U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 1995
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number 2-37589
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AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
-------------------------------------------
(Exact name of small business issuer as specified in its charter)
Pennsylvania 23-1716951
---------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Idenfification No.)
POST OFFICE BOX 2441
1731 SOUTH 19TH STREET, HARRISBURG, PA 17105
------------------------------------------------
(Address of principal executive offices)
717-939-7893
----------------
(Issuer's telephone number)
No Change
-------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the latest practicable date:
Common Stock Outstanding
At April 30, 1995 the Issuer had 943,187 shares of common stock
outstanding, par value $.0025 per share, the only class of such stock issued.
Transitional Small Business Disclosure Format
YES_______ NO___X____
<PAGE>
FORM 10-QSB
COMPANY OR GROUP OF COMPANIES FOR WHICH REPORT IS FILED:
Amalgamated Automotive Industries, Inc., and Subsidiaries*, viz:
Acme Auto Parts, Inc.
Talmens Properties, Inc.
LAM Corporation
*Action was taken in early Fiscal 1993 to have the Issuer's subsidiaries
cease active business operations and to transfer their assets and liabilities
to the Issuer.
GENERAL NOTE TO CONDENSED FINANCIAL STATEMENTS:
The condensed financial statements included herein have been prepared by
the Issuer and its subsidiaries, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Nevertheless, the Issuer believes that its disclosures herein
are adequate to make the information presented not misleading and, in the
opinion of management, all adjustments necessary to present fairly the
results of operations for the interim periods have been reflected. It is
suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the Issuer's
latest Annual Report to the Securities and Exchange Commission on Form
10-KSB.
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<PAGE>
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial_Statements
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For The Six Months
Ended April 30(a)
---------------------
1995 1994(c)
------ --------
NET SALES $ 4,100,944 $ 4,583,510
COST OF GOODS SOLD 2,689,955 3,025,117
--------- ---------
GROSS PROFIT(b) $ 1,410,989 $ 1,558,393
SELLING AND ADMINISTRATIVE EXPENSES 1,475,535 1,563,236
--------- ---------
$ (64,546) $ (4,843)
OTHER INCOME(d) 223,112 15,379
--------- ---------
$ 158,566 $ 10,536
INTEREST EXPENSE 171,853 136,241
--------- ---------
EARNINGS(LOSS) BEFORE INCOME TAXES $ (13,287) $ (125,705)
INCOME TAXES -0- -0-
--------- ---------
NET EARNINGS (LOSS) $ (13,287) $ (125,705)
========== ==========
EARNINGS PER COMMON SHARE COMPUTED ON
THE WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE EQUIVALENTS
OUTSTANDING DURING EACH PERIOD
(943,187 IN BOTH 1995 AND 1994)
NET EARNINGS (LOSS) PER COMMON SHARE $ (.01) $ (.13)
========== ===========
(a)The financial information presented herein reflects all adjustments which
are, in the opinion of management, necessary for a fair statement of the
results for the interim periods.
(b)The Gross profit percentage for the six months ended April 30, 1994,
was restated from 35.9% to 34.0% to reflect the actual gross profit
percentage for the fiscal year ended October 31, 1994. The actual gross
profit percentage for the interim period of 34.4% has been utilized for the
six months ended April 30, 1995.
(c)Reflects impact of restatement of financial results for the twelve months
ended October 31, 1993. See Amendment No. 1 on Form 10-QSB/A (filed May 3,
1994) to the Issuer's Quarterly Report on Form 10-QSB for the three months
ended January 31, 1994, the Issuer's Current Report on Form 8-K, dated April
25, 1994, and Amendment No. 1 on Form 10-KSB/A to the Issuer's Annual Report
on Form 10-KSB for the fiscal year ended October 31, 1993.
(d)Of the $223,112 of Other Income for the six months ended April 30, 1995,
$211,773 represents nonrecurring income resulting from the conversion of a
major product line and the receipt of a credit against amounts owed to the
supplier. Offset against this credit were expenses of the conversion. The
conversion was completed during the six months ended April 30, 1995.
