SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
Electric M & R Inc.
(Name of Issuer)
ELECTRIC M & R INC.
(Name of Person(s) Filing Statement)
Common Stock, par value $1.00 per share
(Title of Class of Securities)
284897-10-5
(CUSIP Number of Class of Securities)
with a copy to:
Gretchen Oswald, President David G. Edwards, Esq.
Electric M & R Inc. Doepken Keevican & Weiss, P.C.
2025 Milford Drive 37th Floor, USX Tower
Bethel Park, PA 15102 600 Grant Street
(412) 831-6101 Pittsburgh, PA 15219
(412) 355-2743
(Name, Address and Telephone Number of Persons Authorized to Receive
Notice and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. (X) The filing of solicitation materials or an information statement
subject to Regulation 14A [17 CFR 240.14a-1 to 240.14a-103],
Regulation 14C [17 CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c)
[Sect. 240.13e-3(c)] under the Securities Act of 1934.
b. ( ) The filing of registration statement under the Securities Act of
1933.
c. ( ) A tender offer.
d. ( ) None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: ( )
Calculation of Filing Fee
Transaction valuation* Amount of filing fee
$96,197.75 $19.24
___________________________________________________________________________
( ) Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $__________ Filing Party: __________
Form of Registration No.: __________ Dated Filed: ___________
* The transaction valuation is based upon (i) $0.25, as the amount per
pre-transaction share which the Issuer will pay in cash in lieu of
fractional shares, multiplied by (ii) the aggregate number of
pre-transaction shares of common stock for which the Issuer will pay
cash.<PAGE>
INTRODUCTORY NOTE
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3") relates to a reverse stock split (the "Transaction") by
Electric M & R Inc., a Delaware corporation (the "Company"). The
Transaction pertains to the Company's presently issued and outstanding
shares of common stock, $1.00 par value per share (the "Common
Stock"). The Company will pay cash in lieu of fractional shares that
would otherwise result from the Transaction. As described in the
Information Statement (the "Information Statement"), a copy of which
is attached hereto as Exhibit 17(d), the Transaction is intended to be
a"going private" transaction.
The cross reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the
Information Statement of the information required to be included in
response to the items of Schedule 13E-3. The Information Statement is
hereby expressly incorporated herein by reference and the responses to
each item are qualified in their entirety by the information contained
in the Information Statement.
<PAGE>
CROSS REFERENCE SHEET
(Pursuant to General Instruction F
to Schedule 13E-3)
Item in Location in
Schedule 13E-3 Information Statement
Item 1(a) Cover Pages
(b) INTRODUCTION; SUMMARY.
(c) PRICE RANGE OF COMMON STOCK; DIVIDENDS;
TRADING VOLUME
(d) SPECIAL FACTORS -- Recommendation of the
Board of Directors; Fairness of the
Transaction; PRICE RANGE OF COMMON STOCK;
DIVIDENDS; TRADING VOLUME.
(e) Not applicable.
(f) Not applicable.
Item 2 INTRODUCTION.
Item 3 Not applicable.
Item 4(a) INTRODUCTION; SUMMARY; SPECIAL FACTORS;
REVERSE STOCK SPLIT INFORMATION.
(b) SUMMARY; SPECIAL FACTORS -- Certain Effects
of the Transaction.
Item 5(a)-(e) Not applicable.
(f)-(g) SPECIAL FACTORS -- Purpose of the
Transaction; Certain Effects of the
Transaction.
Item 6(a) REVERSE STOCK SPLIT INFORMATION -- Financing
the Transaction.
(b) REVERSE STOCK SPLIT INFORMATION -- Expenses.
(c)-(d) Not applicable.
Item 7(a)-(c) SPECIAL FACTORS -- Purpose of the
Transaction.
(d) SPECIAL FACTORS; REVERSE STOCK SPLIT
INFORMATION;
Item 8(a)-(b) SPECIAL FACTORS -- Recommendation of
the Board of Directors; Fairness of the
Transaction.
(c) Not applicable.
(d) SPECIAL FACTORS --
Recommendation of the Board of Directors;
Fairness of the Transaction
<PAGE>
(e) DESCRIPTION OF AMENDMENT TO CERTIFICATE OF
INCORPORATION TO BE APPROVED; SPECIAL FACTORS
-- Recommendation of the Board of Directors;
Fairness of the Transaction.
(f) Not applicable.
Item 9(a)-(b) SUMMARY; SPECIAL FACTORS -- Recommendation of
the Board of Directors; Fairness of the
Transaction.
(c) INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.
Item 10(a) SUMMARY; PRINCIPAL HOLDERS OF THE VOTING
SECURITIES.
(b) Not applicable.
Item 11 Not applicable.
Item 12(a) DESCRIPTION OF AMENDMENT TO CERTIFICATE OF
INCORPORATION TO BE APPROVED; SPECIAL FACTORS
-- Recommendation of the Board of Directors;
Fairness of Transaction.
(b) DESCRIPTION OF AMENDMENT TO CERTIFICATE OF
INCORPORATION TO BE APPROVED.
Item 13(a) REVERSE STOCK SPLIT INFORMATION -- Appraisal
and Other Rights.
(b)-(c) Not applicable.
Item 14(a)-(b) INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.
Item 15(a) Not applicable.
(b) SPECIAL FACTORS -- Recommendation of the
Board of Directors; Fairness of the
Transaction.
Item 16 Information Statement, generally.
Item 17(a) Not applicable.
(b) Valuation Opinion, generally.
(c) Not applicable.
(d) Information Statement, generally.
(e) Not applicable.
(f) Not applicable.
<PAGE>
Item 1. Issuer and Class of Security Subject to the Transaction
(a) Reference is hereby made to the information set forth on the
cover pages of the Information Statement, which information is incorporated
herein by reference.
(b) Reference is hereby made to the information set forth under the
headings "INTRODUCTION" and "SUMMARY" in the Information Statement, which
information is incorporated herein by reference.
(c) Reference is hereby made to the information set forth under the
heading "PRICE RANGE OF COMMON STOCK; DIVIDENDS; TRADING VOLUME" in the
Information Statement, which information is incorporated herein by
reference.
(d) Reference is hereby made to the information set forth under the
headings "SPECIAL FACTORS -- Recommendation of the Board of Directors;
Fairness of the Transaction" and "PRICE RANGE OF COMMON STOCK; DIVIDENDS;
TRADING VOLUME" in the Information Statement, which information is
incorporated herein by reference.
(e) Not applicable.
(f) Not applicable.
Item 2. Identity and Background
The person filing this statement is the issuer of the class of
securities which is the subject of the Rule 13e-3 transaction.
(a)-(g) Not applicable.
Item 3. Past Contracts, Transactions or Negotiations
(a)-(b) Not applicable.
Item 4. Terms of the Transaction
(a) Reference is hereby made to the information set forth under the
headings "INTRODUCTION," "SUMMARY," "SPECIAL FACTORS" and "REVERSE STOCK
SPLIT INFORMATION" in the Information Statement, which information is
incorporated herein by reference.
(b) Reference is hereby made to the information set forth under the
headings "SUMMARY" and "SPECIAL FACTORS -- Certain Effects of the
Transaction" in the Information Statement, which information is
incorporated herein by reference.
Item 5. Plans or Proposals of the Issuer or Affiliate
(a)-(e) Not applicable.
(f)-(g) Reference is hereby made to the information set forth under
the headings "SPECIAL FACTORS -- Purpose of the Transaction" and "SPECIAL
FACTORS -- Certain Effects of the Transaction" in the Information
Statement, which information is incorporated herein by reference.
Item 6. Source and Amount of Funds or Other Consideration
(a) Reference is hereby made to the information set forth under the
heading "REVERSE STOCK SPLIT INFORMATION -- Financing the Transaction" in
the Information Statement, which information is incorporated herein by
reference.<PAGE>
(b) Reference is hereby made to the information set forth under the
heading "REVERSE STOCK SPLIT INFORMATION -- Expenses" in the Information
Statement, which information is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects
(a)-(c) Reference is hereby made to the information set forth under
the heading "SPECIAL FACTORS -- Purpose of the Transaction" in the
Information Statement, which information is incorporated herein by
reference.
(d) Reference is hereby made to the information set forth under the
headings "SPECIAL FACTORS" and "REVERSE STOCK SPLIT INFORMATION" in the
Information Statement, which information is incorporated herein by
reference.
Item 8. Fairness of the Transaction
(a)-(b) Reference is hereby made to the information under the
heading "SPECIAL FACTORS -- Recommendation of the Board of Directors;
Fairness of the Transaction" in the Information Statement, which
information is incorporated herein by reference.
(c) The Transaction is not structured to require approval by a
majority of unaffiliated shareholders.
(d)-(e) Reference is hereby made to the information under the
headings "DESCRIPTION OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO BE
APPROVED" and "SPECIAL FACTORS -- Recommendation of the Board of
Directors; Fairness of the Transaction" in the Information Statement, which
information is incorporated herein by reference.
(f) Not applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations
(a)-(c) Reference is hereby made to the information under the
headings "SUMMARY" and "SPECIAL FACTORS -- Recommendation of the Board of
Directors; Fairness of the Transaction" in the Information Statement, which
information is incorporated herein by reference.
