately 13,000 square foot adjoining building
at 900 Shames Dr., Westbury, New York, which currently houses its catalyst
activities. The Company paid $510,000 for the property, including a mortgage in
the amount of $325,000.
Small administrative offices are also maintained in Lima, Peru and Pawtucket,
Rhode Island.
Item 3. Legal Proceedings
There are no pending legal proceedings to which the Company or any of its
subsidiaries is a party, other than ordinary, routine litigation incidental to
the business, none of which individually or in the aggregate is material to the
financial condition or to the business of the Company.
4
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders of the Corporation held on June 18,1998,
the following persons were elected directors of the corporation with the votes
set opposite their names:
Mandel Sherman 2,065,979 5,000
Michael A. O'Hanlon 2,065,979 5,000
Michael Riess 2,065,979 5,000
Shareholders also approved a name change for the Company from
Rosecap, Inc. to Westbury Metals Group, Inc. by a vote of 2,065,979
in favor and 5,000 against, and ratified and approved a Qualified
Stock Option Plan for the Company by a vote of 1,999,261 in favor and
68,660 against.
5
<PAGE>
PART II
Item 5. Market for Company's Common Equity and Related Stockholder
Matters
The following table sets forth the high and low closing bid prices for
the periods indicated as reported by the National Association of Securities
Dealers Automated Quotation System (NASDAQ) between dealers and do not include
retail mark-ups, mark-downs, or commissions and do not necessarily represent
actual transactions. The Company commenced trading on the Bulletin Board in
September, 1998 under the symbol WMET.
Low High
Calendar Year 1997:
First Quarter Not Traded Not Traded
Second Quarter Not Traded Not Traded
Third Quarter Not Traded Not Traded
Fourth Quarter Not Traded Not Traded
Calendar Year 1998:
First Quarter Not Traded Not Traded
Second Quarter Not Traded Not Traded
- ----------
At September 30, 1998, the Company had 132 holders of record of its
Common Stock.
The Company has paid no cash dividends on its Common Stock to date and it
does not anticipate declaring or paying any cash dividends in the foreseeable
future.
6
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The Company has positioned itself through its subsidiaries to engage in four
significant areas of the precious metals business.
Westbury International, Inc.
Trading and risk management services, including metals leasing, financing
arrangements, cash and forward purchases and sales for internal metals
management requirements. This newly formed entity will be responsible for
the ongoing management and operations of the Peruvian subsidiary.
It is expected that long-term contracts for metals will be entered into
for both the procurement and sales of precious metals on both a domestic
and international basis.
West Tech, Inc.
Manufacture and sale of precious and base metal products for use by
industry.
Westbury Alloys, Inc.
Refining services to accumulators and manufacturers of precious metals.
Catalyst procurement and collection for the purpose of processing and
recovery of platinum group metals.
Year 2000
Management believes that there is no impact to the Company as it relates to the
Year 2000.
Liquidity, Capital Resources and Other Financial Data
During the fiscal year ended June 30, 1998, the Company issued 1,167,312 shares
of common stock and received proceeds, net of offering costs, of $3,234,039.
The Company has been relying on a gold consignment program and internally
generated funds to finance its metal purchase, inventories and accounts
receivable. Inventories are stated at market value. Consistent with other
companies that refine and produce precious metal fabricated products, customers
and suppliers on a consignment basis furnish some of the Company's gold and
silver requirements. Title to the consigned gold and silver remains with the
Consignor. The value of consigned gold and silver held by the Company is not
included in the Company's inventory and there is no related liability recorded.
At June 30, 1998, the company held 7,915 troy ounces of gold at a value of
$2,345,300 of Gold and Silver under a consignment agreement with Republic
National Bank for which the Company is
7
<PAGE>
charged a consignment fee based on the current rates. There can be no assurances
that fluctuations in the precious metals markets and credit would not result in
an interruption of the Company's gold supply or the credit arrangements
necessary to allow the Company to support its accounts receivable and continue
the use of consigned gold.
In general all of the Company's operating entities are capital intensive.
The cash requirements are primarily used to facilitate the acquisition and
maintenance of metal inventories and receivables. In order to maintain and
maximize the current sales growth of West Tech, Inc., a borrowing facility of
$2,000,000 for the financing of accounts receivable has been approved by a
commercial lender and will be available by October 1998. A Director of the
Company is an Officer of the commercial lender.
The Company will have an additional requirement for funds in order to
maximize its potential as it relates to the various segments of activity. Based
upon anticipated future financing requirements of the Company, management
expects that the Company may, from time to time, engage in additional financings
of a character and in amounts to be determined.
The significant factors relating to the loss incurred for the fiscal
year ended June 30, 1998 were amortization and depreciation of $94,696 and the
write-off of goodwill related to the acquisition of West Tech Inc. of $143,638.
In fiscal 1999 the portion of amortization attributable to intangibles is
expected to be reduced from approximately $150,000 to approximately $30,000 due
mainly to the write-off of acquired customer lists in 1998.
Additional staffing for executive, administrative and sales functions as well as
significant start up costs for West Tech, Inc. and the catalyst operation
accounted for the balance of the current year's loss.
Management believes that operations will improve for the year ended
June 30, 1999, as a result of changing from a less efficient start-up
environment in its West Tech Metal Fabricating operation, and its reprocessing
of catalytic converters, to more efficient operations and increased volume in
all its operations. Management believes that as the volume increases it will be
able to control its overall overhead. Additional contributions to profitability
are expected to be generated by the newly formed trading and risk management
services operations. However, there can be no assurance that management will be
successful in its efforts.
8
<PAGE>
Item 7. Financial Statements.
F-1 through F-13
9
<PAGE>
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
Directors and Executive Officers
Name Age Position
Mandel Sherman 59 President, Chief Executive
Officer and Director
Michael A. O'Hanlon 51 Director
Michael Riess 57 Director
David W. Sass 62 Secretary
David Nadler 51 Treasurer
Mandel Sherman, President, Chief Executive Officer and Director
Mandel Sherman, 59, has been the President, Chief Executive Officer and
Director of Westbury since July 1996. From 1993 to 1995, Mr. Sherman acted as an
independent consultant to various investment firms. From 1983 to 1993, Mr.
