Item 1. Business
History of the Company and Recent Developments
Metal Arts Company, Inc. established in 1913 ("Metal Arts" or the "Company"), has operated as a holding company. Except where specific reference is made in this Part I to the individual operations of Metal Arts or its 70 percent owned subsidiary, Coating Technology, Inc. references in the Part I to the "Company" are intended to be a reference to the collective operations of Metal Arts and Coating Technology. Coating Technology engages in contract electroless nickel, aluminum anodizing, electroless nickel and gold plating of circuit boards and other surface coating and enhancement operations.
Metal Arts had outstanding liabilities of $1,128,587 as of the close of Fiscal 1996. A detailed description of these liabilities is set forth in the Financial Statements and Supplementary Data annexed as Item 8 to this Form 10-K. Specific reference is made to Notes 1 and 5 of these Financial Statements for information concerning specific liabilities.
On June 30, 1994, the company undertook to offer twenty(20) of its $25,000 Principal Amount 8% Convertible Subordinated Debentures due June 30, 1999 ( the "Debentures"). The Debentures are convertible into common stock of the company at $.75 through June 30, 1996, $.95 per share from July 1, 1996 through June 30, 1988 and $1.25 per share thereafter, and grant the holder a warrant to purchase an equal number of common shares at $.85. As of September 30, 1994, eleven (11) Debentures had been subscribed for a total of $275,000. The Debentures were offered and issued under Section 4.2 of the Securities Act of 1993 and the rules and regulations thereunder.
The proceeds from the Debenture were used to acquire a new Patent Pending Technology for the plating of electroless nickel on aluminum from Richard Feagins and LeKem, Inc. and to commercialize that technology, initially to the Computer Hard Disk and Aluminum Automobile Wheel Markets. The Company's proprietary specialty chemicals consist of a patent-pending non-zincate aluminum activator solution used in conjunction with a proprietary electroless-nickel bath for plating on aluminum. Both the products and process are proprietary, rendering a smoother surface with enhanced corrosion protection while reducing plating and waste treatment costs. While conducting lab and pilot line trials, marketing efforts to the computer memory disk and aluminum wheel markets were undertaken and continue now. If successful in the U.S., it is the company's intention to market the technology or license it internationally.
The technology was acquired for $50,000 cash, which was paid as of September 30, 1995. In addition, the seller will receive 100,000 shares of Metal Arts common stock and an additional 100,000 shares of Metal Arts common stock upon the issuance of a patent.
As a result of this acquisition, Metal Arts will become an operating company, marketing its proprietary specialty chemicals to end users nationally.
Compliance with environmental laws and regulations has a material and on-going impact on the company. The company must comply and the costs are both capital and operational. It has a positive impact in that certain companies that cannot comply are at a disadvantage, operationally. It has a negative impact in that the costs of compliance affects capital resources and cash flow. During the fiscal year 1996, Coating Technology committed to spend approximately $10,000 on improvements to its waste treatment system and additional amounts out of operations on various compliance requirements. As new technologies and methods are available to the company, additional capital and operational costs will be incurred to comply with and/or reduce on-going expenses of waste treatment.
The Company's Markets
During the past three fiscal years all of the company's sales were attributable to the operations of Coating Technology. Coating Technology provides surface coating services for various regional industries.
Fiscal Years (Ending June 30) ------------------------------------------ 1996 1995 1994 ---- ---- ----
Metal Arts $ $ $ ---------- ---------- ----------
Coating Technology 1,630,000 1,573,000 1,259,000 ---------- ---------- ---------- $1,630,000 $1,573,000 $1,259,000 ---------- ---------- ----------
The Company's Products
Metal Arts is entering the Specialty chemical business, marketing its new process for plating electroless nickel on aluminum. The process consists of a patent pending non-zincate activator and a proprietary high-phosphorus electroless nickel formulation, initially to manufacturers of computer hard disks and aluminum wheels. Coating Technology is engaged in contract electroless and brite nickel and aluminum anodizing operations. Coating Technology services the office products industry through large, medium and small metal fabricating companies who in turn supply subassemblies and individual component parts to major office product manufacturers such as Xerox, Kodak, IBM, Cannon and others. In addition, Coating Technology provides electroless nickel and gold plating for the circuit board industry. It also provides other surface finishes to various contract customers.
Manufacturing Operations
Metal Arts' specialty chemical mixing operations will initially be conducted with existing equipment at Coating Technology and LeKem, Inc., whose facilities are adjacent to each other in the same building.
Surface Coating Operations
Coating Technology engages in the Surface Coatings and Enhancements business. It is a leading regional Electroless Nickel Plater, a plating technique that deposits nickel on metal without the use of an applied electrical current. The process is used to prevent corrosion, enhance smoothness and improve overall surface quality on various metals including aluminum, copper and steel. As a result of its acquisition of the Aluminum Anodizing assets it is now a leading regional anodizer. All surface finishing operations are conducted at its facility at 1600 N. Clinton Ave Rochester, NY.
Compliance with Governmental Regulations
The company believes that its present operations are in compliance with the current requirements of OSHA, EPA and all applicable local and state regulations, utilizing an up-to-date waste treatment system.
Competition
Metal Arts will be competing initially in the computer memory disk and aluminum wheel markets where established, substantially larger companies dominate. There are approximately 10 companies that sell plating chemicals to these markets. Metal Arts will compete on the basis of an improved technology that will save its potential customers material, labor and waste treatment costs.
Coating Technology competes with several regional plating firms including two that are larger and several of the same or smaller size. The company competes on the basis of superior service and, in certain instances, on the basis of proprietary technology or equipment.
Customers
During the fiscal year ended June 30, 1996, Coating Technology had two customers which accounted for 21 percent of its sales, one of which accounted for 13% of its sales.
Inventory Requirements
Coating Technology does not maintain an inventory other than its normal chemical plating and surface finishing solutions which are sourced as needed and are readily available.
Sources of Raw Materials
Metal Arts will be able to source all components for its proprietary electroless nickel process, readily, from multiple sources at competitive prices. The company can accommodate raw material requirements out of current working capital during the initial stages of commercialization. It will be necessary to enhance its working capital either out of cash flow or other external means if sales increase substantially. Coating Technology sources its raw materials on regular trade terms and has the working capital required to sustain current operations and continue to grow at its current rate. There are no rights of return, or extended payment terms for Coating Technology, nor are any anticipated for Metal Arts. Coating Technology sources all chemicals and related supplies from local and national companies at competitive prices.