Item 10. Interest in Securities of the Issuer
(a) Reference is hereby made to the information under the headings
"SUMMARY" and "PRINCIPAL HOLDERS OF VOTING SECURITIES" in the Information
Statement, which information is incorporated herein by reference.
(b) Not applicable.
Item 11. Contracts, Arrangements or Understandings with Respect to the
Issuer s Securities
Not applicable.
<PAGE>
Item 12. Present Intention and Recommendation of Certain Persons with
Regard to the Transaction
(a) Reference is hereby made to the information under the headings
"DESCRIPTION OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO BE APPROVED"
and "SPECIAL FACTORS -- Recommendation of the Board of Directors; Fairness
of the Transaction" in the Information Statement, which information is
incorporated herein by reference.
(b) Reference is hereby made to the information under the heading
"DESCRIPTION OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO BE APPROVED"
in the Information Statement, which information is incorporated herein by
reference.
Item 13. Other Provisions of the Transaction
(a) Reference is hereby made to the information under the heading
"REVERSE STOCK SPLIT INFORMATION -- Appraisal and Other Rights" in the
Information Statement, which information is incorporated herein by
reference. Appraisal rights will not be voluntarily accorded by the
Issuer.
(b)-(c) Not applicable.
Item 14. Financial Information
(a)-(b) Reference is hereby made to the information under the
heading "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" in the
Information Statement, which information is incorporated herein by
reference.
Item 15. Persons and Assets Employed, Retained or Utilized
(a) Reference is hereby made to information under the heading
"REVERSE STOCK SPLIT --Effective Date" in the Information Statement, which
information is incorporated herein by reference.
(b) Not applicable.
Item 16. Additional Information
Reference is hereby made to the Information Statement, which contains
additional information regarding the Transaction, which information is
incorporated herein by reference.
Item 17. Material to be Filed as Exhibits
(a) Not applicable.
(b) A copy of the Valuation Opinion is incorporated herein by
reference.
(c) Not applicable.
(d) A copy of the Preliminary Information Statement is incorporated
herein by reference.
(e) Not applicable.
(f) Not applicable.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
ELECTRIC M & R INC.
By:_________________________________
Gretchen Oswald
Title: President
Date:
<PAGE>
EXHIBIT INDEX
Sequentially
Numbered
Number Description Page
17(a) Not applicable.............................................
17(b) Valuation Opinion..........................................
17(c) Not applicable.............................................
17(d) Preliminary Information Statement..........................
17(e) Not applicable.............................................
17(f) Not applicable.............................................
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES
EXCHANGE ACT OF 1934
Check the appropriate box:
(x) Preliminary Information Statement
( ) Confidential, for the Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
( ) Definitive Information Statement
ELECTRIC M & R INC.
(Name of Registrant as Specified in Charter)
Payment of filing fee (check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
( ) Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
(1) Title of each class of securities to which transaction
applies:
______________________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
______________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________
(5) Total fee paid:
______________________________________________________________
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount previously paid:
______________________________________________________________
(2) Form, schedule or registration statement no.:
______________________________________________________________
(3) Filing party:
______________________________________________________________
(4) Date filed:
______________________________________________________________
<PAGE>
ELECTRIC M & R INC.
2025 Milford Drive, Bethel Park
Allegheny County, Pennsylvania 15102
_______________________
INFORMATION STATEMENT
Pursuant to Section 14
of the Securities Exchange Act of 1934
and Regulation 14C and Schedule 14C thereunder
_______________________
THE COMPANY IS NOT ASKING FOR PROXIES AND
STOCKHOLDERS ARE REQUESTED NOT TO SEND PROXIES.
INTRODUCTION
This Information Statement has been filed with the Securities and
Exchange Commission (the "SEC") and transmitted on or about October
__, 1996 to the holders of record of shares of common stock of
Electric M & R Inc., a Delaware corporation (the "Company"), as of
September __, 1996.
This Information Statement is being furnished pursuant to Section
14(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") in connection with an amendment to the Certificate of
Incorporation of the Company which is being submitted to stockholders
for approval by non-unanimous written consent in lieu of a meeting
pursuant to Section 228 of the Delaware General Corporation Law, as
amended (the "Delaware Law"). As described more fully in this
Information Statement, the purpose of the amendment to the Certificate
of Incorporation of the Company is to accomplish a 50,000-for-1
reverse stock split which is expected to have the
effect of "going-private."
As of the date of this Information Statement there were 734,791
shares of the Company's common stock, par value $1.00 per share (the
"Common Stock"), outstanding, each share of which is entitled to one
vote, and no outstanding warrants and options to purchase shares of
Common Stock. As of that date, Gretchen Oswald, a director of the
Company and its President, held 396,952 shares of Common Stock. There
are no outstanding warrants or options to purchase shares of Common
Stock outstanding as of that date.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
TABLE OF CONTENTS
Section Page
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Effect on Current Record Holders of Less than 50,000 Shares . . . . 1
Effect on Current Record Holder of More than 50,000 Shares. . . . . 1
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 2
DESCRIPTION OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO BE APPROVED. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . 4
BUSINESS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . 4
Certain Historical and Pro Forma Information. . . . . . . . . . . . 5
SPECIAL FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Purpose of the Transaction. . . . . . . . . . . . . . . . . . . . . 5
Recommendation of the Board of Directors; Fairness of the
Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Certain Effects of the Transaction . . . . . . . . . . . . . . . . 7
Market for Common Stock; Exchange Act Registration . . . . . . .
Accretion in Ownership and Control of Certain Stockholders . . .
Financial Effects. . . . . . . . . . . . . . . . . . . . . . . .
REVERSE STOCK SPLIT INFORMATION. . . . . . . . . . . . . . . . . . . . . .
Effecting the Transaction . . . . . . . . . . . . . . . . . . . . . .
Effective Date of the Transaction . . . . . . . . . . . . . . . . . .
Financing the Transaction . . . . . . . . . . . . . . . . . . . . . .
Appraisal and Other Rights. . . . . . . . . . . . . . . . . . . . . .
Conduct of the Company's Business After the Transaction . . . . . . .
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposition of Unclaimed Cash Payments. . . . . . . . . . . . . . . .
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . .
PRICE RANGE OF COMMON STOCK; DIVIDENDS; TRADING VOLUME . . . . . . . . . .
PRINCIPAL HOLDERS OF VOTING SECURITIES . . . . . . . . . . . . . . . . . .
EXHIBIT A Form of Amendment to Company s Certificate of Incorporation . .
EXHIBIT B Report on Form 10-KSB for Year ended December 31, 1995 . . . .
EXHIBIT C Report on Form 10-QSB for Quarter ended June 30, 1996 . . . . .
<PAGE>
SUMMARY
As of the date of this Information Statement, the Company has
approximately 4,227 holders of record of its issued and outstanding Common
Stock. The Common Stock is currently registered under the Exchange Act and
is traded over the counter. Such registration is expected to be terminated
by the Company since the Common Stock will be held by less than 300 holders
of record. (See "SPECIAL FACTORS -- Certain Effects of the Transaction.")
The Board of Directors has determined to (i) effect a 50,000-for-1
reverse stock split of the presently issued and outstanding shares of
Common Stock, (ii) make a cash payment of $0.25 per share in lieu of the
issuance of fractional shares which result from the reverse stock split
(or, in the event the stockholder holds stock in the name
"Calculator-Computer Leasing Corporation," the predecessor corporation to
Electric M & R Inc., make a cash payment of $0.025 per share, in accordance
with the 10 to one reverse stock split effected in 1980) (the "Fractional
Share Price"), and (iii) terminate its registration under the Exchange Act.
As a result of the reverse stock split, 50,000 old shares of Common Stock
(the " Old Common Stock") will be exchanged for one new share of common
stock (the "New Common Stock"), and fractional shares will receive $0.25
per share (or $0.025 per share as previously noted) in lieu of shares of
New Common Stock. (See "SPECIAL FACTORS -- Certain Effects of the
Transaction.") The reverse stock split will be accomplished through an
amendment to the Company s Certificate of Incorporation and will be
effective, as described more fully herein, when filed with the Secretary of
State of the State of Delaware (the"Effective Date").
Effect on Current Record Holders of Less than 50,000 Shares
The current record holders of Common Stock that own less than 50,000
shares of Old Common Stock (who collectively own less than 46% of the
outstanding shares of Old Common Stock) will (i) receive the
nontransferable right to receive the Fractional Share Price for each share
of Old Common Stock, (ii) not receive any shares of New Common Stock,
(iii) no longer have any equity interest in the Company and (iv) not
participate in any future earnings of the Company or any increases in the
value of the Company's assets or operations after the Transaction. (See
"REVERSE STOCK SPLIT INFORMATION -- Effecting the Transaction.")
Effect on Current Record Holders of More than 50,000 Shares
After and as a result of the Transaction, the number of record holders
of Common Stock will decrease from approximately 4,227 to one. The sole
record holder of Common Stock that owns 50,000 or more shares of Old Common
Stock (who individually owns more than 54% of the currently outstanding
shares) will (i) receive one new share of New Common Stock for every 50,000
shares of Old Common Stock held by such record holder, (ii) receive the
nontransferable right to receive the Fractional Share Price for each share
of Old Common Stock which is less than a multiple of 50,000, and (iii)
continue to have an equity interest in the Company and participate in any
future earnings of the Company or any increases in the value of the
Company's assets or operations after the Transaction. (See "REVERSE STOCK
SPLIT INFORMATION -- Effecting the Transaction.")
