ARGAN INC — Capital/Financing Update 2004

Mar 15, 2004

8-K/A 1 k8aoct1.htm ARGAN 8-K/A for 10-31-2003

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 --------------------

FORM 8-K/A

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 31, 2003 ------------ Argan, Inc. ---------------------------------------------- (Exact name of registrant as specified in its charter)

Formerly Puroflow Incorporated

Delaware ---------------------------------------------- (State or other jurisdiction of incorporation)

001-31756	13-1947195
---------	-----------
(Commission File Number)	(I.R.S.
Employer I.D. Number)

One Church Street Suite 302 Rockville, MD	20850
-----------------------	-----
(Address of Principal Executive Offices)	(Zip Code)

(301) 315-0027 ---------------------------------------------- (Registrant's telephone number; including area code)

Explanatory Note :

Argan, Inc. (the "Company" or " AI") is filing this amendment (this "Amendment") to amend its Form 8-K, dated October 31, 2003, that was filed with the Commission on November 14, 2003 (the original Form 8-K as filed on November 14, 2003 is referred to herein as the "Original Form 8-K"). The purpose of this Amendment to the Original Form 8-K is to restate the unaudited condensed pro forma financial statements contained in the Original Form 8-K.

On March 11, 2004, the Company determined that there was an error in the calculation and classification of the deferred income tax liability associated with the identifiable intangible assets recorded in the purchase accounting of its acquisition of Southern Maryland Cable. The error resulted in the overstatement of the customer contractual relationships, trade name and the deferred income tax liability and the understatement of goodwill. The unaudited condensed pro forma financial statements contained in the Original Form 8-K have been restated to correct this error.

The Company has amended and restated in its entirety the unaudited condensed pro forma financial statements contained in the Original Form 8-K. This Amendment does not reflect events occurring after the filing of the Original Form 8-K, or modify or update those disclosures in any way, except as required to reflect the effects of the above-described restatement.

ITEM 2. Acquisition or Disposition of Assets :

On October 31, 2003, Argan, Inc. (AI) sold, in a cash transaction, its subsidiary, Puroflow Incorporated, to Western Filter Corporation (WFC). The sale price of approximately $3,500,000 was satisfied in cash of which $300,000 is being held in escrow for one year to protect WFC from any breach of representations and warranties under the Stock Purchase Agreement ( Item 10.01 below). The proceeds from the sale will be used for AI's ongoing acquisition program and for working capital in expanding the business of Southern Maryland Cable, Inc., its wholly owned subsidiary which it acquired on July 17, 2003.

ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits :

(b) Pro Forma Financial Information:

Unaudited pro forma condensed combined statements of operations for the fiscal years ended January 31, 2003 and 2002, respectively, and for the six months ended July 31, 2003 and unaudited pro forma condensed combined balance sheet as of July 31, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ARGAN, INC.
Date: March 15, 2004	BY /s/ Rainer H. Bosselmann --------------------------------
	Rainer H. Bosselmann Chairman of the Board and Chief Executive Officer

The accompanying unaudited pro forma condensed combined statements of operations present the results of operations of AI as if the sale of PMD had occurred as of February 1, 2001 and the purchase of SMC had occurred on February 1, 2002. PMD is accounted for as a discontinued operation for all periods for which condensed combined proforma statements of operations are presented. The pro forma unaudited condensed combined balance sheet reflects the unaudited pro forma condensed combined financial position of AI as if the sale of PMD had occurred July 31, 2003. (See Item 2., above, for details.)

The pro forma financial data is not necessarily indicative of what the results would have been if the sale of PMD and the acquisition of SMC had occurred on the dates indicated and are not necessarily representative of the Company's financial position or results of operations for any future period. Because SMC and the Company were not under common control prior to July 17, 2003, historical combined results may not be comparable to, or indicative of, future performance.

| Unaudited Pro Forma Condensed Combined Statement of
Operations | | | |
| --- | --- | --- | --- |
| For the Year Ended January 31, 2002 | | | |
| | AI as | | Pro Forma |
| Reported(A) | | Adjustments | Adjusted |
| Net Sales | $7,236,000 | ($7,236,000)(1) | ---------- |
| Cost of | | | |
| Goods
Sold | 5,137,000 | (5,137,000)(1) | ---------- |
| Gross Profit | 2,099,000 | (2,099,000) | ---------- |
| Selling General | | | |
| And | | | |
| Administrative | 1,728,000 | (1,513,000)(1) | 215,000 |
| Operating | | | |
| Income | 371,000 | (586,000) | (215,000) |
| Interest Expense | (47,000) | (47,000)(1) | ---------- |
| Other Income | 2,000 | (2,000)(1) | ---------- |
| Income from Cont- | | | |
| inuing
Operations | | | |
| Before
Tax | 326,000 | (541,000) | (215,000) |
| Provision for Income | | | |
| Taxes | 130,000 | (130,000)(1) | ---------- |
| Net Income
from | | | |
| Continuing | | | |
| Operations | 196,000 | (411,000) | (215,000) |
| Loss on disposal | | | |
| of manufacturing | | | |
| Subsidiary | ---------- | (320,000)(1) | (320,000) |
| Loss on discontinued | | | |
| Operations | (155,000) | (155,000)(1) | |
| Loss on Disposal | | | |
| Of Discontinued | | | |
| Operations | (560,000) | (560,000)(1) | ---------- |
| Net Income(Loss) | $ (519,000) | $
(16,000) | $ (535,000) |

