ELECTRIC M & R INC.
FORM 10-KSB/A AND ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Annual Report Pursuant Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
Commission file number 0-4939
Electric M & R Inc.
(Name of small business issuer in its charter)
Delaware 25-1197808
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2025 Milford Drive, Bethel Park,
Allegheny County, Pennsylvania 15102
(Address of principal executive offices)
Issuer's telephone number: 412-831-6101
Securities registered under section 12(b) of the Exchange Act:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $1.00 Par Value
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act of 1934 during
the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
The issuer's net sales for its most recent fiscal year were
$2,477,229.
The aggregate market value of the voting common stock held by
nonaffiliates as of December 31, 1995 was not determinable
because there is insufficient market transaction data.
Registrant has one class of common stock as of December 31, 1995,
the close of the period covered by this report; 734,787 shares
were outstanding.<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for the year ended December 31, 1995:
Part I - Items 1 and 3
Part II - Items 5-7, except for the approximate number of
holders of common stock securities of the
Registrant at December 31, 1995 which was 4229.
Part III - Items 9-12
PART I
Item 1. DESCRIPTION OF BUSINESS
The information contained in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1995, under the
headings "Narrative Description of Business" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" is incorporated herein by reference.
Item 2. PROPERTIES
The principal plants and other physically important properties of
Registrant are as follows:
A. A 30,000 square foot one-story brick and steel
manufacturing plant placed in service in 1956 in Bethel
Park, Pennsylvania, owned in fee simple. This plant is
used for the manufacture and repair of electric motors and
related equipment and is presently being used at
approximately fifty-five (55) percent of its capacity.
B. An 88,000 square foot one-story brick and steel
manufacturing plant placed in service in 1968 in Irwin,
Pennsylvania, owned in fee simple. This plant is used
primarily for the production of electric lighting products
and is presently being used at approximately forty (40)
percent of its capacity.
C. A tract of land presently containing approximately 89
acres located in Luquillo, Puerto Rico, owned in fee
simple. This property is classified as assets held for
sale.
D. A 2,500 square foot single floor brick office building in
Bethel Park, Pennsylvania. This building was purchased in
1994 and is used for executive and administrative offices
of the Registrant. The balance of the mortgage payable is
$26,649 at December 31, 1995.
E. In 1994, the Registrant took possession of rental
properties resulting from foreclosure action against the
mortgagee. These properties were sold in 1995 and 1996.
The Registrant believes that the facilities are sufficient for
its existing activities and potential growth.
Item 3. LEGAL PROCEEDINGS
The information contained in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1995, under the
heading "Litigation," (see Note 9 to the financial statements) is
incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The information contained in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1995, under the
heading "Market and Dividend Information" is incorporated herein
by reference.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The information contained in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1995, under the
heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations", is incorporated herein by
reference.
Item 7. FINANCIAL STATEMENTS
Financial Statements
The financial statements and related notes and the Report of
Independent Accountants contained in the Registrant's Annual
Report to Shareholders for the year ended December 31, 1995,
are incorporated herein by reference.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1995, under the
heading "Directors and Executive Officers of the Registrant," is
incorporated herein by reference.
Item 10. EXECUTIVE COMPENSATION
The information contained in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1995, under the
heading "Remuneration and Other Transactions with Management
since January 1, 1995," is incorporated herein by reference.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information contained in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1995, under the
heading "Security Ownership of Certain Beneficial Owners and
Management," is incorporated herein by reference.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1995, under the
heading "Remuneration and Other Transactions with Management
since January 1, 1995," is incorporated herein by reference.
Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT
ON FORM 8-K
(a) Financial Statements
The following financial statements of Electric M & R Inc. are
included in Part II, Item 7:
Report of Independent Accountants relating to the
financial statements for 1995 and 1994.
Balance Sheets - December 31, 1995 and 1994.
Statements of Operations and Accumulated Deficit for
the Years Ended December 31, 1995 and 1994.
Statements of Cash Flows for the Years Ended December
31, 1995 and 1994.
