SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported) June 30, 1999
WESTBURY METALS GROUP, INC.
(Exact name of registrant as specified in its charter)
New York
(State or Other Jurisdiction of Incorporation)
33-42408-NY 11-3023099
(Commission File
Number) (I.R.S. Employer Identification No.)
750 Shames Drive, Westbury, New York 11590
(Address of principal executive offices)(Zip Code)
(516) 997-8333
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
On July 16, 1999, the Registrant, through its wholly owned subsidiary,
Reliable - West Tech, Inc., a Delaware corporation ("RWT") (formerly known as
West Tech, Inc.), purchased substantially all of the assets (excluding cash and
accounts receivable) of Reliable Corporation, a Connecticut corporation
("Reliable") pursuant to an Asset Purchase Agreement dated May 5, 1999, as
amended by an Amendment dated July 1, 1999, and as modified by an Escrow
Agreement dated July 1, 1999. This transaction was effective as of June 30,1999
for accounting purposes. Reliable is a manufacturer of silver semi-fabricated
products for the industrial plating industries.
RWT will use the purchased assets to continue the business operations of
Reliable.
The purchase price for the assets was $1,915,000. One Million Dollars
was paid in cash and the balance was paid with a six year, seven percent self
amortizing promissory note in the principal amount of $915,000. The note was
secured by a security agreement granting a security interest in the machinery,
equipment and the customer list purchased pursuant to this transaction. In
addition, RWT paid the sum of $192,578.55 in cash for the purchase of Reliable's
metals inventory. The cash portion of the purchase price was funded by a
combination of the Registrant's funds and the proceeds of certain financing
described in ITEM 5 below.
As part of this transaction, Rajendra A. Shukla, the President and sole
shareholder of Reliable, sold the building and the real property at which
Reliable operated its business for $185,000. RWT shall continue to run the
business operations from this location. The purchase price was paid with a six
year, seven percent self amortizing promissory note from RWT in the principal
amount of $185,000. The record owner of the property is Westbury Realty
Management, Inc.("Westbury Realty"), a wholly owned subsidiary of the
Registrant. The note was secured by the guaranty of Westbury Realty, which
guaranty was secured by a first mortgage on the purchased real property. At the
Closing, RWT entered into a three year employment agreement with Rajendra A.
Shukla. Mr. Shukla shall serve as a vice president of RWT and President of its
"Reliable" division. The employment agreement provides for an annual salary of
$150,000.
<PAGE>
ITEM 5. Other Events
On July 13, 1999 RWT, Westbury International, Inc and Westbury Alloys,
Inc.,(each, a wholly owned subsidiary of the Registrant) as co-borrowers, closed
a financing transaction with BankBoston, N.A. pursuant to which the co-borrowers
received a Twelve Million Dollar revolving credit loan, with a Seven Million
Dollar sublimit for a consignment facility and a One Million Five Hundred
Thousand Dollar credit facility for forward contracts and executed a Loan and
Consignment Agreement and a Revolving Credit Promissory Note in the principal
amount of $12,000,000. The co-borrowers' obligations are secured by a security
interest in the assets of the co-borrowers and the guaranties of the
co-borrowers; such obligations are further secured by an Unlimited Guaranty
Agreement of the Registrant, which is secured by a first priority security
interest in all of its tangible and intangible personal property and by a pledge
of the stock of RWT, Westbury International, Inc and Westbury Alloys, Inc.
On July 15, 1999, the Registrant, RWT, Westbury International, Inc. and
Westbury Alloys, Inc., as co-borrowers closed a financing transaction with
Alliance Capital Investments Corp.("Alliance"),pursuant to a Loan Agreement
dated July 13, 1999, pursuant to which the co-borrowers received a $2,000,000
term loan. and executed a Loan Agreement and a Term Promissory Note in the
principal amount of $2,000,000. The co-borrower's obligations are secured by a
second priority security interest in the assets of the co- borrowers. As further
consideration for the loan, pursuant to an Agreement dated as of July 13,1999
the Registrant granted to Alliance a Warrant for the purchase of 90,000 shares
of the Registrant's common stock at an exercise price of $3.00 per share, such
Warrant to remain outstanding until July 15, 2009.
