SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
August 24, 2007
AIR INDUSTRIES GROUP, INC.
-----------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 000-29245 20-4458244
-------- --------- ----------
State of Commission IRS Employer
Incorporation File Number I.D. Number
1479 North Clinton Avenue, Bay Shore, NY 11706
Address of principal executive offices
Registrant's telephone number: (631) 968-5000
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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))
Explanatory Note
This amendment supplements the Current Report on Form 8-K filed by Air
Industries Group, Inc. ("we," "our," "us," "Gales" or the "Company") with the
Securities and Exchange Commission on August 24 2007, in which we disclosed the
completion of our acquisition of all the outstanding capital stock of Welding
Metallurgy, Inc., to include in such report the financial statements of Welding
Metallurgy, Inc. for the years ended December 31, 2006 and 2005 and the periods
ended June 30, 2007 and 2006, required by Item 9.01(a) and the pro forma
financial information for the years ended December 31, 2006 and 2005 and the
periods ended June 30, 2007 and 2006 required by Item 9.01(b).
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
WELDING METALLURGY, INC.
FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION
FOR THE YEARS ENDED
DECEMBER 31, 2006
DECEMBER 31, 2005
WELDING METALLURGY, INC.
Table of Contents
For the Years Ended
December 31, 2006
December 31, 2005
PAGES
-----
Auditors' Report 1
Comparative Balance Sheets 2-3
Comparative Statements of Income and Retained Earnings 4
Comparative Statements of Cash Flows 5-6
Notes to Financial Statements 7-10
Supplementary Information:
Comparative Schedules of Cost of Goods Sold 11
Comparative Schedules of Expenses 12
Independent Auditors' Report
Board of Directors
Welding Metallurgy, Inc.
We have audited the accompanying Comparative Balance Sheets of Welding
Metallurgy, Inc. as of December 31, 2006 and December 31, 2005 and the related
Statements of Income and Retained Earnings, and Cash Flows for each of the years
then ended. These financial statements are the responsibility of the Welding
Metallurgy, Inc. management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 Welding Metallurgy, Inc. as
of December 31, 2006 and December 31, 2005, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
the accompanying schedules of cost of goods sold and expenses is presented only
for supplementary analysis purposes. Such information has not been subjected to
the inquiry and analytical procedures applied in the audit of the basic
financial statements, but was compiled from information that is the
representation of management, without audit or review. Accordingly, we do not
express an opinion or any other form of assurance on the supplementary
information.
Respectfully submitted,
BILDNER & GIANNASCO, LLP
Certified Public Accountants
Jericho, New York
October 1, 2007
WELDING METALLURGY, INC.
Comparative Balance Sheets
DECEMBER 31, DECEMBER 31,
ASSETS 2006 2005
------------ ------------
CURRENT ASSETS
Cash and Cash Equivalents $ 672,457 $ 989,340
Accounts Receivable 270,741 725,226
Inventory 220,059 212,525
Prepaid Expenses 354 1,204
---------- ----------
TOTAL CURRENT ASSETS $1,163,611 $1,928,295
---------- ----------
FIXED ASSETS - AT COST
Property and Equipment $1,707,445 $1,456,178
Less: Accumulated Depreciation 1,217,670 1,072,012
---------- ----------
FIXED ASSETS - NET $ 489,775 $ 384,166
---------- ----------
OTHER ASSETS $ 20,090 $ 20,090
---------- ----------
TOTAL ASSETS $1,673,476 $2,332,551
========== ==========
The accompanying audit report and notes are an integral
part of these statements.
WELDING METALLURGY, INC.
Comparative Balance Sheets
LIABILITIES AND DECEMBER 31, DECEMBER 31,
STOCKHOLDERS' EQUITY 2006 2005
------------ ------------
CURRENT LIABILITIES
Accounts Payable $ 171,947 $ 212,678
Notes Payable - Current Portion 93,731 --
Accrued Operating Expenses 34,850 29,376
---------- ----------
TOTAL CURRENT LIABILITIES $ 300,528 $ 242,054
---------- ----------
LONG-TERM LIABILITIES
Notes Payable - Long Term $ 90,737 $ --
---------- ----------
TOTAL LONG-TERM LIABILITIES $ 90,737 $ --
---------- ----------
TOTAL LIABILITIES $ 391,265 $ 242,054
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock (No par value; 200 shares
authorized; 100 shares issued and
outstanding) $ 437 $ 437
Retained Earnings 1,281,774 2,090,060
---------- ----------
TOTAL STOCKHOLDERS' EQUITY $1,282,211 $2,090,497
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,673,476 $2,332,551
========== ==========
WELDING METALLURGY, INC.
Comparative Statements of Income and Retained Earnings
FOR THE YEAR ENDED
------------------
DECEMBER 31, DECEMBER 31,
2006 2005
------------ ------------
REVENUE $4,456,376 $5,252,414
---------- ----------
COST OF GOODS SOLD $2,011,151 $2,682,565
---------- ----------
GROSS PROFIT $2,445,225 $2,569,849
---------- ----------
EXPENSES
Selling, General, and Administrative $1,966,350 $1,581,247
Interest 2,480 --
Franchise Tax 425 425
---------- ----------
TOTAL EXPENSES $1,969,255 $1,581,672
---------- ----------
NET INCOME FROM OPERATIONS $ 475,970 $ 988,177
INTEREST INCOME 53,744 63,038
---------- ----------
NET INCOME FOR YEAR $ 529,714 $1,051,215
DISTRIBUTIONS (1,338,000) (2,585,000)
RETAINED EARNINGS, BEGINNING OF YEAR 2,090,060 3,623,845
---------- ----------
RETAINED EARNINGS, END OF YEAR $1,281,774 $2,090,060
========== ==========
The accompanying audit report and notes are an integral
part of these statements.