Sherman participated in numerous real estate ventures as both an investor and
manager of developments with an approximate total value in excess of $30
million. From 1975 to 1983, Mr. Sherman served as the Chief Executive Officer
and President of Refinement International Company ("Refinement", a company he
founded in 1975. Refinement, a full service metals processing company with
financial capabilities and capital resources in precious metals and specialty
metals markets, exceeded sales of $350 million and was publicly traded on the
American Stock Exchange. From 1962 to 1975, Mr. Sherman served as the President
of Eastern Foundry Supplies ("EFS"), a company he founded in 1962. EFS
concentrated in the recovery of precious metals from the electronic and jewelry
industries. In 1967, Mr. Sherman was responsible for the sale of EFS to
Whittaker Corp., a California-based Company listed on the NYSE, where Mr.
Sherman remained as President with sales of approximately $10 million. Mr.
Sherman received his BSBA in Business Administration from Boston University in
1959.
10
<PAGE>
Michael A. O'Hanlon, Director
Michael A. O'Hanlon, 51, has been the president and chief executive
officer of DVI, Inc., since November, 1995 and served as executive vice
president of DVI since joining DVI in March, 1993. DVI is an independent
specialty finance company that conducts a medical equipment finance business and
related medical receivables finance business. Mr. O'Hanlon became a director of
DVI in November, 1993. Prior to joining DVI, Mr. O'Hanlon served as president
and chief executive officer of Concord Leasing, Inc., and its subsidiary, U.S.
Concord, Inc. for nine years. Concord Leasing provides medical, aircraft,
shipping and industrial equipment financing. Previously, Mr. O'Hanlon was a
senior executive with Pitney Bowes Credit Corporation. Mr. O'Hanlon received his
Master of Science degree from the University of Connecticut and his Bachelor of
Business Administration from the Philadelphia College of Textiles and Science.
Michael Riess, Director
Michael Riess, 57, has, since 1978, been the president of Materials
Management Corporation ("MMC"), a consulting firm specializing in precious and
nonferrous metals. He has headed the North American trading operations of the
Gulf Oil Corporation, Brascam, Ltd. and W.C. Heraeus, GmbH. He also managed
Heraeus' U.S. precious metals refining and has been involved in trading and
marketing a broad range of materials, including metals, scrap, and concentrates.
A graduate of Middlebury College with advanced degrees from Columbia
University's Graduate School of Business and its School of International
Affairs, Mr. Riess was Professor of Finance at Columbia University for eight
years. He has been a member of several commodity exchanges and is a Director of
the International Precious Metals Institute and the Center for the Study of
Futures Markets.
David W. Sass, Secretary
David W. Sass, 62, has, for the past 37 years, been a practicing attorney
in New York City and is currently a senior partner in the law firm of McLaughlin
& Stern, LLP, counsel to the Company. Mr. Sass is a director of Pallet
Management Systems, Inc. a company engaged in the manufacture and repair of
wooden pallets and other packaging services; a director of The Harmat
Organization, Inc., a real estate development company; a director of Genisys
Reservation Systems, Inc., a company engaged in the development of a
computerized limousine reservation system and a member and Vice Chairman of the
Board of Trustees of Ithaca College.
David Nadler, Chief Financial Officer
David Nadler, 51, joined the Company as the chief financial
officer and controller in March, 1998. From 1993 to when he joined
11
<PAGE>
the Company, Mr. Nadler was a director, executive vice president, CFO and
controller, with responsibility for the management of all financial and
accounting functions at Merchants Overseas, E&C Imports, a Rhode Island
distributor of jewelry products. From 1988 to 1993, he was a partner of the
public accounting firm of Leventhal, Zupnick, Berg & Co. Prior to this, Mr.
Nadler was vice president of British American Petroleum, a publicly-traded
syndicator of oil and gas drilling programs. From 1974 to 1986, he was principal
of David Nadler & Company, CPA, P.C., which provided accounting, tax and
financial consulting services. Mr. Nadler is a graduate of Pace University and a
member of the AICPA and of the New York State Society of Certified Public
Accountants.
All of Westbury's executive officers devote their full business time to
the affairs of the Company.
All directors shall serve for a term of one year or until their
respective successors have been duly elected and qualified. It is anticipated
that outside directors will receive $500 for each meeting attended in person and
$250 for each meeting attended telephonically as well as reimbursement for
out-of-pocket expenses. In addition, each outside director will receive an
option to purchase 15,000 shares of Common Stock at an exercise price of $3.00
per share. These options will vest each year over a period of three years. As of
September 30, 1998, no options have been granted to directors.
Item 10. Executive Compensation
Employment Agreement
On January 1, 1998, Westbury entered into a three-year employment agreement with
Mr. Sherman, a stockholder, director and chief executiveofficer of the Company.
Under the agreement, Mr. Sherman's compensation is $175,000 annually. In
addition, Mr. Sherman will receive 10% of the pretax profits of the Company in
each year in excess of $500,000 to a maximum bonus of $175,000. This employment
agreement has been assumed by the Company upon the completion of the Merger. In
addition, the Company has taken out a $1,000,000 keyman life insurance policy
for Mr. Sherman.
12
<PAGE>
Consulting Agreements
On July 22, 1996, Westbury entered into a five-year consulting agreement
with Lawrence Raskin, former president of the Company's predecessor, Westbury
Alloys, Inc. The agreement provides for an annual salary of $10,000 for his
consulting services. The Consulting Agreement also contains certain
confidentiality and non-competition provisions which are operative during the
term of the agreement and for given periods of time after termination thereof.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Summary Compensation Table
Name and Principal Long-Term Compensation
Position Annual Compensation Awards Payouts
Other
Annual Restricted All Other
Compen- Stock Options/ LTIP Compen-
Year Salary Bonus sation Award(s) SARs Payouts sation
Mandel Sherman 1998 $166,154 - - - - - $6,888
President
1997 $ -0- - - - - -
$
1996 $ -0- - - - - - -
</TABLE>
13
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth as of September 30, 1998, the number of
shares of Common Stock of the Company and the percentage of that class owned
beneficially, within the meaning of Rule 13d-3 promulgated under the Exchange
Act, and the percentage of the Company's voting power owned by (i) all
shareholders known by the Company to beneficially own more than five percent of
the Company's Common Stock; (ii) each director of the Company; and (iii) all
directors and officers as a group. All shares set forth in the following table
are entitled to one vote per share and the named beneficial owners have sole
voting and investment power. Each percentage set forth in the following table
assumes the exercise of all stock options exercisable by the named individual or
group as of September 30, 1998 or within 60 days thereafter.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Number of Shares
Name and Address Beneficially Percentage
Owned(1)
Dartmouth Capital
Partners(2)
210 Dartmouth Street 832,500 26.0%
Pawtucket, RI 02860
Mandel Sherman(3)
Westbury Alloys, Inc.
