UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
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CURRENT REPORT
(Amendment No. 2)
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 24, 2007
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GALES INDUSTRIES INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
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Delaware 000-29245 20-4458244
State of Incorporation Commission File Number IRS Employer I.D. Number
1479 North Clinton Avenue
Bayshore, New York 11706
Address of principal executive offices
Registrant's telephone number: (631) 968-5000
(Former Name or Former Address, if Changed Since Last Report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Explanatory Note
This amendment supplements the Current Report on Form 8-K filed by Gales
Industries Incorporated ("we," "our," "us," "Gales" or the "Company") with the
Securities and Exchange Commission on April 18, 2007, as previously amended, in
which we disclosed the completion of our acquisition of all the outstanding
capital stock of Sigma Metals, Inc., to include in such report the financial
statements of Sigma Metals, Inc. for the period ended March 31, 2007, required
by Item 9.01(a) and the pro forma financial information for the quarter ended
March 31, 2007 required by Item 9.01(b).
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
SIGMA METALS, INC.
Financial Information for the quarter ended March 31, 2007
(Unaudited)
SIGMA METALS, INC.
Balance Sheet
MARCH 31,
ASSETS 2007
----------
(unaudited)
CURRENT ASSETS
Cash and Cash Equivalents $ 26,895
Accounts Receivable 2,734,910
Inventory 2,874,510
Prepaid Expenses 32,234
----------
TOTAL CURRENT ASSETS $5,668,549
----------
FIXED ASSETS - AT COST
Property and Equipment $ 298,218
Less: Accumulated Depreciation 168,378
----------
FIXED ASSETS - NET $ 129,840
----------
OTHER ASSETS
Security Deposits $ 22,763
Other Assets 63
----------
TOTAL OTHER ASSETS $ 22,826
----------
TOTAL ASSETS $5,821,215
==========
The accompanying notes are an integral part of these statements
SIGMA METALS, INC.
Balance Sheet
LIABILITIES AND MARCH 31,
STOCKHOLDERS' EQUITY 2007
----------
(unaudited)
CURRENT LIABILITIES
Accounts Payable $2,162,808
Notes Payable - SBA 4,451
Notes Payable - State Bank - Software 19,889
Notes Payable - State Bank 897,800
Accrued Operating Expenses 79,713
----------
TOTAL CURRENT LIABILITIES $3,164,661
----------
LONG-TERM LIABILITIES
Advances from Stockholders $ 257,000
----------
TOTAL LONG-TERM LIABILITIES $ 257,000
----------
TOTAL LIABILITIES $3,421,661
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock ($300 par value; 100 shares
authorized and outstanding) $ 30,000
Retained Earnings 2,369,554
----------
TOTAL STOCKHOLDERS' EQUITY $2,399,554
----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $5,821,215
==========
The accompanying notes are an integral part of these statements
SIGMA METALS, INC.
Statements of Income and Retained Earnings
THREE MONTHS ENDED
MARCH 31,
2007
------------------
(unaudited)
REVENUE $5,186,868
----------
COST OF GOODS SOLD
Inventory, Beginning $2,812,873
Purchases 3,503,662
Testing & Tolling 80,974
Manufacturing Overhead 206,807
----------
$6,604,316
Less: Inventory, Ending 2,874,510
----------
COST OF GOODS SOLD $3,729,806
----------
GROSS PROFIT $1,457,062
----------
EXPENSES
Selling $ 442,454
General and Administrative 505,120
Interest 37,591
Franchise Tax 425
----------
TOTAL EXPENSES $ 985,590
----------
NET INCOME FOR PERIOD $ 471,472
RETAINED EARNINGS, BEGINNING OF PERIOD 1,898,082
----------
RETAINED EARNINGS, END OF PERIOD $2,369,554
==========
The accompanying notes are an integral part of these statements
SIGMA METALS, INC.