WELDING METALLURGY, INC.
Comparative Statements of Cash Flows
FOR THE YEAR ENDED
------------------
DECEMBER 31, DECEMBER 31,
2006 2005
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income for Year $ 529,714 $ 1,051,215
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 145,657 133,104
Changes in Assets and Liabilities:
(Increase) Decrease In -
Accounts Receivable 454,485 593,341
Inventory (7,534) (100,670)
Prepaid Expenses 850 14,796
Other Current Assets -- (11,340)
Increase (Decrease) In -
Accounts Payable (40,730) 80,769
Accrued Operating Costs 5,474 8,433
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES (Forward) $ 1,087,916 $ 1,769,648
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment $ (251,267) $ (100,449)
----------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES (Forward) $ (251,267) $ (100,449)
----------- -----------
WELDING METALLURGY, INC.
Comparative Statements of Cash Flows
(Continued)
FOR THE YEAR ENDED
-----------------
DECEMBER 31, DECEMBER 31,
2006 2005
---- ----
NET CASH PROVIDED BY
OPERATING ACTIVITIES (Forward) $ 1,087,916 $ 1,769,648
----------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES (Forward) $ (251,267) $ (100,449)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Bank Debt $ 184,468 $ --
Distributions (1,338,000) (2,585,000)
----------- -----------
NET CASH (USED) BY
FINANCING ACTIVITIES $(1,153,532) $(2,585,000)
----------- -----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS $ (316,883) $ (915,801)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 989,340 1,905,141
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 672,457 $ 989,340
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 2,480 $ --
----------- -----------
Income Taxes Paid $ 425 $ 425
----------- -----------
The accompanying audit report and notes are an integral
part of these statements.
SUPPLEMENTARY INFORMATION
WELDING METALLURGY, INC.
Comparative Schedules of Costs of Goods Sold
FOR THE YEAR ENDED
------------------
DECEMBER 31, DECEMBER 31,
2006 2005
---- ----
COST OF GOODS SOLD
Inventory, Beginning $ 212,525 $ 236,623
Purchases, Hardware & Materials & Sub Contracting 669,841 1,188,875
Direct Labor 422,190 475,717
Manufacturing Overhead 926,654 993,875
---------- ----------
$2,231,210 $2,895,090
Less: Inventory, Ending 220,059 212,525
---------- ----------
COST OF GOODS SOLD $2,011,151 $2,682,565
---------- ----------
MANUFACTURING OVERHEAD
Rent $ 59,533 $ 81,942
Supplies 66,287 98,637
Equipment Rental 5,084 5,224
Utilities 28,377 27,268
Repairs and Maintenance 6,917 15,783
Depreciation 158,232 133,576
Truck and Auto 11,945 10,352
Supervisor and Quality Control 458,931 478,340
Payroll Taxes 131,348 142,753
---------- ----------
TOTAL MANUFACTURING OVERHEAD $ 926,654 $ 993,875
========== ==========
The accompanying audit report and notes are an integral
part of these statements.
WELDING METALLURGY, INC.
Comparative Schedules of Expenses
FOR THE YEAR ENDED
------------------
DECEMBER 31, DECEMBER 31,
2006 2005
---- ----
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES
Advertising $ 1,012 $ --
Travel 29,243 28,744
Auto Leases 24,311 11,651
Entertainment 18,352 13,170
Freight and Delivery 30,173 32,286
Officers' Salaries 1,221,500 763,000
Other Wages 357,900 466,897
Employee Benefits -- 52,232
Office Supplies 21,349 31,838
Computer Expense 47,492 40,187
Insurance 51,842 33,925
Hospitalization 48,077 36,616
Outside Services 60,327 11,283
Telephone 6,914 6,854
Dues and Subscriptions 1,806 7,066
Licenses and Fees 800 809
Seminars 11,315 7,848
Professional Fees 16,645 15,853
Holiday Party 14,734 3,449
Donations 1,695 13,505
Security -- 127
Bank Charges 863 3,907
---------- ----------
TOTAL SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES $1,966,350 $1,581,247
========== ==========
The accompanying audit report and notes are an integral
part of these statements.
WELDING METALLURGY, INC.
Notes to Financial Statements
For the Years Ended
December 31, 2006
December 31, 2005
1 - SIGNIFICANT ACCOUNTING POLICIES
Background of Company
Welding Metallurgy, Inc. ("the Company") is a New York Subchapter S
corporation and is 100% owned by the Gantt family. The Company is in the
business of welding, inspecting, and metal fabrication as a supplier to
firms in the aircraft and rotorcraft businesses that are part of the
defense industry. The company operates in a single, leased 10,000 sq. ft.
facility in West Babylon, NY and all of its sales are to US companies.
There are 25 full time employees.