Employees
The company employs one executive in its Metal Arts operations and 25 in its Coating Technology operations none of whom are union members.
Item 2.
Item 2. Properties
Coating Technology leases approximately 22,000 square feet at an initial rental of $2.95 per square foot escalating to $4.95 by the end of the first five year term on September 1, 1996. Both are "gross" leases with responsibility for payment of utilities. The company is currently renting its space on a month-to month basis.
The plant includes surface finishing machinery and equipment which the company believes are adequate to satisfy the requirements of Metal Arts' and Coating Technology's present and proposed future businesses.
Item 3.
Item 3. Legal Proceedings
There are no legal proceedings at the present time.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
During the fiscal year ended June 30, 1996 no annual meeting was held and no shareholder votes took place. It is anticipated that the next annual meeting will take place in the next few months.
PART II
Item 5.
Item 5. Market for Registrant's Common Shares and related Stockholder Matters
The common shares of Metal Arts have been traded in the over-the-counter market since its initial public offering on January 22, 1981, and are now traded on the NASDAQ "Bulletin Board" under the symbol MTRT.
The following table sets forth, for the calendar quarters indicated, the
range of high and low bid quotations on the NASDAQ National Market System, as reported by the National Quotation Bureau, Inc.
Fiscal Year Ended June 30, 1995
First Quarter (July - September 1994) 3/4 5/8 Second Quarter (October - December 1994) 3/4 5/8 Third Quarter (January - March 1995) 3/4 1/2 Fourth Quarter (April - June 1995) 1/2 1/4
Fiscal Year Ended June 30, 1996
First Quarter (July - September 1995 1/2 3/8 Second Quarter (October - December 1995) 1/4 1/8 Third Quarter (January - March 1996) 1/4 1/8 Fourth Quarter (April - June 1996) 9/16 5/16
Fiscal Year Ended June 30, 1997
First Quarter (July - September 1996) 9/16 5/16
For a recent reported quotation for the company's common shares, see the cover page of this Form 10-K. The quotations listed above reflect inter-dealer prices, without retail markup, markdown, or commissions and may not necessarily represent actual transactions.
To date, the company has not paid a dividend on its common shares. The payment of future dividends is subject to the company's earnings and financial position and such other factors, including contractual restrictions, as the Board of Directors may deem relevant and it is unlikely that dividends will be paid in the foreseeable future.
As of October 1, 1996, there were approximately 980 holders of record of the common shares of Metal Arts, approximately 20 holders of record of warrants issued (and extended to December 30, 1996) as part of the 1988 Private Placement (23,000 have been exercised and 552,000 are left), one holder of record of options issued pursuant to the Incentive Stock Option Plan of Metal Arts and eleven holders of record of the June 30, 1994 Debentures which are potentially convertible into a total of 366,663 common shares of the company.
In June, 1995, the Board of Directors of The Metal Arts Company, Inc. (the "Company"), voted to distribute to the Company's shareholders, pro rata, the Company's holdings of the common shares of its then subsidiary, Bastian Company, Inc. ("Bastian"). As of June, 1995, the Company held approximately 356,000 of the then outstanding 400,000 common shares of Bastian, or approximately 89% of the then issued and outstanding common shares of Bastian. Bastian has advised the Company that Bastian believes it has an aggregate of approximately 260
holders of its common shares. The Company has approximately 980 holders of its own common shares. The Company's management believes that the value of the Bastian common shares then owned by the Company, both as of the date of the decision to distribute those shares, and as of the date of this Report, was negligible both in the aggregate and on a per share basis.
Bastian has advised the Company that Bastian has not filed a registration statement with the Securities and Exchange Commission to register the Bastian common shares pursuant to The Securities Exchange Act of 1934, as amended (the "1934 Act"), and has not taken any other steps to comply with federal or state securities statutes. As such, since the Company believes that such registration under the 1934 Act, and other actions under federal and state securities statutes, may be required prior to the time that the Bastian common shares are distributed to the Company's shareholders, the Company has not completed the pro rata distribution of the Bastian common shares which was declared in June 1995. Management of the Company is unable to determine when, or if Bastian will register the Bastian common shares pursuant to the 1934 Act, but will further advise the Company's shareholders at the time that any further determination is made with regard to the distribution of the Bastian common shares.
At this time, management of the Company believes that all of the Company's shareholders have a right to receive their pro rata distribution of the Bastian common shares, subject, however, to the completion of the necessary 1934 Act registration being filed and becoming effective and certain other securities requirements being fulfilled.
Item 6.
Item 6. Selected Financial Data
Cash dividends paid per common share - No dividends have been paid in the past.
The following table illustrates the major components of consolidated net sales and net income (loss):
1996 1995 1994 ---- ---- ---- CONSOLIDATED NET SALES:
Metal Arts $ -- $ -- $ -- Coating Technology 1,630,000 1,573,000 1,259,000 ----------- ----------- -----------
$ 1,630,000 $ 1,573,000 $ 1,259,000 =========== =========== ===========
CONSOLIDATED NET INCOME (LOSS):
Metal Arts $ (158,719) $ (206,584) $ 169,672 Coating Technology 16,321 85,319 71,682 Minority Interest (4,896) (25,596) (21,504) Discontinued Operations -- (253,861) 87,868 ----------- ----------- -----------
$ (147,294) $ (400,722) $ 307,718 =========== =========== ===========
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management Discussion and Analysis should be read in conjunction with this entire Form 10-K 1996 Annual Report. Except where specific reference is made in this Item 7 to the individual operations of Metal Arts or its 70 percent owned subsidiary, Coating Technology, references in this Item 7 to the "Company" are intended to be a reference to the joint operations of all of Metal Arts, and Coating Technology.
Liquidity and Capital Resources
Private Placement of Debentures
The company sold, as of September 30, 1994, eleven debentures for a total of $275,000. The purpose of the private placement was to acquire the technology for plating electroless nickel on aluminum, complete all research and development, conduct test trials with potential customers leading up to commercialization in the computer disk and aluminum wheel markets.