<PAGE>
ADDITIONAL INFORMATION
As a result of the Transaction, the percent of Common Stock owned or
controlled by the sole holder of record owning more than 50,000 shares of
Common Stock prior to the Transaction will change from 54% to 100%.
(See"PRINCIPAL HOLDERS OF VOTING SECURITIES.")
The Board of Directors believes the Fractional Share Price is fair to
the Company"s stockholders after taking into consideration, among other
things: (i) current and historical market prices for the Common Stock and
the de minimis or infrequent trading of the shares over the last 10 years;
(ii) the Company"s history of lack of dividend payments as well as the
Company"s prospects for paying dividends in the future; (iii) the business
of the Company; and (iv) the valuation opinion rendered by Smith
Dougherty Inc. (the "Valuation Opinion") (See "SPECIAL FACTORS --
Recommendation of the Board of Directors; Fairness of the Transaction.")
As a result of the Transaction, the Company will eliminate the cost
and expense to the Company of Exchange Act reporting, which is
approximately $25,000 on an annual basis. The Company continues to incur
such expenses even though there is not now, and for over 10 years there
has not been, other than generally de minimis and sporadic, trading in
shares of Common Stock. (See"SPECIAL FACTORS--Purpose of the Transaction.")
Under the Delaware Law and the Company's Certificate of Incorporation,
stockholders of the Company will not be entitled to appraisal rights for
dissenting stockholders if the Transaction is approved. Stockholders,
however, will be entitled to any rights and remedies available to
stockholders under the federal securities laws relating to the disclosure
of information in this Information Statement and under Delaware law
relating to the fiduciary duties of the Board of Directors of the Company.
(See "REVERSE STOCK SPLIT INFORMATION --Appraisal and Other Rights.")
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of the date of this Information
Statement and assuming the completion of the reverse stock split.
Beneficial Ownership
Assuming
As of July 31, 1996 Completion Of
Reverse Stock Split
Number of Percent of Number of Percent of
Stockholder Categories Shares Class (1) Shares Class (1)
All directors and officers 396,952 54.02% 7 100%
as a group (5 persons)
Stockholders of record who 396,952 54.02% 7 100%
hold 50,000 or more shares
of Common Stock (1 person)
Stockholders of record who 337,839 45.98% 0 0%
hold less than 50,000 shares
of Common Stock (approximately
4,226 persons)
_____________
(1) This table has been prepared in accordance with Rule 13d-3 of
the Exchange Act. There are no outstanding warrants or options to
purchase shares of Common Stock.
<PAGE>
DESCRIPTION OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO BE APPROVED
The Certificate of Incorporation is proposed to be amended to reduce
the number of authorized shares of Common Stock from 2,000,000 shares to 40
shares and increase the par value of Common Stock from $1.00 per share to
$50,000.00 per share, effect a 50,000-for-1 reverse stock split of the
presently issued and outstanding shares of Common Stock, and make a cash
payment of $0.25 per share for the presently issued and outstanding shares
of Common Stock (or, in the event the stockholder holds stock in the name
"Calculator-Computer Leasing Corporation," the predecessor corporation to
Electric M & R Inc., make a cash payment of $0.025 per share, in accordance
with the 10 to one reverse stock split effected in 1980) in lieu of the
issuance of fractional shares which result from the reverse stock split, as
more fully described herein (the "Transaction"). A copy of the proposed
amendment to the Certificate of Incorporation is attached hereto as Exhibit
A.
The proposed amendment to the Certificate of Incorporation of the
Company has been unanimously approved by the Board of Directors of the
Company. Consent of the holders of a majority of the issued and outstanding
Common Stock is required to approve the amendment under the Delaware Law.
It is anticipated that Gretchen Oswald, as the holder of over 54% of the
issued and outstanding Common Stock, will adopt the resolution by written
consent without a meeting, approving this amendment upon the expiration of
the twenty (20) day waiting period prescribed by Section 14 of the Exchange
Act and Regulation 14C thereunder. (See "PRINCIPAL HOLDERS OF VOTING
SECURITIES.") However, if Gretchen Oswald does not consent to the
amendment, then such amendment will not become effective.
This Information Statement also serves as notice to stockholders of an
action taken by less than unanimous written consent as required by Section
228 of the Delaware Law.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. This Information Statement includes
information required to be disclosed by the SEC pursuant to Rule 13e-3
under the Exchange Act, which governs, among other things, transactions by
certain issuers or their affiliates which have a reasonable likelihood or a
purpose of, among other things, causing any class of equity securities of
an issuer which is subject to Section 12(g) or Section 15(d) of the
Exchange Act to be held of record by fewer than 300 persons. The
Company has also filed a Rule 13e-3 Transaction Statement on Schedule 13E-3
(the "Schedule 13E-3") with the Commission relating to the transaction
being proposed in this Information Statement.
All such reports, proxy statements, schedules and other information
contain detailed financial and other information relating to the Company
and may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material can also be obtained from
the Commission at prescribed rates. Written requests for such material
should be addressed to the Pubic Reference Section, Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated by reference in this
Information Statement and are attached hereto as an exhibit or accompany
this Information Statement:
1. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995; and
2. The Company's Quarterly Report on Form 10-QSB for the fiscal
quarter ended June 30, 1996.
BUSINESS OF THE COMPANY
The Company was incorporated in Delaware in June 1968. It principally
manufactures and sells electrical lighting fixtures and electric motors and
related services.
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 Company also owns real estate in Luquillo, Puerto Rico which it
has held as an investment property and is currently trying to sell.
The sale of the Company's products is conducted by direct retail sales
to manufacturers or sales to distributors. Real estate sales are conducted
by agents of the Company.
There have been no significant changes in the kinds of products or
services rendered or in markets or methods of distributions since the
beginning of the Company's fiscal year.
<PAGE>
The sources and availability of raw material essential to the
Company's business are not significant factors; however, the profitability
of the Company'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 the Company's business. Also, none of the Company'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 Company.
Certain Historical and Pro Forma Information
Historical and pro forma information for the Company for the Year
ended December 31, 1995 and the Quarter ended June 30, 1996 are included in
the Company's reports on Form 10-KSB and 10-QSB filed with the Securities
and Exchange Commission which accompany this Information Statement and are
incorporated herein by reference.
SPECIAL FACTORS
Purpose of the Transaction
The purpose of the Transaction is to terminate the equity interests in
the Company by the approximately 4,226 record holders of Common Stock that
own fewer than 50,000 shares of Common Stock, at a price determined to be
fair by both the sole independent director as well as the entire Board of
Directors, and to permit the Company to deregister the Common Stock under
the Exchange Act in order to eliminate the cost and expense to the Company
of Exchange Act reporting. Of the present 4,227 record holders of Common
Stock, only one owns more than 50,000 shares of Common Stock (representing
approximately 54% of the issued and outstanding shares of Common Stock) and
approximately 4,226 own fewer than 50,000 shares of Common Stock
(representing approximately 46% of the issued and outstanding shares of
Common Stock).
Stockholders owning fewer than 50,000 shares of Common Stock will no
longer have any equity interest in the Company and will not participate in
any future earnings of the Company or any increases in the value of the
Company's assets or operations. Further, the sole stockholder that will
continue to have an equity interest in the Company after the Transaction
will own a security the liquidity of which will be restricted. The
Fractional Share Price offered by the Company for fractional share
interests was not determined in arms length negotiations or on the basis of
over the counter trading of the Common Stock and therefore does not
necessarily reflect an actual market value of the Common Stock. (See
"SPECIAL FACTORS -- Recommendation of the Board of Directors; Fairness of
the Transaction.")
<PAGE>
The Transaction is structured to be a "going private" transaction as
defined in Rule 13e-3 promulgated under the Exchange Act because it is
intended to, and, if completed, will likely terminate the Company's
reporting requirements under Section 12(g) of the Exchange Act. In
connection with the Transaction, the Company has filed with the Securities
and Exchange Commission a Schedule 13E-3 pursuant to Rule 13e-3 under the
Exchange Act.
The Transaction will (i) cause the Company to redeem shares held by
approximately 4,227 holders of record of Common Stock, (ii) not eliminate
the sole record holder who holds more than 50,000 shares of Common Stock,
(iii) reduce the number of shares, on a pro-rata basis, held by the holder
of record who holds more than 50,000 shares of Common Stock, and (iv)
change the percent of Common Stock held by all remaining stockholders by
100%.
Recommendation of the Board of Directors; Fairness of the Transaction
The Company's Board of Directors believes that the Fractional Share
Price, from a financial point of view, is fair to the Company's
stockholders who will be receiving the Fractional Share Price and whose
equity interest in the Company will be terminated as a result of the
Transaction. In reaching its conclusion that the Fractional Share Price is
fair to the Company's stockholders receiving cash in lieu of fractional
shares, from a financial point of view, the Board of Directors took into
account the factors discussed below. The Board of Directors did not
consider the liquidation value of the Company because it believes that if
the Company assets were liquidated and cash distributed to stockholders,
the stockholders would receive less than the Fractional Share Price.
The Board of Directors did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the specific
factors considered in reaching their respective determinations. No
unaffiliated representative was retained to act solely on behalf of
unaffiliated stockholders for the purposes of negotiating the terms of the
Transaction.