Notes to Financial Statements
Exhibits
(13) Annual Report to Security Holders for the year ended
December 31, 1995.
(b) Report on Form 8-K
There were no reports on Form 8-K which were required to be
filed during the period October 1, 1995 to December 31, 1995.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ELECTRIC M & R INC.
By /s/ V. E. Oswald
V. E. Oswald
Chairman of the Board
Director
By /s/ Raymond F. Croushore
Raymond Croushore
Treasurer (Principal
Accounting Officer)
Director
Date: March 27, 1996
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Date: March 27, 1996 By /s/ Gretchen Oswald
Gretchen Oswald
Director
Date: March 27, 1996 By /s/ Richard MacQuown
Richard MacQuown
Director
Date: March 27, 1996 By /s/ Fred Jacobs
Fred Jacobs
Director
<PAGE>
1995
ANNUAL REPORT
<PAGE>
DIRECTORS
V. E. OSWALD
Chairman of the Board of Directors of Electric M & R Inc.
Since 1969
GRETCHEN OSWALD
President, Chief Executive Officer of Electric M & R Inc.
Since 1982
FRED JACOBS
Vice President of Electric M & R Inc.
Since 1991
Raymond F. Croushore
Treasurer and Secretary of Electric M & R Inc.
Since 1995
RICHARD MacQUOWN
President, Tomsett Consulting Associates, Inc.
Since 1984
OFFICERS
V. E. OSWALD
Chairman of the Board of Directors
GRETCHEN OSWALD
President, Chief Executive Officer
FRED JACOBS
Vice President
RAYMOND F. CROUSHORE
Treasurer and Secretary
GENERAL COUNSEL
GREENFIELD AND ASSOCIATES
1035 Fifth Avenue
Pittsburgh, PA 15219
TRANSFER AGENT
ELECTRIC M & R INC.
2025 Milford Drive
P.O. Box 326
Bethel Park, PA 15102
ELECTRIC M & R INC.
DIVISIONS
PITTSBURGH REFLECTOR DIVISION
ELECTRIC MANUFACTURING AND REPAIR COMPANY DIVISION<PAGE>
MANAGEMENT'S STATEMENT REGARDING SUMMARY OF OPERATIONS
Electric M & R Inc. has two (2) operating divisions:
1. Pittsburgh Reflector Company - Manufacture and sales of
electric lighting fixtures
2. Electric Manufacturing & Repair Company - Manufacture and
repair of electric motors and related equipment
MARKET AND DIVIDEND INFORMATION
Sales Prices of Common Shares
1995 1994
(From "National Quotation (From "National
Quotation
Bureau Incorporated") Bureau Incorporated")
Quarter Bid Ask Dividend Bid Ask Dividend
First .750 N/A None .125 N/A None
Second .750 N/A None .250 N/A None
Third .375 N/A None .500 N/A None
Fourth .375 N/A None .500 N/A None
A copy of SEC Form 10-KSB/A will be sent free of charge to the
shareholders upon written request addressed to the Secretary,
or the Corporation: 2025 Milford Drive, P.O. Box 326, Bethel
Park, Pennsylvania 15102-0326.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) The principal holder of securities of Registrant as of
February 28, 1996 was:
Title of Type of Amount Percent
Name and Address Class Ownership Owned of Class
Gretchen Oswald Common Of record 396,952 54.02%
2025 Milford Drive stock
Bethel Park, PA 15102
(B) Equity securities owned directly or indirectly by directors
and officers of Registrant as a group were as follows:
Title of Class Amount Owned Percent of Class
Common Stock 396,952 54.02%
<PAGE>
NARRATIVE DESCRIPTION OF BUSINESS
The Company was incorporated in Delaware in June, 1968.
Business done and intended to be done:
The principal markets for electrical lighting fixtures are
firms engaged in the installation of electrical fixtures in
construction projects and firms installing new or replacement
electrical fixtures in their own facilities.
The principal market for electric motors and related services
is industry in the Western Pennsylvania area.