750 Shames Drive
Westbury, NY 11590 450,166 14.1%
Michael A. O'Hanlon
DVI, Inc.
500 Hyde Park
Doylestown, PA 18901 100,000 3.1%
Michael Riess -0- -0-
818 Lake Avenue
Greenwich, CT 06831
Directors and Officers as 550,166 17.2%
a Group (3)
</TABLE>
(1) All share amounts reflect beneficial ownership determined pursuant to Rule
13d-3 under the Exchange Act, and include voting and investment power with
respect to shares of Common Stock of the Company.
(2) The members of this limited liability company are immediate family members
of Mr. Mandel Sherman, President and Chief Executive Officer of Westbury. Mr.
Sherman disclaims beneficial ownership of such shares.
(3) Does not include 832,500 shares owned by Dartmouth Capital Partners, a
company owned and controlled by Mr. Sherman's children.
14
<PAGE>
Item 12. Certain Relationships and Related Transactions
On July 3, 1996, Westbury's predecessor, Westbury Alloys, LLC
executed an asset purchase agreement (the "Asset Purchase Agreement") where
Westbury Alloys, LLC purchased the assets of a unrelated New York corporation,
Westbury Alloys, Inc. ("Westbury New York") for a purchase price of $650,000,
payable as follows: $550,000 in cash at or prior to closing and with a balance
due in equal amounts of $50,000 on January 31, 1997 and July 31, 1997. To fund
this purchase Westbury Alloys, LLC borrowed from Graco Holdings, Inc. ("Graco"),
the sum of $550,000. This loan has been repaid from the proceeds of certain
bridge financing in the amount of $700,000 (described below). On July 16, 1996,
the obligation due to Graco was assigned by Graco to another affiliate of a
former stockholder. In July 1996, Graco guaranteed Westbury Alloys, LLC's line
of credit ("Line of Credit") and deposited a letter of credit in the amount of
$2,600,000 as security for its guaranty.
On July 22, 1996, Lawrence Raskin, former president of Westbury New York
executed a five (5) year consulting agreement with Westbury to serve as a
consultant to Westbury in connection with transitional issues and continuing
conduct of Westbury's business. Mr. Raskin will receive a fee of $10,000 per
annum for his consulting services. Westbury signed a five year lease on its
10,200 square foot facilities at 750 Shames Drive, Westbury, New York, with Mr.
Raskin. The term of the lease expires on July 31, 2003. Throughout the term of
the lease, Westbury has the option to renew the lease at a mutually agreeable
rental at least 30 days prior to expiration. In addition, Westbury has an option
to purchase the existing facility space at the appraised fair market value,
although not for less than $1.2 million for the first three years. Westbury has
no current intention to exercise this option.
From time to time, Westbury borrowed funds from several affiliated
investment limited partnerships. These loans were repaid in July and August,
1997. Mandel Sherman, the president, director and a principal shareholder of the
Company is the general partner and manager of such affiliated entities.
In October, 1997, Westbury Alloys, LLC merged into Westbury Alloys, Inc.,
a Delaware corporation. The membership interests in Westbury Alloys, LLC were
converted into 1,850,000 shares of common stock of Westbury Alloys, Inc. in
proportion to the interest held by each member.
On January 1, 1998, Westbury entered into a three-year employment
agreement with Mandel Sherman. Under the agreement, Mr. Sherman's compensation
is $175,000 annually. In addition, Mr. Sherman will receive 10% of the pretax
profits of the Company in each year in excess of $500,000 to a maximum bonus of
$175,000 per year. This agreement has been assumed by the Company. In addition,
the Company
15
<PAGE>
has taken out a $1,000,000 keyman life insurance policy for Mr.
Sherman.
The Agreement terminates upon the death or disability of Mr. Sherman and
permits the Company to terminate the agreement, without further payment
obligation to Mr. Sherman, upon the commission of certain acts, and to terminate
the Agreement for any other reason, provided that the Company pays to him a
severance payment equal to the aggregate base salary otherwise owed to him over
the remaining term of the Agreement. Pursuant to the terms of the Agreement, in
the event that Mr. Sherman is not nominated or re-elected to serve as a member
of the Board of Directors, either he or the Company may terminate his employment
with the Company and in such event, he shall be entitled to continue to receive
his base salary as set forth in the Agreement for the remainder of the term.
The Agreement also contains certain confidentiality and non-compete
provisions which are operative during the term of the Agreement. The
confidentiality provisions remain in effect after termination of employment.
In July, 1996, the original members of Westbury Alloys, LLC, subscribed
for membership interests of $100,000, in the aggregate, in Westbury Alloys, LLC.
Such interests were converted into Westbury Common Stock at the time of the
merger between Westbury Alloys, LLC and Westbury.
On March 31, 1998, the Company completed a reverse merger of its wholly
owned subsidiary, Westbury Acquisition Corp. a New York corporation ("WAC") with
Westbury Alloys, Inc., a Delaware corporation ("Westbury") pursuant to which
Westbury has become a wholly owned subsidiary of the Company. Westbury provides
a broad range of processing and refining services in connection with the
reclamation of precious and specialty metals from scrap materials. Pursuant to
the merger, the principals of Westbury have become the principals of the Company
and have become the largest shareholders of the Company.