As a Subchapter S corporation, the Company is not taxed as a separate
legal entity; its profits pass through to the owners and become part of
the owners' taxable income. Accordingly, the Company records no income tax
expense on its books and pays no corporate income taxes.
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
Receivables are generally due within 30 days. The company sells to a small
number of customers who are major suppliers to the defense industry.
Management has determined that no reserve for bad debts is required for
the balances presented.
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 the United
States.
Inventory
Inventory is stated at the lower of cost-or market, on a FIFO basis.
1 - SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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.
Property, Plant and Equipment
The Company depreciates all property, plant, and equipment over 7 years
using the double declining balance method of depreciation. Expenditures
for repairs and maintenance are expensed and major betterments are
capitalized.
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 its
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
Sales are recorded at the time of shipment. Pre-acceptance inspections by
customers are generally performed at the Company's plant before a part is
released for shipment.
Expenses
Selling, general, and administrative costs are charged to expenses 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.
1 - SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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."
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 it 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 of the following:
2006 2005
---- ----
Raw Materials $ 40,235 $ 47,635
Work in Progress 173,456 154,664
Finished Goods 6,368 10,226
--------- ---------
$ 220,059 $ 212,525
========= =========
3 - NOTES PAYABLE - BANK
The Company financed the acquisition of certain machinery with a financial
institution in an amount of $200,000. The terms of the agreement are 23
monthly payments of $9,006.22 which includes interest at a rate of 7.46%.
Principal payments over the next two years are as follows:
2007 $ 93,731
2008 $ 90,737
Subsequent to the Balance Sheet date, this note was satisfied from the
purchaser as part of the "Purchase Agreement" (see Note 6).
4 - EMPLOYEE BENEFITS
The Company had offered eligible employees the option of investing in a
tax-deferred Individual Retirement Account (IRA). This plan was intended
to be used in combination with their Social Security benefits and personal
resources to provide them with supplemental income upon retirement. The
Plan was terminated in October 2005.
5 - COMMITMENTS AND CONTINGENCIES
The Company presently leases manufacturing and office facilities under a
lease expiring on December 31, 2007 at an annual rental of approximately
$62,400 plus utilities and annual escalation adjustments for real estate
taxes.
This lease is between the Company and Prime Real Estate Inc.
6 - SUBSEQUENT EVENTS
On March 9, 2007, the Company entered into a Stock Purchase Agreement
("Welding Metallurgy, Inc.") with Gales Industries Incorporated, a
Delaware Corporation, and the holders of all of the outstanding shares of
Welding Metallurgy, Inc. (the "Shareholder"). Pursuant to the Welding
Metallurgy Inc. 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 Welding Metallurgy, Inc.
WELDING METALLURGY, INC.
COMBINED FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION
JUNE 30, 2007
WELDING METALLURGY, INC.
Index to Report
June 30, 2007
PAGES
-----
Accountants' Report 1
Comparative Balance Sheets 2-3
Comparative Statements of Income and
Retained Earnings 4
Comparative Statements of Cash Flows 5-6
Supplementary Information:
Comparative Schedules of Cost of Goods Sold 7
Comparative Schedules of Expenses 8
Independent Accountants' Report
Board of Directors
Welding Metallurgy, Inc.
Gentlemen:
We have compiled the accompanying Comparative Balance Sheets of Welding
Metallurgy, Inc. as of June 30, 2007 and June 30, 2006 and the related
Comparative Statements of Income and Retained Earnings and Cash Flows for the
period then ended, as well as the accompanying Schedules of Costs of Goods Sold
and Expenses in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of financial statements
and supplementary schedules information that is the representation of
management. We have not audited nor reviewed the accompanying financial
statements and supplementary schedules and, accordingly, we do not express an
opinion or any other form of assurance on them.
Management has elected to omit all the disclosures required by generally
accepted accounting principles. If the omitted disclosures were included in the
financial statements, they might influence users' conclusions about the
Company's financial position, results of operations, and cash flows.
Accordingly, these financial statements are not designed for persons who are not
informed about such matters.
Respectfully submitted,
BILDNER & GIANNASCO, LLP
Certified Public Accountants
Jericho, New York
November 7, 2007
WELDING METALLURGY, INC.
Comparative Balance Sheets
JUNE 30, JUNE 30,
ASSETS 2007 2006
CURRENT ASSETS
Cash and Cash Equivalents $ 385,595 $1,841,987
Accounts Receivable 534,050 939,847
Inventory 382,851 151,818
Prepaid Expenses -- 6,849
---------- ----------
TOTAL CURRENT ASSETS $1,302,496 $2,940,501
---------- ----------
FIXED ASSETS - AT COST
Property and Equipment $1,716,659 $1,456,178
Less: Accumulated Depreciation 1,288,627 1,151,128
---------- ----------
FIXED ASSETS - NET $ 428,032 $ 305,050
---------- ----------
OTHER ASSETS
Loan Receivable -- 20,090
---------- ----------
TOTAL ASSETS $1,730,528 $3,265,641
========== ==========
The accompanying audit report and notes are an integral
part of these statements.
WELDING METALLURGY, INC.