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<PAGE>
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial_Statements
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For The Three Months
Ended April 30(a)
---------------------
1995 1994
------ ------
NET SALES $ 2,057,690 $ 2,541,120
COST OF GOODS SOLD 1,353,870 1,677,139
--------- ----------
GROSS PROFIT(b) $ 703,820 $ 863,981
SELLING AND ADMINISTRATIVE EXPENSES 734,885 816,197
--------- ---------
$ (31,065) $ 47,784
OTHER INCOME(c) 7,005 5,025
--------- ---------
$ (24,060) $ 52,809
INTEREST EXPENSE 90,122 66,358
--------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES $ (114,182) $ (13,549)
INCOME TAXES -0- -0-
--------- ---------
NET EARNINGS (LOSS) $ (114,182) $ (13,549)
========== =========
EARNINGS PER COMMON SHARE COMPUTED ON
THE WEIGHTED AVERAGE NUMBER OF
COMMON SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING DURING
EACH PERIOD (943,187 IN BOTH 1995
AND 1994)
NET EARNINGS (LOSS) PER COMMON SHARE $ (.12) $ (.01)
========== ==========
(a)The financial information presented herein reflects all adjustments which
are, in the opinion of management, necessary to a fair statement of the
results for the interim periods.
(b)The gross profit percentage for the three months ended April 30, 1994 was
restated from 36.8% to 34.0% to reflect the actual gross profit percentage
for the fiscal year ended October 31, 1994. The actual gross profit
percentage for the three month interim period of 34.2% has been utilized for
the period ended April 30, 1995.
(d)Of the $7,005 of Other Income for the three months ended April 30, 1995,
$1,340 represents nonrecurring income resulting from the completed conversion
of a major product line and the receipt of a credit against amounts owed to
the supplier. Offset against this credit were expenses of the conversion.
The conversion was completed during the three months ended April 30, 1995.
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<PAGE>
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial_Statements (continued)
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
April 30, October 31,
ASSETS 1995 1994(a)
--------- -----------
CURRENT ASSETS
Cash $ 46,672 $ 97,500
Accounts receivable - net allowance
for doubtful accounts - (1995 -
$10,000, 1994 - $4,000) 810,307 892,587
Other receivables 6,241 74,417
Inventories - at the lower of cost
or market (first-in, first-out) 3,385,796 3,117,078
Prepaid expenses 122,871 82,453
Deferred Taxes 10,749 10,749
--------- ---------
Total current assets $ 4,382,636 $ 4,274,784
--------- ---------
PROPERTY AND EQUIPMENT - AT COST
Land $ 190,874 $ 190,560
Buildings 921,160 921,160
Leasehold improvements 278,378 277,559
Fixtures and equipment 714,346 706,005
Autos and trucks 595,124 640,007
--------- ---------
$ 2,699,882 $ 2,735,291
Less accumulated depreciation and
amortization 1,677,867 1,682,541
--------- ---------
$ 1,022,015 $ 1,052,750
--------- ---------
OTHER ASSETS
Excess of cost over net assets of
companies acquired $ 500,268 $ 501,637
Other 115,857 116,099
Loan Origination Cost
Net of Amortization 50,374 57,223
--------- ---------
$ 666,499 $ 674,959
--------- ---------
$ 6,071,150 $ 6,002,493
========== =========
(a) Reflects impact of restatement of financial results for the twelve months
ended October 31, 1993. See Amendment No. 1 on Form 10-QSB/A (Filed May 3,
1994) to the Issuer's Quarterly Report on Form 10-QSB for the three months
ended January 31, 1994, the Issuer's Current Report on Form 8-K, dated April
25, 1994, and Amendment No.1 on Form 10-KSB/A to the Issuer's Annual Report
on Form 10-KSB for the fiscal year ended October 31, 1993.
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<PAGE>
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial_Statements (continued)
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
April 30, October 31,
LIABILITIES 1995 1994(a)
--------- -----------
CURRENT LIABILITIES
Notes payable to bank $ 1,877,000 $ 1,860,000
Current maturities of long-term
debt 107,631 120,497
Accounts payable 1,473,832 1,323,239
Accrued liablities 126,201 144,782
--------- ---------
Total current liabilities $ 3,584,664 $ 3,448,518
--------- ---------
LONG-TERM DEBT
Notes, mortgages and leases payable $ 1,150,780 $ 1,209,009
Less current maturities 107,631 120,497
--------- ---------
Total Long-Term Debt $ 1,043,149 $ 1,088,512
--------- ---------
COMPENSATION PAYABLE $ 278,275 $ 287,114
--------- ---------
SHAREHOLDERS' EQUITY
Shares issued
and
outstanding
Common stock, ($.0025 par value;
authorized 8,000,000 shares) $ 2,949 $ 2,949
--------- ---------
Treasury Stock $ (136,083) $ (136,083)
--------- ---------
Additional Contributed capital $ 813,213 $ 813,213
--------- ---------
Retained earnings-
Balance beginning of fiscal year
as previously reported $ 498,270 $ 747,242
Net Income (Loss) (13,287) (248,972)
Balance at:
January 31, 1995 484,983
October 31, 1994 498,270
--------- ---------
$ 6,071,150 $ 6,002,493
========= =========
(a) Reflects impact of restatement of financial results for the twelve months
ended October 31, 1993. See Amendment No.1 on Form 10-QSB/A (Filed May 3,
1994) to the Issuer's Quarterly Report on Form 10-QSB for the three months
ended January 31, 1994, the Issuer's Current Report on Form 8-K, dated April
25, 1994, and Amendment No. 1 on Form 10-KSB/A to the Issuer's Annual Report
on Form 10-KSB for the fiscal year ended October 31, 1993.