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired (to be
filed by amendment hereto)
(b) Pro Forma Financial Information (to be
filed by amendment hereto)
<PAGE>
(c) Exhibits
1. Copy of Asset Purchase Agreement dated as of May 5, 1999.
2. Copy of Amendment to Asset Purchase Agreement dated July 1,
1999.
3. Copy of Escrow Agreement dated July 1, 1999.
4. Copy of $915,000 Promissory Note dated July 1, 1999.
5. Copy of $185,000 Promissory Note dated July 1, 1999.
6. Copy of Employment Agreement between Reliable - West Tech,
Inc and Rajendra A. Shukla dated as of July 1, 1999.
7. Copy of Loan and Consignment Agreement with BankBoston,
N.A. dated July 13, 1999.
8. Copy of Revolving Credit Promissory Note dated July 13,
1999.
9. Copy of Unlimited Guaranty Agreement dated July 13, 1999.
10. Copy of Loan Agreement with Alliance Capital Investment
Corp. dated as of July 13, 1999.
11. Copy of $2,000,000 Term Promissory Note dated
July 15, 1999.
12. Agreement with Alliance Capital Investment Corp. dated
July 13, 1999 with respect to its purchase of Stock
Warrants from Registrant.
13. Copy of Stock Warrant issued to Alliance Capital
Investment Corp. dated as of July 15,1999.
<PAGE>
ITEM 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
(i) Introduction To Unaudited Pro Forma Consolidated Financial Statements
(ii) Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1999
(iii) Unaudited Pro Forma Consolidated Statement of Operations for the
Nine Months Ended March 31, 1999.
(iv) Notes To Unaudited Pro Forma Consolidated Statement Of
Operations for the Year Ended June 30, 1998.
(v) Notes to Unaudited Pro Forma Consolidated Financial Statements
(i) The unaudited pro forma consolidated balance sheet as of March 31, 1999
gives pro forma effect to the acquisition by RWT of certain assets of
Reliable as if the acquisition had occurred on March 31, 1999. The
unaudited pro forma consolidated statements of operations for the nine
months ended March 31, 1999 and for the year ended June 30, 1998 give
pro forma effect to the acquisition of Reliable as if such acquisition
had occurred on July 1, 1997.
The unaudited pro forma consolidated financial statements give effect
to the acquisition described above under the purchase method of
accounting and are based on the assumptions and adjustments described
in the accompanying notes to the unaudited pro forma consolidated
financial statements presented on the following pages. The fair value
of the consideration will be allocated to the assets and liabilities
acquired based upon the fair values of such assets and liabilities at
the Effective Time and may be revised for a period of up to one year
thereafter. The preliminary estimates and assumptions as to the value
of the assets and liabilities of Reliable to the combined company is
based upon information available at the date of preparation of these
unaudited pro forma consolidated financial statements and will be
adjusted upon the final determination of such fair values.
The unaudited pro forma consolidated financial statements do not
purport to represent what RWT results of operations or financial
condition would have actually been or what operations would be if the
Merger had occurred on the dates assumed and are not indicative of
future results. The unaudited pro forma financial statements below
should be read in conjunction with the historical consolidated
financial statements and related noted thereto of RWT and Reliable.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Pro Forma Financial Information (ii)
Westbury Metals Group, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1999
Historical Historical
Westbury Metals Reliable (a) Adjustments Pro Forma
Group, Inc.