The market for the Registrant's investment in real estate is in
Luquillo, Puerto Rico and Irwin, Pennsylvania.
The sale of the Registrant's products, except real estate, is
conducted by direct retail sales to manufacturers or sales to
distributors. Real estate sales are conducted by agents of the
Registrant.
There have been no significant changes in the kinds of products
or services rendered or in markets or methods of distribution
since the beginning of Registrant's fiscal year.
The sources and availability of raw material essential to
Registrant's business are not significant factors; however, the
profitability of Registrant's manufacture, remanufacture,
repair and sale of coils, lighting products, transformers,
electric motors and similar equipment is affected by the price
of materials.
Patents, licenses, franchises and concessions are not
significant factors to Registrant's business. Also, none of
the Registrant's segments are significantly seasonal.
There are three significant customers of the Company's
Electrical Lighting Products Division and one significant
customer of the Company's Electrical Motor Repair Division.
These customers accounted for approximately 90% and 10% of the
net revenue of each respective division and 58% of the
Company's total net sales. All significant customers are
independent of the Registrant. See note 14 to the Registrant's
financial statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity
Management expects cash flow to be restrictive over the next few
years as available cash will be used to liquidate the notes
payable and accrued interest owed by the Registrant. Major
factors affecting the Registrant's liquidity include the
following:
1. At the present time, related parties, which are owed in
excess of $2.1 million in notes payable and accrued
interest, have not charged the Registrant interest on the
portion of the liability representing accrued interest.
2. The Registrant has an available line of credit with Dollar
Bank for $150,000 with annual interest at the bank's prime
rate plus 1-1/2%. As of December 31, 1995, $91,000 had
been borrowed on the line of credit.
3. The Registrant continues to actively attempt to sell its
property in Puerto Rico. Management believes the property
to have a value in excess of two million dollars, but
recognizes that achieving this value will require
additional time and effort which may be extended and
substantial.
4. The Company also sold property in Irwin, Pennsylvania
during 1995 and 1996 with proceeds totalling approximately
$300,000. The gain from mortgage foreclosure in 1994 represents the
market value of these properties, less the cost of acquisition.
Capital Resources
There are no commitments for any major capital expenditures at
December 31, 1995.
Net Sales
The 1995 manufacturing sales of $2,477,000 reflect a decrease of
$1,027,000 for the year. This decrease was primarily
attributable to decreased volume of electrical lighting products
sales due to a significant decrease from a major customer, whose store
renovation schedule has been lengthened and whose parent company has been
experiencing financial difficulties. The Registrant is actively pursuing
alternative business areas and anticipates sales may remain constant or
decline in 1996.
Cost of Product Sold
The cost of raw material, labor and purchased services are
stable, with the exception of normal inflationary increases.
Cost of sales as a percentage of sales has decreased 3.5% due to the
implementation of increases in certain market prices during 1995.
Research and Development Expenses
There have been no significant research and development expenses
during the last two fiscal years.
Selling, General and Administrative Expenses
The selling, general and administrative expenses, exclusive of
attorney fees, are stable. Attorney fees decreased in 1995 by
approximately $4,000. The percentage of selling, general and administrative
expense to sales has increased 6% in 1995 due to decreased sales volume
with no feasible alternative for further reducing selling, general and
administrative expense.
Interest and Financing Expense
The interest rate on the notes payable to related parties is
prime plus 1% as it was in years previous to 1995.
Net Earnings
The Company's ability to increase profitability is dependent on a
number of factors. The drop in gross sales volume at the lighting division
is directly related to the decrease in business from its major customer,
which is dependent on their recovery from the current industry recession.
Increased sales volume through a wider customer base would have a salutary
effect on profitability as well as the conclusion of litigation (as
mentioned in Note 9 to the financial statements).
The sale of the land held for sale would also have a positive
effect on net earnings.
Business in General
Backlogs existing for the electrical lighting products were
approximately $500,000 and $1,000,000 as of December 31, 1995 and
December 31, 1994, respectively. A portion of such backlog must
await release instructions from the purchaser and can be held for
some time. However, all of the backlog can be delivered within
the current fiscal year.