Statements of Cash Flows
THREE MONTHS ENDED
MARCH 31,
2007
------------------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income for Period $ 471,472
Adjustments to Reconcile Net Income to Net
Cash Used in Operating Activities:
Depreciation 9,598
Changes in Assets and Liabilities:
(Increase) Decrease In -
Accounts Receivable (341,963)
Inventory (61,637)
Prepaid Expenses (4,416)
Other Current Assets 788
Increase (Decrease) In -
Accounts Payable 127,778
Accrued Operating Costs (202,879)
---------
NET CASH USED IN
OPERATING ACTIVITIES (Forward) $ (1,259)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment $ (7,443)
---------
NET CASH USED IN
INVESTING ACTIVITIES (Forward) $ (7,443)
---------
The accompanying notes are an integral part of these statements
SIGMA METALS, INC.
Statements of Cash Flows
(Continued)
THREE MONTHS ENDED
MARCH 31,
2007
------------------
(unaudited)
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (Forward) $ (1,259)
--------
NET CASH (USED) BY
INVESTING ACTIVITIES (Forward) $ (7,443)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Notes Payable Equipment (9,201)
--------
NET CASH PROVIDED BY
FINANCING ACTIVITIES $ (9,201)
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS $(17,903)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 44,798
--------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 26,895
========
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 37,591
--------
Income Taxes Paid $ 425
--------
The accompanying notes are an integral part of these statements
SIGMA METALS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
1- SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND OF COMPANY
Sigma Metals, Inc. ("The Company") is a stocking aircraft metals warehouse
with value added capability. The Company also services the critical needs
of aircraft manufacturers and the major airlines. The Company is located
in Deer Park, New York. Its customer base consists of both foreign and
domestic Corporations.
CASH & CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid debt instruments with
an original maturity of three month or less. Cash consists of aggregate
cash balances in the Company's bank accounts and cash equivalents consist
primarily of money market accounts.
ACCOUNTS RECEIVABLE
Accounts receivable are presented at face value, net of the allowance for
doubtful accounts. The allowances for doubtful accounts are established
through provisions charged against income and are maintained at a level
believed adequate by management to absorb estimated bad debts based on
current economic conditions. Management considers all accounts to be
collectible and, therefore, has not established a provision for
uncollectible accounts.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist of trade accounts receivable. The
Company grants credits to its customers, which are located in and out of
the United States. The Company does have foreign sales, but they are
primarily with large corporations that the Company has done business with
for a number of years. The majority of these transactions are insured.
INVENTORY
Inventories are stated at the lower of cost (first-in, first-out) or
market.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation
and amortization. The Company maintains a policy to capitalize all
property and equipment purchases in excess of $1,000. Expenditures for
repairs and improvements in excess of $1,000 that add to the productive
capacity or extend the useful life of an asset are capitalized. Repair and
maintenance charges are expensed as incurred. Property under a capital
lease is capitalized and amortized over the lease terms. Upon disposition,
the cost and related accumulated depreciation are removed from the
accounts and any related gain or loss is reflected in earnings.
Depreciation on property and equipment is calculated on the straight-line
method over the estimated useful lives of the assets.
PROPERTY AND EQUIPMENT - (Continued)
Depreciation and Amortization are provided by charges to operations over
the estimated useful lives, principally on the straight-line method. The
estimated useful lives are:
Tools 5 Years
Furniture, Fixtures and Office
Equipment 5 Years
Transportation Equipment 5 Years
Machinery and Equipment 7 Years
Leasehold Improvements 3-15 Years
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets for impairment at the facility level
annually or when events or circumstances indicate that the carrying value
of such assets may not be fully recoverable. Impairment is evaluated based
on the sum of undiscounted estimated future cash flows expected to result
from use of the assets compared to their carrying value. If impairment is
recognized, the carrying value of the impaired asset is reduced to their
fair value, based on discounted estimated future cash flows.