Current and Historical Market Prices/Level of Trading
The Board considered the historical and recent market prices of the
stock (see "PRICE RANGE OF COMMON STOCK; DIVIDENDS; TRADING VOLUME"). The
Board recognized that there is not now, and for over 10 years there has not
been, other than de minimis or infrequent trading in the Common Stock. The
Board further understood that, given the historical trading volume and the
lack of interest in the stock on the buy side, the price of the stock would
likely decline below $0.25 if a significant number of shares were offered
for sale.
Operational Losses and Costs of Meeting Reporting Obligations
The Board considered the Company's history of operational losses and
the estimated $25,000 annual costs of continuing to meet the reporting
requirements for a public company.
<PAGE>
Valuation Opinion
The Board considered the opinion of Smith Dougherty Inc. (the
"Valuation Opinion") that the consideration offered to the stockholders
(i.e., the "Fractional Share Price" of $0.25 per share) was fair to such
holders from a financial point of view. The Valuation Opinion states that
the Fractional Share Price is a fair market value for the shares of the
Company, where fair market value is defined as: The price at which the
property would change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell, and both having
reasonable knowledge of the relevant facts. (This definition, used for
federal estate and gift tax purposes, has taken on universal application in
the valuation of closely held securities.) In reaching this conclusion,
Smith Dougherty considered (i) the history and nature of the business, (ii)
general economic and specific industry conditions and outlooks, (iii) the
book value and financial condition of the business, (iv) the earnings
capacity of the business, (v) the dividend paying capacity, (vi) the
existence of intangible value, (vii) prior sales of the securities, and
(viii) the market prices of comparable publicly-traded securities (i.e.,
all the elements of appraisal contained in Revenue Ruling 59-60).
Smith Dougherty is a professional business valuation firm specializing
in the appraisal of closely held entities. At the time of its selection,
Smith Dougherty Inc. had no prior business relationships with the Company
or any of its officers or directors. It was selected upon the
recommendation of the Company's auditors, McCrory and McDowell, following
an interview in which its qualifications were considered and evaluated.
The fee received by Smith Dougherty Inc. for its services was not
contingent upon the conclusions reached by Smith Dougherty Inc. in the
Valuation Opinion and Smith Dougherty did not recommend the amount of
consideration to be paid.
Certain Effects of the Transaction
The Transaction can be expected to have the following significant
effects:
Market for Common Stock; Exchange Act Registration
The Company believes that the Transaction will reduce the number of
record stockholders from approximately 4,227 to 1. The number of shares
which might otherwise trade publicly will change from 2,000,000 to 40.
The Company also believes that completion of the Transaction will cause the
market for shares of Common Stock, which at present is virtually
nonexistent, to be eliminated, except for privately negotiated transactions
with the sole remaining stockholder.
The Common Stock is currently registered under the Exchange Act. Such
registration may be terminated by the Company if the Common Stock is no
longer held by 300 or more stockholders of record. Termination of
registration of the Common Stock under the Exchange Act would substantially
reduce the information required to be furnished by the Company to its
stockholders and to the Commission and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b) of the Exchange Act in connection with stockholders meetings and the
related requirement of an annual report to stockholders, no longer
applicable to the Company. Accordingly, for a total cost to the Company of
approximately $30,000, the Company will eliminate the cost and expense to
the Company of the Exchange Act registration, which is approximately
$25,000 on an annual basis. The Company intends to apply for such
termination as soon as practicable following completion of the Transaction.
<PAGE>
Accretion in Ownership and Control of Certain Stockholders
At present, the Company believes that only one record holder of the
Company's Common Stock owns 50,000 or more shares of Common Stock. That
record holder is both a director and an executive officer of the Company.
After and as a result of the Transaction, the percent of the outstanding
Common Stock of the Company held by this stockholder will increase from
54% to 100%. There are no stockholders owning more than 50,000 shares who
are not affiliated with the Company.
Stockholders now owning fewer than 50,000 shares of Common Stock will
no longer continue to have an equity interest in the Company and,
accordingly, will not participate in future earnings, if any, of the
Company.
Financial Effects
The Transaction and the use of approximately $126,000 cash to
complete the Transaction are not expected to have any material effect on
the Company's capitalization, liquidity, results of operations and cash
flow. (See "BUSINESS OF THE COMPANY - Certain Historical and Pro Forma
Information" and "REVERSE STOCK SPLIT INFORMATION - Financing the
Transaction.")
<PAGE>
<TABLE>
ELECTRIC M & R, INC.
ACTUAL AND PROFORMA BALANCE SHEETS
<CAPTION>
As of December 31, 1995 As of June 30, 1996
_________________________________________ __________________________________________
Proforma if Proforma if
Estimated Transaction Estimated Transaction
Actual Costs of had Occured Actual Costs of had Occured
Per Audit Transaction in 1995 Unaudited Transaction in 1996
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 11,790 $ 11,790 $ 127,075 $ (126,200) $ 587,249
Accounts Receivable - Net of
Allowance for Doubtful Accounts 141,308 141,308 281,881 281,881
Inventories 870,361 870,361 798,703 798,703
Other Current Assets 40,418 40,418 43,858 43,858
---------- ---------- ---------- ----------
1,063,877 1,063,877 1,251,517 1,125,317
---------- ---------- ---------- ----------
Property, Plant and Equipment
Land and Improvements 22,484 22,484 22,484 22,484
Buildings and Improvements 787,936 787,936 787,936 787,936
Machinery and Equipment 1,402,388 1,402,388 1,402,388 1,402,388
Furniture and Fixtures 193,047 193,047 197,470 197,470
---------- ---------- ---------- ----------
2,405,855 2,405,855 2,410,278 2,410,278
Less: Accumulated Depreciation 2,059,538 2,059,538 2,085,164 2,085,164
---------- ---------- ---------- ----------
346,317 346,317 325,114 325,114
---------- ---------- ---------- ----------
Other Assets
Real Estate Held for Sale 789,439 789,439 509,277 509,277
---------- ---------- ---------- ----------
TOTAL ASSETS $ 2,199,633 $ 2,199,633 $ 2,085,908 $ 1,959,708
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable - Demand $ 91,000 $ 91,000 $ 0 $ 0
Current Portion of Long-Term Debt 29,866 29,866 23,746 23,746
Accounts Payable 183,247 183,247 231,236 231,236
Accrued Expenses 20,741 20,741 27,662 27,662
Income Taxes Payable 32,000 32,000 159,630 159,630
Notes Payable - Related Parties 1,107,890 $ 126,200 1,234,090 842,429 842,429
Accrued Interest-Related Parties 1,067,933 1,067,933 778,587 778,587
---------- ---------- ---------- ----------
2,532,677 2,658,877 2,063,290 2,063,290
---------- ---------- ---------- ----------
Long-Term Debt 18,082 18,082 10,297 10,297
---------- ---------- ---------- ----------
Shareholders' Equity
Common Stock 734,787 734,787 734,787 734,787
Additional Paid in Capital 1,486,440 1,486,440 1,486,440 1,486,440
Treasury Stock (96,200) (96,200) (96,200) (96,200)
Accumulated Earnings (Deficit) (2,572,353) (2,602,353) (2,208,906) (2,238,906)
---------- ---------- ---------- ----------
(351,126) (477,326) 12,321 (113,879)
---------- ---------- ---------- ----------
TOTAL LIAB. AND SHRHOLDERS. EQUITY $ 2,708,867 $ 2,199,633 $ 2,085,908 $ 1,959,708
========== ========== ========== ==========
BOOK VALUE PER SHARE $ (0.48) $(68,189.43) $ 0.02 $(16,268.43)
SHARES USED TO CALCULATE BOOK VALUE 734,787 7 734,787 7
/TABLE
<PAGE>
<TABLE>
ELECTRIC M & R, INC.
ACTUAL AND PROFORMA STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
<CAPTION>
Year Ended Dec. 31, 1995 Six Months Ended June 30, 1996
_________________________________________ _________________________________________
Estimated Proforma Estimated Proforma
Actual Costs of With Actual Costs of With
Per Audit Transaction Transaction Unaudited Transaction Transaction
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 2,477,229 $ 2,477,229 $ 1,211,166 $ 1,211,166
Cost of Goods Sold 2,089,074 2,089,074 1,062,064 1,062,064
---------- ---------- ---------- ----------
Gross Profit 388,155 388,155 149,102 149,102
Selling, General and Administrative 488,873 $ 30,000 518,873 261,412 $ 30,000 291,412
---------- ---------- ---------- ----------
Operating Loss (100,718) (130,718) (112,310) (142,310)
---------- ---------- ---------- ----------
Other (Income) and Expense
Interest Income (1,593) (1,593) (1,748) (1,748)
Other Income (68,321) (68,321) (8,609) (8,609)
Interest Expense 131,484 131,484 52,912 52,912
Sale of Land (113,761) (113,761) (652,312) (652,312)
---------- ---------- ---------- ----------
(52,191) (52,191) (609,757) (609,757)
---------- ---------- ---------- ----------
Net Income (Loss) Before Provision
for Income Taxes (48,527) (78,527) 497,447 467,447
Provision for Income Taxes 32,000 32,000 134,000 134,000
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (80,527) $ (110,527) $ 363,447 $ 333,447
========== ========== ========== ==========
Net Income (Loss) Per Share
of Common Stock (0.11) (15,789.57) 0.49 47,635.29
========== ========== ========== ==========
Number of Shares Used in
Computing Earnings Per Share 734,787 7 734,787 7
========== ========== ========== ==========
Accumulated Deficit
at Beginning of Year $(2,491,826) $(2,491,826) $(2,572,353) $(2,572,353)
Net Income (Loss) (80,527) (110,527) 363,447 333,447
---------- ---------- ---------- ----------
ACCUMULATED DEFICIT
AT END OF PERIOD $(2,572,353) $(2,602,353) $(2,208,906) $(2,238,906)
========== ========== ========== ==========
/TABLE
<PAGE>
<TABLE>
ELECTRIC M & R, INC.