The manufacture and sale of electrical lighting products and the
manufacture and repair of electric motors and similar equipment
are highly competitive. Numerous larger companies with greater
resources compete with the Registrant in the market for these
products. Sales of lighting products are directly affected by
the level of industrial and commercial construction. The
Registrant's sales of land investment in Puerto Rico are affected
by the general economic conditions of Puerto Rico.
Registrant employs approximately 25 employees relating to the
manufacture and sale of electric lighting products and
approximately 10 employees relating to the manufacture and repair
of electric motors and similar equipment and the distribution of
electrical products. There are not expected to be significant
changes in the number of employees in 1996.
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Fees are paid to non-employee directors at the rate of $100 per
meeting.
The Board of Directors has no audit, nominating or compensation
committees.
The Board of Directors held five meetings during the last fiscal
year. None of the directors attended fewer than 70% of these
meetings.
The following information is furnished with respect to each
director and executive officer:
Shares
Beneficially
Name and Position Period Owned as of Percent
Presently Held Served February 28, 1996 of Class
Vincent E. Oswald Director and -0- 0.00%
Age 83 Officer
Director, Chairman of Since January 9, 1969
the Board of the Company
(Father of Gretchen Oswald)
Gretchen Oswald Director 396,952 54.02
Age 50 Since April 18, 1982
Director, President Chief Executive Officer
and Chief Executive Since February 15, 1985
Officer of the Company
(Daughter of Vincent E. Oswald)
Fred Jacobs, Age 47 Director -0- 0.00
Director and Vice and Officer
President of the Since January 29, 1990
Company
Raymond F. Croushore Director and Officer -0- 0.00
Age 48 Since December 27, 1995
Secretary and Treasurer
of the Company
(Formerly Controller for
Gregg Services, Pittsburgh,
PA 1978-1995)
Richard MacQuown Director -0- 0.00
Age 76 Since April 18, 1984
President of Tomsett
Consulting Associates, Inc.
<PAGE>
REMUNERATION AND OTHER TRANSACTIONS WITH MANAGEMENT
SINCE JANUARY 1, 1995
The following information is furnished with respect to the Chief
Executive Officer and to each Director and Officer of the Company
whose aggregate direct remuneration exceeded $100,000 for the
fiscal year ended December 31, 1995 and with respect to all
Directors and Officers of the Company as a Group. No Officer's
or Director's aggregate direct remuneration exceeded $100,000.
Capacities in Name of Individual
Which Remuneration or Number of Aggregate Remuneration
Received Persons in Group 1995 1994 1993
President Gretchen Oswald $42,000 $42,000 $31,500
All Directors & Officers
As a Group (5) $76,088 $112,300 $115,100
Shop Materials Company, a corporation in which all voting
securities are owned by Vincent E. Oswald, received certain
accounting services, office space, office staff, telephone, and
management services from the Company and reimbursed the Company
for such services.
In 1995, Shop Materials Company paid approximately $46,700 for
such services. The Company believes that amounts received for
such services and space are fair and reasonable and are as fair
as amounts which would be received from non-affiliates for such
services and space.
Gretchen Oswald has loaned the Company prior to December 31, 1995
$60,000 and $20,000 payable on demand with interest at 10% and
8%, respectively. There is no outstanding interest on these
loans at December 31, 1995.
Vincent E. Oswald and Shop Materials Company have, from time to
time prior to and including the fiscal year ended December 31,
1995, made various loans to the Company, payable upon demand with
interest at the prime rate plus one (1%) percent. The present
outstanding balance of such loans is $1,027,890. The terms of
the loans are as favorable as the Company could have obtained
from unrelated parties. The outstanding interest on the above
loans to and including December 31, 1995 is $1,067,933.
Neither Mr. Oswald nor Shop Materials Company have charged the
Company interest on the accrued interest balance and have
provided the Company flexibility in making payments on the
interest.<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
February 14, 1996
Board of Directors and Shareholders
Electric M & R, Inc.