| Earnings
Per Share: | | |
| --- | --- | --- |
| Basic -
Continuing | | |
| Operations | $ .40 | $ (.43) |
| Basic -
Discontinued | | |
| Operations | (1.45) | (.65) |
| Total | $ (1.05) | $ (1.08) |
| Diluted
- Continuing | | |
| Operations | $ .40 | $ (.43) |
| Diluted - Discontinued | | |
| Operations | (1.45) | (.65) |
| Total | $ (1.05) | $ (1.08) |

Notes to unaudited pro forma condensed combined statement of operations

(1)
(A)	Reported on Form 10-KSB
for the year ended January 31, 2003 filed with the Securities and Exchange Commission
on March 20, 2003.

| Unaudited Pro Forma Condensed Combined Statement of
Operations | | | | |
| --- | --- | --- | --- | --- |
| For the Year Ended January 31, 2003 | | | | |
| | AI as | Proforma | SMC | Pro Forma |
| | Reported(B) | Adjustments | Acquisition(C) | Adjusted |
| Net Sales | $ 6,834,000 | ($6,834,000)(2) | $8,808,000 | $8,808,000 |
| Cost of | | | | |
| Goods
Sold | 4,500,000 | (4,500,000)(2) | 6,939,000 | 6,939,000 |
| Gross Profit | 2,334,000 | (2,334,000) | 1,869,000 | 1,869,000 |
| Selling General | | | | |
| And | | | | |
| Administrative | 1,939,000 | (1,808,000)(2) | 1,566,000 | 1,697,000 |
| Operating | | | | |
| Income | 395,000 | (526,000) | 303,000 | 172,000 |
| Interest Expense | (26,000) | 26,000(2) | (90,000) | (90,000) |
| Other Income | 57,000 | (57,000)(2) | 17,000 | 17,000 |
| Write-down of Excess | | | | |
| and Obsolete | | | | |
| Inventory | (250,000) | 250,000(2) | -------- | -------- |
| Income from Cont- | | | | |
| inuing Operations | | | | |
| Before
Tax | 176,000 | (307,000) | 230,000 | 99,000 |
| Provision for Income | | | | |
| Taxes | 31,000 | (15,000)(2) | 23,000 | 39,000 |
| Net Income from | | | | |
| Continuing | | | | |
| Operations | 145,000 | (292,000) | 207,000 | 60,000 |
| Recovery of Excess | | | | |
| Accrual for Disposal | | | | |
| Of
Segment | (172,000) | 172,000 | -------- | -------- |
| Net Income (Loss) | $ 317,000 | ($464,000) | $207,000 | $60,000 |

| Earnings
Per Share(3) | | |
| --- | --- | --- |
| Basic -
Continuing | | |
| Operations | $.29 | $.03 |
| Basic -
Discontinued | | |
| Operations | $.35 | ---- |
| Total | $.64 | $.03 |
| Diluted
- Continuing | | |
| Operations | $.29 | $.03 |
| Diluted
- Discontinued | | |
| Operations | $.35 | ---- |
| Total | $.64 | $.03 |

Notes to unaudited pro forma condensed combined statement of operations

| (2) | To adjust for the sale of
PMD as if it occurred on February 1,
2001. |
| --- | --- |
| (3) | The number of shares
outstanding were increased to 1,798,000 to reflect the impact of the
Company's private placement consummated on April 29, 2003, a portion of whose proceeds were used to acquire SMC. |
| (B) | Reported on Form 10-KSB
for the year ended January 31, 2003 filed with the Securities and Exchange Commission
on March 20, 2003. |
| (C) | Gives effect to the acquisition of
Southern Maryland Cable, Inc. (SMC) as if the transaction had occurred on February 1, 2002.
SMC was acquired on July 17, 2003. The adjustments reflecting the impact of the
acquisition of SMC contained herein are the combination of the historical
results of SMC and the proforma adjustments as previously reported on the
Company's Form 8-K/A filed with the Securities and Exchange Commission on September 24, 2003. |