New York State Energy Research and Development Authority Funding
The company signed an agreement with the New York State Energy Research and Development Authority (NYSERDA) dated June 22, 1995 for funding of $325,000 for its new technology. This was done as a part of NYSERDA's Industrial Waste Minimization Program. The purpose of the funding is to provide money for the completion of research and development, test trials, commercial demonstrations and commercialization of the technology. To date the company has received a total of $165,000 on this contract.
Operating Activities
Over the past three fiscal years Coating Technology has shown steady growth in sales and earnings. Cash flow, along with term loans from the company's commercial bank, was adequate to provide for the acquisition of capital equipment and provide the working capital necessary to run the business. There was a significant increase in cash generated during the fiscal year 1996 over 1995 and 1994 as well as the cash balance at the end of the year. In addition, all relevant measures relating to: Debt to Equity; current ratio; working capital; and net worth increased.
Through the first quarter of fiscal year 1996, Coating Technology operated profitably with sufficient resources to sustain operations.
If Metal Arts is successful in commercializing its new technology it will be necessary to raise additional capital. The amount of capital required will depend on how rapidly market acceptance might occur. If this does occur it could result in growth in the company's sales and earnings over the next few years. The company will seek, if commercial sales commence, to raise additional capital in the form of receivables financing, warrant conversion or other investment mechanisms to sustain operations.
Item 8.
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Independent Auditors' Report .......................................... 1
Consolidated Balance Sheets at June 30, 1996 and 1995 ................. 2 - 3
Consolidated Statements of Income (Loss) for the years ended June 30, 1996, 1995 and 1994 ............................... 4 - 5
Consolidated Statements of Changes In Stockholders' Equity (Deficiency) for the years ended June 30, 1996, 1995 and 1994 ............................... 6 - 7
Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994 ............................. 8 - 9
Notes to Consolidated Financial Statements ............................ 10 - 19
Financial Schedules:
II - Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other Than Related Parties ........................ 20
V - Property, Plant and Equipment .............................. 21
VI - Accumulated Depreciation and Amortization of Property, Plant and Equipment .......................... 22
VII - Valuation and Qualifying Accounts and Reserves .............. 23
X - Supplementary Income Statement Information .................. 24
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.
CHAPMAN, COLLINS, AGOSTINELLI & SHAW, P.C. A Professional Corporation CERTIFIED PUBLIC ACCOUNTANTS
1100 Midtown Tower (716) 232-2060 Rochester, New York 14604 (716) 454-7389 Fax
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders The Metal Arts Company, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of The Metal Arts Company, Inc. and Subsidiaries as of June 30, 1996 and 1995, and the related consolidated financial statements listed in the accompanying index for each of the years in the three-year period ended June 30, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
As described in Notes 1 and 2 to the financial statements, the Company has elected not to consolidate its Bastian and Ocean State subsidiaries as required by generally accepted accounting principals.
In our opinion, except for the effects of not consolidating its Bastian and Ocean State subsidiaries as discussed in the preceding paragraph, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Metal Arts Company, Inc. and Subsidiaries as of June 30, 1996 and 1995, and the results of their operations, changes in their stockholders' equity (deficiency) and their cash flows for each of the years in the three-year period ended June 30, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 11 to the financial statements, the Company changed its method of accounting for income taxes in 1994.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial schedules listed in the accompanying index are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Chapman, Collins, Agostinelli & Shaw, P.C. August 30, 1996
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 2 ---------------------------------------------
Consolidated Balance Sheets June 30, 1996 and 1995
ASSETS
See accompanying notes to consolidated financial statements.
LIABILITIES AND STOCKHOLDERS' EQUITY
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 4
Consolidated Statements Of Income (Loss) For The Years Ended June 30, 1996, 1995 and 1994
See accompanying notes to consolidated financial statements.
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 6
Consolidated Statements Of Changes In Stockholders' Equity (Deficiency) For The Years Ended June 30, 1996, 1995 And 1994
Common Stock --------------------- Number Of Shares Amount ------ ------
Balance June 30, 1993 6,252,102 $ 67,521
Reissuance of treasury stock 500,000 --
Exercise of stock options 435,000 4,350
Shares issued in payment of expenses and liabilities 33,500 335
Shares issued to purchase equipment 60,000 600
Net income for the year -- -- --------- ---------
Balance June 30, 1994 7,280,602 72,806
Exercise of warrants 23,000 230
Shares issued in payment of expenses 3,800 38
Property dividend (Note 1) -- --
Net loss for the year -- -- --------- ---------
Balance June 30, 1995 7,307,402 73,074
Net loss for the year -- -- --------- ---------
Balance June 30, 1996 7,307,402 $ 73,074 ========= =========
See accompanying notes to consolidated financial statements.
THE METAL ARTS COMPANY, INC AND SUBSIDIARIES 8
Consolidated Statements Of Cash Flows For The Years Ended June 30, 1996, 1995 And 1994
See accompanying notes to consolidated financial statements.
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 10
Notes To Consolidated Financial Statements June 30, 1996, 1995 And 1994
1. Business Description
The Company and its 70% owned subsidiary, Coating Technology, Inc., are primarily engaged in the surface coatings and enhancements business. Customers, substantially all of whom are manufacturers, are located primarily in Western, New York.
Prior to June 30, 1995, the Company owned 89% of The Bastian Company, Inc. (Bastian) and 100% of Ocean State Enameling, Inc. (Ocean State). On June 7, 1995, the Company's Board of Directors approved the sale of the Company's interest in Ocean State at its original investment amount of $500 to Bastian. In addition, the spin-off of Bastian, in the form of a stock dividend to the Company's stockholders of record as of June 30, 1995, was approved. As of August 30, 1996, Bastian has not filed a registration statement with the Securities and Exchange Commission to register the Bastian common shares pursuant to the Securities Exchange Act of 1934. Therefore, the Company has not completed the pro rata distribution of the Bastian common shares and, as such, Bastian and Ocean State are still technically subsidiaries of the Company.