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<PAGE>
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial_Statements (Continued)
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the Six Months
Ended April 30
------------------
1995 1994(a)
------ -------
Cash flows from operating activities:
Net income (loss) $ (13,287) $(125,705)
Noncash items included in net income:
Depreciation and amortization 74,498 74,826
(Increase) decrease in:
Accounts and other receivables 150,456 (75,990)
Inventories (268,718) (370,518)
Prepaid expenses (40,418) (19,662)
Other Assets 242 0
Increase (decrease) in:
Accounts payable 150,593 694,064
Compensation payable (8,839) 0
Accrued liabilities (18,584) 8,000
Net cash provided by (used in) ------- -------
operating activities $ 25,943 $ 185,015
------- -------
Cash flows from investing activities:
Proceeds from Sale of Assets $ 2,850
Purchase of property and equipment $ (12,203) (33,377)
Net cash provided by (used in) ------- -------
investing activities $ (12,203) $ (30,527)
Cash flows from financing activities:
Debt reduction - Loans, Mtgs & Leases $ (81,568) (63,311)
Net borrowings under line of credit 17,000 (97,000)
Net cash provided by (used in) ------- -------
financing activities $ 64,568 $(160,311)
------- -------
Net increase (decrease) in cash $ (50,828) $ (5,823)
Cash - beginning 97,500 69,195
------- ------
Cash - ending $ 46,672 $ 63,372
======= =======
Schedule of noncash investing transactions
Acquisition of property and equipment $ 35,542 $ 33,377
Financing from long-term obligations 23,339 -0-
Cash payment for property ------- -------
and equipment $ 12,203 $ 33,377
======= =======
(a)Reflects impact of restatement of financial results for the twelve months
ended October 31, 1993. See Amendment No. 1 on Form 10-QSB/A (Filed May 3,
1994) to the Issuer's Quarterly Report on Form 10-QSB for the three months
ended January 31, 1994, the Issuer's Current Report on Form 8-K, dated April
25, 1994, and Amendment No 1. on Form 10-KSB/A to the Issuer's Annual Report
on Form 10-KSB for the fiscal year ended October 31, 1993.
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<PAGE>
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial_Statements (Continued)
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
The following notes are an integral part of the foregoing financial
information:
(1) Preferred Stock.
There were no shares of Preferred Stock outstanding at April 30,
1995.
(2) Common Stock.
Options. There were no options to purchase shares of the
Issuer's Common Stock outstanding at April 30, 1995.
Warrants. There were no warrants for the purchase of shares of
the Issuer's Common Stock outstanding at April 30, 1995.
Employee Stock Purchase Program. In June 1986 the Issuer
instituted an Employee Stock Purchase Program for Key Employees. Under this
Program, a total of 42,200 shares of Common Stock were sold at the fair
market value to 11 key employees on an installment basis. At
April 30, 1995, a total of 8,400 shares had been repurchased by the
Issuer in accordance with the provisions of the Program from three
employees who terminated their employment with the Issuer following
their purchase of shares under the Program. An additional 10,000 shares
and 1,000 shares purchased under the Program were respectively
transferred by gift and private sale when the Issuer declined to purchase
the shares.
-8-
<PAGE>
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis or Plan of Operation
1. Material Changes in Financial Condition
(a) General Condition
There were no material changes in the Issuer's general
financial condition from the end of its preceding fiscal year on October 31,
1994 to the end of the six months reported herein on April 30, 1995.
However, as reported in the Issuer's Current Report on Form 8-K, dated April
28, 1995, and more fully discussed in Item 5 under the heading (a) Demand_for
Repayment of Revolving Credit Line Loan, the Provident Bank of Maryland
("Provident"), with which the Issuer has a revolving line of credit loan
agreement, advised by letter received April 28, 1995 that it was the bank's
intent for the Issuer to repay or replace Provident's credit facility by no
later than June 1, 1995. Provident had earlier agreed that although the
Issuer was in default of certain ratio and cash flow requirements, the bank
would waive its rights and remedies allowed per the loan agreement as of
October 31, 1994, but as a condition for the waiver, the loan interest rate
was increased from 2% to 4% per annum above the bank's prime rate effective
January 9, 1995.