ASSETS
CURRENT ASSETS:
Cash $ 368,638 $ 181,598 $ (181,598) (b) $ -
Accounts Receivable 2,287,764 1,664,418 (1,664,418) (b) 2,287,764
Inventory 1,257,329 192,578 1,449,907
Prepaid expenses and other current assets
918,597 - 918,597
Total Current Assets 4,832,328 2,038,594 (2,214,654) 4,656,268
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment 1,425,286 887,276 22,724 (e) 2,335,286
Less: accumulated depreciation and
amortization (269,685) (745,568) 745,568 (e) (269,685)
Property, Plant, and Equipment - net
1,155,601 141,708 768,292 2,065,601
OTHER ASSETS:
Goodwill - net of accumulated amortization
228,040 - 1,190,000 (e) 1,418,040
Acquisition Cost - Reliable - - 58,000 (e) 58,000
Deposits 105,375 - - 105,375
Total Other Assets 333,415 - 1,248,000 1,581,415
TOTAL ASSETS $ 6,321,344 $ 2,180,302 $ (198,362) $ 8,303,284
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 1,424,703 $ 1,395,930 $ (1,395,930) (b) $ 1,550,703
Due to customers 1,377,930 - 1,377,930
Accounts payable and accrued expenses
454,226 107,674 (107,674) (b) 1,336,166
Mortgage Payable 11,092 - 11,092
Total Current Liabilities 3,267,951 1,503,604 (495,664) 4,275,891
Mortgage Payable - Non Current Portion
309,402 - 309,402
Note Payable - Long Term - - 974,000 (c) 974,000
TOTAL LIABILITIES 3,577,353 1,503,604 478,336 5,559,293
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock $.001 par value 3,197 3,197
Common stock, no par value, 100 shares (1,000) (e)
1,000 -
Capital in excess of par 3,171,879 49,000 (49,000) (e) 3,171,879
Accumulated (deficit)earnings (431,085) 626,698 (626,698) (e) (431,085)
TOTAL STOCKHOLDERS' EQUITY (676,698)
2,743,991 676,698 2,743,991
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 6,321,344 $2,180,302 $ (198,362) $ 8,303,284
<PAGE>
Pro Forma Financial Information (iii)
Westbury Metals Group, Inc.
Unaudited Pro Forma Consolidated Statements of Operations
For The Nine Months Ended March 31, 1999
Historical Historical
Westbury Metals Reliable (f) Adjustments Pro Forma
Group, Inc.
Revenues:
Sales $ 22,532,534 $ 11,837,301 (35,692) (g) $ 34,334,143
Refining 3,713,695 - 3,713,695
Other 71,741 - 71,741
Total Revenues 26,317,970 11,837,301 (35,692) 38,119,579
Costs and expenses:
Cost of Sales 21,347,007 11,284,040 (35,692) (g) 32,595,355
Cost of refining 2,747,284 - 2,747,284
Selling, general
and administrative 1,843,195 953,893 56,250 (h) 2,853,338
Depreciation and amortization 116,261 44,625 (i) 269,486
6,600
Interest 124,071 108,563 54,750 (k) 287,384
Total costs and expenses 26,177,818 12,353,095 221,933 38,752,846
Income before income taxes 140,152 (515,794) (257,625) (633,267)
Provision for income taxes 44,036 44,036
Net income (loss) $ 96,116 (515,794) $ (257,625) $ (677,303)
Net income (loss) per share - basic
$ .03 $ (0.21)
Net income (loss) per share - diluted
$ .03
Average shares outstanding - basic
3,197,312 3,197,312
Average shares outstanding - diluted
3,522,312
<PAGE>
Pro Forma Financial Information (iv)
Westbury Metals Group, Inc.
Unaudited Pro Forma Consolidated Statements of Operations
For The Year Ended June 30, 1998
Historical Historical
Westbury Metals Reliable (l) Adjustments Pro Forma
Group, Inc.
Revenues:
Sales $ 1,425,315 $ 18,122,333 (4,530) (g) $ 19,543,118
Refining 1,874,829 - 1,874,829
Other 22,188 - 22,188
Total Revenues 3,322,332 18,122,333 (4,530) 21,440,135
Costs and expenses:
Cost of Sales 1,335,607 16,971,187 (4,530) (g) 18,302,264
Cost of refining 807,221 - 807,221
Selling, general
and administrative 1,377,159 813,248 75,000 (h) 2,265,407
Depreciation and amortization 94,696 25,731 59,500 (i) 299,927
Interest 132,090 184,994 73,000 (k) 390,084
Total costs and expenses 3,746,773 17,995,160 322,970 22,064,903
Income before income taxes (424,441) 127,174 (327,500) (624,768)
Provision for income taxes - 14,100 - 14,100
Net (loss) income $ (424,441) 113,074 $ (327,500) $ (638,868)
Net (loss) income per share - basic
$ (0.20) $ (0.29)
Average shares outstanding - basic 2,173,139
2,173,139
<PAGE>
(a) Represents the historical unaudited balance sheet of Reliable as of March
31, 1999.