ACTUAL AND PROFORMA STATEMENT OF CASH FLOWS
<CAPTION>
Year Ended Dec. 31, 1995 Six Months Ended June 30, 1996
_________________________________________ _________________________________________
Estimated Proforma Estimated Proforma
Actual Costs of With Actual Costs of With
Per Audit Transaction Transaction Unaudited Transaction Transaction
<S> <C> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net Income (Loss) $ (80,527) $ (30,000) $ (110,527) $ 363,447 $ (30,000) $ 333,447
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by
(Used in) Operating Activities
Depreciation 57,221 57,221 25,626 25,626
Net Loss (Gain) on Sale of Real
Estate Held for Sale (113,761) (113,761) (652,312) (652,312)
(Increase) Decrease in:
Accounts Receivable 292,693 292,693 (140,573) (140,573)
Inventories (2,671) (2,671) 71,658 71,658
Other Current Assets 6,989 6,989 (3,440) (3,440)
Increase (Decrease) in:
Accounts Payable (242,491) (242,491) 47,989 47,989
Accrued Expenses 4,996 4,996 6,921 6,921
Accrued Interest-
Related Parties (106,141) (106,141) (289,346) (289,346)
Income Taxes Payable 32,000 32,000 127,630 127,630
---------- ---------- ---------- ----------
(151,692) (181,692) (442,400) (472,400)
---------- ---------- ---------- ----------
Cash Flows from Investing Activities
Payments for Capital Expenditures (28,425) (28,425) (4,423) (4,423)
Net Proceeds from Sale of
Real Estate Held for Sale 239,660 239,660 932,474 932,474
Collection of Notes Receivable 49,649 49,649 0 0
Purchase of Treasury Stock (96,200) (96,200) (96,200) (96,200)
---------- ---------- ---------- ----------
260,884 164,684 928,051 831,851
---------- ---------- ---------- ----------
Cash Flows from Financing Activities
Proceeds from Additional Borrowings 91,000 126,200 217,200 75,000 75,000
Principal Payment on Long-Term Debt (22,651) (22,651) (179,905) (179,905)
Principal Payments on Notes Payable-
Related Parties (173,214) (173,214) (265,461) (265,461)
---------- ---------- ---------- ----------
(104,865) 21,335 (370,366) (370,366)
---------- ---------- ---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents 4,327 4,327 115,285 (10,915)
Cash and Cash Equivalents at
Beginning of Year 7,463 7,463 11,790 11,790
---------- ---------- ---------- ----------
Cash and Cash Equivalents at
End of Year $ 11,790 $ 11,790 $ 127,075 $ 875
========== ========== ========== ==========
</TABLE>
<PAGE>
ELECTRIC M & R, INC.
ASSUMPTIONS USED IN PREPARING PROFORMA FINANCIAL STATEMENTS
1) If transaction had occured in 1995 it would have been necessary to
obtain funds required from related parties through additional
borrowing at that time.
2) The $ 126,200 estimated costs of this transaction include:
Cost of buying back the fractional shares after the reverse stock
split:
Number of
Old Shares
Outstanding
337,835 Shares outstanding to minority shareholders
prior to the reverse stock split.
46,952 Fractional share outstanding to Gretchen Oswald
prior to the reverse stock split.
----------
384,787 Total fractional shares to be purchased
@ $ 0.25/share $ 96,197
Miscellaneous costs including appraisals,
attorney fees, printing and mailing costs. 30,003
----------
Total estimated cost of transaction $ 126,200
==========
3) The Company anticipates savings to be realized due to this transaction,
however these savings will not be realized until the fiscal year ending
December 31, 1997. Management anticipates savings of approximately
$ 25,000 per year as a result of reduced printing, mailing, legal and
accounting costs for the annual report, SEC filing fees, and a
reduction in the cost of the annual audit.
<PAGE>
<TABLE>
ELECTRIC M & R, INC.
CALCULATION OF "RATIO OF EARNINGS TO FIXED CHARGES" UNDER ITEM 14(a)(2)
<CAPTION>
YEAR ENDED DEC. 31, 1994 YEAR ENDED DEC. 31, 1995 6 MO. ENDED JUNE 30, 1996
_________________________ _________________________ _________________________
TOTAL COSTS FIXED COSTS TOTAL COSTS FIXED COSTS TOTAL COSTS FIXED COSTS
<S> <C> <C> <C> <C> <C> <C>
COST OF GOODS SOLD $ 3,079,016 $ 241,946 $ 2,089,074 $ 190,165 $ 1,062,064 $ 87,201
SELLING, GENERAL & ADMINISTRATIVE 477,764 339,317 488,873 358,803 261,412 183,654
OTHER EXPENSES 123,344 113,605 167,706 144,161 65,724 57,397
PROVISION FOR INCOME TAXES 3,794 0 32,000 0 134,000 0
----------- ----------- ----------- ----------- ----------- -----------
TOTAL $ 3,683,918 $ 694,868 $ 2,777,653 $ 693,129 $ 1,523,200 $ 328,252
=========== =========== =========== =========== =========== ===========
NET INCOME (LOSS) 11,352 (80,527) 363,447
RATIO OF EARNINGS TO FIXED CHARGES 0.02 (0.12) 1.11
****************************************************************************************************************************
PRO FORMA EFFECT OF THE TRANSACTION
OCCURING IN 1994
Estimated Expense (Savings)
of Transaction 30,000 30,000 (25,000) (25,000) (25,000) (25,000)
----------- ----------- ----------- ----------- ----------- -----------
Total Expenses With Transaction $ 3,713,918 $ 724,868 $ 2,752,653 $ 668,129 $ 1,498,200 $ 303,252
=========== =========== =========== =========== =========== ===========
Net Earnings (Loss) if Transaction
Had Taken Place in 1994 (18,648) (55,527) 388,447
Ratio of Earnings to Fixed Charges
if Ttansaction Had Taken Place
in 1994 (0.03) (0.08) 1.28
****************************************************************************************************************************
PRO FORMA EFFECT OF THE TRANSACTION
OCCURING IN 1995
Estimated Expense (Savings)
of Transaction 30,000 30,000 (25,000) (25,000)
----------- ----------- ----------- -----------
Total Expenses With Transaction $ 2,807,653 $ 723,129 $ 1,498,200 $ 303,252
=========== =========== =========== ===========
Net Earnings (Loss) if Transaction
Had Taken Place in 1995 (110,527) 388,447
Ratio of Earnings to Fixed Charges
if Transaction Had Taken Place
in 1995 (0.15) 1.28
****************************************************************************************************************************
PRO FORMA EFFECT OF THE TRANSACTION
OCCURING IN 1996
Estimated Expense (Savings)
of Transaction 30,000 30,000
----------- -----------
Total Expenses With Transaction $ 1,553,200 $ 358,252
=========== ===========
Net Earnings (Loss) if Transaction
Had Taken Place in 1996 333,447
Ratio of Earnings to Fixed Charges
if Transaction Had Taken Place
in 1996 0.93
</TABLE>
<PAGE>
REVERSE STOCK SPLIT INFORMATION
Effecting the Transaction
The Transaction, if approved, will be effected by an amendment to the
Company's Certificate of Incorporation whereby the number of authorized
shares of Common Stock will be reduced from 2,000,000 shares to 40 shares
and the par value of the common stock will be increased from $1.00 per
share to $50,000.00 per share. The Company will not issue fractional
shares but in lieu thereof, will pay the Fractional Share Price for each
share of Old Common Stock which is less than a multiple of 50,000. A copy
of the proposed form of amendment to the Company's Certificate of
Incorporation is attached as Exhibit A to this Information Statement.
In connection with the Transaction, a single share of New Common Stock
will be exchanged for every 50,000 shares of Old Common Stock presently
issued and outstanding. The Company believes that there is only one
record holder of the Company's Common Stock that owns more than 50,000
shares of Common Stock. Such shareholder is a director and an executive
officer of the Company. In lieu of the issuance of fractional shares in
connection with the Transaction, any fractional share of New Common Stock
that would otherwise result from the Transaction will instead be
automatically converted into the right to receive the Fractional Share
Price paid for each share of Old Common Stock held immediately prior to the
Transaction. Holders of Common Stock who own 50,000 shares, or a multiple
thereof, will receive one share of New Common Stock for each 50,000 shares
of Old Common Stock owned, and holders of Common Stock who do not own a
multiple of 50,000 shares will receive the Fractional Share Price for each
share of Old Common Stock which is less than a multiple of 50,000 in lieu
of the issuance of certificates for fractional shares of New Common Stock.
Such exchange and/or payment will be made by the Company upon the physical
surrender by stockholders of their stock certificates for Common Stock
pursuant to the transmittal instructions to be mailed by the Company to
stockholders.
