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 earliest event reported) January 11, 1999
Worksafe Industries Inc. f/k/a
Eastco Industrial Safety Corp.
(Exact name of registrant as specified in charter)
New York 0-8027 11-1874010
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
130 West 10th Street, Huntington Station, New York 11746
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 428-1802
Eastco Industrial Safety Corp.
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
1. On January 11, 1999, effective the close of business on December 31,
1998, the registrant sold certain of its assets ("Acquired Assets") of its
distribution business and the Eastco name to Arbill Industries, Inc. ("Arbill").
Included in the Acquired Assets sold amongst various items were the following,
excluding certain specified Excluded Assets.
(a) Office and warehouse equipment, furniture, fixtures and catalogs.
(b) Lists of all customers and suppliers of goods and services of the
Distribution Division.
(c) Intellectual Property used in the operation of the Distribution
Division.
(d) Specified leases and licenses.
(e) Inventory.
(f) Open sourcing orders or contracts and open purchase orders or
contracts of the Distribution Division.
(g) Registrant's rights, if any, in and to the names Eastco Industrial
Safety and Puerto Rico Safety.
2. Until the 60th day after January 11, 1999, the registrant will continue
to collect the accounts receivable of the Distribution Division sold and on the
5th day thereafter, Arbill will purchase 90% of primarily all unpaid invoices
subsequent to November 30, 1998.
3. The purchase price for the acquired assets, which was determined by good
faith negotiation between the two parties is $2,493,641.96, exclusive of related
adjustments, payments applicable to rent and payments for open accounts
receivable.
4. Neither the registrant or any of its affiliates, directors, or officers
or associates thereof have any material relationship with Arbill.
5. The sale described above was made pursuant to an asset purchase
agreement between the registrant and Arbill dated December 14, 1998 ("Asset
Purchase Agreement"). A copy of the Asset Purchase Agreement is annexed as
Exhibit 10.14 hereto. Reference is made to this agreement for the full terms of
this transaction, including registrant's covenant not to compete.
Item 5. Other Events.
In connection with the consummation of the Asset Purchase Agreement the
registrant entered into Amendment No. 9 to the
Company's agreements with Congress Financial Corp. which is annexed hereto as
Exhibit 10.15, allowing Congress to release its lien against the assets sold by
the registrant to Arbill pursuant to the Asset Purchase Agreement.
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
WORKSAFE INDUSTRIES INC.
PRO-FORMA CONSOLIDATED BALANCE SHEET AS AT
SEPTEMBER 30, 1998
PRO-FORMA
SEPTEMBER 30, DISTRIB. DIV. SEPTEMBER 30,
1998 ADJUSTMENTS 1998
------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 58,395 $ 58,395
ACCOUNTS RECEIVABLE - NET 5,804,763 5,804,763
INVENTORIES 7,363,853 ($1,594,146) B 5,769,707
OTHER 570,458 570,458
NOTES RECEIVABLE- CURRENT 210,000 C 210,000
TOTAL CURRENT ASSETS 13,797,469 ($1,384,146) 12,413,323
PROPERTY, PLANT AND EQUIPMENT, NET 2,240,767 (36,218) D 2,204,549
EXCESS OF COST OVER NET ASSETS ACQUIRED 420,529 420,529
OTHER ASSETS 15,427 15,427
NOTES RECEIVABLE, LESS CURRENT MATURITIES 105,000 C 105,000
TOTAL ASSETS $ 16,474,192 ($1,315,364) $ 15,158,828
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
LOANS PAYABLE $ 8,027,254 ($1,848,336) A $ 6,178,918
CURRENT MATURITIES OF LONG-TERM DEBT 278,463 278,463
ACCOUNTS PAYABLE 3,790,612 3,790,612
ACCRUED EXPENSES 294,532 294,532
TOTAL CURRENT LIABILITIES 12,390,861 (1,848,336) 10,542,525
LONG-TERM DEBT, LESS CURRENT MATURITIES 468,346 468,346
TOTAL LIABILITIES 12,859,207 (1,848,336) 11,010,871
SHAREHOLDERS' EQUITY (DEFICIENCY)
PREFERRED STOCK --
COMMON STOCK 201,970 201,970
ADDITIONAL PAID IN CAPITAL 9,807,708 9,807,708
(DEFICIT) (6,394,693) 532,972 E (5,861,721)
TOTAL SHAREHOLDERS' EQUITY 3,614,985 532,972 4,147,957
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 16,474,192 ($1,315,364) $ 15,158,828
WORKSAFE INDUSTRIES INC.