The Company has recorded the spin-out as though it has been formally consumated. Accordingly, retained earnings was increased by $539,502 in 1995, representing the carrying value of the investment on June 30, 1995. (See Note 2)
Following is a summary of consolidated net liabilities and consolidated results of operations of The Bastian Company, Inc. and subsidiary as of June 30, 1995 and 1994, and for the years then ended:
1995 1994 ---- ----
Accounts receivable $ 193,603 $ 317,477 Inventory 71,411 132,849 Property, plant and equipment (net) 291,797 291,992 Other assets 770 11,645 Goodwill 262,246 272,846 ----------- -----------
Total assets 819,827 1,026,809 ----------- -----------
Accounts payable 203,976 121,646 Notes payable 217,792 217,792 Other current liabilities 837,561 881,870 Long-term debt 100,000 194,253 ----------- -----------
Total liabilities 1,359,329 1,415,561 ----------- -----------
Net liabilities 539,502 388,752
Intercompany account eliminated upon consolidation -- (194,253) Property dividend (539,502) -- ----------- ----------- Net liabilities of discontinued operations $ -- $ 194,499 =========== ===========
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 11
Notes To Consolidated Financial Statements June 30, 1996, 1995 And 1994
1. Business Description (continued) 1995 1994 ---- ---- Sales and other revenue $ 1,466,388 $ 2,219,709 Cost and expenses 1,616,406 2,131,093 ----------- ----------- Income (loss) before income taxes (150,018) 88,616 Income taxes 732 748 ----------- -----------
Net income (loss) (150,750) 87,868
(Income) expense eliminated upon consolidation (103,111) -- ----------- -----------
Income (loss) from discontinued operations $ (253,861) $ 87,868 =========== ===========
As of June 30, 1996, the Company was owed $109,000 from Bastian for advances that had been made to Bastian. The Company has a second security interest in virtually all of the assets in Bastian. Due to the financial condition of Bastian, the Company reserved $100,000 for possible uncollectibility, as of June 30, 1996 and 1995.
2. Summary Of Significant Accounting Policies
a) Principles of consolidation
The consolidated financial statements include the accounts of the Company and its 70% owned subsidiary, Coating Technology, Inc. (Formerly Bastian Plating Company, Inc.) All material intercompany items have been eliminated in consolidation.
The consolidated financial statements do not include the accounts of its 89% owned subsidiary, The Bastian Company, Inc. and its 100% owned subsidiary, Ocean State Enameling, Inc., as required by generally accepted accounting principles. The Company believes that not consolidating these subsidiaries provides for a more meaningful presentation of continuing operations. (See Note 1)
b) Revenue recognition
The Company records its revenues and expenses on the accrual basis of accounting. Revenues are recognized on the date goods are shipped.
c) Property, plant and equipment
Property, plant and equipment are carried at cost. Depreciation is computed on the straight-line method over a period of 5 to 39 years. Accelerated methods are used for tax purposes by Coating Technology, Inc.
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 12
Notes To Consolidated Financial Statements June 30, 1996, 1995 And 1994
2. Summary Of Significant Accounting Policies (continued)
d) Operating rights
During 1995, the Company acquired the rights to a new technology, which is a new process for plating electroless nickel on aluminum. These operating rights are being amortized using the straight-line method over 15 years.
e) Debt issuance costs
Debt issuance costs are being amortized using the straight-line method over the term of the related debt instrument, five years.
f) Income taxes
Deferred income taxes reflect the impact of temporary differences arising from assets and liabilities whose basis are different for financial reporting and income tax purposes. Basis differences for which deferred taxes are provided relate primarily to allowance for uncollectible accounts and depreciable assets.
As discussed in Note 11, the Company changed its method of accounting for the tax benefits of net operating loss and tax credit carryforwards in 1994.
g) Earnings per share
Earnings per common share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Options to purchase common stock have a negligible effect on earnings per share.
h) Estimates
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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
3. Due From NYSERDA
On June 22, 1995, the Company entered into an agreement with the New York State Energy Research and Development Authority (NYSERDA). Under the terms of this agreement, NYSERDA will share in the cost to develop a new technology by paying up to $325,010, which represents 59.8% of the actual development costs. NYSERDA shall pay the Company 90% of its 59.8% share upon receipt of an invoice for a progress payment and final payments shall be made after completion of work and receipt of the final report. The Company has recorded $212,467 of reimbursements from NYSERDA through June 30, 1996.
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 13
Notes To Consolidated Financial Statements June 30, 1996, 1995 And 1994
3. Due From NYSERDA (continued)
In accordance with the agreement, the Company is obligated to pay to NYSERDA 2% of sales of the new technology to New York State manufacturers and 4% of sales to non-New York State manufacturers. The Company's obligation to make payments to NYSERDA shall commence upon the earlier of the two following events; 1) sales exceed $500,000; 2) two years after the Company's receipt of final payment under the contract.
NYSERDA possesses certain rights to contract data and certain liquidation or dissolution preferences pursuant to the contract.
4. Property, Plant And Equipment
Property, plant and equipment consists of the following: 1996 1995 ---- ----
Leasehold improvements $ 28,784 $ 26,052 Machinery and equipment 794,998 759,582 Furniture and fixtures 60,375 42,516 -------- --------
$884,157 $828,150 ======== ========
Depreciation and amortization expense for each of the three years in the period ended June 30, 1996 was $87,858, $76,425 and $60,324, respectively.
5. Long-Term Debt
Long-term debt consists of the following: 1996 1995 ---- ----
8% convertible subordinated debentures due and payable on June 30, 1999. The debentures are subordinated to the Company's senior indebtedness. See Note 8 for conversion provisions. $275,000 $275,000
Note payable secured by specific equipment. Interest accrues at 5%. Principal, in the amount of $26,667, plus interest will be payable each December through 1998. 80,000 80,000
Installment note payable in monthly payments of $1,667, plus interest at prime plus 1.5%, through October 2000. The note is secured by a general lien on equipment, accounts receivable and inventory and is guaranteed by the shareholders of Coating Technology, Inc. 86,667 --
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 14
Notes To Consolidated Financial Statements June 30, 1996, 1995 And 1994
5. Long-Term Debt (continued) 1996 1995 ---- ----
Installment note payable in monthly payments of $1,667, plus interest at prime plus 2%, through December 1997. The note is secured by a general lien on equipment, accounts receivable and inventory and is guaranteed by the stockholders of Coating Technology, Inc. 29,958 49,970
Installment note payable. -- 6,250 -------- -------- 471,625 411,220 Less: Current portion 66,679 26,262 -------- --------
Long-term debt, net of current portion $404,946 $384,958 ======== ========
The aggregate maturities for all long-term borrowings for the next five fiscal years, as of June 30, 1996, are as follows:
1997 $ 66,679 1998 56,613 1999 321,666 2000 20,000 2001 6,667 -------- $471,625 ========
The installment note in the amount of $29,958 requires certain restrictive covenants of which Coating Technology, Inc. was in compliance.