By letter dated June 1, 1995, Provident demanded the
immediate and full repayment of all sums outstanding under the Issuer's
revolving line of credit loan agreement with Provident, dated May 7, 1992.
On June 5, 1995, the Issuer and Provident entered into a Forbearance
Agreement, whereby Provident agreed to forbear from the immediate exercise of
its enforcement and collection rights in accordance with the terms and
conditions of the Forbearance Agreement and to advance funds under the
revolving credit line as modified by the Forbearance Agreement. Unless a
further forbearance is agreed to, the agreement of Provident to forbear from
exercising its rights and remedies under the agreement shall expire at 5:00
P.M. on June 30, 1995 ("Date of Termination") or sooner in the event of
additional defaults. Under the terms of the Forbearance Agreement, the
original $2,000,000.00 revolving line of credit was modified and the
aggregate allowable principal amount outstanding reduced by $37,500 weekly to
$1,824,500 for the seven days prior to termination. For a full and complete
description and understanding of the terms and conditions of the Forbearance
Agreement, reference should by made to the agreement which is attached hereto
as Exhibit No. (10.9).
The Issuer is actively seeking a replacement credit facility
and presently has an application pending with another lending institution.
In addition, the Issuer has received an expression of possible interest in
the purchase of the Issuer's shares and is in preliminary discussions with
another company. Nevertheless, the reductions in the Provident line will
make it extremely difficult to maintain inventories at necessary levels and
if a replacement credit facility is not obtained or a further forbearance
agreed to pending the obtainment of another credit facility or the
acquisition of the Issuer by another company, the Issuer will not be able to
remain in business.
(b) Liquidity and Capital Resources
The Issuer's liquidity and capital resources are extremely
constrained due to the actions taken by the Issuer's primary lending
institution and discussed in (a) above and in Item 5(a).
At both fiscal year end 1994 and at April 30, 1995, the
current ratio was 1.2 to 1. The quick ratio was .3 to 1 at fiscal year end
1994 and .2 to 1 at April 30, 1995. The ratio of long-term debt to equity
was 1.2 to 1 at fiscal year end 1994 and 1.1 to 1 at April 30, 1995.
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<PAGE>
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis or Plan of Operation (continued)
1. Material Changes in Financial Condition (continued)
(b) Liquidity and Capital Resources (continued)
For fiscal 1995 the Issuer has not made any material
commitments for capital expenditures beyond general maintenance on real
properties and replacement of depreciated vehicles and computer equipment.
These capital expenditures can be considered immaterial.
2. Material Changes in Results of Operations
(a) Six Months Ended April 30, 1995 and 1994
For the six months ended April 30, 1995, there was a loss
of $ 13,287 (see item 2(a)(5) Other Income) compared to a loss of
$ 125,705 for the same period in 1994. The loss for the six months ended
April 30, 1995 reflects a decrease in net sales primarily attributable to the
impact of mild winter weather during the first half of fiscal 1995. Although
the Issuer normally experiences losses during the first half of its fiscal
years, the loss for the first quarter of 1994 was affected by the extreme
cold, heavy snow falls and weather emergencies experienced in January and
February 1994, which had a negative effect on the results for the first
quarter of fiscal 1994, and a positive effect on the results for the second
quarter of fiscal 1994. Severe winters and hot summers tend to accelerate
automotive parts fatigue creating a corresponding need for replacement parts
with the opposite being true during mild winters and cool summers.
(1) Net Sales
Total net sales for the six months ended April 30, 1995
decreased $ 482,566 (10%) compared to the corresponding period in 1994.
Jobber location sales decreased $ 87,218 (4%) while the warehouse location
sales decreased $ 395,348 (17%) as compared to the same period in 1994.
Sales for all locations were negatively impacted by the unseasonably mild
winter weather experienced during the first and second quarters of fiscal
1995.
(2) Cost of Goods Sold
The cost of goods sold for the six month period ended April 30,
1995 decreased by $ 335,162 (11%) as compared to the six month period ended
April 30, 1994. The decrease in the cost of goods sold was due to decreased
sales for the period as discussed above.
(3) Selling and Administrative Expenses
Selling and administrative expenses for the six month period
ended April 30, 1995 decreased 6% or $87,701 as compared to the same
period in 1994. The decrease was due primarily to a reduction of personnel.