Comparative Balance Sheets
LIABILITIES AND JUNE 30, JUNE 30,
STOCKHOLDERS' EQUITY 2007 2006
CURRENT LIABILITIES
Accounts Payable $ 185,259 $ 86,264
Due to Air Industries Mach -- --
Due to Air Industries Group -- --
Loan Payable - Officers 83,672 --
Accrued Operating Expenses 2,390 3,243
---------- ----------
TOTAL CURRENT LIABILITIES $ 271,321 $ 89,507
---------- ----------
LONG-TERM LIABILITIES
Notes Payable - Long Term $ 136,641 $ --
---------- ----------
TOTAL LONG-TERM LIABILITIES $ 136,641 $ --
---------- ----------
TOTAL LIABILITIES $ 407,962 $ 89,507
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock ($300 par value; 100 shares
authorized and outstanding) $ 437 $ 437
Equity -- --
Retained Earnings 1,322,129 3,175,697
---------- ----------
TOTAL STOCKHOLDERS' EQUITY $1,322,566 $3,176,134
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,730,528 $3,265,641
========== ==========
WELDING METALLURGY, INC.
Comparative Statements of Income and Retained Earnings
FOR THE PERIOD ENDED
--------------------
JUNE 30, JUNE 30,
2007 2006
---- ----
REVENUE $ 1,798,084 $ 2,616,241
----------- -----------
COST OF GOODS SOLD $ 970,964 $ 1,046,496
----------- -----------
GROSS PROFIT $ 827,120 $ 1,569,745
----------- -----------
EXPENSES
Selling, General, and Administrative $ 577,201 $ 409,078
Interest Expense 6,211 --
Franchise Tax -- --
----------- -----------
TOTAL EXPENSES $ 583,412 $ 409,078
----------- -----------
NET INCOME FROM OPERATIONS $ 243,708 $ 1,160,667
INTEREST INCOME 9,343 18,970
----------- -----------
NET INCOME FOR PERIOD $ 253,051 $ 1,179,637
DISTRIBUTIONS (212,696) (94,000)
RETAINED EARNINGS, BEGINNING OF PERIOD 1,281,774 2,090,060
----------- -----------
RETAINED EARNINGS, END OF PERIOD $ 1,322,129 $ 3,175,697
=========== ===========
WELDING METALLURGY, INC.
Comparative Statements of Cash Flows
FOR THE PERIOD ENDED
--------------------
JUNE 30, JUNE 30,
2007 2006
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income for Period $ 253,051 $ 1,179,637
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 70,956 79,116
Changes in Assets and Liabilities:
(Increase) Decrease In -
Accounts Receivable (263,309) (214,621)
Inventory (162,792) 60,707
Prepaid Expenses 354 (5,645)
Other Current Assets 20,090 --
Increase (Decrease) In -
Accounts Payable 13,313 (126,414)
Intercompany Payable -- --
Accrued Operating Costs (32,460) (26,133)
----------- -----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (Forward) $ (100,797) $ 946,647
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment $ (9,214) $ --
----------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES (Forward) $ (9,214) $ --
----------- -----------
WELDING METALLURGY, INC.
Comparative Statements of Cash Flows
(Continued)
FOR THE PERIOD ENDED
--------------------
JUNE 30, JUNE 30,
2007 2006
---- ----
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (Forward) $ (100,797) $ 946,647
----------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES (Forward) $ (9,214) $ --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) in Bank Debt $ (47,827) $ --
(Decrease) in Notes Payable - Officers 83,672 --
Distributions (212,696) (94,000)
----------- -----------
NET CASH (USED) BY
FINANCING ACTIVITIES $ (176,851) $ (94,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ (286,862) $ 852,647
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 672,457 989,340
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 385,595 $ 1,841,987
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 6,211 $ --
----------- -----------
Income Taxes Paid $ -- $ --
----------- -----------
SUPPLEMENTARY INFORMATION
WELDING METALLURGY, INC.
Comparative Schedules of Cost of Goods Sold
FOR THE PERIOD ENDED
--------------------
JUNE 30, JUNE 30,
2007 2006
COST OF GOODS SOLD
Inventory, Beginning $ 220,059 $ 212,525
Purchases, Hardware, Materials & Sub-Contracting 649,331 337,565
Direct Labor 192,738 190,046
Manufacturing Overhead 291,687 458,178
---------- ----------
$1,353,815 $1,198,314
Less: Inventory, Ending 382,851 151,818
---------- ----------
COST OF GOODS SOLD $ 970,964 $1,046,496
========== ==========
MANUFACTURING OVERHEAD
Rent $ 46,783 $ 26,775
Supplies 24,461 20,141
Equipment Rental 2,542 2,542
Utilities 15,136 16,225
Repairs and Maintenance 2,586 1,487
Depreciation 70,956 79,116
Supervisor and Quality Control 123,335 305,563
Payroll Taxes 5,888 6,329
---------- ----------
TOTAL MANUFACTURING OVERHEAD $ 291,687 $ 458,178
========== ==========
WELDING METALLURGY, INC.
