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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 of earliest event reported) January 15, 1998
Cragar Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-12559 86-0721001
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4636 North 43rd Avenue, Phoenix, Arizona 85031
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 247-1300
Not Applicable
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
Cragar Industries, Inc. (the "Company") is filing the enclosed
financial statements to demonstrate compliance with the minimum capital
and shareholders' equity requirements to maintain the listing of its
securities on The Nasdaq Stock Market and the Boston Stock Exchange.
Following the filing of the Company's Quarterly Report on Form 10-Q for
the three months ended September 30, 1997, Nasdaq advised the Company that
its securities were subject to delisting for failing to maintain at least
$1,000,000 in capital and surplus. Subsequently, the Boston Stock Exchange
informed the Company that its shareholders' equity value failed to meet
the minimum maintenance requirement of $500,000 for listing on the Boston
Stock Exchange. The Company's failure to maintain such requirements was
due solely to the Company's election to establish an allowance for bad
debt of $3,258,115 related to the accounts receivable owed by its primary
customer, Super Shops, Inc. ("Super Shops"), which filed for bankruptcy on
September 19, 1997.
In response to Nasdaq's letter, the Company submitted a proposal to
Nasdaq describing its plan to achieve compliance with the minimum capital
and surplus requirement by January 15, 1998 by (i) raising at least $1.8
million through a private placement of convertible preferred stock and
(ii) working out a settlement regarding recovery of the largest amount
possible of the account receivable obligation from Super Shops, which
would reduce the amount of the account receivable classified as allowance
for bad debt. Nasdaq granted the Company's request for an extension until
January 15, 1998, to achieve compliance with its maintenance standards,
and required the Company to file a Form 8-K with the Securities and
Exchange Commission and Nasdaq by that date with a balance sheet
demonstrating at least $2,000,000 in net tangible assets, an amount that
would comply with Nasdaq's new maintenance standard scheduled to become
effective on February 23, 1998.
In response to the letter from the Boston Stock Exchange, the
Company submitted the same proposal that was submitted to Nasdaq. The
Boston Stock Exchange advised the Company that it would accept the
Company's proposal to achieve compliance with the minimum maintenance
requirement by January 15, 1998 by filing the Form 8-K with the requested
balance sheet as described above.
The unaudited balance sheet filed with this report indicates a
tangible net worth of $391,820, including $61,456 attributable to negative
goodwill, as of December 1, 1997. The balance sheet also sets forth
unaudited pro forma balance sheet information that gives effect to the
sale by the Company of $1.8 million of its Series A Convertible Preferred
Stock (the "Series A Preferred Stock") pursuant to a private placement to
accredited investors, subsequent to December 1, 1997, as if such private
placement had occurred December 1, 1997.
Including $1.8 million in proceeds from the private placement and
assuming no adjustment of the allowance for bad debt established as a
result of the Super Shops bankruptcy, the unaudited pro forma balance
sheet information indicates net tangible assets of $2,130,364 as of
December 1, 1997. Given the uncertainty regarding the possible outcome
associated with the Super Shops' bankruptcy, the Company does not believe
it currently can reliably estimate the amount or the timing of the
recovery from the accounts receivable due from Super Shops. Accordingly,
the Company has elected to continue to reserve the full amount of such
accounts receivable, which currently is $3,258,115.
Of the $1.8 million in proceeds from the private placement, $1.1
million has been received by the Company for which shares of Class A
Preferred Stock have not been issued pending closing of the private
placement, which the Company anticipates will occur on January 16, 1998;
$400,000 is currently being held in escrow pending closing scheduled for
January 16, 1998; and $300,000 is anticipated to be received by the
scheduled closing date based on oral commitments by investors. Although
the Company anticipates that the entire $1.8 million will be fully
collected by January 16, 1998, there can be no assurance that the receipt
of such funds will not be delayed or that investors who committed to
contributing such funds will not elect to withdraw such commitments.
Although the Company believes it has demonstrated compliance with
the $2,000,000 minimum net tangible assets test required by Nasdaq, there
can be no assurance that Nasdaq will concur with the Company's position
given the assumptions discussed above. Even if Nasdaq concurs with the
Company's position, there can be no assurance that the Company will
continue to meet the minimum net tangible assets requirement in the
future. If Nasdaq does not concur with the Company's position regarding
compliance with the minimum net tangible assets requirement discussed
above, or if the Company fails to meet such requirement in the future, the
Company's securities may be delisted from The Nasdaq Stock Market and the
Boston Stock Exchange.
If the Company fails to maintain such listings, the market value of
its Common Stock likely would decline and holders likely would find it
more difficult to dispose of, or to obtain accurate quotations as to the
market value of the Common Stock. In addition, if the Company fails to
maintain Nasdaq market listing for its securities, and no other exclusion
from the definition of a "penny stock" under the Securities and Exchange
Act of 1934 (the "Exchange Act") is available, then any broker engaging in
a transaction in the Company's securities would be required to provide any
customer with a risk disclosure document, disclosure of market quotations,
if any, disclosure of the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market values of the Company's securities held in the customer's account.
The bid and offer quotation and compensation information must be provided
prior to effecting the transaction and must be contained on the customer's
confirmation. If brokers become subject to the "penny stock" rules when
engaging in transactions in the Company's securities, they would become
less willing to engage in such transactions, thereby making it more
difficult for the Company's security holders to dispose of the Common
Stock.
This report contains forward-looking statements. Additional written
or oral forward-looking statements may be made by the Company from time to
time in filings with the Securities and Exchange Commission or otherwise.