6. Other - Long-Term Liability
The Company entered into a partnership (Sunshine Bullion Co.) on September 1, 1981.
The Company incurred a liability to certain vendors relating to silver price fluctuations during the period of time that Sunshine Bullion Co. was operating. The Company has denied responsibility for these amounts. The vendors obtained a judgement against the Company in 1983, but no collection effort has been made since that time.
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 15
Notes To Consolidated Financial Statements June 30, 1996, 1995 And 1994
7. Incentive Stock Option Plan
The Company has an incentive stock option plan for key employees, reserving 850,000 shares of common stock for issuance upon the exercise of options granted under the plan. The options expire 10 years from date of grant (5 years for grantees who hold 10% or more of the Company voting power) and are exercisable one year from the date of the grant on a cumulative basis at the rate of 25% of the total number of shares covered by the grant. As of June 30, 1996, options on 435,000 shares have been exercised at $.06 per share; options on 150,000 shares at $.06 per share are outstanding and exercisable and expire in December, 1997; leaving options on 265,000 shares available under the plan.
8. Common Stock And Stock Warrants
In December 1988, the Company sold 575,000 $.01 par value common shares and warrants to purchase 575,000 additional common shares. The selling price was $.50 per newly issued share. The warrants were exercisable for two years at $.60 per common share. The sale of common stock and warrants was made by means of a private placement. The 575,000 newly issued shares constituted the minimum offering under terms of the private placement. 552,000 warrants were outstanding as of June 30, 1996. The Company has extended the exercise period for these warrants to December 31, 1996.
During the year ended June 30, 1995, the Company issued convertible subordinated debentures. These debentures are redeemable by the Company upon at least 30 days notice at any time after December 30, 1995, and will be convertible into common shares of the Company. The holders of the debentures may convert the debentures into common shares of the Company at any time prior to 5:00 pm on June 30, 1999. The conversion price shall be $.75 per share through June 30, 1996, $.95 per share from July 1, 1996 through June 30, 1998, and $1.25 per share thereafter.
Accompanying each $25,000 debenture is a non-detachable warrant. Each non-detachable warrant enables the holder to purchase up to an additional 33,333 shares at an exercise price of $.85 per share. The warrants can only be exercised coincidentally with the conversion of the debenture.
The Company also has an outstanding warrant to purchase 60,000 common shares at $.06 per share. The warrant was issued in connection with the purchase of equipment in 1994 and expires December 31, 1996.
During the year ended June 30, 1995, the Company acquired the operating rights to a new chemical process. As part of the purchase price, the Company is obligated to issue 100,000 common shares upon the transfer of clear title to certain patent pending rights and receipt of $.06 per share. An additional 100,000 common shares must be issued when the patent is accepted.
Also, 300,000 common shares must be issued based upon the Company attaining certain sales levels of the new chemical process. All common shares issued under this agreement require payment of $.06 per share.
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 16
Notes To Consolidated Financial Statements June 30, 1996, 1995 And 1994
9. Minority Interests
Coating Technology, Inc. is in the business of electroless nickel and aluminum anodizing operations. The accounts of Coating Technology, Inc. for the years ended June 30, 1996 and 1995 are included in the consolidated financial statements of the Company with recognition of a minority interest representing the 30% interest owned by another party.
Summarized balance sheet data of Coating Technology, Inc. as of June 30, 1996 and 1995 is as follows:
1996 1995 ---- ----
Current assets $318,000 $291,000 Property and equipment, net 497,000 534,000 Other assets 10,000 2,000 -------- --------
$825,000 $827,000 ======== ========
Current liabilities $251,000 $198,000 Long-term liabilities 144,000 216,000 -------- -------- 395,000 414,000 Shareholders' equity 430,000 413,000 -------- --------
$825,000 $827,000 ======== ========
Summarized income statement data of Coating Technology, Inc. for the years ended June 30, 1996, 1995 and 1994 is as follows:
1996 1995 1994 ---- ---- ----
Revenues $ 1,629,000 $ 1,573,000 $1,259,000 Costs and expenses 1,613,000 1,488,000 1,187,000 ----------- ----------- ----------
Net income $ 16,000 $ 85,000 $ 72,000 =========== =========== ==========
Depreciation expense for Coating Technology, Inc. for the years ended June 30, 1996, 1995 and 1994 amounted to $86,081, $76,326 and $60,324, respectively.
Capital expenditures for Coating Technology, Inc. for the years ended June 30, 1996, 1995 and 1994 amounted to $48,922, $115,249 and $190,887, respectively.
10. Significant Customers and Concentration of Credit Risk
During the year ended June 30, 1996, Coating Technology, Inc. had two customers whose sales comprised 21% of consolidated sales, in the aggregate.
During the years ended June 30, 1995 and 1994, Coating Technology, Inc. had one customer whose sales comprised 13% and 12% of consolidated sales, respectively.
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 17
Notes To Consolidated Financial Statements June 30, 1996, 1995 And 1994
10. Significant Customers and Concentration of Credit Risk (continued)
One customer comprised 10%, 23% and 23% of accounts receivable at June 30, 1996, 1995 and 1994, respectively.
11. Income Taxes
Provision for income taxes was determined as follows:
Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109 (FASB 109), "Accounting for Income Taxes", became effective for the year ended June 30, 1994. FASB 109 requires that an asset be recorded for the expected realizable value of net operating loss carryforwards and tax credits and a corresponding valuation allowance for the amount of tax benefits not expected to be realized. As a result, the Company recorded a cumulative effect of a change in accounting method in the amount of $176,400. Periods prior to June 30, 1994 have not been restated.