| Unaudited Pro Forma Condensed Combined Statement of
Operations | | | | |
| --- | --- | --- | --- | --- |
| For the Six Months Ended July 31, 2003 | | | | |
| | AI as | Pro Forma | SMC | Pro Forma |
| | Reported (D) | Adjustments | Acquisition(E) | Adjusted |
| Net Sales | $4,166,000 | ($3,603,000)(4) | $4,277,000 | $4,840,000 |
| Cost of | | | | |
| Goods Sold | 2,979,000 | (2,515,000)(4) | 3,300,000 | 3,764,000 |
| Gross Profit | 1,187,000 | (1,088,000) | 977,000 | 1,076,000 |
| Selling General | | | | |
| And | | | | |
| Administrative | 1,359,000 | (1,128,000)(4) | 806,000 | 1,037,000 |
| Operating | | | | |
| Income (Loss) | (172,000) | 40,000 | 171,000 | 39,000 |
| Interest Expense | (12,000) | 8,000(4) | (36,000) | (40,000) |
| Other Income | 27, 000 | ------ | 16,000 | 43,000 |
| Pretax (Loss) | | | | |
| Income | (157,000) | 48,000 | 151,000 | 42,000 |
| Provision for Income | | | | |
| Taxes | 245,000 | (245,000)(4) | 145,000 | 145,000 |
| Net (Loss) Income | $(402,000) | 293,000 | $6,000 | $(103,000) |
| Earnings Per Share(5): | | | | |
| Basic and Diluted | $.(34) | | | $.(06) |

Notes to unaudited pro forma condensed combined statement of operations

(4)To adjust for the sale of PMD as if it had occurred on February 1, 2001.

(5)The number of shares outstanding were increased to 1,798,000 to reflect the impact of the Company's private placement consummated on April 29, 2003, a portion of whose proceeds were used to acquire SMC.

(D) Reported on Form 10-QSB/A for the six months ended July 31, 2003 filed with the Securities and Exchange Commission on March 15, 2004.

(E) Gives effect to the acquisition of Southern Maryland Cable, Inc. (SMC) as if the transaction had occurred on February 1, 2002. SMC was acquired on July 17, 2003. The adjustments reflecting the impact of the acquisition of SMC contained herein are the combination of the historical results of SMC and the pro forma adjustments as previously reported on Form 8-K/A filed with the Securities and Exchange Commission on September 24, 2003.

Unaudited Pro Forma Condensed Combined Balance Sheet As of July 31, 2003

	Reported(F)	Pro Forma — Adjustments	Pro Forma — Adjusted
Cash and cash equivalents	$5,875,000	(79,000)(6)	$8,846,000
		3,050,000(7)
Accounts receivable, net
of allowance for doubtful
accounts of $35,000	2,444,000	(1,164,000)(6)	1,280,000
Estimated earnings in
excess of billings	226,000	------	226,000
Inventories	1,688,000	(1,688,000)(6)	------
Prepaid expenses and other
current assets	305,000	(181,000)(6)	124,000
Funds escrowed from
Acquisition and
disposition	260,000	300,000(7)	560,000
Total current assets	10,798,000	238,000	11,036,000
Leasehold improvements	469,000	(317,000)(6)	152,000
Machinery and equipment	4,720,000	(3,785,000)(6)	935,000
Trucks	615,000		615,000
Tooling and dies	413,000	(413,000)(6)	------
	6,217,000	(4,515,000)	1,702,000
Less accumulated
depreciation and
amortization	3,868,000	(3,848,000)(6)	20,000
Net property and equipment	2,349,000	(667,000)	1,682,000
Contractual customer
relationships	1,600,000	------	1,600,000
Tradename	680,000	------	680,000
Goodwill	1,548,000	------	1,548,000
Total assets	$16,975,000	($429,000)	$16,546,000

Unaudited Pro Forma Condensed Combined Balance Sheet (continued) As of July 31, 2003

	Reported(F)	Pro Forma — Adjustments	Pro Forma — Adjusted
Accounts Payable	$1,163,000	(463,000)(6)	$700,000
Billings in excess of
estimated earnings	196,000		196,000
Accrued expenses	459,000	(141,000)(6)	318,000
Accrued income taxes	96,000		96,000
Deferred income tax
liability,
net	128,000	195,000(6)	323,000
Current portion of
long-term
Debt	427,000	------	427,000
Total current liabilities	2,469,000	(409,000)	2,060,000
Deferred income tax
liability,
net of current portion	939,000	312,000(6)	1,251,000
Long-term debt	531,000	(12,000)(6)	519,000
Common stock, par value
$.15 per share, authorized -	.
12,000,000 shares - issued
1,804,304 shares at
July 31, 2003	270,000		270,000
Warrants outstanding	849,000		849,000
Additional paid-in capital	14,092,000		14,092,000
Accumulated deficit	(2,142,000)	(320,000)(8)	(2,462,000)
Treasury stock, at cost	(33,000)		(33,000)
Total stockholders' equity	13,036,000	(320,000)	12,716,000
Total liabilities and
stockholders' equity	$16,975,000	(429,000)	$16,546,000

Notes to unaudited pro forma condensed combined balance sheet

| (6) | To adjust for the sale of
PMD as if it had occurred on July 31,
2003. |
| --- | --- |
| (7) | To reflect the proceeds of
the sale of PMD of $3,500,000, of which $300,000 is being held in escrow.
Cash proceeds have been reduced by $150,000 in employee and legal deal
related costs. |
| (8) | To adjust the net assets
for the sale of PMD based on July 31,
2003 net book value including deal
related costs in (7) above. |
| (F) | Reported on Form 10-QSB/A for the six months ended July 31,
2003 filed with the Securities and Exchange Commission on March 15, 2004. |