Such forward-looking statements are within the meaning of that term as
defined in Section 27A of the Securities Act of 1933, and Section 21E of
the Exchange Act. Such statements may include, by not be limited to,
projections of revenues, income or loss, estimates of capital
expenditures, plans for future operations, products or services, and
financing needs or plans, as well as assumptions relating to the
consummation of the Company's private placement of its Series A Preferred
Stock. The words "believe," "expect," "anticipate," "estimate," "project,"
and similar expressions identify forward-looking statements which speak
only as of the date the statement is made. Forward-looking statements are
inherently subject to risks and uncertainties, some of which cannot be
predicted or quantified. Future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements. The disclosures contained in this report, as
well as other disclosures contained in the Company's filings with the
Securities and Exchange Commission, describe factors, among others, that
could contribute to or cause such differences.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Included with this report are the following unaudited historical and
pro forma financial statements.
a. Balance Sheet as of December 1, 1997.
b. Statement of Operations for the Two Months Ended
December 31, 1997.
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.
CRAGAR INDUSTRIES, INC.
Date: January 15, 1998 /s/ Michael L. Hartzmark
-------------------------------------
Michael L. Hartzmark
President, Treasurer & CEO
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The following unaudited financial information includes unaudited
historical and pro forma balance sheet data for the Company as of December 1,
1997 and unaudited historical statement of operations data for the two months
ended December 1, 1997. The unaudited pro forma balance sheet data gives effect
to the sale by the Company of $1.8 million of its Series A Preferred Stock as if
such sale had been completed on December 1, 1997. The pro forma balance sheet
data assumes that the private placement has been consummated, although the $1.8
million in proceeds includes (i) $400,000 that is currently being held in escrow
pending closing of the private placement, which the Company anticipates will
occur on January 16, 1998; (ii) $300,000 that has not been received from
investors, but which the Company anticipates will be received by the closing
scheduled for January 16, 1998, based on oral commitments received from such
investors; and (iii) $1.1 million that has been received by the Company but for
which no shares of Series A Preferred Stock have been issued pending the closing
scheduled for January 16, 1998. Although the Company anticipates that
consummation of the private placement in the amount of $1.8 million will occur
on January 16, 1998, there can be no assurance that all or a portion of such
private placement will not be consummated. If the Company does not receive all
or substantially all of the $1.8 million in proceeds anticipated from the
private placement on the scheduled closing date, the Company's securities will
be subject to delisting from Nasdaq and the Boston Stock Exchange.
The financial statements included in this report are unaudited and
therefore are subject to adjustments upon audit, which adjustments could be
materially adverse to the Company.
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CRAGAR INDUSTRIES, INC.
BALANCE SHEET
DECEMBER 1, 1997
<TABLE>
<CAPTION>
ASSETS
PROFORMA
DECEMBER 1 DECEMBER 1
1997 1997
---------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 30,199 1,830,199
Accounts receivable, less allowance for doubtful accounts of 3,228,742 3,228,742
$3,613,390 as of 12/1/97
Inventories, net 5,245,403 5,245,403
Prepaid expenses 245,196 245,196
---------------- -----------------
Total current assets 8,749,540 10,549,540
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Property and equipment, net 1,257,683 1,257,683
Other assets, net 46,374 46,374
---------------- -----------------
$10,053,596 11,853,596
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,357,843 2,357,843
Accrued expenses 1,384,269 1,384,269
Accrued interest 78,542 78,542
Current installments of capital lease obligations 114,357 114,357
Current installments of long-term debt 4,453 4,453
---------------- -----------------
Total current liabilities 3,939,464 3,939,464
Notes payable 5,722,313 5,722,313
Capital lease obligations, less current installments 0 0
Long-term debt, less current installments 0 0
Subordinated investor debt, less current portion 0 0
Excess of fair value of assets acquired over cost 61,456 61,456
---------------- -----------------
Total liabilities 9,723,233 9,723,233
---------------- -----------------
Stockholders' equity:
Preferred stock, par value $.01; authorized 200,000 shares, 1,800 - 1,800
shares issued and outstanding pro forma
Common stock, par value $.01; authorized 5,000,000 shares, 24,855 24,855
2,485,490 shares issued and outstanding at 12/1/97
Additional paid-in capital 11,845,565 13,643,765
Accumulated deficit (11,540,056) (11,540,055)
---------------- -----------------
Total stockholders' equity 330,364 2,130,364
Commitments, contingencies and subsequent events
---------------- -----------------
$10,053,596 11,853,596
================ =================
</TABLE>
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CRAGAR INDUSTRIES, INC.
STATEMENTS OF OPERATIONS FOR THE
TWO MONTHS ENDED DECEMBER 1, 1997
<TABLE>
<CAPTION>
TWO MONTHS
ENDING
DECEMBER 1
1997
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<S> <C>
Net sales 2,229,952
Cost of goods sold 1,682,770
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Gross profit 547,182
---------------------
Selling, general and administrative expenses 535,431
Amortization of excess of fair value of assets acquired over cost (122,912)
---------------------
Income from operations 134,663
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Non-operating expenses, net 110,512
Interest expense, net
Other, net 43,773
Total non-operating expenses 154,285
---------------------
Income before income taxes (19,622)
Income taxes (300)
---------------------
Income (loss) before extraordinary item (19,322)
Extraordinary item:
Gain on sale of assets 0
Net income (19,322)
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</TABLE>
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