(4) Interest Expense
Interest expense for the six months ended April 30, 1995
increased $35,612 (26%) as compared to the corresponding period in 1994. The
increase in interest expense was due to increases in the prime rate coupled
with an increase from 2% to 4% in the rate over the prime rate charged by the
Issuer's primary lender. This change took place in January 1995.
-10-
<PAGE>
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis or Plan of Operation (continued)
2. Material Changes in Results of Operations (continued)
(a) Six Months Ended April 30, 1995 and 1994 (continued)
(5) Other Income
Other income for the six months ended April 30, 1995
increased by $207,733 from $15,379 to $223,112 as compared to the
corresponding period in 1994 primarily due to the Company converting a major
product line and receiving a nonrecurring credit against amounts owed to the
supplier. Offset against this were expenses of the conversion. The major
portion of the net amount of the incentives and related costs was recognized
as Other Income in the first quarter of fiscal 1995 and the small amount
remaining was recognized during the second quarter when the conversion was
completed.
(b) Three Months Ended April 30, 1995 and 1994
For the three months ended April 30, 1995, there was a loss
of $ 114,182 compared to a loss of $ 13,549 for the same period in 1994.
The loss for the second quarter of fiscal 1995 was caused primarily by
decreased sales as discussed below.
(1) Net Sales
Total net sales for the three months ended April 30, 1995
decreased $ 483,430 (19%) compared to the corresponding period in 1994.
Jobber location sales decreased $ 140,699 or 11% while the warehouse location
sales decreased $ 342,731 or 26% as compared to the same period in 1994.
The depressed sales for the second quarter were a result of the unseasonably
mild winter weather experienced during the first and second quarters of
fiscal 1995.
(2) Cost of Goods Sold
The cost of goods sold for the three month period ended
April 30, 1995 decreased by $ 323,269 (19%) as compared to the three month
period ended April 30, 1994. The decrease in the cost of goods sold was due
to decreased sales for the period as discussed above.
(3) Selling and Administrative Expenses
Selling and Administrative expenses for the three month
period ended April 30, 1995 decreased 10% or $ 81,312 as compared to the same
period in 1994 due primarily to a reduction in personnel.
(4) Interest Expense
Interest expense for the three months ended April 30, 1995
increased by 36% or $ 23,764 as compared to the corresponding period in 1994.
The increase in interest expense was due to increases in the prime rate
coupled with an increase from 2% to 4% in the rate over the prime rate
charged by the Issuer's primary lender. This change took place in January,
1995.
(5) Other Income
Other Income for the three months ended April 30, 1995
increased by 39% or $ 1,980 as compared to the corresponding period in 1994
due to the remaining amount of the product line conversion discussed earlier
being recognized during the three months ended April 30, 1995.
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<PAGE>
FORM 10-QSB
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Date and Type of Meeting
The matters reported herein were submitted to a vote of Issuer's
Security Holders through the solicitation of Proxies at its Annual Meeting
held February 24, 1995.
(b) Election of Directors
Proxies for the aforesaid Annual Meeting were solicited pursuant
to Regulation 14A; there was no solicitation in opposition to the Board of
Directors nominees as listed in the Proxy Statement; and all of such nominees
were elected.
(c) The only matters voted upon at the aforesaid Annual Meeting
were (i) the election of two (2) Class Two Directors to serve until the 1998
Annual Meeting and until their successors are elected and qualify and (ii)
the election of one (1) Class Three Director to serve until the 1996 Annual
Meeting and until her successor is elected and qualifies and (iii) a proposal
to ratify the appointment of the firm of McKonly & Asbury as independant
auditors of the Issuer for the fiscal year ending October 31, 1995. The vote
tabulations with respect to each of these matters were as follows:
(i) Election of Class Two Directors
Shares Voted Shares Withholding
Nominees in Favor Authority to Vote
-------- ------------ ------------------
Samuel L. Andes 745,286 19,100
Ralph E. Wilson 745,262 19,124
(ii) Election of Class Three Director
Shares Voted Shares Withholding
Nominee in Favor Authority to Vote
------- ------------ ------------------
Lisa Myers Sweeney 743,286 21,100
(iii) Ratification of the Appointment of Independant Auditors
Shares Voted in Favor: 746,686
Shares Voted Against: 16,900
Abstentions: 800
Item 5. Other Information
(a) Demand for Repayment of Revolving Credit Line Loan
Since May, 1992, the Issuer has maintained a revolving line of
credit with Provident Bank of Maryland("Provident"). Under the original loan
agreement, the Issuer was allowed to borrow up to $2,000,000 and at April 30,
1995, the Issuer had utilized the credit facility to the extent of
$1,877,000. The line of credit is collateralized by accounts receivable,
inventory, equipment, and working fund accounts maintained at the bank. The
agreement provides, among other things, for maintenance of working capital
above $750,000 and tangible net worth above $500,000, the meeting of certain
performance ratios and cash flows (as defined in the agreement).