In order to maintain and maximize the current sales growth of West Tech,
Inc., a borrowing facility of $2,000,000 for the financing of accounts
receivable has been approved by a commercial lender and will be available by
October 1998. A Director of the Company is an Officer of the commercial lender.
The Company paid to the firm of McLaughlin & Stern, LLP during the year
ended June 30, 1998, the sum of $67,641 for various legal services. David W.
Sass, the Secretary of the Company, is a member of said firm.
16
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K.
Schedules and Reports on Form 8-K
(A)(1) The following financial statements are included in Part II, Item
7:
Independent Auditors' Reports
Consolidated Balance Sheets as at June 30, 1998 and 1997.
Consolidated Statements of Operations for the Years Ended June 30,
1998 and 1997
Consolidated Statements of Stockholders' Equity for the Years Ended June 30,
1998 and 1997.
Consolidated Statements of Cash Flows for the Years Ended June
30,1998 and 1997
Notes to Consolidated Financial Statements
Schedules are omitted for the reason that they are not required, are not
applicable, or the required information is included in the financial statements
or notes thereto.
(B) Reports on Form 8-K - Not applicable.
(C) Exhibits. The following exhibits are filed as part of the Company's
report. Where such filing is made by incorporation by reference (I/B/R)
to a previously filed statement or report, such statement or report is
identified in parenthesis.
Official Exhibit
Number Description
[3](a) Certificate of Incorporation, as amended.
[3](b) By-Laws.
4 Form of Common Stock Certificate
10 Form of Employment Agreement with Mandel Sherman.
[27] Financial Data Schedule
* Filed herewith.
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
Westbury Metals Group, Inc.
We have audited the accompanying consolidated balance sheet of Westbury Metals
Group, Inc. (formerly known as Rosecap, Inc.) and subsidiaries as of June 30,
1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year 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 audit. We did not audit the financial statements of
Alloy Trading S.A., a 98% owned subsidiary, which statements reflect total
assets of $508,432 as of June 30, 1998; there were no revenues as they have been
eliminated in consolidation. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Alloy Trading S.A., is based solely on the report of
the other auditors.
We conducted our audit 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 audit and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Westbury Metals Group,
Inc. and subsidiaries as of June 30, 1998, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
As discussed in Note 18 to the consolidated financial statements, the Company's
management discovered subsequent to the issuance of the consolidated financial
statements that the merger of Westbury Alloys Inc. and Rosecap, Inc. have
been recorded with Westbury Alloys, Inc. as the acquirer. Accordingly, the
accompanying consolidated financial statements have been restated, and an
adjustment made to accumulated deficit to reflect the correction of that
treatment.
CITRIN COOPERMAN & COMPANY, LLP
New York, New York September 18, 1998 except as to Note 18, which is as of
February 15, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997
1998 1997
--------------- ---------------
ASSETS
CURRENT ASSETS:
Cash $ 877,520 $ 73,136
Accounts receivable 788,749 77,590
Inventory 835,565 720,948
Due from affiliates 81,445
Prepaid expenses and other current assets 348,795 624,887
--------------- ---------------
Total Current Assets 2,850,629 1,578,006
--------------- ---------------
PROPERY PLANT AND EQUIPMENT:
Property and equipment 599,843 425,448
Accumulated depreciation and amortization (162,695) (78,239)
--------------- ---------------
Net Property Plant and Equipment 437,148 347,209
--------------- ---------------
OTHER ASSETS:
Goodwill - net of accumulated amortization of $70,480
and $60,240 respectively 230,720 240,960
Deposits 113,177 21,063
--------------- ---------------
Total Other Assets 343,897 262,023
--------------- ---------------
TOTAL ASSETS $3,631,674 $2,187,238
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Loans payable $ $ 973,046
Current portion of long-term debt 553,906
Due to customers 455,553 439,703
Accounts payable and accrued expenses 528,246 208,266
--------------- ---------------
Total Current Liabilities 983,799 2,174,921
--------------- ---------------
Long-term debt-net of current portion 15,077
--------------- ---------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock $.001 par value; Authorized 50,000,000 shares; issued and
outstanding 3,197,312 shares and 1,850,000 shares
at June 30, 1998 and 1997, respectively 3,197 1,850
Capital in excess of par value 3,171,879 98,150
Accumulated deficit (527,201) (102,760)
--------------- ---------------
Total Stockholders' Equity (Deficit) 2,647,875 (2,760)
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $3,631,674 $2,187,238
=============== ===============
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
1998 1997
--------------- --------------
Revenues:
Sales $1,425,315 $
Refining fees 1,874,829 1,540,479
Other income 22,188
--------------- --------------
Total revenues 3,322,332 1,540,479
--------------- --------------
Cost and expenses:
Cost of sales 1,335,607
Cost of refining 807,221 703,853
Selling, general and administrative 1,377,159 735,235
Depreciation and amortization 94,696 138,479
Interest 132,090 56,654
--------------- --------------
Total costs and expenses 3,746,773 1,634,221
--------------- --------------
Loss before provision for income taxes (424,441) (93,742)
Provision for income taxes 9,018
--------------- --------------
Net loss $(424,441) $ (102,760)
=============== ==============
Net loss per share - basic $ (.20) $ (.06)
Net loss per share - diluted $ (.20) $ (.06)
Average shares outstanding - basic 2,173,139 1,850,000
Average shares outstanding - diluted 2,173,139 1,850,000
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
WESTBURY METALS GROUP, INC. AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
Common Stock Capital in Total
excess of Accumulated Stockholders'
Shares Amount par value Deficit Equity
Balance, July 1, 1996 1,850,000 $ 1,850 $ 98,150 $ $ 100,000
Net loss for the year ended
June 30, 1997 (102,760) (102,760)
---------------- -------------- --------------- --------------- -----------------
Balance, June 30, 1997 1,850,000 1,850 98,150 (102,760) (2,760)
Common stock issued upon merger with Rosecap, Inc.