The Company has recorded a deferred tax asset of $193,200 reflecting the benefit of net operating loss carryforwards and investment tax credit carryforwards. Realization is dependent on generating sufficient taxable income prior to expiration of the net operating loss and investment tax credit carryforwards. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 18
Notes To Consolidated Financial Statements June 30, 1996, 1995 And 1994
11. Income Taxes (continued)
At June 30, 1996, for Federal income tax purposes, the Company had available net operating loss deduction carryforwards and investment tax credit carryforwards as follows:
Year Of Net Operating Investment Expiration Loss Carryforwards Tax Credits ---------- ------------------ ----------- 1997 $1,093,000 $30,800 1998 697,000 400 2001 8,000 - 2003 160,000 - 2009 8,000 - 2010 206,000 - 2011 152,000 ---------- ------- $2,324,000 $31,200 ========== =======
Deferred income taxes consist of: 1996 1995 ---- ----
Assets: NOL carryforward $ 697,200 $648,900 Federal tax credit carryforwards 37,500 39,100 NYS tax credit carryforwards 95,200 86,700 Allowance for doubtful accounts 2,200 1,000 --------- -------- Total deferred tax assets 832,100 775,700
Valuation allowance (592,500) (546,300) --------- --------
Net deferred tax assets 239,600 229,400
Liabilities: Depreciation (58,400) (59,600) --------- --------
$ 181,200 $169,800 ========= ========
Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The net deferred tax asset is presented on the balance sheet as follows:
Net current deferred tax assets - Metal Arts $ 12,700 $ 7,100 Net long-term deferred tax assets - Metal Arts 180,500 180,700 Net long-term deferred tax liabilities - Coating Technology (12,000) (18,000) --------- --------
$181,200 $169,800 ======== ========
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 19
Notes To Consolidated Financial Statements June 30, 1996, 1995 And 1994
12. Commitments
On July 30, 1992, Coating Technology, Inc. entered into a lease agreement for a five year period ending August 31, 1996. In addition to the minimum annual rental payments specified in the lease, Coating Technology, Inc. is also responsible for its own utilities and general maintenance. The minimum lease payments for the year ending June 30, 1997 are $17,418
Effective July 1, 1995, the Company rents office space from its unconsolidated subsidiary on a month-to-month basis for $500 per month.
Consolidated rent expense for each of the years ended June 30, 1996, 1995 and 1994 was approximately $109,000, $92,000 and $83,000, respectively.
During the year ended June 30, 1995, the Company entered into a royalty agreement in conjunction with the purchase of the operating rights to a new chemical process. The agreement requires royalty payments of 2% of gross sales of the new chemical process throughout the former owner's lifetime. As of June 30 ,1996, no royalties were due under this agreement.
In addition, the Company entered into a licensing agreement for an existing chemical process. The agreement requires licensing fees equal to 50% of the Company's net profit on sales of this process. As of June 30, 1996, no fees were due under this agreement.
13. Contingencies
The Company is the guarantor of debt owed to the City of Geneva, N.Y. by its unconsolidated subsidiary, Bastian, in the approximate amount of $250,000. Bastian is currently in default on its debt payments to the City of Geneva.
Bastian has incurred substantial losses in recent years and has a deficiency of stockholders' equity. Although Bastian has taken steps to return to profitability, it is at least reasonably possible that Bastian will not become profitable in the near future. If not, the Company may become responsible for repayment of at least a portion of the amount owed to the City of Geneva. No amount has been reported in the Company's financial statements.
14. Benefit Plan
During 1996, Coating Technology, Inc. started a salary reduction plan pursuant 401(k) of the Internal Revenue Code that covers all eligible
employees. Employees are eligible for participation in the plan after the completion of six months of service and attainment of age twenty-one. Under terms of the plan, the Company contributes up to 1.25% of each participant's compensation. Also, Coating may make additional contributions to the plan at its discretion. Coating's contributions to the plan amounted to $2,807 in 1996.
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 20
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
For The Years Ended June 30, 1996, 1995 And 1994
Balance at Balance beginning Amounts Amounts at end Name of debtor of year Additions collected written off of year
June 30, 1996
N/A $ - $ - $ - $ - $ - ======= ======= ======= ======= =======
June 30, 1995
N/A $ - $ - $ - $ - $ - ======= ======= ======= ======= =======
June 30, 1994
N/A $ - $ - $ - $ - $ - ======= ======= ======= ======= =======
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 21
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
For The Years Ended June 30, 1996, 1995 And 1994
Balance at Balance beginning Additions at end Classification of year at cost Retirements of year - -------------- -------- --------- ----------- --------
June 30, 1996
Leasehold improvements $ 26,052 $ 2,732 $ -- $ 28,784 Machinery and equipment 759,582 35,416 -- 794,998 Furniture and fixtures 42,516 17,859 -- 60,375 -------- -------- -------- --------
$828,150 $ 56,007 $ -- $884,157 ======== ======== ======== ========
June 30, 1995
Leasehold improvements $ 24,027 $ 2,025 $ -- $ 26,052 Machinery and equipment 662,358 97,224 -- 759,582 Furniture and fixtures 23,740 18,776 -- 42,516 Artwork and dies 196,358 -- 196,358 -- -------- -------- --------
$906,483 $118,025 $196,358 $828,150 ======== ======== ======== ========
June 30, 1994
Leasehold improvements $ 21,219 $ 2,808 $ -- $ 24,027 Machinery and equipment 474,956 187,402 -- 662,358 Furniture and fixtures 23,063 677 -- 23,740 Artwork and dies 196,358 -- -- 196,358 -------- -------- -------- --------
$715,596 $190,887 $ -- $906,483 ======== ======== ======== ========
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 22
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
For The Years Ended June 30, 1996, 1995 And 1994
Additions Balance at Charged To Balance beginning Costs And at end Classification of year Expenses Retirements of year -------- -------- ----------- -------- June 30, 1996
Leasehold improvements $ 8,606 $ 2,742 $ -- $ 11,348 Machinery and equipment 259,542 76,565 -- 336,107 Furniture and fixtures 19,884 8,551 -- 28,435 -------- -------- -------- --------
$288,032 $ 87,858 $ -- $375,890 ======== ======== ======== ========
June 30, 1995
Leasehold improvements $ 6,103 $ 2,503 $ -- $ 8,606 Machinery and equipment 190,795 68,747 -- 259,542 Furniture and fixtures 14,709 5,175 -- 19,884 Artwork and dies 196,358 -- 196,358 -- -------- -------- -------- --------
$407,965 $ 76,425 $196,358 $288,032 ======== ======== ======== ========
June 30, 1994
Leasehold improvements $ 3,842 $ 2,261 $ -- $ 6,103 Machinery and equipment 136,213 54,582 -- 190,795 Furniture and fixtures 11,228 3,481 -- 14,709 Artwork and dies 196,358 -- -- 196,358 -------- -------- -------- --------
$347,641 $ 60,324 $ -- $407,965 ======== ======== ======== ========
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 23
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For The Years Ended June 30, 1996, 1995 And 1994
Additions Balance at Charged To Balance beginning Costs And at end Description of year Expenses Deductions (1) of year - ----------- ------- -------- -------------- -------
Allowance for doubtful accounts - deducted from accounts and notes receivable in the balance sheet
June 30, 1996 $104,000 $ 6,000 $ - $110,000 ======== ========= ========= ========
June 30, 1995 $ 4,000 $100,000 $ - $104,000 ========= ======== ========= ========
June 30, 1994 $ 4,000 $ 5,992 $ 5,992 $ 4,000 ========= ========= ========= =========
(1) uncollectible accounts written off.