(b) The pro forma adjustments to cash, accounts receivable, notes payable, and
accounts payable and accrued expenses represents the elimination of Reliable's
assets not acquired and liabilities not assumed.
(c) The pro forma adjustments to cash, notes payable (current and long term)
represent cash paid (including the estimated acquisition costs) of $1,250,578
and promissory notes issued by Westbury Metals Group to the former shareholder
of Reliable in the aggregate amount of $1,000,000.
(d) The pro forma adjustments to cash and accounts payable and accrued expenses
represents a reclassification of the negative cash balance of $881,940 after
giving effect to the acquisition adjustments
(e) The pro forma adjustment to goodwill, plant, property and equipment, common
stock, capital in excess of par, and accumulated (deficit) earnings represents
the costs in excess of net assets acquired, the estimated costs of the
acquisition of $58,000, and the elimination of the historical equity of
Reliable.
(f) Represents the historical unaudited Statement of Operations of Reliable for
the nine months ended March 31, 1999.
(g) The pro forma adjustments to sales and cost of sales for the nine months
ended March 31, 1999 and the year ended June 30, 1998 represent the elimination
of the intercompany sales and related cost of sales.
(h) The pro forma adjustments to selling, general and administrative expenses
represents additional salary expense to Reliable pursuant to an employment
agreement with the former shareholder.
(i) The pro forma adjustment to depreciation and amortization expense represents
the amortization of the excess of cost over fair market value of net assets
acquired, amortized on a straight-line basis over an estimated life of 20 years.
(j) The pro forma adjustment to depreciation and amortization expense represents
the additional depreciation expense resulting from the fair market value
increase of plant, property and equipment.
(k) The pro forma adjustment to interest expense relates to the promissory notes
issued in connection with the reliable purchase (calculated at the stated
interest rate of 7.0 percent).
(l) Represents the historical unaudited Statement of Operations of Reliable for
the year ended June 30, 1998.
<PAGE>
RELIABLE CORPORATION
FINANCIAL STATEMENTS
AND
SUPPLEMENTARY INFORMATION
WITH
INDEPENDENT AUDITORS' REPORT
YEAR ENDED DECEMBER 31, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Reliable Corporation
Naugatuck, Connecticut
We have audited the accompanying balance sheet of Reliable Corporation
as of December 31, 1998 and the related statements of operations and retained
earnings and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Reliable Corporation
as of December 31, 1998 in conformity with generally accepted accounting
principles.
The accompanying supplementary information, while not necessary for a
fair presentation of financial position, results of operations or changes in
financial position has been examined and, in our opinion, is fairly stated in
all material respects in relation to the financial statement taken as a whole.