We have audited the accompanying balance sheets of Electric M &
R, Inc. as of December 31, 1995 and 1994, and the related
statements of operations and accumulated deficit and cash flows
for the years then ended, appearing on pages 10 through 19 of
this Annual Report. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these 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.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Electric M & R, Inc. as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting
principles.
McCRORY & McDOWELL LLC
Pittsburgh, Pennsylvania
<PAGE>
ELECTRIC M & R, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
1995 1994
Current Assets
Cash and Cash Equivalents $ 11,790 $ 7,463
Accounts Receivable - Net of
Allowance for Doubtful Accounts
of $4,300 and $9,000, Respectively 141,308 434,001
Inventories 870,361 867,690
Note Receivable 3,671 53,320
Other Current Assets 36,747 43,736
1,063,877 1,406,210
Property, Plant and Equipment
Land and Improvements 22,484 22,484
Buildings and Improvements 787,936 786,051
Machinery and Equipment 1,402,388 1,367,939
Furniture and Fixtures 193,047 188,848
2,405,855 2,365,322
Less: Accumulated Depreciation 2,059,538 2,013,209
346,317 352,113
Other Assets
Real Estate Held for Sale 789,439 915,338
TOTAL ASSETS $ 2,199,633 $ 2,673,661
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Notes Payable - Demand $ 91,000 $ -0-
Current Portion of Long-Term Debt 29,866 20,950
Accounts Payable 183,247 425,738
Accrued Expenses 52,741 15,745
Notes Payable - Related Parties 1,107,890 1,281,104
Accrued Interest - Related Parties 1,067,933 1,174,074
2,532,677 2,917,611
Long-Term Debt 18,082 26,649
Shareholders' Deficit
Common Stock 734,787 734,787
Additional Paid-In Capital 1,486,440 1,486,440
Accumulated Deficit (2,572,353) (2,491,826)
(351,126) (270,599)
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $ 2,199,633 $ 2,673,661
See accompanying notes.
<PAGE>
ELECTRIC M & R, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
Net Sales $ 2,477,229 $ 3,503,817
Cost of Goods Sold 2,089,074 3,079,016
Gross Profit 388,155 424,801
Selling, General and Administrative 488,873 477,764
Operating Loss (100,718) (52,963)
Other (Income) and Expense
Interest Income (1,593) (17,762)
Other Income (68,321) (32,307)
Interest Expense 131,484 106,981
Sale of Land, Net of Costs and Expenses
of $156,353 and $46,364, respectively (113,761) 16,363
Gain from Mortgage Foreclosure -0- (141,384)
(52,191) (68,109)
Net Income (Loss) Before Provision
for Income Taxes (48,527) 15,146
Provision for Income Taxes 32,000 3,794
NET INCOME (LOSS) $ (80,527) $ 11,352
Net Income (Loss) Per Share
of Common Stock (.11) .02
Number of Shares Used in
Computing Earnings Per Share 734,787 734,787
Accumulated Deficit at
Beginning of Year $(2,491,826) $(2,503,178)
Net Income (Loss) (80,527) 11,352
ACCUMULATED DEFICIT AT
END OF YEAR $(2,572,353) $(2,491,826)
See accompanying notes.