Comparative Schedules of Expenses
FOR THE PERIOD ENDED
--------------------
JUNE 30, JUNE 30,
2007 2006
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Travel 9,986 10,319
Auto 10,953 11,181
Entertainment 4,179 7,581
Freight and Delivery 9,634 18,099
Officers' Salaries 225,000 60,500
Other Wages 188,385 208,814
Office Supplies 9,268 17,589
Computer Expense 18,411 11,792
Insurance 2,536 2,500
Hospitalization 24,249 16,127
Telephone 3,453 3,415
Advertising -- 1,012
Dues and Subscriptions 4,056 1,506
Licenses and Fees 100 100
Seminars 900 1,315
Professional Fees 61,151 6,418
Outside Services -- 28,247
Holiday Party 411 254
Donations 4,268 1,118
Bank Charges 261 1,191
-------- --------
TOTAL SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES $577,201 $409,078
======== ========
(b) Pro forma financial information
Air Industries Group, Inc. (AIRI.ob)
Unaudited Pro Forma Consolidated Comparative Balance Sheet
December 31, 2006
Welding
Metallurgy, AIRI Welding
AIRI Consolidated Inc. Adjustments Consolidated
----------------- ----------- ----------- ------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 3,049,140 $ 672,457 $ 609,832 (a) $ 4,331,429
Accounts Receivable (Net of Allowance for Doubtful
Accounts of $176,458 for AIRI) 5,901,904 270,741 6,172,645
Inventory 18,070,514 220,059 18,290,573
Prepaid Expenses and Other Current Assets 260,567 354 260,921
Deposits 180,456 -- -- 180,456
--------------------------------------------- -----------
Total Current Assets 27,462,581 1,163,611 609,832 29,236,024
Property, Plant, and Equipment, net 3,697,311 489,775 4,187,086
Deferred Financing Costs 369,048 -- -- 369,048
Other Assets 64,373 20,090 84,463
Goodwill 6,671,410 -- 4,849,989 (b)(l) 11,521,399
Deposits 471,293 -- -- 471,293
--------------------------------------------- -----------
TOTAL ASSETS $38,736,016 $ 1,673,476 $ 5,459,821 $45,869,313
============================================= ===========
Current Liabilities
Accounts Payable and Accrued Expenses $ 9,966,048 $ 206,797 (432,730) (h)(k) $ 9,740,115
Notes Payable Current Portion 127,776 93,731 (93,731) (c) 127,776
Notes Payable - Revolver 5,027,463 -- 5,027,463
Subordinated Note - SCCF 4,500,000 (j) 4,500,000
Notes Payable - Sellers Sigma - Current Portion 553,804 -- 553,804
Notes Payable - Sellers Welding
Metallurgy - Current Portion -- -- 1,000,000 (d) 1,000,000
Capital Lease Obligations - Current Portion 407,228 -- 407,228
Due to Sellers AIM 53,694 -- 53,694
Dividends Payable 120,003 -- 120,003
Deferred Gain on Sale - Current Portion 38,033 -- 38,033
Income Taxes Payable 653,426 -- 328,978 (i) 982,404
--------------------------------------------- -----------
Total current liabilities 16,947,475 300,528 5,302,517 22,550,520
Long term liabilities
Due to Sellers - Sigma - Net of Current Portion -- -- --
Notes Payable - Net of Current Portion 1,833,799 90,737 (90,737) (c) 1,833,799
Notes Payable - Sellers AIM - Net of
Current Portion 1,290,562 -- 1,290,562
Notes Payable - Sellers Sigma - Net of
Current Portion 722,807 -- 722,807
Notes Payable - Sellers Welding Metallurgy - Net
of Current Portion 1,000,000 (d) 1,000,000
Capital Lease Obligations - Net of Current Portion 552,589 -- 552,589
Deferred Tax Liability 512,937 -- 512,937
Deferred Gain on Sale - Net of Current Portion 713,118 -- 713,118
Deferred Rent 39,371 -- 39,371
--------------------------------------------- -----------
TOTAL LIABILITIES $22,612,658 $ 391,265 $ 6,211,780 $29,215,703
Commitments and Contingencies
Stockholders' Equity
Preferred Stock - 8,003,716 shares authorized
Series A Convertible Preferred - $.001 Par value,
1,000 Shares authorized, 900 shares Issued and
0 Outstanding
Series B Convertible Preferred - $.001 Par value,
2,000,000 Shares Authorized, 802,300 Shares
Issued and Outstanding with an initial
liquidation value of $8,023,000 (Authorized ,
Issued and Outstanding for the Proforma
December 31, 2006) $ 802 $ -- $ 802
Common Stock - $.001 Par value, 120,055,746 Shares
Authorized, 65,314,732 Shares Issued and
Outstanding as of December 31, 2006 on a pro
forma basis 67,638,348 Shares Issued and
Outstanding as of December 31,2006 65,314 437 1,887 (e) 67,638
Additional Paid-In Capital 7,898,702 -- 7,898,702
Additional Paid-In Capital Series B Preferred 7,352,858 -- 7,352,858
Additional Paid-In Capital: Sigma Shares 1,891,955 -- 1,891,955
Additional Paid-In Capital: Welding Shares -- -- 564,176 (e)(f) 564,176
Retained Earnings (Accumulated Deficit) (1,086,273) 1,281,774 (1,281,774) (g) (1,086,273)
Proforma net effect of P&L adjustments
(see attached schedule below) -- -- (36,248) (h)(i) (36,248)
--------------------------------------------- -----------
Total Stockholders' Equity 16,123,358 1,282,211 (751,959) 16,653,610
--------------------------------------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,736,016 $ 1,673,476 $ 5,459,821 $45,869,313
============================================= ===========
Notes to Comparative Pro Forma Consolidated & Condensed Balance Sheet
(a) Represents the net proceeds from sale of SCCF Loan Agreement after
completing the purchase of Welding Metallurgy and paying soft costs
associated with the acquisition, along with notes of as if the deal was
done on 12/31/2006
(b) Represents the goodwill resulting from the excess of the purchase price
paid for the stock of Welding Metalurgy after adjusting the value of the
assets acquired and liabilities assumed to reflect the purchase price if
the deal was completed on 12/31/2006.