FINANCE COSTS
Costs connected with obtaining and executing debt arrangements are
capitalized and amortized on the straight-line basis over the term of the
related debt.
REVENUE RECOGNITION
The Company generally recognizes revenue when products are shipped and the
customer takes ownership and assumes risk of loss, collection of the
relevant receivable is probable, persuasive evidence of an arrangement
exists, and the sales price is fixed or determinable.
EXPENSES
Selling, general, and administrative costs are charged to expense as
incurred.
USE OF ESTIMATES
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts in the
financial statements and accompanying notes. The more significant
management estimates are the useful lives of property and equipment,
provisions for inventory obsolescence, unamortized finance costs, accrued
expenses, and various contingencies. Actual results could differ from
those estimates. Changes in facts and circumstances may result in revised
estimates, which are recorded in the period in which they become known.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has estimated the fair value of financial instruments using
available market information and other valuation methodologies in
accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments."
FAIR VALUE OF FINANCIAL INSTRUMENTS - (Continued)
Management of the Company believes that the fair value of financial
instruments, consisting of cash, accounts receivable, accounts payable and
accrued liabilities, approximates carrying value due to the immediate or
short-term maturity associated with these instruments and that the notes
payable is carried at fair value in that is carries interest rates that
are comparable to similar instruments with similar maturities.
INCOME TAXES
The Company has elected to be taxed as a Small Business Corporation and,
consequently, no Federal tax liability is reflected on the Comparative
Statements of Income and Retained Earnings.
2- INVENTORY
Inventory consists primarily of sheet metal and is considered all raw
materials.
2007
----
Raw Material (Sheet Metal) $2,874,510
3- PROPERTY AND EQUIPMENT
A schedule of Property and Equipment as of March 31, 2007 is set forth
below:
Tools, Machinery and Equipment $ 107,702
Furniture, Fixtures and Office Equipment 120,021
Transportation Equipment 17,006
Leasehold Improvements 53,489
----------
Total Property and Equipment $ 298,218
Less: Accumulated Depreciation (168,378)
----------
PROPERTY, AND EQUIPMENT, NET $ 129,840
==========
Depreciation and amortization expense for the three months ended was
$9,598.
4- LINES OF CREDIT
The Company had a Bank Line of Credit that expired on May 31, 2006 with a
maximum borrowing limit of $800,000 and interest at one and one half over
prime. The prime interest rate at March 31, 2007 was 8.25%. The Line of
Credit was renewed for a maximum borrowing limit of $900,000 and interest
at one and one half over prime. This new Line of Credit expired on May 31,
2007. As of March 31, 2007 the balance was $897,800. Subsequent to the
Balance Sheet date, as part of the stock purchase agreement (see Note 10),
the line of credit was satisfied. The Line of Credit is secured by a first
security interest in all assets. The Line of Credit is due on demand or,
if no demand is made, in one payment of all outstanding principal plus
accrued unpaid interest on May 31, 2007, at which time it is subject to
annual review, pending receipt of the subject's financial statements.
5- NOTES PAYABLE - SOFTWARE
In March of 2006, the Company financed the purchase of new computer
software with State Bank of Long Island in the amount of $50,000. The
terms of the Note are 2 years at 8% payable monthly in the amount of
$2,261.36. As of the Balance Sheet date, the current balance was $19,889.
Scheduled amortization payments for the following years are set forth
below:
December 31, 2007 $19,673
December 31, 2008 216
6- NOTES PAYABLE - SBA
The Company has an SBA Loan of $50,000, payable in monthly installments of
$1,477 that started on June 17, 2004 with an interest rate of 4%. The loan
is secured by the Company's assets. This loan matured in May of 2007.
7- RETIREMENT PLAN
The Company adopted a 401(k) Profit Sharing Plan effective June 6, 1994.
The terms of the Plan are as follows:
CONTRIBUTION: Up to 25% of Plan Participations' Compensation.
ALLOCATION- EMPLOYER: 3.32% of Annual Compensation greater than Cov.