Hackensack, New Jersey
May 18, 1999
<PAGE>
RELIABLE CORPORATION
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current assets:
Cash $ 6,560
Accounts receivable - trade 908,174
-affiliate 757,729
Inventories 610,414
Total current assets 2,282,877
Property and equipment, less accumulated
depreciation and amortization 149,042
$2,431,919
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable - bank $1,400,000
Subordinated note payable - officer 200,835
Accounts payable 111,028
Accrued expenses and taxes payable 111,186
Total current liabilities 1,823,049
Stockholders' equity:
Common stock, no par value, 100 shares
authorized, issued and outstanding 1,000
Additional paid-in capital 49,000
Retained earnings 558,870
608,870
$2,431,919
See notes to financial statements
<PAGE>
RELIABLE CORPORATION
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1998
Sales $17,502,428
Costs and expenses:
Cost of sales 16,614,389
Selling, general and administrative 1,152,809
Interest 184,427
17,951,625
Net loss (449,197)
Retained earnings - beginning of year 1,063,357
Less: dividends paid (55,290)
Retained earnings - end of year $ 558,870
See notes to financial statements
<PAGE>
RELIABLE CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
Operating activities:
Net loss $ (449,197)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization of property and equipment 17,933 Changes in
operating assets and liabilities:
Accounts receivable -trade 1,041,447
- affiliate (67,633)
Inventories 37,081
Accounts payable (20,649)
Accrued expenses and taxes payable 86,986
Net cash provided by operating activities 645,968
Investing activities:
Disposition of property and equipment, net (81,183)
Net cash used in investing activities (81,183)
Financing activities:
Repayment of short-term bank borrowings (425,000)
Repayment of loan from officer (110,221)
Dividends paid (55,290)
Net cash used in financing activities (590,511)
Decrease in cash (25,726)
Cash - beginning of year 32,286
Cash - end of year $ 6,560
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $184,427
See notes to financial statements
<PAGE>
RELIABLE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
Note 1 Summary of accounting policies
(a) Business description
The Company was incorporated in 1982 under the laws of the
state of Connecticut and manufactures plating supplies for the
electroplating industry.
(b) Uses of estimates in the preparation of financial statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of net
revenue and expenses during each reporting period. Actual results could
differ from those estimates.
(c) Cash
The Company maintains cash balances at various financial
institutions. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. The Company's accounts at
these institutions may, at times, exceed the Federally insured limits.
The Company has not experienced any losses in such accounts.
(d) Inventories
Inventories, consisting substantially of raw materials and
work in process, are priced at the lower of cost, determined on the
first-in, first-out basis, or market (replacement cost).
(e) Property and equipment
Property and equipment are recorded at cost. Depreciation is
provided for in amounts sufficient to amortize the costs of the related
assets over their estimated useful lives under the straight-line and
accelerated methods for both financial reporting and income tax
purposes.
Maintenance, repairs and minor renewals are charged to expense
when incurred. Replacements and major renewals are capitalized.
(f) Income taxes
The Company has elected to be taxed as an "S" Corporation and,
accordingly, is not subject to Federal income tax. State income taxes
are provided since the Company operates in a state jurisdiction which
does not recognize "S" Corporation status.
Note 2 Account receivable - affiliate
The account receivable - affiliate bears interest at 12% per annum
and is due on demand.
<PAGE>
Note 3 Property and equipment
A summary of property and equipment and the estimated lives used
in the computation of depreciation and amortization is as follows:
Amount Life
Machinery and equipment $639,723 5 years
Automobiles 120,366 3 years
Furniture and fixtures 9,657 5 years
Leasehold improvements 109,864 5 years
879,610
Depreciation and amortization 730,568
$149,042
Note 4 Note payable - bank
Pursuant to an agreement with its bank, the Company has an
available line of credit of $2,000,000. Borrowings under this agreement
bear interest at the bank's prime rate and are due on demand. This
obligation is collateralized by a first security interest in
substantially all assets of the corporation and is personally
guaranteed by the officers of the corporation.
Note 5 Subordinated note payable - officer
Subordinated note payable officer bears interest at 12% per annum,
is due on demand and is subordinated to bank borrowings referred to in
Note 4.
Note 6 Concentration of risk
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily accounts receivable. The
Company performs on-going credit evaluations of its customers'
financial condition and generally requires no collateral from its
customers. The allowance for non-collection of accounts receivable is
based upon the expected collectibility of all accounts receivable.
The Company relies on several key vendors to supply its inventory.
Although there are a limited number of manufacturers in the market
capable of supplying these goods, the Company believes that other
suppliers could provide for the Company's needs on comparable terms.
Abrupt changes in the supply flow could, however, cause a delay in
manufacturing and a possible inability to meet sales commitments on
schedule, or a possible loss of sales, which would affect operating
results adversely.
Note 7 Commitments, contingencies and general comments
The Company leases its plant from an officer of the corporation on
a month-to-month basis at an annual rental of approximately $120,000.
Rental expense charged to operations for the year ended December 31,
1999 aggregated $120,000.