(c) Represents the payoff of the note to a financial institution satisfied as
part of the SPA and the former Officers of Welding Metallurgy if the deal
was completed on 12/31/2006.
(d) Represents the long term portion of the $2.0 MM note purchase price
(due 8/31/2011; with the first installment $500,000 due 8/24/2008; bearing
interest @ 7% per annum commencing 8/24/2008; with quarterly installments
therafter of $125,000) accepted by the Welding Metallurgy sellers as part
of the purchase.
(e) Represents the elimination the of common stock portion of Welding
Metallurgy Stockholders' Equity ($437) partially offset by the book value
($2324) of the pro forma 2,323,626 shares that would have been issued to
the sellers as part of the purchase price if the transaction had closed on
December 31,2006
(f) Represents the excess over par value of share issued to Welding Metallurgy
sellers.
(g) Represents the pro forma elimination of Welding Metallurgy accumulated
surplus $1,281,774
(h) Represents interest accrued based on SCCF Loan Agreement $4.5MM @ prime +6
(14.25%) and elimination of $2,480 interest on former Welding Met's notes
(i) Represents 40% estimated tax provision/(benefit) of Welding Met as if it
was a C corporation
(j) Issuance of the demand note SCCF Loan Agreement in connection with the
Welding Metallurgy acquisition
(k) Represents adjustment to former Welding Met Officer's salaries
($1,221,500) and adjusted for one officer now an employee of Air
Industries Group, Inc earning $150,000 annual salary
(l) Represents the $2.0mm note resulting from Welding Met acquisition reduced
to reflect the accretion of the interest as a result of imputed interest
for one year @7% ($140,000)
Air Industries Group, Inc. (AIRI.ob)
Unaudited Pro Forma Combined Statement Of Income
December 31, 2006
Welding
AIRI Metallurgy, AIRI Welding
Consolidated Inc. Adjustments Consolidated
------------ ----------- ----------- ------------
Net Sales $ 51,024,410 $ 4,456,376 $ 55,480,786
Cost of Sales 40,825,436 2,011,151 $ 42,836,587
------------ ----------- ---------- ------------
Gross Profit 10,198,974 2,445,225 -- 12,644,199
Operating costs and expenses
Selling and marketing 1,524,858 1,012 $ 1,525,870
General and administrative 6,007,640 1,965,338 (1,071,500) (k) $ 6,901,478
------------ ----------- ---------- ------------
Income (Loss) from operations 2,666,476 478,875 1,071,500 4,216,851
Other (income) and expenses:
Interest & financing costs (net) 1,230,692 (51,264) $778,770 (h)(l) $ 1,958,198
Gain on Sale of Life Insurance Policy (53,047) -- $ (53,047)
Gain on Sale of Real Estate (300,037) -- $ (300,037)
Other Income (435,627) -- $ (435,627)
Other Expenses 247,084 425 $ 247,509
------------ ----------- ---------- ------------
Net Income (Loss) before provision for income taxes 1,977,411 529,714 292,730 2,799,855
Provision for income taxes 1,232,915 211,886 (i) 117,092 (i) $ 1,561,893
------------ ----------- ---------- ------------
Net Income (Loss) $ 744,496 $ 317,828 $ 175,638 $ 1,237,962
------------ ----------- ---------- ------------
Proforma dividend attributable to preferred stockholders 561,610 561,610
------------ ------------
Proforma net earnings attributable to common stockholders 182,886 676,352
============ ============
Earnings per share (basic) $ 0.02
============
Earnings per share (diluted) $ 0.01
============
Weighted average shares outstanding (basic) 42,460,513 (m)
============
Weighted average shares outstanding (diluted) 46,803,612 (m)
============
Notes to Comparative Pro Forma Statement Of Operations
(h) Represents interest accrued based on SCCF Loan Agreement $4.5MM @ prime +6
(14.25%) and elimination of $2,480 interest on former Welding Met's notes
(i) Represents 40% estimated tax provision/(benefit) of Welding Met as if it
was a C corporation
(j) intentionally omitted
(k) Represents adjustment to former Welding Met Officer's salaries
($1,221,500) and adjusted for one officer now an employee of Air
Industries Group, Inc earning $150,000 annual salary
(l) Represents the $2.0mm note resulting from Welding Met acquisition reduced
to reflect the accretion of the interest as a result of imputed interest
for one year @7% ($140,000) imputed interest for one year @7% ($140,000)
(m) adjusted for the change in the weighted average shares as a result of the
proforma Welding Met Shares
Air Industries Group, Inc. (AIRI.ob)
Unaudited Pro Forma Consolidated Comparative Balance Sheet
June 30, 2007
Welding
AIRI Metallurgy, AIRI Welding
Consolidated Inc. Adjustments Consolidated
------------ ----------- ----------- ------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 1,010,522 $ 385,595 $ (226,326) (a)(m)(o)(q) $ 1,169,791
Accounts Receivable (Net of Allowance for
Doubtful Accounts of $244,597 for AIRI) 6,331,004 534,050 6,865,054