<PAGE>
ELECTRIC M & R, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1995 1994
Cash Flows from Operating Activities
Net Income (Loss) $ (80,527) $ 11,352
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by (Used in)
Operating Activities:
Depreciation 57,221 58,085
Gain from Mortgage Foreclosure -0- (141,384)
Net Loss (Gain) on Sale of Real
Estate Held for Sale (113,761) 16,363
(Increase) Decrease in:
Accounts Receivable 292,693 (52,044)
Inventories (2,671) 105,256
Other Current Assets 6,989 (14,625)
Increase (Decrease) in:
Accounts Payable (242,491) 178,809
Accrued Expenses 36,996 (2,857)
Accrued Interest - Related Parties (106,141) (60,470)
Income Taxes Payable -0- (40,545)
(151,692) 57,940
Cash Flows from Investing Activities
Payments for Capital Expenditures (28,425) (112,387)
Payments for Real Estate Held for Sale -0- (36,348)
Net Proceeds from Sale of Real Estate
Held for Sale 239,660 2,537
Collection of Notes Receivable 49,649 5,026
260,884 (141,172)
Cash Flows from Financing Activities
Proceeds from Additional Borrowings 91,000 181,000
Principal Payments on Long-Term Debt (22,651) (14,651)
Principal Payments on Notes Payable -
Related Parties (173,214) (114,640)
(104,865) 51,709
Net Increase (Decrease) in Cash and
Cash Equivalents 4,327 (31,523)
Cash and Cash Equivalents at
Beginning of Year 7,463 38,986
Cash and Cash Equivalents at
End of Year $ 11,790 $ 7,463
See accompanying notes.
<PAGE>
ELECTRIC M & R, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents - The Company considers all highly
liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Inventories - Inventories are stated at the lower of cost
(first-in, first-out method) or market.
Property, Plant and Equipment - The cost of the assets is
depreciated using straight-line and accelerated methods over
their estimated useful lives for financial statement and tax
return purposes.
Use of 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.
2. INVENTORIES
Inventories consist of the following:
1995 1994
Raw Materials $ 434,893 $ 471,519
Work in Progress 183,191 197,443
Finished Goods 252,277 198,728
$ 870,361 $ 867,690
3. LINE OF CREDIT
In 1994, the Company established a $150,000 line of credit
with Dollar Bank. Borrowings bear interest at the bank's
prime rate plus 1-1/2%. The line of credit is personally
guaranteed by the principal shareholder of the Company. At
December 31, 1995, $91,000 had been borrowed on the line of
credit. At December 31, 1994 there were no borrowings under
this arrangements.
<PAGE>
4. NOTES PAYABLE
Demand notes payable to related parties in the amounts of
$1,107,890 and $1,281,104 at December 31, 1995 and 1994,
respectively, consist of amounts due officer-shareholders of
the Company, and entities under their control. These notes
and amounts bear interest at prime (8.5% at December 31,
1995) plus 1% with the exception of a $60,000 and a $20,000
note payable to an officer-shareholder at 10% and 8%,
respectively. Accrued interest on these notes was $1,067,933
and $1,174,074 at December 31, 1995 and 1994, respectively.
5. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995
and 1994:
8% mortgage payable to an individual 1995 1994
with final payment due March 15, 1997.
The note is secured by a building. $ 26,649 $ 47,599
8.49% note payable to Dollar Bank with
final payment due September 18, 1998.
The note is secured by a vehicle. 21,299 -0-
47,948 47,599
Less: Current Portion 29,866 20,950
$ 18,082 $ 26,649
Aggregate maturities of long-term debt subsequent to December
31, 1995 are as follows:
By: December 31, 1996 $ 29,866
December 31, 1997 11,774
December 31, 1998 6,308
$ 47,948
6. RELATED PARTY TRANSACTIONS
During 1995 and 1994 the Company charged an affiliated
Company owned by an officer approximately $46,700 and $9,800,
respectively, for administrative and management services.
These amounts are included in other income.
In addition, interest expense for the years ended December
31, 1995 and 1994, pertaining to notes payable to related
parties, amounted to approximately $120,674 and $104,000,
respectively.
During 1994, the Company purchased an office building from a
relative of an officer for $62,250.
<PAGE>
7. ASSETS HELD FOR SALE
The Company owns land in Puerto Rico which is being actively
offered for sale. This land is recorded at the Company's
cost, $557,439 and $582,861 at December 31, 1995 and 1994,
respectively, which is estimated to be less than net
realizable value.
The Company owned rental property in Irwin, Pennsylvania
which was being actively offered for sale. During 1996,
management of the Company sold this property for $232,000.
8. INCOME TAXES
As required by FASB Statement No. 109, "Accounting for Income
Taxes", the Company uses the liability method of accounting
for income taxes.