Comp. plus 3.32070% of Annual Compensation.
Cov. Comp. is based upon $72,001 year.
NORMAL RETIREMENT AGE: 65 or 5 years of Participation, if later.
FORFEITURES: Allocated to Participants' Accounts.
ELIGIBILITY: All Non-Union Employees over the Age of 21 who
completed 1 year of service.
DEATH BENEFIT: 100% of the Total Account
DISABILITY: 100% of the Total Account
EMPLOYEES CONTRIBUTIONS: Up to 100% of Annual Compensation. (Maximum
$15,000)
MATCHING CONTRIBUTIONS: 0.00% of Employee deferral up to 0.00% of
Compensation deferred.
VESTING SCHEDULE
----------------
YEAR PCT VESTED
---- ----------
1 0
2 20
3 40
4 60
5 80
6-15 100
8- SHAREHOLDER LOANS
Two of the major shareholders have advanced the Company $125,000 each for
working capital. These notes are payable on demand and bear interest at a
rate of 6%. They also have been subordinated to State Bank of Long Island.
9- COMMITMENTS AND CONTINGENCIES
The Company presently leases manufacturing and office facilities under a
lease expiring January 31, 2008, at an annual rental of approximately
$22,000, plus annual real estate tax and utilities by the lessee.
This lease is between the Company and Giaquinto - Lusting Associates, LLC,
a Limited Liability Company.
10- SUBSEQUENT EVENTS
On January 2, 2007, the Company entered into a Stock Purchase Agreement
(the "Sigma Agreement") with Gales Industries Incorporated, a Delaware
Corporation and the holders of all of the outstanding shares of Sigma
Metals (the "Shareholder"). Pursuant to the Sigma Agreement, subject to
the satisfaction of various terms and conditions, the Company will acquire
from the Shareholders all of the issued and outstanding capital stock of
Sigma Metals.
The closing of the Agreement occurred in April of 2007. The purchase price
for all of the shares is $5,008,204, plus an amount equal to Sigma Metals'
earnings for the period from January 1, 2006, until the closing, subject
to certain adjustments as set forth in the Sigma Agreement.
(b) Pro forma financial information
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements and related notes are presented to show the pro forma effects of the
acquisition of Sigma Metals, Inc. and the issuance of Series B Convertible
Preferred Stock having an initial liquidation value of $8,023,000. The pro forma
condensed consolidated statement of operations for the quarter ended March 31,
2007 is presented to show income from continuing operations as if the
acquisition of Sigma Metals, Inc. and the issuance of the Series B Convertible
Preferred Stock had occurred as of the beginning of the period. The pro forma
condensed consolidated balance sheet is based on the assumption that the
acquisition of Sigma Metals, Inc. and the issuance of the Series B Convertible
Preferred Stock had occurred effective March 31, 2007.
Pro forma condensed consolidated financial statements and related notes to
show the pro forma affects of the acquisitions of Sigma Metals, Inc. and the
issuance of the Series B Convertible Stock referred to above on the results of
the registrant as at and for the year ended December 31, 2006, were previously
filed.
Pro forma data are based on assumptions and include adjustments as
explained in the notes to the unaudited pro forma condensed consolidated
financial statements. The pro forma data are not necessarily indicative of the
financial results that would have been attained had the acquisition of Sigma
Metals, Inc. and the issuance of the Series B Convertible Preferred Stock
occurred on the dates referenced above and should not be viewed as indicative of
operations in future periods. The unaudited pro forma condensed consolidated
financial statements should be read in conjunction with the notes thereto, our
consolidated financial statements as of and for the year ended December 31, 2006
included in our Annual Report on Form 10-KSB for the year ended December 31,
2006 and the consolidated financial statements as of and for the years ended
December 31, 2006 and 2005 of Sigma Metals, Inc. filed as part of this Report.