THE METAL ARTS COMPANY, INC. AND SUBSIDIARIES 24
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
For The Years Ended June 30, 1996, 1995 And 1994
Item Charged To Costs And Expenses - ---------------------------------- 1996 1995 1994 ---- ---- ----
Maintenance and repairs $66,478 $26,740 $15,053 ======= ======= =======
Depreciation and amortization of intangible assets, pre- operating costs and similar deferrals $ * $ * $ * ======= ======= =======
Taxes, other than payroll and income taxes $ * $ * $ * ======= ======= =======
Royalties $ * $ * $ * ======= ======= =======
Advertising costs $ * $ * $ * ======= ======= =======
* Less than 1% of total sales
Item 9.
Item 9. Disagreements on Accounting and Financial Disclosure
During the two most recent fiscal years, there have been no changes in, or disagreements with, accountants on accounting and financial disclosures.
PART II
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of Metal Arts are listed below, followed by a brief description of their business experience for at least the last five years. These persons also hold officer and director positions with Coating Technology.
NAME AGE POSITIONS WITH METAL ARTS - ---- --- -------------------------
Stanley J. Dahle 59 President, Chief Executive Officer and Director
Albert A. Cauwels 62 Secretary and Director
Geoffrey A. Rich 47 Director
Stanley J. Dahle has been President of Metal Arts since October, 1981 and
Chairman since 1990. He was Executive Vice President of Metal Arts since its inception in June, 1976, until October, 1981. Mr. Dahle has also served in various other offices for Metal Arts since its inception. He is a director of Coating Technology.
Albert A. Cauwels became a director of Metal Arts in June, 1984 and serves as Secretary. He is a director of Coating Technology, Inc.
Geoffrey A. Rich has been President of Coating Technology since its inception in 1989, Chief Executive Officer since 1995 and a Director of Metal Arts since December, 1990.
None of Metal Arts' Directors is a Director of any company with a class of securities registered pursuant to Section 12 of the Securities & Exchange Act of 1934, as amended, or of any company registered under the Investment Company Act of 1940, as amended. There is no family relationship among any members of the Board of Directors or the Executive Officers or significant employees of Metal Arts. The Board of Directors met 4 times during the fiscal year ended June 30, 1996. At the present time, the company has no Audit, Compensation or Nominating Committees. All Directors and Executive Officers have been elected to serve as Directors and Executive Officers until the next annual meeting of shareholders of Metal Arts or until their successors have been elected and qualified. There are no arrangements or understandings between any Director or Executive Officer and any other persons pursuant to which any such Directors or Executive Officers was or is to be selected as a Director or nominee for Director.
Item 11.
Item 11. Executive Compensation
The aggregate direct remuneration accrued and paid by Metal Arts and Coating Technology, during the fiscal year ended June 30, 1996, to each of Metal Arts' Officers and Directors whose aggregate remuneration exceeded $50,000, and to all Directors and Officers of Metal Arts as a group, is set forth in the following table.
Cash and Cash-Equivalent Form of Reimbursement ------------------------------- Salaries, fees, Securities or director's property, fees, insurance Name of individual commissions benefits or or number of Capacities in and reimbursements, persons in group which served (1) bonuses personal benefits
- ---------------- ---------------- ------- -----------------
Stanley J. Dahle President, $ 85,650 $5,000 CEO, and Director
Albert A. Cauwels Secretary and -0- -0- Director
Geoffrey A. Rich Director $ 73,400 $5,000
All Officers and All Officers $159,050 $10,000 Directors as a and Directors group (3) persons as a group
Other Compensation
There was no other compensation of any kind paid to the officers and directors during fiscal year 1996. No executive earned more than $100,000 of total compensation. There is no executive committee and all compensation decisions are made by the Board of Directors. There were no loans made to officers, no directors fees and no long term compensation arrangements. There were no outstanding stock option grants to officers at year end. There are no employment agreements.
Option Exercise and Value Table Number of Securities In-the-Money Underlying Options/SARs Shares Unexercised at Fiscal Acquired Value Options/SARs Year-End($)*** On Exercise Realized*** at Fiscal Exercisable(E)/ Name (#) ($) Year-End (#) Unexercisable(U) Exercisable (E) / Unexercisable (U) - -------------------------------------------------------------------------------- Stanley J. Dahle -0- -0- -0- -0-
Albert A. Cauwels -0- -0- -0- -0-
Geoffrey A. Rich -0- -0- -0- -0-
(1) These capacities include the capacities in which each such individual served Metal Arts and Coating Technology as officers and directors as set forth in the preceding table in Item 10 of this Form 10-K.
Non-Management directors are paid a fee of $250 per meeting attended. There are no such directors at this time. During the past fiscal year, fees aggregating -0- were paid. Directors who are also full time employees are not paid director's fees.