For Federal Income Tax reporting purposes, the Company has
available $2,400,000 of net operating loss carryforwards as
of December 31, 1995. If unused, these amounts will expire
in varying amounts beginning in 1997 through 2010. For state
income tax reporting purposes, the Company has $820,000 of
net operating loss carryforwards as of December 31, 1995. If
unused, these amounts will expire in varying amounts
beginning in 1996 and 1997.
These losses result in a deferred tax asset which has been
reduced to zero by a valuation allowance due to a trend of
minimal taxable income in prior years.
1995 1994
Deferred Tax Asset $ 891,000 $ 912,000
Valuation Allowance (891,000) (912,000)
$ -0- $ -0-
Significant components of income tax expense from continuing
operations consist of the following at December 31, 1995 and
1994:
Current - State $ -0- $ 3,794
Puerto Rico 32,000 -0-
$ 32,000 $ 3,794
9. LITIGATION
On June 21, 1990, the Company was awarded damages of
$1,009,000 from a former employee of the Company and his
related entities. The judgement was the result of a long-
standing suit by the Company against the former employee and
his related entities. The Company is currently involved in
a lis pendens action in order to collect the judgement.
In 1992, the Company received $171,000 as settlement in a
lawsuit with a financial institution related to the lawsuit
against the former employee. The net proceeds were used to
reduce a receivable in the amount of $44,016 with the
remaining $126,984 recorded as income in 1992. The Company
used the proceeds to purchase three first mortgages from the
financial institution secured by three rental properties.
The mortgagee of each of these properties was the former
employee. The mortgagee defaulted on payment on all the
mortgages. The Company took possession of these properties
during 1994. The gain from mortgage foreclosure reflected in 1994
represents the market value of these properties, less the costs of
acquisition. The properties were sold in 1995 and 1996.
(See Note 7)
10. CONTINUING OPERATIONS
At December 31, 1995 the Company had negative working capital
of $1,468,800, and shareholders' deficit of $351,126. As
discussed in Note 4 to the financial statements, the Company
owes related parties in excess of $2.1 million in loans and
accrued interest. In the past, the officer has not charged
the Company interest on the portion of the debt representing
accrued interest and has only demanded payment to the extent
of available cash flow. Continued operations of the Company
are dependent on receiving continued favorable financial
assistance from the officer. The officer has represented
that he will continue to provide this assistance. It is the
intent of the Company that available proceeds from the sale
of Real Estate Held for Sale will be used to liquidate this
obligation.
11. CONCENTRATION OF CREDIT RISK
The principal markets for electrical lighting products are
firms engaged in the installation of electrical fixtures in
construction projects and firms installing new or replacement
electrical fixtures in their own facilities.
The principal market for electric motors and related services
is industry in the Western Pennsylvania area.
The sole market for the Registrant's investment in real
estate is in Luquillo, Puerto Rico.
All customer receivables are unsecured.
12. COMMON STOCK
Common stock has a stated value of $1 per share. There are
2,000,000 shares authorized, and 734,787 shares issued and
outstanding at December 31, 1995 and 1994.
<PAGE>
13. SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing and financing activities for the year
ended December 31, 1995:
Capital Expenditures $ 51,425
Cash Payments (28,425)
Capital Expenditures Financed $ 23,000
Non-cash investing and financing activities for the year
ended December 31, 1994:
Capital Expenditures $ 194,637
Cash Payments (112,387)
Capital Expenditures Financed $ 82,250
During the year ended December 31, 1994, the Company
foreclosed on mortgages receivable and recorded the property
acquired as Real Estate Held for Sale.
Real Estate Held for Sale $ 332,477
Mortgages Receivable (154,745)
Net Expenses from Acquisition (36,348)
Gain from Mortgage Foreclosure $ 141,384
Interest paid during the years ended December 31, 1995 and
1994 totalled $237,625 and $157,619, respectively. Income
taxes paid during the years ended December 31, 1995 and 1994
totalled $12,984 and $57,985, respectively.