PRO FORMA - CONSOLIDATED STATEMENT OF OPERATIONS
ACTUAL OPERATIONS PRO-FORMA
YEAR OF YEAR
ENDED DISTRIBUTION ENDED
JUNE 30,1998 DIVISION JUNE 30,1998
------------ ------------ ------------
NET SALES $34,339,038 $9,571,559 $24,767,479
COST OF SALES 28,622,886 8,030,538 20,592,348
GROSS PROFIT 5,716,152 1,541,021 4,175,131
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 5,369,397 1,925,893 3,443,504
INCOME(LOSS) FROM OPERATIONS 346,755 (384,872) 731,627
INTEREST EXPENSE, NET 879,406 319,800 559,606
OTHER (INCOME) NET (44,166) 0 (44,166)
NET(LOSS)/INCOME ($488,485) ($704,672) $216,187
INCOME/(LOSS) PER COMMON SHARE
BASIC ($0.29) $0.13
DILUTED ($0.29) $0.13
AVERAGE NUMBER OF SHARES USED IN
COMPUTING PER SHARE AMOUNTS
BASIC 1,683,079 1,683,079
DILUTED 1,683,079 1,683,079
WORKSAFE INDUSTRIES INC.
PRO FORMA - CONSOLIDATED STATEMENT OF OPERATIONS
ACTUAL OPERATIONS PRO-FORMA
THREE-MONTHS OF THREE-MONTHS
ENDED DISTRIBUTION ENDED
SEPTEMBER 30,1998 DIVISION SEPTEMBER 30,1998
----------------- ------------ -----------------
(UNAUDITED) (UNAUDITED)
NET SALES $8,000,263 $2,332,327 $5,667,936
COST OF SALES 6,714,718 1,933,964 4,780,754
GROSS PROFIT 1,285,545 398,363 887,182
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 1,304,395 504,858 799,537
INTEREST EXPENSE, NET 277,624 146,900 130,724
OTHER (INCOME) NET (12,651) 0 (12,651)
NET INCOME (LOSS) ($283,823) ($253,395) ($30,428)
INCOME/(LOSS) PER COMMON SHARE
BASIC ($0.17) ($0.02)
DILUTED ($0.17) ($0.02)
AVERAGE NUMBER OF SHARES USED IN
COMPUTING PER SHARE AMOUNTS
BASIC 1,683,079 1,683,079
DILUTED 1,683,079 1,683,079
NOTES TO THE PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentaion
Reference is made to Item 2. of this filing for a description of the
Distribution Division (as defined in Item 2) for which the following pro forma
financial statements are provided.
The unaudited pro forma balance sheet eliminates the assets of the Distribution
Division as of September 30,1998 that were sold and further includes the
transaction assuming the disposition had been completed as of the respective
balance sheet date. The pro forma statements of operations are the manufacturing
operations of Worksafe Industries Inc. for the year ended June 30, 1998 and for
the three months ended September 30, 1998 assuming that the Distribution
Division sale occurred at the beginning of the periods presented.
The historical balance sheet used in preparation of the pro forma financial
statements has been derived from Worksafe Industries Inc.'s unaudited financial
statements as of September 30, 1998. The historical statement of operations for
the year ended June 30, 1998 has been derived from the audited statements of
operations for such period. The historical statement of operations for the three
months ended September 30, 1998 has been derived from the Company's unaudited
financial statements for such period.
2. Unaudited Pro Forma Adjustments
A description of the adjustments included in the unaudited pro forma financial
statements are as follows:
A) Amount of cash received in the transaction less estimated transaction costs
of $245,000 used to pay down debt
B) Cost of inventories sold to acquiror plus additional inventory reserve of
$100,000 for merchandise not sold based on agreement formula
C) Total of $315,000 note received from acquiror
D) Book value of Property, Plant & Equipment purchased by the acquiror
E) Reflects the estimated gain on the sale of the Distribution Division
(c) Exhibit Number
10.14 Asset Purchase Agreement between the registrant and Arbill
Industries Inc. dated December 14, 1998 (without exhibits and
schedules)
10.15 Amendment Number 9 to line of credit agreement with Congress
Financial Corp.
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.
Dated: January 26, 1999
WORKSAFE INDUSTRIES INC.
By: /s/ Arthur Wasserspring
---------------------------
ARTHUR WASSERSPRING
Vice-President of
Finance, Treasurer
and Chief Financial
Officer