<PAGE>
SUPPLEMENTARY INFORMATION
(Unaudited)
Cost of sales:
Inventories - beginning of year $ 647,495
Purchases 16,540,382
Other costs 36,926
17,224,803
Inventories - end of year 610,414
$16,614,389
Selling, general and administrative expenses:
Salaries - officers $ 117,690
Salaries - other 254,873
Payroll taxes and other taxes 69,978
Insurance and employee benefits 60,745
Rent 120,000
Utilities 31,689
Telephone and telex 16,067
Travel and entertainment 34,791
Professional fees 12,730
Depreciation 17,933
Repairs and maintenance 4,473
Auto and truck 27,751
Office expense and postage 19,943
Advertising 21,617
Donations 1,725
Commissions 67,311
Pension plan 30,000
Bad debt expense 243,493
<PAGE>
RELIABLE CORPORATION
FINANCIAL STATEMENTS
AND
SUPPLEMENTARY INFORMATION
WITH
INDEPENDENT AUDITORS' REPORT
YEAR ENDED DECEMBER 31, 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Reliable Corporation
Naugatuck, Connecticut
We have audited the accompanying balance sheet of Reliable Corporation
as of December 31, 1997 and the related statements of income and retained
earnings and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
Except as explained in the following paragraph, 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 financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
We did not observe the taking of physical inventory as of December 31,
1996, since that date was prior to our appointment as auditors for the Company,
and we were unable to satisfy ourselves regarding inventory quantities by means
of other auditing procedures. Inventory amounts as of December 31, 1996
materially enter into the determination of net income and cash flows for the
year ended December 31, 1997.
Because of the matter discussed in the preceding paragraph, the scope
of our work was not sufficient to enable us to express, and we do not express,
an opinion on the results of operations and cash flows for the year ended
December 31, 1997.
In our opinion, the balance sheet referred to in the first paragraph
presents fairly, in all material respects, the financial position of Reliable
Corporation as of December 31, 1997 in conformity with generally accepted
accounting principles.
The accompanying supplementary information, while not necessary for a
fair presentation of financial position, results of operations or changes in
financial position has been examined and, in our opinion, is fairly stated in
all material respects in relation to the financial statement taken as a whole.
Hackensack, New Jersey
February 28, 1998
<PAGE>
RELIABLE CORPORATION
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
Current assets:
Cash $ 32,286
Accounts receivable - trade 1,949,621
- affiliate 690,096
Inventories 647,495
Total current assets 3,319,498
Property and equipment, less accumulated
depreciation and amortization 85,792
$3,405,290
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable - bank $1,825,000
Subordinated note payable - officer 311,056
Accounts payable 131,677
Accrued expenses and taxes payable 24,200
Total current liabilities 2,291,933
Stockholders' equity:
Common stock, no par value, 100 shares
authorized, issued and outstanding 1,000
Additional paid-in capital 49,000
Retained earnings 1,063,357
1,113,357
$3,405,290
See notes to financial statements
<PAGE>
RELIABLE CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1997
Sales $16,486,502
Costs and expenses:
Cost of sales 15,444,442
Selling, general and administrative 851,280
Interest 165,239
16,460,961
Income before income taxes 25,541
State income taxes 4,200
Net income 21,341
Retained earnings - beginning of year 1,123,225
Less: dividends paid (81,209)
Retained earnings - end of year $1,063,357
See notes to financial statements
<PAGE>
RELIABLE CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
Operating activities:
Net income $ 21,341
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization of property and equipment 21,462 Changes in
operating assets and liabilities:
Accounts receivable -trade (55,950)
-affiliate (214,155)
Inventories (54,395)
Accounts payable (67,083)
Accrued expenses and taxes payable 7,109
Net cash used in operating activities (341,671)
Investing activities:
Disposition of property and equipment, net 13,052
Net cash used in investing activities 13,052
Financing activities:
Short-term bank borrowings 250,000
Loan from officer
124,342
Dividends paid (81,209)
Repayment of long-term debt (18,333)
Net cash provided by financing activities 274,800
Decrease in cash (53,819)
Cash - beginning of year 86,105
Cash - end of year $ 32,286
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $140,695
See notes to financial statements
<PAGE>
RELIABLE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 1 Summary of accounting policies
(a) Business description
The Company was incorporated in 1982 under the laws of the
state of Connecticut and manufactures plating supplies for the
electroplating industry.