March 31, 1998 180,000 180 40,857 41,037
Common stock issued
in private placement
March 31, 1998 814,503 815 2,015,224 2,016,039
Common stock issued
upon conversion of
bridgeholder loans
March 31, 1998 233,333 233 699,767 700,000
Common stock issued
in private placement
May 8, 1998 119,476 119 317,881 318,000
Net loss for the year
ended June 30, 1998 (424,441) (424,441)
---------------- -------------- --------------- --------------- -----------------
Balance, June 30, 1998 3,197,312 $ 3,197 $3,171,879 $(527,201) $2,647,875
================ ============== =============== =============== =================
See accompanying notes to consolidated
financial statements.
F-4
<PAGE>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
1998 1997
------------------ -----------------
Operating activities:
Net loss $ (424,441) $ (102,760)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 94,696 138,479
Changes in assets and liabilities:
Inventory (114,617) (720,948)
Accounts receivable (711,159) (77,590)
Due from affiliates 81,445 (81,445)
Prepaid expenses and other current assets 276,092 (361,841)
Deposits (92,114) (21,063)
Due to customers 15,850 439,703
Accrued expenses 319,599 208,266
------------------ -----------------
Net cash used by operating activities (554,649) (579,199)
------------------ -----------------
Investing activities:
Equipment additions (174,395) (55,046)
Loans to customers (163,046)
Payments of organization costs (1,200)
------------------ -----------------
Net cash used by investing activities (174,395) (219,292)
------------------ -----------------
Financing activities:
Issuance of common stock 2,334,039
Repayment of loans payable (973,046)
Proceeds of Bridge financing 700,000
Repayment of long-term debt (568,983)
Note payable (101,419)
Loans payable 973,046
------------------ -----------------
Net cash provided by financing activities 1,492,010 871,627
------------------ -----------------
Net increase in cash 762,966 73,136
Cash from merged subsidiary 41,418
Cash - beginning 73,136
------------------ -----------------
CASH - ENDING $ 877,520 $ 73,136
================== =================
See accompanying notes to consolidated financial
statements.
</TABLE>
F-5
<PAGE>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STAEMENTS
JUNE 30, 1998 AND 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On June 18, 1998, the Company name was changed from Rosecap, Inc. to Westbury
Metals Group, Inc. ("WMG"). On March 31, 1998 the Company entered into a merger
between Westbury Acquisition Corp. ("WAC"), a wholly owned subsidiary of the
Company, and Westbury Alloys, Inc., ("Westbury") a Delaware Corporation, the
surviving entity. At June 30, 1997 Westbury was a Limited Liability Company. The
merger is a reverse merger whereby the principals of Westbury became the
principals and the largest shareholders of the Company. The Company commenced
operating the business of Westbury after the consummation of the merger. Prior
to the merger, the Company, which was incorporated in 1990, had not conducted
any operations and reported as a development stage enterprise.
Westbury reclaims principally gold, silver, platinum and palladium from scrap
and residues from the electronics, jewelry, petroleum, dental, chemical,
automotive, mining and aerospace industries. After controlled weighing,
sampling, and assaying to determine values and to settle with the customer,
Westbury either purchases the precious metal or returns metal to the customer.
Through its Peruvian subsidiary Alloy Trading S.A. ("Alloy"), Westbury imports
metals for its own use as well as for direct sales to third parties.
Alloy, a 98% owned subsidiary of Westbury, was incorporated in Peru in 1996. The
remaining 2% of the capital stock of Alloy is owned by the two local managers of
Alloy. The long range purpose of Alloy is to develop trading opportunities
between Peruvian companies and their counterparts worldwide and to explore
opportunities in metal related activities including gold and silver bullion,
transactions with the mining industry, jewelry manufacturers, and other similar
activities.
On March 30,1998 West Tech, Inc. ("West Tech") was formed as a subsidiary of
Westbury (with ownership being subsequently transferred to WMG) for the
manufacture and sale of silver in various forms and shapes, plating salts as
well as tin and tin-lead anodes used in manufacturing. In the near future the
Company anticipates a broader product line to include precious metal casting
grains, alloys, and mill products. In May of 1998 the Company acquired the
registered trade name Onic for use in the manufacture and sale of its high
quality tin products.
Westbury Realty Management Corp. (WRMC) was formed in June of 1998 for the
purpose of acquiring the property that is presently being rented by Westbury for
its processing of catalyst materials. This acquisition should be completed by
September 30, 1998. There was no financial activity during the reporting period.
Gold and silver comprise the major portion of the value of Westbury's precious
metal inventory, which may be held under certain consignment agreements (see
Note 4). The prices of gold and silver are subject to fluctuations and are
expected to continue to be affected by world market conditions. At June 30, 1998
all inventory owned by Westbury was fully hedged to protect against market
fluctuations. Market gains or losses as well as all trading activities are
included in "Cost of sales". It is the Company's policy that all metal
transactions are fully hedged and should result in no gains or losses due to
market fluctuations. Hedging consists of the sale or purchase of forward
contracts for the physical delivery of metals. When the Company purchases
precious metal it sells a forward contract to protect against fluctuating market
prices, conversely when the company sells precious metals it buys a contract to
close the transaction. Futures contracts are measured at market value with
unrealized gains and losses reflected in operations during the period. Westbury
maintains inventories of precious metals in various states of processing.
Westbury also maintains inventories at independent outside refineries. Such
inventories are carried on its books at current market value.
F-6
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the operations of WMG for the
period from April 1, 1998 through June 30, 1998 and the operations of
Westbury, Alloy and West Tech, from July 1, 1997 through June 30, 1998. All
significant intercompany balances and transactions have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of financial statements requires the Company's management
to estimate the current effects of transactions and events whose ultimate
outcomes may not be determinable until future years. Consequently, actual
results could differ from those estimates.
TRANSLATION OF FOREIGN CURRENCIES
Translation adjustments result from the process of translating Alloy's
financial statements from their local currency to U.S. dollars. Assets and
liabilities in foreign currencies are translated into U.S. dollars at the
rate in effect on the balance sheet date. Revenues and expenses are
translated at the average rate for the period. Translation adjustments were
not significant. Where amounts denominated in a foreign currency are
converted to U.S. dollars by remittance or repayment, the realized exchange
differences are not material and are included in determining net loss for
the period.