14. BUSINESS SEGMENTS
The Company operates principally in the following industries:
(a) manufacture and sale of metal electrical lighting
products; (b) manufacture and repair of electric motors and
similar equipment. In addition, the Company is attempting to
sell approximately 89 acres of land in Puerto Rico which is
included on the balance sheet as Real Estate Held for Sale.
The Company has no intersegment sales.
Net sales to several customers in 1995 and 1994 each
represented 10% or more of total net sales of each division.
Net sales to these customers were approximately as follows:
1995 1994
Electrical Lighting Products:
Customer A $ 288,000 $ 284,000
Customer B 686,000 1,512,000
Customer C 372,000 266,000
$1,346,000 $ 2,062,000
<PAGE>
14. BUSINESS SEGMENTS (Continued)
Manufacture and Repair of
Electric Motors:
Customer A $ -0- $ 119,000
Customer B 100,000 -0-
$ 100,000 $ 119,000
Operating income is comprised of total revenues less
operating expenses. In computing operating income, the
following items have been omitted: general corporate
expenses; interest expense; and income taxes.
Identifiable assets by industry are those assets that are
used in the Company's operation in each industry. Corporate
assets are principally cash, other receivables, and prepaid
expenses.
Year Ended December 31, 1995
Manufacture
Electrical and Repair
Lighting of Electric
Products Motors Total
REVENUES:
Net Sales to Major
Customers $1,346,000 $ 100,000 $1,446,000
Net Sales to Others 152,000 879,000 1,031,000
$1,498,000 $ 979,000 $2,477,000
Operating Income $ 49,000 $ 141,000 $ 190,000
General Corporate Earnings 70,000
General Corporate Expenses (291,000)
Sale of Land, Net of Cost and Expenses 113,000
Income Taxes (32,000)
Interest Expense (131,000)
Net Loss $ (81,000)
Identifiable Assets at
December 31, 1995 $ 620,000 $ 738,000 $1,358,000
Corporate Assets 841,000
$2,199,000
Depreciation $ 30,000 $ 27,000 $ 57,000
Capital Expenditures $ 7,000 $ 44,000 $ 51,000
<PAGE>
14. BUSINESS SEGMENTS (Continued)
Year Ended December 31, 1994
Manufacture
Electrical and Repair
Lighting of Electric
Products Motors Total
REVENUES:
Net Sales to Major
Customers $2,062,000 $ 119,000 $2,181,000
Net Sales to others 331,000 991,000 1,322,000
$2,393,000 $1,110,000 $3,503,000
Operating Income $ 56,000 $ 85,000 $ 141,000
General corporate earnings 191,000
General corporate expenses (194,000)
Sale of Land, Net of Cost
and Expenses (16,000)
Income Taxes (4,000)
Interest Expense (107,000)
Net Income $ 11,000
Identifiable assets at
December 31, 1994 $ 909,000 $ 745,000 $1,654,000
Corporate assets 1,020,000
$2,674,000
Depreciation $ 30,000 $ 28,000 $ 58,000
Capital expenditures $ 80,000 $ 115,000 $ 195,000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,790
<SECURITIES> 0
<RECEIVABLES> 144,608
<ALLOWANCES> (4,300)
<INVENTORY> 870,361
<CURRENT-ASSETS> 1,063,877
<PP&E> 2,405,855
<DEPRECIATION> (2,059,538)
<TOTAL-ASSETS> 2,199,633
<CURRENT-LIABILITIES> 2,532,677
<BONDS> 0
<COMMON> 734,787
0
0
<OTHER-SE> (1,085,913)
<TOTAL-LIABILITY-AND-EQUITY> 2,199,633
<SALES> 2,477,229
<TOTAL-REVENUES> 2,477,229
<CGS> 2,089,074
<TOTAL-COSTS> 2,089,074
<OTHER-EXPENSES> 305,198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131,484
<INCOME-PRETAX> (48,527)
<INCOME-TAX> 32,000
<INCOME-CONTINUING> (80,527)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (80,527)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
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