In the Management's Discussion and Analysis Section of its Annual
Report on Form 10-KSB, the Issuer reported that although it was in default of
certain ratio and cash flow requirements under its line of credit agreement,
Provident had agreed to waive its rights and remedies allowed per the
agreement as of October 31, 1994, but as a condition for the waiver, the loan
interest rate under the loan agreement had been increased from 2% to 4% per
annum above the bank's prime rate effective January 9, 1995.
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<PAGE>
FORM 10-QSB
PART II
OTHER INFORMATION
Item 5. Other Information (continued)
(a) Demand for Repayment of Revolving Credit Line Loan (continued)
As reported in the Issuer's Current Report on Form 8-K, dated
April 28, 1995, Provident, by letter received April 28, 1995, advised that it
continued to review with concern the Issuer's performance, that their
continued to be uncured covenant violations, and that it was the bank's
intent for the Issuer to repay or replace Provident's credit facilities by no
later than June 1, 1995. The Issuer also reported that during the fourth
quarter of Calendar 1994, it had engaged a firm to provide consulting
services to include such matters as the structuring of financing
alternatives, preparation of financial and marketing presentations and making
inquiries within the industry regarding interest in the possible acquisition
of the Company's stock or assets. The Issuer further reported that
management, with the assistance of the consulting firm, was in the process of
seeking alternative financing arrangements to replace Provident's credit
facilities at the earliest opportunity, but was uncertain whether it could be
accomplished by June 1, 1995. It was also reported that the Issuer had
received some expressions of interest in the possible purchase of its shares
or a substantial portion of its assets and had commenced discussions of a
preliminary nature with firms expressing an interest and that Shareholders
had been advised that management would consider legitimate proposals and, if
they merit it, make a recommendation regarding same to Shareholders.
By letter dated June 1, 1995, Provident demanded the immediate
and full repayment of all sums outstanding under the Issuer's revolving line
of credit loan agreement. On June 5, 1995, the Issuer and Provident entered
into a Forbearance Agreement, whereby Provident agreed to forbear from the
immediate exercise of its enforcement and collection rights in accordance
with the terms and conditions of the Forbearance Agreement and to advance
funds under the revolving credit line as modified by the Forbearance
Agreement. Unless a further forbearance is agreed to, the agreement of
Provident to forbear from exercising its rights and remedies under the
agreement shall expire at 5:00 P.M. on June 30, 1995 ("Date of Termination")
or sooner in the event of additional defaults. Under the terms of the
Forbearance Agreement, all payments received on the Issuer's accounts and
receivables and all payments received as a result of the sale or other
disposition of the Issuer's inventory must be paid to Provident and applied
to reduce the sums owed by the Issuer to Provident. In addition, the
original $2,000,000 revolving line of credit was modified and the aggregate
allowable principal amount outstanding reduced by $37,500 weekly as follows:
- Through June 8, 1995 $1,937,000
- June 9 through June 15, 1995 1,899,500
- June 16 through June 22, 1995 1,862,000
- June 23 to Date of Termination 1,824,500
For a full and complete description and understanding of the terms and
conditions of the Forbearance Agreement, reference should be made to the
agreement which is attached hereto as Exhibit No. (10.9)
The issuer is actively seeking a replacement credit facility and
presently has an application pending with another lending institution. In
addition, the Issuer has received an expression of possible interest in the
purchase of the Issuer's shares and is in preliminary discussions with
another company. Nevertheless, the reductions in the Provident line will
make it extremely difficult to maintain inventories at necessary levels and
if a replacement credit facility is not obtained or a further forbearance
agreed to pending the Issuer's obtaining another credit facility or the
acquisition of the Issuer by another company, the Issuer will not be able to
remain in business.
-13-
<PAGE>
FORM 10-QSB
PART II
OTHER INFORMATION
Item 5. Other Information (continued)
(b) Election of Officers
At the organizational meeting of the Issuer's Board of Directors
following the Annual meeting of Shareholders on February 24, 1995, the
following persons were elected to the offices set forth adjacent to their
respective names:
Kurt J. Myers Chairman of the Board,
President and Chief Executive Officer
Timothy L. McMasters Treasurer
Mark Jenkins Secretary
(c) Resignation of Director
On March 22, 1995, Director Eugene W. Hickock was named by the
Governor of Pennsylvania as Secretary Designate for the Pennsylvania
Department of Education and on May 2, 1995 was confirmed as Pennsylvania's
Secretary of Education. At the request of the Governor, Mr. Hickok has
resigned from all boards, including the Issuer's. The Issuer has no
immediate plans to fill the vacancy created by Mr. Hickock's resignation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index on Page 16-17 hereof.