In determining which stockholders of the Company own fewer than 50,000
shares (a"Fractional Stockholder"), the Company will consider the number of
shares of Common Stock held of record by each person who appears as the
owner of shares as of the Effective Date on the record of stockholders
maintained by the Company.
Effective Date of the Transaction
If the proposal to effect the Transaction is approved, on the
Effective Date, each certificate representing shares of Old Common Stock
will be deemed for all corporate purposes to evidence ownership of the
appropriate reduced number of shares of New Common Stock and/or the right
to receive a cash payment for any fractional share interests.
The Company will send letters of transmittal to stockholders for use
in transmitting their stock certificates to the Company in exchange for new
certificates, cash, or some combination thereof, as appropriate. No cash
payment or delivery of a new certificate will be made to a stockholder
until such stockholder's outstanding certificates together with the letter
of transmittal are delivered to the Company. The cash payment will be paid
after the Effective Date in cash, net to the stockholder and without
interest, with respect to all fractional shares of New Common Stock.
Stockholders will not be obligated to pay brokerage fees or commissions or
any transfer taxes with respect to sales of any fractional share of New
Common Stock pursuant to the reverse stock split. Officers and employees of
the Company will perform the functions required of the Company for this
Transaction without additional compensation.
Financing the Transaction
The Board of Directors estimates that the total costs to be incurred
by the Company in connection with the Transaction for payment of fractional
shares interests, including transactional expenses of $30,000 will be
approximately $126,000. The Company will fund the Transaction by
utilizing cash proceeds from the completed sale of property it owned in
Irwin, Pennsylvania for the amount of $224,000.
Appraisal and Other Rights
Under the Delaware Law and the Company's Certificate of Incorporation,
stockholders of the Company will not be entitled to appraisal rights for
dissenting stockholders if the Transaction is approved. Stockholders will
be entitled to any rights and remedies available under Delaware Law
relating to fiduciary duties of directors and under the federal securities
laws relating to the disclosure of information included in the Information
Statement.
<PAGE>
Conduct of the Company's Business After the Transaction
If the Transaction is effected, the Company believes that it will have
one stockholder of record. In such event, the Company will terminate the
registration of the Common Stock under the Exchange Act. Thereafter, the
Company will cease the filing of periodic reports, proxy statements
and other reports and documents otherwise required to be filed with the
Securities and Exchange Commission. The Company expects its business and
operations to continue as they are currently being conducted and the
Transaction is not anticipated to have any effect upon the conduct of such
business, other than as set forth under "SPECIAL FACTORS -- Certain Effects
of the Transaction." If the Transaction is completed, stockholders holding
fewer than 50,000 shares at the Effective Date will no longer have any
interest in, and will not be stockholders of the Company and therefore will
not participate in its future potential of earnings and growth, if any.
Instead, each such holder of Common Stock will have the right to receive,
and will receive the Fractional Share Price in cash for each share of Old
Common Stock.
Except as set forth herein, and except for the potential sale of
certain real property owned by the Company in Puerto Rico for an estimated
$1 million dollars, which proceeds will be used to partially repay
outstanding indebtedness owed to an affiliate, the Company does not have
any present plans or proposals which relate to or would result in any
extraordinary corporate transaction, such as a merger, reorganization,
liquidation, or a sale or transfer of a material amount of assets involving
the Company or any of its subsidiaries, or any changes in the Company's
present capitalization or any other change in the Company's corporate
structure or business (other than pursuant to the Transaction) or the
composition of its management. The sale of the land in Puerto Rico will
have no material impact on shareholder value since the amount expected to
be received for the property is equal to the value of the property carried
on the Company's books and the affiliate had not agreed to continue to
forbear from demanding payment on such indebtedness upon the sale of this
property. The Company has no plan or proposal in effect or contemplated
that would result in a change in the present management or Board of
Directors of the Company and each present member of the Board of Directors
has indicated an intention to continue to serve until the next annual
meeting of stockholders.
Notwithstanding the foregoing, the Company will continue to review its
business, operations, markets and economic environments, and the Board of
Directors or management may propose or develop additional or new plans or
proposals or may propose the acquisition or disposition of assets or other
changes in the Company's business, capital structure or dividend policies
which it considers to be in the best interests of the Company.
Expenses
The following is an estimate of the costs and expenses incurred or
expected to be incurred by the Company in connection with the Transaction.
Amounts shown below exclude the cost of paying for fractional share
interests after the Transaction is effected.
Legal fees and expenses $10,000
Opinion and Appraisal fee $11,000
Transfer Agent fees $ 0
SEC and other filing fees $ 150
Printing and mailing costs $ 8,000
Miscellaneous $ 850
Total $30,000
<PAGE>
Disposition of Unclaimed Cash Payments
As discussed above, the Company will make a cash payment of $0.25 per
share (or $0.025 per share), in lieu of the issuance of fractional shares,
to stockholders of record on the Effective Date. If the Company is unable
to locate any stockholder, the Company will dispose of the amount
otherwise payable to such stockholder in accordance with applicable state
laws regarding unclaimed property. Such laws provide that property that
is unclaimed or abandoned after a specified period, generally five to seven
years, shall be delivered to the state in which the stockholder last
resided by the person in possession of such unclaimed property.
Certain Federal Income Tax Consequences
THE FOLLOWING DISCUSSION SUMMARIZING CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS BASED ON CURRENT LAW AND IS INCLUDED FOR GENERAL
INFORMATION ONLY. SUCH DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES
OF STOCKHOLDERS, SUCH AS TAX-EXEMPT ORGANIZATIONS AND FOREIGN STOCKHOLDERS.
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX EFFECTS OF THE TRANSACTION IN LIGHT OF THEIR
INDIVIDUAL CIRCUMSTANCES.
The receipt of shares of New Common Stock in exchange for shares of
Old Common Stock will not result in the recognition of gain or loss by a
stockholder, and the aggregate tax basis of a stockholder in all of the
stockholder's shares of New Common Stock will be the same as the
stockholder's aggregate tax basis in the stockholder's shares of Old Common
Stock for which shares of New Common Stock are exchanged. Accordingly, it
is not expected that stockholders owning 50,000 or more shares of Common
Stock will incur any tax liability in connection with the Transaction,
except to the extent of cash payments for any fractional shares of New
Common Stock.
The receipt of cash for fractional shares by a stockholder pursuant to
the Transaction will be a taxable transaction for federal income tax
purposes. A stockholder owning fewer than 50,000 shares will receive only
cash in the Transaction and will recognize gain or loss equal to the
difference between the cash received and the stockholder's adjusted tax
basis in the surrendered shares of Old Common Stock. The gain or loss
recognized generally will be capital gain or loss if the Common Stock is
held as a capital asset. Any such capital gain or loss will be
long-term capital gain or loss if the stockholder's holding period for the
Common Stock exceeds one year as of the Effective Date.
A stockholder who owns 50,000 or more shares of Old Common Stock but
does not hold a number of shares of Old Common Stock that is evenly
divisible by 50,000 will receive both shares of New Common Stock and cash
in lieu of a fractional share of the New Common Stock. The sole
stockholder who owns more than 50,000 shares of Old Common Stock has been
advised to consult her own tax advisors as to the federal, state, local and
foreign tax effects of the transaction in light of her individual
circumstances.
<PAGE>
Special taxation and withholding rules may apply to any stockholder
that is a nonresident alien or a foreign corporation. Those rules are
beyond the scope of this discussion and should be discussed with a personal
tax advisor. Each stockholder will be required to provide his or her
social security or other taxpayer identification number (or, in some
instances, certain other information) to the Company in connection with
the Transaction for reporting purposes. The letter of transmittal will
require such stockholder to deliver such information when the certificates
for shares of Old Common Stock are surrendered.
PRICE RANGE OF COMMON STOCK; DIVIDENDS; TRADING VOLUME
For the periods indicated below, the following tables sets forth the
high and low bid prices of the Company s Common Stock as reported in the
"pink sheets" for the over-the counter market, rounded to the nearest
1/16th of a dollar. The table represents prices between dealers that do
not include retail mark-up, mark-down, or commissions, nor do they
represent actual transactions.
Fiscal 1994 High Low
Jan. 1 - Mar. 31 1/8 1/8
Apr. 1 - June 30 1/4 1/8
July 1 - Sept. 30 1/2 1/4
Oct. 1 - Dec. 31 1/2 1/2
Fiscal 1995
Jan. 1 - Mar. 31 3/4 3/4
Apr. 1 - June 30 3/4 3/4
July 1 - Sept.30 3/8 3/8
Oct. 1 - Dec. 31 3/8 1/4
Fiscal 1996
Jan. 1 - Mar. 31 1/4 1/4
Apr. 1 - June 30 1/4 1/16
July 1 - Aug. 2 1/16 1/16
The Company has not paid a dividend on the Common Stock in the
past two years and has no plans to commence dividend payments in the
foreseeable future. Because of the Company's cash needs, it is unlikely
that the Company will be able to commence dividend payments in the
foreseeable future.
As of July 31, 1996, there were approximately 4,227 record holders
of the Common Stock. Following the Transaction, there will be one record
holder of the Common Stock.