INVENTORY AND DUE TO CUSTOMERS
The Company's customers have the option of receiving cash in lieu of the
refined precious metals. Since the Company bears the risk of loss, it is
the policy of the Company to record all precious metals received for
refining as inventory and an offsetting liability due to customers.
Inventories which consist of precious metals, are stated at their market
value. Quantities are determined based upon physical count.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and depreciated using
straight-line methods over the estimated usefullives of the assets ranging
from 5 years to 39 years.
AMORTIZATION OF INTANGIBLE ASSETS
Intangible assets consist of goodwill, which is the excess of the purchase
price over the fair value of assets acquired in business combinations
accounted for as purchases. Goodwill is amortized on a straight-line basis
over the period benefited, 24 years. Goodwill is reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. Impairment would be recognized in operating
results if a permanent diminution in value were to occur.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement
109, Accounting for Taxes issued by the Financial Accounting Standards
Board. Under such statement, the tax benefits of tax operating loss
carryforwards are recorded to the extent available less a valuation
allowance if it is more likely than not that some portion of the deferred
tax asset will not be realized.
NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is calculated using the weighted
average number of common shares outstanding during the period. Diluted
income (loss) per share is calculated by including all dilutive potential
common shares such as stock options and warrants. Potential common shares
are not included for all periods presented because they would be
anti-dilutive.
F-7
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
Effective July 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". This statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of assets may not be recoverable. There was no significant
impact on the Company's results of operations or financial position.
STOCK BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method in accordance with APB No. 25, "Accounting for Stock Issued to
Employees". Effective July 1, 1996, the Company adopted the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation",
which require the disclosure of pro forma net income and earnings per share
as if the Company adopted the fair value-based method in measuring
compensation expense as of the beginning of fiscal 1996 (See Note 13).
NEW REPORTING PRONOUNCEMENT
The Company will implement the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, SFAS
No. 131, Disclosures About Segments of an Enterprise and Related
Information, and SFAS No. 132, Employers' Disclosures about Pensions and
Other Post-retirement Benefits which require the Company to report and
display certain information related to comprehensive income, operating
segments, and employee benefits plans, respectively, as required in 1998.
Adoption of these statements will not impact the Company's financial
position or results of operations.
FAIR VALUE FINANCIAL INSTRUMENTS
The Company considers the fair value of all financial instruments to be not
materially different from their carrying value at year end.
NOTE 2 - CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant
credit risk.
NOTE 3 - ADVANCES TO CUSTOMERS
Advances to customers arise as a result of the Company advancing finished
metal or cash to the customer prior to the subsequent settled amount. At
the request of the customer, the Company may advance up to 90% of the
expected settlement value of the metal to the customer. The Company
occasionally advances or consigns metal to its customers. These advances
are charged against future transactions with the customer.
NOTE 4 - INVENTORIES
Inventories are stated at current market value. Consistent with other
companies that refine and produce precious metal fabricated products, some
of the Company's gold and silver requirements are furnished by customers
and suppliers on a consignment basis. Title to the consigned gold and
silver remains with the Consignor. The value of consigned gold and silver
held by the Company is not included in the Company's Balance Sheet. At June
30, 1998 and 1997 the Company held $2,345,300 and $1,580,421 under
consignment agreements with Republic National Bank at June 30, 1998 and
Republic National Bank and A-Mark Precious Metals Inc. at June 30, 1997.
The Company's gold and silver requirements are provided from a combination
of owned inventories, precious metals which have been purchased and sold
for future delivery, and gold and silver received from suppliers and
customers on a consignment basis.
F-8
<PAGE>
NOTE 5 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets at June 30, 1998 and 1997
substantially consist of a value added tax credit from the Peruvian
government of $245,847 and $194,712, respectively, and of payments in
advance of Peruvian income tax of $56,886 and $47,550, respectively. Alloy
may request the reimbursement of the value added tax credit to the local
tax administration and is entitled to also receive reimbursement of the
payments in advance of income taxes.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at consists of the following:
1998 1997
Machinery and equipment $487,777 $362,840
Furniture and fixtures 54,135 32,914
Leasehold improvements 31,646 7,454
Vehicles 26,285 22,240
----------- --------------
Less accumulated depreciation
and amortization 162,695 78,239
=========== ==============
Property, plant and equipment - net $437,148 $347,209
=========== ==============
NOTE 7 - DUE FROM AFFILIATES
As of June 30, 1997, an affiliate of the Company through common management
and ownership was indebted to the Company in the amount of $11,902. The
receivable, represents a reimbursement of certain expenses which were paid
by the Company, does not bear interest and is payable on demand.
In addition, the Company loaned $69,543 to a trust whose trustees consist
of the owners of one of the members of the Company. The loan, which does
not bear interest, was repaid subsequent to June 30, 1997.
NOTE 8 - LOANS PAYABLE
The Company has entered into an agreement with Republic National Bank at
June 30, 1998 and at June 30, 1997 with both Republic National Bank and
A-Mark Precious Metals Inc. to provide the Company with the gold used in
production through consignment arrangements. At June 30, 1998 and 1997, the
Company included in its inventory 7,915 and 2,569 troy ounces respectively
of fine gold on consignment having market values of $2,345,300 and
$1,580,421 respectively (see Note 4). The maximum amount of consigned gold
available is limited to the amount guaranteed by letters of credit provided
by a third party consignee, presently $2,600,000.
The Company has incurred consignment fees in the amount of $22,518 and
$35,489 on the above loans for the years ended June 30, 1998 and 1997
In addition, loans to the Company at June 30,1997 consisted of the
following:
A) Loan payable to Wingate Financial Associates, LLC ("Wingate") in the
amount of $703,046 is due on demand and bears interest at the rate of 8%
per annum. The president of Westbury is also the manager of Wingate. In
addition, other members of Westbury are also members of Wingate. Interest
expense on this loan for the year was $8,500. In addition, other members of
Westbury are also members of Elmgrove. This loan was repaid in July and
August 1997.
B) Loan payable to Elmgrove Assoc. II, L.P., ("Elmgrove") in the amount of
$200,000 is due on demand and bears interest at the rate of 8% per annum.