(b) Reports on Form 8-K - One report on Form 8-K, dated April 28,
1995 was filed during the quarter ended April 30, 1995, reporting inter alia,
on the letter received from Provident Bank of Maryland advising that it was
the bank's intent that the Issuer repay or replace the Bank's credit
facilities by no later than June 1, 1995.
-14-
<PAGE>
FORM 10-QSB
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
---------------------------------------
(Registrant)
Date 6/14/95 /s/ Kurt J. Myers
------------------- -------------------
Kurt J. Myers, Chairman of Board,
President and Chief Executive Officer
Date 6/14/95 /s/ Timothy L. McMasters
------------------- -------------------------
Timothy L. McMasters, Treasurer
-15-
<PAGE>
FORM 10-QSB
EXHIBIT INDEX FOR QUARTERLY REPORTS ON FORM 10-QSB
--------------------------------------------------
Exhibit No. Subject Applicability
----------- ------- -------------
(2) Plan of purchase, sale acquisition, Not Applicable
reorginization, arrangement, liquidation
or succesion
(4) Instruments defining the rights of Not Applicable
security holders including indentures
(10) Material Contracts
(10.1) March 13, 1992 Employment
Agreement with Jacob J. Myers, Jr.
(10.2) March 15, 1992 Stock Purchase
Option Agreement with Ralph E. Wilson,
Maxine J. Wilson and Fayette Drilling
Company, Inc. Provided in
Annual Report
(10.3) May 6, 1992 Note and Mortgage on Form 10-KSB
Issued to Unitas National Bank for the
Year Ended
(10.4) May 7, 1992 Loan and Security 10-31-93
and Open End Mortgage Agreement with and
Provident Bank of Maryland Incorporated
Herein by
(10.5) July 15, 1992 Agreement with Reference
Jacob J. Myers, Jr. and Judgment
Promissory Note
(10.6) January 1, 1993 Employment
Agreement with Kurt J. Myers
(10.7) Letter of January 9, 1995 from
Provident National Bank of Maryland
("Provident") agreeing to waive
defaults as of October 31, 1994 in
certain ratio and cash flow requirements
under the Loan Agreement and other
agreements with Provident [Exhibit(10.4)]
as well as all of Provident's rights and Provided in
remedies with respect to such defaults Annual Report
under the Loan Agreement and on Form 10-KSB
other agreements for the
Year Ended
(10.8) Letter Agreement of January 9, 10-31-94
1995 with Provident Bank of Maryland and
("Provident"), amending the Promissory Incorporated
Note to Provident, as a condition of the Herein by
waiver granted by Exhibit (10.7) so as to Reference
increase the interest rate under the Loan
Agreement from 2% to 4% per annum above
Provident's prime rate effective 1-1-95
-16-
<PAGE>
FORM 10-QSB
EXHIBIT INDEX FOR QUARTERLY REPORTS ON FORM 10-QSB (continued)
------------------------------------------------------------
(10.9) Forbearance Agreement of Attached Hereto
June 5, 1995 with Provident Bank
of Maryland
(11) Statement re computation of per share Attached Hereto
earnings
(15) Letter on unaudited interim financial Not Applicable
information
(18) Letter on change in accounting Not Applicable
principles
(19) Reports furnished to security holders Not Applicable
(22) Published report regarding matters Not Applicable
submitted to vote of security holders
(23) Consents of experts and counsel Not Applicable
(24) Power of Attorney Not Applicable
(27) Financial Data Schedule Not Applicable
(99) Additional Exhibits Not Applicable
-17-
FORM 10-QSB
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
Exhibit No. (10.9) - Forbearance Agreement of June 5, 1995
with Provident Bank of Maryland
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT (hereafter, this "AGREEMENT") is made
as of June 5, 1995 by and between AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.,
a Pennsylvania corporation, ACME AUTO PARTS, INC., a Pennsylvania corporation,
LAM CORPORATION, a Pennsylvania corporation, and TALMENS PROPERTIES, INC., a
Pennsylvania corporation (collectively, "BORROWER") and PROVIDENT BANK OF
MARYLAND, a Maryland banking corporation ("LENDER") .