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of July 31, 1996 by: (i) each
person who is known by the Company to own beneficially more than 5% of the
Common Stock; (ii) each of the Company's directors; (iii) the Company's
Chief Executive Officer and the most highly compensated executive officers
whose compensation exceeded $100,000 in fiscal 1995; and (iv) all
directors and executive officers of the Company as a group.
Beneficial Ownership(1)
Assuming
As of July 31, 1996 Completion of
Reverse Stock Split
Number of Percent of Number of Percent of
Name of Beneficial Owner Shares Class Shares Class
Gretchen Oswald, President, 396,952 54.02% 7 100%
Chief Executive Officer
and Director
V.E. Oswald, Chairman of -0- 0% -0- 0%
the Board
Richard MacQuown, Director -0- 0% -0- 0%
Fred Jacobs, Vice President and -0- 0% -0- 0%
Director
Raymond F. Croushore, -0- 0% -0- 0%
Treasurer, Secretary and
Director
All directors and officers as a -0- 54.02% 7 100%
group (5 persons)
_____________
(1) Except as otherwise noted, each person named in the table has sole
voting and investment power with respect to all shares of common stock
that the person is shown to beneficially own. This table has been
prepared in accordance with Rule 13d-3 of the Exchange Act. There are
no outstanding warrants or options to purchase shares of Common Stock.
There has been no change in control of the Company since the beginning of
its last fiscal year, nor are there any arrangements which may result in a
change in control of the small business issuer.
<PAGE>
EXHIBIT A
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
IV. The Corporation shall have authority to issue an aggregate of 40
shares of Common Stock, par value $50,000.00 per share. Such class of
shares may be uncertificated, as may be designated by the Board of
Directors, provided that any such designation shall not apply to shares
represented by a certificate until the certificate is surrendered to the
Corporation. Simultaneously with the effective date of this amendment (the
"Effective Date"), each share of the Corporation's Common Stock, par value
$1.00 per share, issued and outstanding as of the Effective Date (the "Old
Common Stock") shall automatically and without any action on the part of
the holder thereof be reclassified as and changed into one fifty-thousandth
(1/50,000) of a share of the Corporation's Common Stock, par value
$50,000.00 per share (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. No certificates or scrip
representing fractional share interests in New Common Stock will be issued,
and no such fractional share interests will entitle the record holder
thereof to vote, or to any rights of a shareholder of the Corporation. A
record holder of certificates representing shares of Old Common Stock ("Old
Certificates," whether one or more) shall receive, in lieu of any fraction
of a share of New Common Stock to which the record holder would otherwise
be entitled, a cash payment therefor in an amount equal to Twenty-Five
Cents ($0.25) for each share of Old Common Stock. From and after the
Effective Date, Old Certificates representing at least Fifty Thousand
(50,000) shares of Old Common Stock shall represent only the right to
receive, upon surrender to the Company's Transfer Agent for cancellation, a
certificate or certificates (the "New Certificates," whether one or more)
representing the number of whole shares of the New Common Stock into which
and for which the shares of Old Common Stock represented by the Old
Certificates so surrendered are reclassified and changed under the terms
hereof (and, where applicable, cash in lieu of fractional shares as
provided herein, without interest). From and after the Effective Date, Old
Certificates held by shareholders of the Corporation that own fewer than
Fifty Thousand (50,000) shares of Old Common Stock ("Fractional
Shareholders") shall not be transferrable and shall represent only the
right to receive, upon surrender to the Company's Transfer Agent for
cancellation, cash in lieu of fractional shares as provided herein
without interest. The share transfer books of the Corporation as they
relate to shares of Old Common Stock held by Fractional Shareholders shall
be closed and no further transfers of said shares shall thereafter be made.
In determining which shareholders of the Corporation are Fractional
Shareholders, the Corporation will consider the number of shares of Old
Common Stock held of record by each person who appears as the owner of
shares as of the Effective Date in the record of shareholders maintained by
the Corporation, except that (i) if a holder of record of Fifty Thousand
(50,000) or more shares of Old Common Stock has certified to the
Corporation that a portion of such shares is owned beneficially as of the
Effective Date by a person who beneficially owns less than Fifty Thousand
(50,000) such shares in the aggregate, the Corporation will (subject to
receipt of such evidence of such ownership as the Corporation may require)
deem such beneficial owner to be a Fractional Shareholder and make payment
for such Fractional Shareholder's shares of Old Common Stock by payment to
the holder of record thereof for the account of such Fractional Shareholder
and (ii) if it appears to the Corporation (based on such evidence as may be
available and the Corporation considers adequate) that a beneficial owner
owns Fifty Thousand (50,000) or more shares of Old Common Stock as of the
Effective Date, then, notwithstanding any holding of record of all or any
portion of such shares by another person, the beneficial and record owners
of such shares will not be deemed to be Fractional Shareholders with
respect to such shares and will receive cash in lieu of fractional shares
only for any portion of such shares of Old Common Stock that exceeds a
multiple of Fifty Thousand (50,000).
<PAGE>
EXHIBIT B
<PAGE>
ELECTRIC M & R INC.
FORM 10-KSB AND ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
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 N/A N/A None N/A 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 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.
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. The
Registrant is actively pursuing alternative business areas and
anticipates sales will remain constant in 1996.
Cost of Product Sold
The cost of raw material, labor and purchased services are
stable, with the exception of normal inflationary increases.
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.
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. These include a recovery from the current
industry recession, increased sales and 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
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
several related lawsuits 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 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
<PAGE>
EXHIBIT C
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996, 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 requirement for the past
90 days.
Yes_____X_____ No___________
Registrant has one class of common stock as of June 30, 1996, the close of
the period covered by the report; 734,787 shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PART I - Financial Information Pages - 1-10
PART II - Other Information Page - 11
<PAGE>
ELECTRIC M & R INC.
TABLE OF CONTENTS
June 30, 1996
UNAUDITED
Part I - Financial Information
Balance Sheet -June 30, 1996 and December 31, 1995.
Statement of Operations -For the three months ended June 30, 1996
and 1995.
For the six months ended June 30, 1996 and 1995.
Statement of Cash Flows -For the three months ended June 30, 1996 and
1995.
For the six months ended June 30, 1996 and
1995.
Notes to Financial Statements
Management's Discussion and Analysis
Part II - Other Information
Item 1 - Legal Proceedings
Item 2 - Not Applicable
Item 3 - Not Applicable
Item 4 - Not Applicable
Item 5 - Not Applicable
Item 6 - Exhibits and Report of Form 8-K
<PAGE>
Part 1, Item l
ELECTRIC M & R INC.
BALANCE SHEET
Unaudited
ASSETS JUNE 30, 1996 DEC. 31, 1995
Current Assets
Cash and Cash Equivalents $127,075 $11,790
Accounts Receivable-Net Allowance
for Doubtful Accounts of $4,300 281,881 141,308
Inventories-See Number 2 798,703 870,361
Note Receivable-Current -0- 3,671
Other Current Assets 43,858 36,747
$1,251,517 $1,063,877
Property, Plant and Equipment
Land 22,484 22,484
Buildings 787,936 787,936
Machinery and Equipment 1,402,388 1,402,388
Furniture and Fixtures 197,470 193,047
$2,410,278 $2,405,855
Less: Accumulated Depreciation (2,085,164) (2,059,538)
325,114 346,317
Other Assets
Assets Held For Resale 509,277 789,439
$2,085,908 $2,199,633
LIABILITIES & SHAREHOLDERS' EQUITY
Notes Payable Demand $ -0- $91,000
Current Portion of Long Term Debt 23,746 29,866
Notes Payable-Related Parties 842,429 1,107,890
Accounts Payable 219,236 183,247
Accrued Expenses:
Salaries, Wages, Vacations & Taxes 27,662 8,741
Interest-Related Parties 778,587 1,067,933
Other:
Land Deposits 12,000 12,000
Income Tax Payable 159,630 32,000
$2,063,290 $2,532.677
Long Term Debt 10,297 18,082
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock, $1.00 Par Value;
2,000,000 Shares Authorized;
734,783 Shares Issued & Outstanding 734,787 734,787
Additional Paid in Capital 1,486,440 1,486,440
Accumulated Deficit (2,208,906) (2,572,353)
12,321 (351,126)
$2,085,908 $2,199,633
<PAGE>
Part 1, Item 2
ELECTRIC M & R INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 & 1995
UNAUDITED
PROFIT AND LOSS INFORMATION FOR THE 3 MONTHS ENDED JUNE 30,
1996 1995
REVENUES
Net Sales-Manufacturing $620,245 $510,879
Sales of Real Estate -0- 6,000
Other Income 6,186 5,774
$ 626,431 $522,653
COST AND EXPENSES
Cost of Products Sold Manufacturing $532,919 $503,760
Cost of Real Estate Sold -0- 3,780
Selling, General and Administrative 131,148 116,090
Interest Expense 23,611 36,981
Total Cost and Expenses $ 687,678 $660,611
PROVISION FOR INCOME TAX
Income Tax $ -0- $-0-
NET INCOME (LOSS) $(61,247) $(137,958)
NET INCOME PER SHARE OF COMMON STOCK
(Based on 734,787 and 734,787 shares of common
stock outstanding) $(.08) $( .19)
PROFIT PER SHARE OF COMMON STOCK
Per Share data for the three months ended June 30, 1996 and 1995, are based
upon the weighted average number of shares which were 734,787 and 734,787,
respectively.