Gales and Sigma Proforma
3/31/2007
Balance Sheet
GALES SIGMA Gales/Sigma
March 31, 2007 March 31, 2007 Adjustments Consolidated
(unaudited) (unaudited) (unaudited) (unaudited)
ASSETS
Current Assets
Cash and Cash Equivalents $ -- $ 26,895 $ 3,004,342 (a) $ 3,031,237
Accounts Receivable, Net of Allowance for Doubtful --
Accounts of 204,566 and 25,000 2,672,799 2,734,910 -- 5,407,709
Inventory 15,866,131 2,874,510 -- 18,740,641
Prepaid Expenses and Other Current Assets 455,958 32,234 -- 488,192
Deposits 776,673 -- -- 776,673
-------------------------------------------- -------------
Total Current Assets 19,771,561 5,668,549 3,004,342 28,444,452
Property, Plant, and Equipment, net 3,399,089 129,840 -- 3,528,929
Deferred Financing Costs 338,294 -- -- 338,294
Other Assets 65,122 -- -- 65,122
Goodwill 1,265,963 -- 5,405,447 (b) 6,671,410
Deposits 495,632 22,826 -- 518,458
-------------------------------------------- -------------
TOTAL ASSETS $ 25,335,661 $ 5,821,215 $ 8,409,789 $ 39,566,665
============================================ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts Payable and Accrued Expenses $ 7,544,130 $ 2,242,521 $ -- $ 9,786,651
Notes Payable - Revolver 5,352,845 897,800 (897,800) (c) 5,352,845
Notes Payable - Current Portion 127,776 24,340 (33,541) (c) 118,575
Notes Payable - Sellers - Current Portion 192,400 -- 361,404 (d) 553,804
Capital Lease Obligations - Current Portion 413,463 -- -- 413,463
Due to Sellers 53,694 -- -- 53,694
Dividends Payable 120,003 -- -- 120,003
Deferred Gain on Sale - Current Portion 38,033 -- -- 38,033
Income Taxes Payable 769,396 -- 187,416 956,812
-------------------------------------------- -------------
Total current liabilities 14,611,740 3,164,661 (382,521) 17,393,880
Long term liabilities
Due to Sellers - Sigma - Net of Current Portion -- 257,000 (257,000) (c) --
Notes Payable - Net of Current Portion 613,514 -- 1,188,341 (c) 1,801,855
Notes Payable - Sellers AIM - Net of Current Portion 577,200 -- -- 577,200
Notes Payable - Sellers Sigma - Net of Current Portion -- -- 722,807 (d) 722,807
Capital Lease Obligations - Net of Current Portion 524,053 -- -- 524,053
Deferred Tax Liability 461,731 -- -- 461,731
Deferred Gain on Sale - Net of Current Portion 703,609 -- -- 703,609
Deferred Rent 86,929 -- -- 86,929
-------------------------------------------- -------------
Total liabilities 17,578,776 3,421,661 1,271,627 22,272,064
Commitments and contingencies
Stockholders' Equity
Series B Convertible Preferred - .001 Par Value, 2,000,000
Shares Authorized, 802,300 Shares Issued and Outstanding
with an intial liquidation value of $8,023,000
'(Authorized, Issued and Outstanding for the Proforma
March 31, 2007 -- -- 8,023 (e) 8,023
Common Stock - .001 Par, 120,055,746 Shares Authorized
59,579,998 and 57,269,301 Shares Issued and Outstanding
as of March 31, 2007; on a pro forma basis 65,314,694
shares issued and outstanding as of March 31, 2007 59,580 30,000 (21,955) (f) 67,625
Additional Paid-In Capital 8,855,065 -- -- 8,855,065
Additional Paid-In Capital Series B Preferred -- -- 7,345,637 (g) 7,345,637
Additional Paid-In Captial: Sigma Shares -- -- 2,176,011 (h) 2,176,011
Accumulated Deficit (1,157,760) 2,369,554 (2,369,554) (i) (1,157,760)
-------------------------------------------- -------------
Total Stockholders' Equity 7,756,885 2,399,554 7,138,162 17,294,601
-------------------------------------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,335,661 $ 5,821,215 $ 8,409,789 $ 39,566,665
============================================ =============
Notes to Unaudited Pro Forma Consolidated Comparative Condensed Balance Sheet
(a) Represents the net cash from sale of Series B Convertible Preferred Stock
remaining after using a portion of the proceeds for the purchase of the
stock of Sigma Metals, Inc. and paying soft costs associated with the
acquisition.