(b) Uses of estimates in the preparation of financial statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of net
revenue and expenses during each reporting period. Actual results could
differ from those estimates.
(c) Cash
The Company maintains cash balances at various financial
institutions. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. The Company's accounts at
these institutions may, at times, exceed the Federally insured limits.
The Company has not experienced any losses in such accounts.
(d) Inventories
Inventories, consisting substantially of raw materials and
work in process, are priced at the lower of cost, determined on the
first-in, first-out basis, or market (replacement cost).
(e) Property and equipment
Property and equipment are recorded at cost. Depreciation is
provided for in amounts sufficient to amortize the costs of the related
assets over their estimated useful lives under the straight-line and
accelerated methods for both financial reporting and income tax
purposes.
Maintenance, repairs and minor renewals are charged to expense
when incurred. Replacements and major renewals are capitalized.
(f) Income taxes
The Company has elected to be taxed as an "S" Corporation and,
accordingly, is not subject to Federal income tax. State income taxes
are provided since the Company operates in a state jurisdiction which
does not recognize "S" Corporation status.
Note 2 Account receivable - affiliate
The account receivable - affiliate bears interest at 12% per annum
and is due on demand.
<PAGE>
Note 3 Property and equipment
A summary of property and equipment and the estimated lives used
in the computation of depreciation and amortization is as follows:
Amount Life
Machinery and equipment $639,723 5 years
Automobiles 49,668 3 years
Furniture and fixtures 9,657 5 years
Leasehold improvements 102,439 5 years
801,487
Depreciation and amortization 715,695
$ 85,792
Note 4 Note payable - bank
Pursuant to an agreement with its bank, the Company has an
available line of credit of $2,000,000. Borrowings under this agreement
bear interest at the bank's prime rate and are due on demand. This
obligation is collateralized by a first security interest in
substantially all assets of the corporation and is personally
guaranteed by the officers of the corporation.
Note 5 Subordinated note payable - officer
Subordinated note payable officer bears interest at 12% per annum,
is due on demand and is subordinated to bank borrowings referred to in
Note 4.
Note 6 Concentration of risk
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily accounts receivable. The
Company performs on-going credit evaluations of its customers'
financial condition and generally requires no collateral from its
customers. The allowance for non-collection of accounts receivable is
based upon the expected collectibility of all accounts receivable.
The Company relies on several key vendors to supply its inventory.
Although there are a limited number of manufacturers in the market
capable of supplying these goods, the Company believes that other
suppliers could provide for the Company's needs on comparable terms.
Abrupt changes in the supply flow could, however, cause a delay in
manufacturing and a possible inability to meet sales commitments on
schedule, or a possible loss of sales, which would affect operating
results adversely.
Note 7 Commitments, contingencies and general comments
The Company leases its plant from an officer of the corporation on
a month-to-month basis at an annual rental of approximately $120,000.
Rental expense charged to operations for the year ended December 31,
1997 aggregated $120,000.
<PAGE>
SUPPLEMENTARY INFORMATION
(Unaudited)
Cost of sales:
Inventories - beginning of year $ 593,100
Purchases 15,431,725
Other costs 67,112
16,091,937
Inventories - end of year 647,495
$15,444,442
Selling, general and administrative expenses:
Salaries - officers $ 109,660
Salaries - other 203,294
Payroll taxes and other taxes 39,395
Insurance and employee benefits 45,305
Rent 105,000
Utilities 37,719
Telephone and telex 18,897
Travel and entertainment 35,772
Professional fees 12,800
Depreciation 21,463
Repairs and maintenance 6,225
Auto and truck 53,617
Office expense and postage 16,065
Advertising 29,495
Donations 2,225
Commissions 2,750
Bad debt expense 111,598
$ 851,280
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WESTBURY METALS GROUP, INC.
(Registrant)
By:
Mandel Sherman, President
DATED: September 14, 1999