Inventory 20,360,593 382,851 20,743,444
Prepaid Expenses and Other Current Assets 261,082 - 261,082
Deposits 692,578 - - 692,578
------------------------------------------ ------------
Total Current Assets 28,655,779 1,302,496 (226,326) 29,731,949
Property, Plant, and Equipment, net 3,394,883 428,032 3,822,915
Deferred Financing Costs 346,820 - 346,820
Other Assets 486,885 - 486,885
Goodwill 6,434,282 - 4,949,634 (b) 11,383,916
Income Taxes Receivable 60,260 - 60,260
Deposits 424,490 - 424,490
------------------------------------------ ------------
------------------------------------------ ------------
TOTAL ASSETS $ 39,803,399 $ 1,730,528 $ 4,723,308 $ 46,257,235
=========================================== ============
Current Liabilities
Accounts Payable and Accrued Expenses $ 7,501,566 $ 187,649 103,263 (h)(k)(l)(n)(o)(p)(q) $ 7,792,478
Notes Payable Current Portion 127,776 83,672 (83,672) (c) 127,776
Notes Payable - Revolver 9,899,414 - 9,899,414
Subordinated Note - SCCF 4,500,000 (j) 4,500,000
Notes Payable - Sellers AIM- Current Portion 192,400 192,400
Notes Payable - Sellers Sigma- Current Portion 362,604 - 362,604
Notes Payable - Sellers Welding Metallurgy -
Current Portion - - 500,000 (d)(m)(o)(q) 500,000
Capital Lease Obligations - Current Portion 166,397 - 166,397
Due to Sellers AIM - - -
Dividends Payable 120,003 - 120,003
Deferred Gain on Sale - Current Portion 38,033 - 38,033
Income Taxes Payable - - 39,790 (i) 39,790
------------------------------------------ ------------
Total current liabilities 18,408,193 271,321 5,059,381 23,738,895
Long term liabilities
Due to Sellers - Sigma - Net of Current
Portion - - -
Notes Payable - Net of Current Portion 709,070 136,641 (136,641) (c) 709,070
Notes Payable - Sellers AIM - Net of Current
Portion 1,074,573 - 1,074,573
Notes Payable - Sellers Sigma - Net of
Current Portion 529,100 - 529,100
Notes Payable - Sellers Welding Metallurgy -
Net of Current Portion 750,000 (d) 750,000
Capital Lease Obligations - Net of Current
Portion 776,988 - 776,988
Deferred Tax Liability 695,379 - 695,379
Deferred Gain on Sale - Net of Current
Portion 694,101 - 694,101
Deferred Rent 134,487 - 134,487
------------------------------------------ ------------
TOTAL LIABILITIES $ 23,021,891 $ 407,962 $ 5,672,740 $ 29,102,593
Commitments and Contingencies
Stockholders' Equity
Preferred Stock - 8,003,716 shares
authorized Series A Convertible
Preferred - $.001 Par value, 1,000
Shares authorized, 900 shares Issued
and 0 Outstanding
Series B Convertible Preferred - $.001 Par
value, 2,000,000 $ 802 $ - $ 802
Shares Authorized, 802,300 Shares Issued
and Outstanding with an initial
liquidation value of $8,023,000
(Authorized , Issued and Outstanding for
the Proforma December 31, 2006)
Common Stock - $.001 Par value, 120,055,746
Shares Authorized, 67,008,507 Shares Issued
and Outstanding as of June 30, 2007 on a
pro forma basis 69,100,978 Shares Issued
and Outstanding as of June 30,2007 67,009 437 1,655 (e) 69,101
Additional Paid-In Capital 8,942,086 - 8,942,086
Additional Paid-In Capital Series B Preferred 7,352,858 - 7,352,858
Additional Paid-In Capital: Sigma Shares 1,891,955 - 1,891,955
Additional Paid-In Capital: Welding Shares - - 564,408 (e)(f) 564,408
Retained Earnings (Accumulated Deficit) (1,473,202) 1,322,129 (1,322,129) (g) (1,473,202)
Proforma net effect of P&L adjustments (see
attached schedule below) - - (193,366) (h)(i)(k)(l)(n)(p) (193,366)
------------------------------------------ ------------
Total Stockholders' Equity 16,781,508 1,322,566 (949,432) 17,154,642
------------------------------------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 39,803,399 $ 1,730,528 $ 4,723,308 $ 46,257,235
========================================== ============
Notes to Comparative Pro Forma Consolidated & Condensed Balance Sheet
(a) Represents the net proceeds from sale of SCCF Loan Agreement after
completing the purchase of Welding Metallurgy and paying soft costs
associated with the acquisition, along with notes of Welding Metallurgy as
if the deal was done on 6/30/2007
(b) Represents the goodwill resulting from the excess of the purchase price
paid for the stock of Welding Metalurgy after adjusting the value of the
assets acquired and liabilities assumed to reflect the purchase price if
the deal was completed on 6/30/2007
(c) Represents the payoff of the note to a financial institution satisfied as
part of the SPA and the former Officers of Welding Metallurgy if the deal
was completed on 6/30/2007
(d) Represents the long term portion of the $2.0 MM note purchase price
(due 8/31/2011; with the first installment $500,000 due 8/24/2008; bearing
interest @ 7% per annum commencing 8/24/2008; with quarterly installments
therafter of $125,000) accepted by the Welding Metallurgy sellers as part
of the purchase.