The president of Westbury is also the president of the general partner of
Elmgrove. Interest expense for the year was $19,080 on this loan. This loan
was repaid in July 1997.
F-9
<PAGE>
C) Loan payable to Stacie Greene in the amount of $70,000 is due on demand
and bears interest at the rate of 6% per annum, payable on a quarterly
basis. The loan was repaid in August 1997. Interest for the year was
waived.
NOTE 9 - LONG-TERM DEBT
Long-term debt as of June 30, 1997 is summarized as follows:
A) Lexus Financial Services $ 18,983
B) Stacie Greene 500,000
C) Lawrence Raskin 50,000
568,983
553,906
$ 15,077
Long-term debt as of June 30, 1997 consists of the following:
A) The Company entered into a loan with Lexus Financial Services for an
automobile due in 48 monthly installments of $522 including interest at the
rate of 10.25% per annum. This loan is secured by the automobile, having a
net book value of $17,792, which has been pledged as collateral.
B) Note payable to Stacie Greene which is due on demand after July 31, 1997
and requires payments of interest at the rate of 6% on a monthly basis. The
note may be prepaid, in whole at any time, or in part from time to time,
without penalty. Stacie Greene is the sole member of a limited liability
company which owns 45 percent of the Company. This note is secured by all
assets of the Company. Interest expense for the year was $28,750 on this
note.
C) Note payable to Lawrence Raskin has a final payment of $50,000 due on
July 31, 1997. The note does not bear interest.
NOTE 10 - INCOME TAXES
The Company's net deferred tax asset as of June 30, 1998 and 1997 is
estimated as follows:
Deferred tax assets: 1998 1997
Net operating loss carryforward $140,000 $40,000
Deferred tax liability:
Amortization of goodwill 4,000 16,000
--------------- --------------
Net deferred tax asset 144,000 56,000
Valuation allowance 144,000 56,000
--------------- --------------
Net deferred taxes $ 0 $ 0
--------------- --------------
A valuation allowance for 1998 and 1997 has been applied to offset the
deferred tax asset in recognition of the uncertainty that such tax benefits
will be realized.
At June 30, 1998, the Company has available net operating loss
carryforwards for federal and state income tax purposes of approximately
$350,000, which are available to offset future taxable income, if any.
These carryforwards expire beginning in 2012.
The provision for income tax represents the Peruvian tax on the income of
Alloy. Income tax has been computed on the basis of taxable income adjusted
by inflation (a fixed rate of 30%).
F-10
<PAGE>
NOTE 11 -STOCKHOLDERS' EQUITY
The Company issued 1,850,000 shares of its common stock in exchange for all
of the outstanding shares of Westbury Alloys, Inc. This merger was
accounted for as a purchase. The value attributed to the shares was
$100,000, which was the value of all of the outstanding shares on the books
of Westbury Alloys, Inc. The financial statements reflect that the
1,850,000 were issued for all periods presented.
The Company entered into an agreement whereby it issued shares of its
common stock through a private placement memorandum. The proceeds of the
offering, net of expenses, was $2,334,039, from the issuance of 1,167,312
shares of common stock. In October, November and December 1997 the Company
obtained Bridge Financing of $700,000. A substantial portion of the
proceeds was used to repay the long-term debt of $500,000 due to Stacie
Greene. Included in the issued shares are 233,333 shares issued to certain
investors who had provided the bridge financing to Westbury and converted
their loans to equity at the same offering price of $3.00 per share. These
noteholders also received warrants to purchase 700,000 shares of common
stock of the Company at $2.25 per share. The warrants expire on March 31,
2000.
NOTE 12 - STOCK OPTION PLAN
Under the Company's stock option plan (Westbury Alloys' Inc.'s 1997 Omnibus
Stock Incentive plan (as amended) (the "Plan") which has been ratified by
the shareholders' of Westbury Metals Group Inc., options to purchase a
maximum of 750,000 shares of common stock (subject to adjustment in the
event of stock splits, stock dividends, recapitalization and other capital
adjustments) may be granted to employees and outside directors of the
Company. The options to be granted under the plan are designated as
incentive stock options or non-incentive stock options by the board of
directors which also has the discretion as to the person to be granted the
options, the number of shares subject to the options and the terms of the
option agreements. The plan is administered by the board of directors. All
present and future employees shall be eligible to receive incentive awards
under the plan, and all present and future non-employee directors shall be
eligible to receive non-statutory options under the plan. The options are
intended to receive incentive stock option tax treatment under Section 422
of the Internal Revenue Code of 1986, as amended.
The exercise price of shares of common stock covered by an incentive stock
option shall not be less than 100% of the fair market value of such shares
on the date of grant, provided that if an incentive stock option is granted
to an employee who, at the time of the grant, is a 10% shareholder, then
the exercise price of the shares covered by the incentive stock option
shall not be less than 110% of the fair market value of such shares on the
date of grant. The exercise price of shares covered by a non-statutory
stock option shall not be less than 85% of the fair market value of such
shares on the date of grant.
Options outstanding at June 30, 1998 are exercisable at prices ranging from
$.50 to $3.00 per share, the fair market value on the date of grant, and
expire at various dates to June 17, 2008. Options to purchase 180,000
shares were granted October 28, 1997, while the plan was part of Westbury
Alloys, Inc. Options to purchase 100,000 shares were granted June 18, 1998
and are exercisable through June 17, 2008. The options granted October 28,
1997 are exercisable at a rate of 45,000 shares annually for four years
beginning October 28, 1997. Of the options granted June 18, 1998, 50,000
are exercisable immediately and 25,000 are exercisable annually beginning
June 18, 1999 and June 18, 2000. No other options have been granted,
exercised or terminated.
NOTE 13 - COMMITMENTS
EMPLOYMENT AGREEMENT The Company's chief executive officer has an
employment agreement expiring December 31, 2000. Under the agreement he
receives $175,000 annually plus 10% of the annual pretax profits of the
Company in excess of $500,000 to a maximum bonus of $175,000 per year.