(b) Represents the goodwill resulting from the excess of the purchase price
paid for the stock of Sigma over the value of the assets acquired less the
liabilities assumed.
(c) Represents the revolving loan facility put in place to pay the amounts due
third parties and the former Officers of Sigma for borrowed money.
(d) Represents the current and long term portions of the notes issued by Gales
Industries as part of the purchase price for the stock of Sigma.
(e) Represents the par value of the shares of Gales Industries Series B
Convertible Preferred stock issued, in part, to finance the purchase of
the stock of Sigma.
(f) Represents the elimination of Sigma's Stockholders' Equity ($30,000)
partially offset by the par value ($8,045) of the 8,045,393 shares issued
to the sellers as part of the purchase price for the stock of Sigma.
(g) Represents the excess of amounts paid by investors over the par value of
shares of Gales Industries Series B Convertible Preferred stock net of the
soft costs associated with the issuance of such shares.
(h) Represents the excess over par value of the fair value of the common stock
issued as part of the purchase price for the stock of Sigma.
(i) Represents the eliminations of Sigma's accumulated surplus.
Gales and Sigma Proforma Statement of Income
for the three months ended 3/31/2007
GALES SIGMA Gales/Sigma
3/31/2007 3/31/2007 Adjustments Consolidated
(unaudited) (unaudited) (unaudited) (unaudited)
Net sales 7,488,130 5,186,868 -- 12,674,998
Cost of Sales 6,239,484 3,729,806 -- 9,969,290
---------------------------- ---------- -----------
Gross profit 1,248,646 1,457,062 -- 2,705,708
Operating costs and expenses:
Selling and marketing 95,342 442,879 -- 538,221
General and administrative 1,031,450 505,120 -- 1,536,570
---------------------------- ---------- -----------
Income from operations 121,854 509,063 -- 630,917
Other (Income) and Expenses --
Interest and financing costs 130,954 37,591 18,974 (b) 187,519
Gain on Sale of Real Estate (9,509) -- -- (9,509)
Other Income (1,446) -- -- (1,446)
Other Expenses 8,578 -- -- 8,578
---------------------------- ---------- -----------
Net (Loss) income before provision for income taxes (6,723) 471,472 (18,974) 445,775
Provision for income taxes 64,764 188,683 (a) (7,593) 245,854
---------------------------- ---------- -----------
Net (Loss) Income (71,487) 282,789 (11,380) 199,921
---------------------------- ---------- -----------
Pro Forma dividend attributable to preferred stockholders 160,460 (c) 160,460
-----------
-----------
Pro forma net earnings attributable to common stockholders 39,461
===========
Notes to Pro Forma Combined Statement Of Income
(a) Represents the pro forma income tax expense for Sigma, as if it were
taxable as a "C" not an "S" corp.
(b) Represents one year's interest expense on $1,084,213 of notes issued as
part of purchase price for Sigma stock, being amortizing monthly with an
interest rate of 7%.
(c) Represents the 8% preferred stock dividend for the $8,023,000 Series B
Convertible Preferred Stock used to purchase Sigma.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to its Current Report to be signed on
its behalf by the undersigned hereunto duly authorized.
Dated: June 28, 2007 GALES INDUSTRIES INCORPORATED.
By: /s/ Louis A.Giusto.
--------------------------------------------
Name: Louis A.Giusto.
Title: Vice Chairman and Chief Financial Officer