<PAGE>
Part 1, Item 2
ELECTRIC M & R INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 & 1995
UNAUDITED
PROFIT AND LOSS INFORMATION FOR THE 6 MONTHS ENDED JUNE 30,
1996 1995
REVENUES
Net Sales-Manufacturing $1,211,166 $1,326,386
Sales of Real Estate 973,000 6,000
Other Income 10,357 4,317
$2,194,523 $1,336,703
COST AND EXPENSES
Cost of Products Sold Manufacturing $1,062,064 $1,166,459
Cost of Real Estate Sold 320,688 3,780
Selling, General and Administrative 261,412 244,594
Interest Expense 52,912 67,964
Total Cost and Expenses $1,697,076 $1,482,797
PROVISION FOR INCOME TAX
Income Tax $134,000 $-0-
NET INCOME (LOSS) $363,447 $(146,094)
NET INCOME PER SHARE OF COMMON STOCK
(Based on 734,787 and 734,787 shares of common
stock outstanding) $ .49 $( .20)
PROFIT PER SHARE OF COMMON STOCK
Per Share data for the six months ended June 30, 1996 and 1995, are based
upon the weighted average number of shares which were 734,787 and 734,787,
respectively.
<PAGE>
Part 1, Item 3 ELECTRIC M & R INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
UNAUDITED
FOR THE THREE MONTHS ENDED JUNE 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $718,167 $809,465
Cash Paid to Suppliers and Employees (670,418) (788,421)
Interest Received -0- -0-
Interest Paid (256,242) (46,720)
Income Tax Paid (6,370) -0-
Net Cash Provided (Used) by Operating
Activities $(214,863) $(25,676)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate $-0- $ -0-
Closing Costs Paid On Real Estate Sales -0- -0-
Payments for Capital Expenditures -0- (6,348)
Net Cash Provided (Used) By Investing $-0- $(6,348)
Activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Additional Borrowings $ -0- $ -0-
Principal Payments on Notes Payable (371,511) (45,262)
Net Cash Provided (Used) by
Financing Activities $(371,511) $(45,262)
Net Increase (Decrease) in Cash and
Cash Equivalents $(586,374) $(77,286)
Cash and Cash Equivalents at Beginning
of Period 713,449 83,087
CASH AND CASH EQUIVALENTS AT END OF PERIOD $127,075 $ 5,801
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
Net Income $(61,247) $(137,958)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
(Increase) Decrease in:
Accounts Receivable 91,574 271,812
Inventory 39,135 49,405
Notes Receivable -0- 15,000
Other Current Assets (21,992) (10,507)
Increase (Decrease) in:
Accounts Payable (34,552) (223,837)
Accrued Expenses (240,649) (2,780)
Depreciation Expenses 12,868 13,189
(Gain) / Loss on Sale of Real Estate -0- -0-
Net Cash Provided (Used) by Operating
Activities $(214,863) $ (25,676)
<PAGE>
Part 1, Item 3 ELECTRIC M & R INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30,
1996
1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $1,093,814 $1,551,613
Cash Paid to Suppliers and Employees (1,187,586) (1,594,802)
Interest Received -0- -0-
Interest Paid (342,258) (61,863)
Income Tax Paid (6,370) -0-
Net Cash Provided (Used) by Operating
Activities $(442,400) $(105,052)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate $973,000 $69,764
Closing Costs Paid On Real Estate Sales (40,526) -0-
Payments for Capital Expenditures (4,423) (13,568)
Net Cash Provided (Used) By Investing $928,051 $56,196
Activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Additional Borrowings $ 75,000 $120,000
Principal Payments on Notes Payable (445,366) (72,806)
Net Cash Provided (Used) by
Financing Activities $(370,366) $ 47,194
Net Increase (Decrease) in Cash and
Cash Equivalents $ 115,285 $ (1,662)
Cash and Cash Equivalents at Beginning
of Period 11,790 $7,463
CASH AND CASH EQUIVALENTS AT END OF PERIOD $127,075 $ 5,801
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
Net Income $363,447 $(146,094)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
(Increase) Decrease in:
Accounts Receivable (140,573) 197,097
Inventory 71,658 96,937
Notes Receivable 3,671 15,000
Other Current Assets (7,111) 18,255
Increase (Decrease) in:
Accounts Payable 35,989 (322,402)
Accrued Expenses (142,795) 7,463
Depreciation Expenses 25,626 25,879
(Gain) / Loss on Sale of Real Estate (652,312) 2,813
Net Cash Provided (Used) by Operating
Activities $(442,400) $(105,052)
<PAGE>
Part 1, Item 4
ELECTRIC M & R INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED JUNE 30, 1996 AND DECEMBER 31, 1995
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 the 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 for 1996 and 1995:
Raw Materials $403,306 $434,893
Work in Progress 186,770 183,191
Finished Goods 208,627 252,277
$798,703 $870,361
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, there had been
$91,000 borrowed on the line of credit. As of June 30, 1996, there is
nothing due on the credit line.
4. NOTES PAYABLE
Demand notes payable to related parties in the amounts of $ 842,429
and $1,107,890 at June 30, 1996 and December 31, 1995, respectively,
consist of amounts due officer-shareholders of the Company, and
entities under their control. These notes and amounts bear interest
at prime (8.25% at June 30, 1996 and 8.50% at December 31, 1995)
plus 1% with the exception of a $60,000 note payable to an officer-
shareholder at 10%, and a $20,000 notes payable to an officer-
shareholder at 8%. Accrued interest on these notes was $ 778,587
and $1,067,933 at June 30, 1996 and December 31, 1995 respectively.
<PAGE>
Part 1, Item 4
ELECTRIC M & R INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED JUNE 30, 1996 AND DECEMBER 31, 1995
5. LONG-TERM DEBT
Long-term debt consists of the following at June 30, 1996 and
December 31, 1995.
1996 1995
8% mortgage payable to an individual
with final payment due March 15,1997.
The note is secured by a building. $15,532 $26,649
8.49% note payable to Dollar Bank with
final payment due September 18, 1998.
The note is secured by a vehicle. 18,511 21,299
$34,043 $47,948
Less: Current Portion 23,746 29,866
$10,297 $18,082
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 1996 and 1995 the Company charged an affiliated Company owned
by an officer approximately $7,600 and $46,700 respectively, for
administrative and management services. These amounts are included
in other income.
In addition, interest expense for the periods ended June 30, 1996,
and December 31, 1995 pertaining to notes payable to related parties,
amounted to approximately $45,000 and $120,674, respectively.
7. ASSETS HELD FOR SALE
The Company owns land in Puerto Rico that is being actively offered
for sale. This land is recorded at the Company's cost, $509,277 and
$557,439 at June 30, 1996 and December 31, 1995, 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.
<PAGE>
Part 1, Item 4
ELECTRIC M & R INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED JUNE 30, 1996 AND DECEMBER 31, 1995
8. INCOME TAXES
Significant components of income tax expense from continuing
operations consist of the following at June 30, 1996 and 1995.
1996 1995
Current - State $ -0- $ -0-
- Puerto Rico $134,000 $ -0-
$134,000 $ -0-
For Federal income tax reporting purpose, the Company has available
approximately $2,400,000 of net operating loss carry forwards as of
December 31, 1995. If unused, these 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.
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 several related lawsuits 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 payments
on all the mortgages. The Company took possession of these
properties during 1994. The properties were sold in 1995 and in
1996.
10. COMMON STOCK
Common stock has a stated value of $l per share. There are
2,000,000 shares authorized, and 734,787 shares issued and
outstanding at June 30, 1996 and December 31, 1995.
<PAGE>
Part 1, Item 5
ELECTRIC M & R INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE PERIODS ENDED JUNE 30, 1996 AND DECEMBER 31, 1995
MANAGEMENT'S DISCUSSION AND ANALYSIS
Revenues from manufacturing for the six months ended June 30, 1996,
were $1,211,166 compared to $1,326,386 for the same period in 1995.
This represents a decrease in Revenues of $115,220.
Selling, general and administrative expenses for the six months ended
June 30, 1996 increased by approximately $16,800 from the previous
year. Gross margin has remained the same at approximately 12%. Real
estate sales netted a $652,312 profit. This resulted in net income of
$363,447 for the six months ended June 30, 1996, compared to a loss of
($146,094) for the 1995 period.
This is an increase of $509,541.
Management expects operating results of the Company will improve
during 1996, principally through increased sales volume.
At March 31, 1996,the Company had negative working capital of
approximately ($812,000). This is caused principally by amounts owed
to related parties in excess of $1.6 million. The related parties
continue to provide favorable financial assistance to the company.
<PAGE>
Part 2, Item 1 & 6
ELECTRIC M & R INC.
OTHER INFORMATION
FOR THE PERIODS ENDED JUNE 30, 1996 AND DECEMBER 31, 1995
LEGAL PROCEEDINGS
There have been no significant changes in the Company's legal
proceedings during the six months ended June 30, 1996.
EXHIBITS AND REPORT OF FORM 8-K
No event occurred that required the registrant to file form 8-K during
the six months ended June 30, 1996.
SIGNATURES
In accordance with the requirements 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.
Registrant
DATE
GRETCHEN OSWALD
PRESIDENT
DATE
RAYMOND F. CROUSHORE
TREASURER