F-11
<PAGE>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STAEMENTS
JUNE 30, 1998 AND 1997
NOTE 13 - COMMITMENTS (CONTINUED)
LEASE COMMITMENT
Effective July 22, 1996 the Company entered into a seven-year lease, expiring
July 31, 2003, for the premises known as 750 Shames Drive, Westbury, New York,
which approximates 10,200 square feet. The annual rental in the initial year of
the lease is $7.50 per square foot, plus escalation's for real estate taxes.
Provided the Company is not in default under the lease, the Company has the
option to purchase the premises, along with premises known as 700 Shames Drive
(7,800 square feet). If the Company exercises the option to buy within the first
three years of the lease, the combined purchase price of both premises shall be
$1,200,000. After the first three years of the lease, the purchase terms of the
property shall be determined as specified in the lease, which calls for among
other provisions, the purchase price to be fair market value.
Future minimum lease payments are as follows:
For the year ending June 30,
1999 $82,416
2000 84,762
2001 85,884
2002 89,556
2003 92,004
==============
$ 434,622
==============
Rent expense for the years ended June 30, 1998 and 1997 was $91,624 and $72,181,
respectively.
CONSULTING SERVICES
Effective July 22, 1996, the Company entered into a five year consulting
agreement with Lawrence Raskin. Under the agreement, the Company will pay
Lawrence Raskin $10,000 annually for a total fee of $50,000 plus certain
expenses.
LETTERS OF CREDIT
An affiliate of the Company has entered into letter of credit arrangements with
an unrelated third party to provide letters of credit in the amount of
$2,600,000 to guarantee the debt to Republic National Bank. During the current
fiscal year the Company paid fees of $21,807 for these letters of credit.
NOTE 14 - STOCK BASED COMPENSATION
The per share average fair value of stock options granted during the year ended
June 30, 1998 were $2.59 and $.66 on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
Expected dividend yield 0%
Risk free interest rate 5%
Expected stock volatility 0%
Expected option life 4 YEARS AND 5 YEARS
The Company applies APB opinion No 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized in the financial
statements for its stock options which have an exercise price equal to the fair
value of the stock on the date of the grant. Had the Company determined
compensation cost based on the fair value at the grant date of this stock
options under SFAS No. 123, the Company's net loss would have been increased to
the pro forma amounts indicated below for the year ended June 30, 1998:
F-12
<PAGE>
NOTE 14 - STOCK BASED COMPENSATION (CONTINUED)
Net loss: Net loss per share:
As reported $(424,441) As reported $(.20)
Pro forma $(502,694) Pro forma $(.23)
Pro forma net loss reflects only options granted during the year ended June 30,
1998. The full impact of calculating compensation cost for stock options under
SFAS No. 123 is not reflected in the pro forma net loss amounts presented above
because compensation cost is reflected over the options' vesting period of 4
years. No stock options were granted during the year ended June 30, 1997.
NOTE 15 - SUBSEQUENT EVENTS
On July 1, 1998 Westbury International, Inc., was formed to provide trading and
risk management services. Activities include metals leasing, financing
arrangements, cash and forward purchases and sales for internal metals
management requirements and as a profit center dealing with third parties.
The Company has entered into an agreement to purchase an adjacent building at
900 Shames Drive, Westbury, New York for a total of $510,000. There is a
mortgage commitment from Roosevelt Savings Bank in the amount of $325,000. The
title to this property will be in Westbury Realty Management Inc., a newly
formed corporation with no activity in the current year. The closing is
anticipated to take place on September 29, 1998.
NOTE 16 - RELATED PARTY TRANSACTIONS
An officer of the Company is affiliated with a legal firm which provided
services to the Company in 1998. Fees earned by such affiliate were $67,641.
NOTE 17 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
1998 1997
Cash paid during the year for:
Interest expense $164,454 $ 24,290
Noncash investing and financing activity:
A loan obligation was incurred when the
Company financed the purchase of its automobile. $ 20,402
Various not obligations were incurred when the
Company financed the purchase of equipment and goodwill. $ 550,000
NOTE 18 - RESTATEMENT OF FINANCIAL STATEMENTS
Subsequent to the issuance on September 18, 1998 of the consolidated financial
statements as of and for the year ended June 30, 1998, the Company's management
discovered that the merger of Westbury Alloys Inc. and Rosecap, Inc., treating
Rosecap, Inc. as the acquirer whereas, under interpretations of reverse
acquisitions it seems more appropriate to show the accounting treatment for the
merger with Westbury Alloys, Inc. as the acquirer. Accordingly, the accompanying
consolidated financial statements have been restated to correct this treatment,
resulting in the reduction of goodwill by $416,496, reduction of capital in
excess of par value by $1,292 and an increase in the accumulated deficit by
$415,204.
F-13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act,
Westbury Metals Group, Inc. has caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
Dated: February 23, 1999
WESTBURY METALS GROUP, INC.
By: _______________________
Mandel Sherman,President
Pursuant to the requirements of the Exchange Act, this report has been
signed by the following persons on behalf of the Registrant and in the
capacities and on the date indicated:
Name Titles Date
_______________ President, Chief Executive February 23, 1999
Mandel Sherman Officer and Director
___________________ Director February 23, 1999
Michael A. O'Hanlon
___________________ Director February 23, 1999
Michael Riess
___________________ Chief Financial Officer February 23, 1999
David Nadler
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED INT HE COMPANY'S FORM 10-KSB AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-1-1997
<PERIOD-END> JUN-30-1998
<CASH> 877,520
<SECURITIES> 0
<RECEIVABLES> 788,749
<ALLOWANCES> 0
<INVENTORY> 835,565
<CURRENT-ASSETS> 2,850,629
<PP&E> 599,843
<DEPRECIATION> 162,695
<TOTAL-ASSETS> 4,048,170
<CURRENT-LIABILITIES> 983,799
<BONDS> 0
0
0
<COMMON> 3,197
<OTHER-SE> 3,061,174
<TOTAL-LIABILITY-AND-EQUITY> 4,048,170
<SALES> 1,425,315
<TOTAL-REVENUES> 2,031,033
<CGS> 1,335,607
<TOTAL-COSTS> 1,335,607
<OTHER-EXPENSES> 732,354
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,304
<INCOME-PRETAX> 75,232
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,232
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