(e) Represents the elimination the of common stock portion of Welding
Metallurgy Stockholders' Equity ($437) partially offset by the book value
($2092) of the pro forma 2,092,471 shares that would have been issued to
the sellers as part of the purchase price if the transaction had closed on
June 30,2007
(f) Represents the excess over par value of share issued to Welding Metallurgy
sellers.
(g) Represents the pro forma elimination of Welding Metallurgy accumulated
surplus $1,322,566
(h) Represents interest accrued based on SCCF Loan Agreement $4.5MM @ prime +6
(14.25%) @ 6 months for 2007 and elimination of $6,211 interest on former
Welding Met's notes
(i) Represents 40% estimated tax provision/(benefit) of Welding Met as if it
was a C corporation
(j) Issuance of the demand note SCCF Loan Agreement in connection with the
Welding Metallurgy acquisition
(k) Represents elimination of Welding Met's legal fees @ 6/30/07 ($61,151)
(l) Represents adjustment to former Welding Met Officer's salaries @ 6/30/07
($225,000) and adjusted for one officer now an employee of Air Industries
Group, Inc earning $150,000 annual salary for six months earning ($75,000)
(m) Represents the payment of the first installment of the $2.0MM note all as
principal ($500K)
(n) Represents the interest accrual ($26,250) on residual principal $1.5MM
note (aforementioned $2.0mm note) after initial $500K principal payment @
7% per annum for the first qtr
(o) Represents the first qtrly payment of principal and interest of $1.5MM
note (aforementioned $2.0 mm note)($125,000 principal and $26,250
interest)
(p) Represents the interest accrual ($24,063) on residual principal $1.375MM
note (aforementioned $2.0mm note) after initial $500K principal payment
and 1st qtr principal payment of $125k @ 7% per annum for the second qtr
(q) Represents the first qtrly payment of principal and interest of $1.375MM
note (aforementioned $2.0 mm note)($125,000 principal and $24,063
interest)
Air Industries Group, Inc. (AIRI.ob)
Unaudited Pro Forma Combined Satement Of Income
June 30, 2007
Welding
AIRI Metallurgy, AIRI Welding
Consolidated Inc. Adjustments Consolidated
------------ ----------- ----------- ------------
Net Sales $ 18,477,666 $ 1,798,084 $ 20,275,750
Cost of Sales 14,856,182 970,964 $ 15,827,146
------------ ----------- --------- ------------
Gross Profit 3,621,484 827,120 - 4,448,604
Operating costs and expenses
Selling and marketing 620,878 - $ 620,878
General and administrative 2,836,412 577,201 (211,151)(k)(l) $ 3,202,462
------------ ----------- --------- ------------
Income (Loss) from operations 164,194 249,919 211,151 625,264
Other (income) and expenses:
Interest & financing costs (net) 411,823 (3,132) $ 364,727 (h)(n)(p) $ 773,418
Gain on Sale of Life Insurance Policy - - $ -
Gain on Sale of Real Estate (19,018) - $ (19,018)
Other Income (9,887) - $ (9,887)
Other Expenses 25,304 - $ 25,304
------------ ----------- --------- ------------
Net Income (Loss) before provision for income taxes (244,028) 253,051 (153,576) (144,553)
Provision/(Benefit) for income taxes 142,903 101,220 (i) (61,430) (i) $ 182,693
------------ ----------- --------- ------------
Net Income (Loss) $ (386,931) $ 151,831 $ (92,146) $ (327,246)
------------ ----------- --------- ------------
Less dividend attributable to preferred stockholders 110,964 110,964
------------ ------------
Net loss attributable to common stockholders $ (497,895) $ (438,210)
============ ============
Loss Per Share (basic and diluted) $ (0.01)
============
Weighted average shares outstanding (basic and diluted) 64,333,885 (o)
============
Notes to Comparative Pro Forma Statement Of Operations
(h) Represents interest accrued based on SCCF Loan Agreement $4.5MM @ prime +6
(14.25%) @ 6 months for 2007 and elimination of $6,211 interest on former
Welding Met's notes
(i) Represents 40% estimated tax provision/(benefit) of Welding Met as if it
was a C corporation
(j) intentionally omitted
(k) Represents elimination of Welding Met's legal fees ($61,151)
(l) Represents adjustment to former Welding Met Officer's salaries @ 6/30/07
($225,000) and adjusted for one officer now an employee of Air Industries
Group, Inc earning $150,000 annual salary for six months earning ($75,000)
(m) intentionally omitted
(n) Represents the interest accrual ($26,250) on residual principal $1.5MM
note (aforementioned5$2.0mminote)laftereinitial $500Knprincipalhpayment
@t7% per annum for the first qtr
(o) intentionally omitted
(p) Represents the interest accrual ($24,063) on residual principal $1.375MM
note (aforementioned $2.0mm note) after initial $500K principal payment
and 1st qtr principal payment of $125k @ 7% per annum for the second qtr
(q) adjusted for the change in the weighted average shares as a result of the
proforma Welding Met Shares
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: November 13, 2007 AIR INDUSTRIES GROUP, INC.
By: /s/ Louis A.Giusto
--------------------------------------------
Name: Louis A.Giusto
Title: Vice Chairman and Chief Financial Officer