Name Year Commissions & Business Personal Benefits ---- ---- ---------------------- -----------------
Stanley J. Dahle 1996 $85,650 $5,000 1995 80,000 5,000 1994 80,000 2,000
Albert A. Cauwels 1996 -0- -0- 1995 -0- -0- 1994 80,000 2,000
Geoffrey A. Rich 1996 73,400 5,000 1995 73,750 5,000 1994 71,000 2,000
Stock Option Plan
On March 3, 1982, Metal Arts adopted an incentive stock option plan (the "Plan" or the "Stock Option Plan") pursuant to Section 422A of the Internal Revenue Code. Under the Plan, as amended, Metal Arts' Board of Directors may grant options to key employees (including executive officers of Metal Arts) to purchase up to an aggregate 850,000 common shares.
Such options expire 10 years from the date of the grant (but must be exercised within 5 years of the date of grant for grantees who hold 10 percent or more of the common shares) and are exercisable (1 ) year from the date of the grant on a cumulative basis at the rate of 25 percent of the total number of common shares subject to the option granted. Options must be granted at no less than fair market value (but not less than 110 percent of fair market value for grantees who hold 10 percent or more of the common shares). During the Fiscal Year ended June 30, 1996, no options were exercised. Remaining is an option by Mr. Charlson to purchase 150,000 common shares at $.06 per share. There are currently available under the plan 265,000 common shares for future grants. Metal Arts' management believes that the availability of the Plan, and the grants of the options, will enable the Company to attract and hold valuable employees by providing them with incentives to foster growth.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of October 1, 1996, with respect to all directors, officers, and persons who are known by Metal Arts to be the beneficial owners of more than five percent (5%) of the common shares of Metal Arts. The common shares are the only voting securities of Metal Arts. All
persons listed below have sole voting and investment power with respect to their common shares unless otherwise indicated.
Name and address of Amount beneficially Percent beneficial owner owned of class ------------------- ------------------- -------- Stanley J. Dahle 1,419,000(a) 20 81 Country Club Drive Rochester, New York
Clifford W. Charlson 753,000(b) 10 987 East Avenue Rochester, New York
Albert A. Cauwels 486,551 6.8 28 Franklin Street Phelps, New York
Geoffrey A. Rich 225,000 3.2 2856 Gildersleeve Road Walworth, New York
All officers and directors as a group (3) persons 2,130,551 30
(a) Includes 102,000 shares owned by Mr. Dahle's wife and children of which Mr. Dahle disclaims any beneficial ownership.
(b) Includes 18,000 common shares owned by Mr. Charlson's children of which Mr. Charlson disclaims any beneficial interest. Includes 150,000 common shares covered by an option to purchase 150,000 common shares at $.06 per share issued in December 1987.
As noted, Metal Arts owns 70 percent of Coating Technology, and therefore, Coating Technology is considered to be a subsidiary of Metal Arts. No member of management of Metal Arts owns any common shares of Coating Technology. No one person other than Metal Arts owns in the aggregate in excess of 5 percent of the common shares of Coating Technology, except Geoffrey A. Rich, who owns 30 percent of the common shares of Coating Technology.
Item 13.
Item 13. Certain Relationships and Related Transactions
Coating Technology leases 22,000 square feet in which it operates in Rochester, N.Y. The annual rental of the space ranges from $64,900 to $108,900, which represents a market rate.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this Form 10-K 1996 Annual Report:
1 and 2. Consolidated Financial Statements and Schedules. (See "INDEX TO FINANCIAL STATEMENTS AND SCHEDULES.")
3. (See "INDEX TO EXHIBITS.")
SIGNATURE
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE METAL ARTS COMPANY, INC.
Date: 10-9-96 By: ____________________________ Stanley J. Dahle President and Chief Executive Officer
Date: 10-9-96 By: ____________________________ Albert A. Cauwels Secretary and Director
Pursuant to the requirement of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date
Chairman, President Chief Executive Officer 10-9-96 ___________________ and Director Stanley J. Dahle
___________________ Secretary and Director 10-9-96 Albert A. Cauwels
___________________ Director 10-9-96 Geoffrey A. Rich
Exhibits
3(a) Certificate of Incorporation of Registrant and Secured Promissory Note dated November 30, 1992, between Coating Technology and M&T Bank. (Filed as Exhibit 4(i) to the company's Form 10-K for the year ended June 30, 1993 and incorporated herein by reference.)
4(b) Secured Promissory Note dated December 10, 1993, between Coating Technology and M&T Bank. (Filed as Exhibit 4(j) to the company's Form 10-K for the year ended June 30, 1994 and incorporated herein by reference.)
10(a) Lease agreement dated September 1, 1991, between John Albiston, William B. Mendick, Andrew Gallina and Raymond C. Shaheen, as Landlords, and Coating Technology as Tenant, relating to its facility in Rochester, New York. (Filed as Exhibit 10(a) to the company's Form 10-K for the year ended June 30, 1992, and incorporated herein by reference.)
10(b) The company's Stock Option Plan, as approved by the company's shareholders on March 3, 1982. (Filed as Exhibit 10(b) to the company's Form 10-K for the year ended July 3, 1982, and incorporated herein by reference.)
10(c) First amendment to the Incentive Stock Option Plan of the Metal Arts Company, Inc., approved at the 1989 Annual Meeting of shareholders.
10(d) Asset purchase agreement between Coating Technology and Rochester Steel Treating Works, Inc. dated December 22, 1993. (Filed as Exhibit 10(d) to the company's 10-K for the year ended June 30, 1994 and incorporated herein by reference.)
10(e) Option Agreement between the company and LeKem Inc., and Richard Feagins dated February 28, 1994. (Filed as Exhibit 10(e) to the company's Form 10-K for the year ended June 30, 1994 and incorporated herein by reference.)
10(f) Agreement between Metal Arts Company and the New York State Energy Research and Development Authority, dated June 22, 1995. (Filed as Exhibit 10(f) to the company's Form 10-K for the year ended June 30, 1995, and incorporated herein by reference.)
11 Description of computation of per share earnings. (See Note 2 of Notes to Consolidated Financial Statements of the Metal Arts Company, Inc.)
22 Subsidiaries. The subsidiaries of the company and the state of incorporation are as follows:
a. Coating Technology incorporated in the State of New York.
b. Metal Arts Acquisitions, Inc. incorporated in the State of New York.
(b) Reports on Form 8-K: 8-K dated November 23, 1994 8-K dated June 9, 1995
(c) See Item 14(a) (3), above.
(d) See Item 14(a) (2), above.