RECITALS
Pursuant to the terms and provisions of a Loan And Security Agreement
between the LENDER and the BORROWER dated May 7, 1992 (the "LOAN AGREEMENT")
the LENDER provided to the BORROWER a revolving line of credit ("REVOLVER") as
evidenced by a Promissory Note dated May 7, 1992 from the BORROWER to the order
of the LENDER in the stated principal amount of Two Million Dollars
($2,000,000.00) ("DEMAND NOTE") .
Pursuant to the terms and provisions of the LOAN AGREEMENT and the
DEMAND NOTE all sums outstanding under the REVOLVER are due and payable in full
on the demand of the LENDER. The BORROWER is in default under the terms of the
LOAN AGREEMENT and pursuant to the terms of a letter dated June 1, 1995, the
LENDER demanded the immediate and full repayment of all sums outstanding under
the REVOLVER.
The BORROWER has failed to repay the sums due under the REVOLVER, and
the LENDER is entitled to assert and enforce any or all of its rights and
remedies thereunder or under applicable law. The BORROWER has requested that
the LENDER forbear from immediately exercising its enforcement and collection
rights against the BORROWER and the collateral securing the obligations of the
BORROWER to the LENDER and has further requested that the LENDER continue to
advance proceeds of the REVOLVER to the BORROWER.
The LENDER has agreed to forbear from the immediate exercise of its
enforcement and collection rights in accordance with the terms and conditions
set forth in this AGREEMENT. In addition, the LENDER has agreed to advance
proceeds of the REVOLVER, as modified herein, to the BORROWER pursuant to the
terms and conditions set forth in this AGREEMENT.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
-18-
<PAGE>
Section 1. RECITALS. The parties hereby acknowledge the accuracy of the
Recitals to this AGREEMENT, and agree that the Recitals are hereby incorporated
into this AGREEMENT and made a part hereof.
Section 2. ACKNOWLEDGMENT OF DEFAULTS. The BORROWER
acknowledges and agrees that all sums outstanding under the LOAN DOCUMENTS are
due and payable in full and that the BORROWER has defaulted in its obligation to
the LENDER: (a) by failing to repay all sums outstanding under the REVOLVER
upon the demand of the LENDER; and (b) by failing to comply with the covenants
contained in Sections 6.28 and 6.30 of the LOAN AGREEMENT (collectively,
"EXISTING DEFAULT"). In addition, the BORROWER hereby acknowledges and agrees
that in the absence of the specific agreement to forbear as set forth in this
AGREEMENT, the LENDER has the immediate and unconditional right to pursue
enforcement and collection proceedings against the BORROWER and the collateral
securing the BORROWER'S obligations to the LENDER.
Section 3. FORBEARANCE. The LENDER agrees to forbear from exercising any
of its rights or remedies under the LOAN DOCUMENTS as a result of the EXISTING
DEFAULT, subject to the following terms and conditions:
3.1. Time Limitation. The agreement of the LENDER to
forbear from exercising its rights and remedies as set forth herein shall expire
at 5:00 p.m. on June 30, 1995. As used herein, the term "DATE OP TERMINATION"
means the date on which the LENDER'S agreement to forbear from exercising its
rights and remedies as set forth herein expires pursuant to this Section 3.1,
Section 3.2 or any other section of this AGREEMENT.
3.2 Additional Defaults. The LENDER'S agreement to
forbear from exercising its rights and remedies as set forth herein shall
terminate immediately upon the occurrence of: (a) an event of default (other
than the EXISTING DEFAULT) under the LOAN AGREEMENT or any other document
evidencing, securing or otherwise documenting the REVOLVER (collectively,
the "LOAN DOCUMENTS"), or (b) any event or condition (other than the EXISTING
DEFAULT) which with the giving of notice, the passage of time, or both, would
constitute an event of default under any of the LOAN DOCUMENTS.
3.3. Collection Of Accounts. All payments received on the
BORROWER'S accounts and receivables and all payments received as a result of
the sale or other disposition of any of the BORROWER'S inventory, after the date
of this AGREEMENT, shall be paid to the LENDER and applied to reduce the sums
owed by the BORROWER under the LOAN DOCUMENTS. The BORROWER hereby irrevocably
authorizes the LENDER to automatically debit each of the BORROWER'S accounts
with the LENDER on a daily basis and apply all sums so debited from the
BORROWER'S accounts to reduce the BORROWER'S obligations under the LOAN
DOCUMENTS.
-19-
<PAGE>
Section 4. ADDITIONAL ADVANCES UNDER THE REVOLVER. The LENDER
agrees to continue to advance proceeds of the REVOLVER to the BORROWER pursuant
to and subject to the following terms and conditions:
4.1. Time Limitation. The LENDER'S agreement to continue
to advance proceeds of the REVOLVER to the BORROWER shall expire on the DATE OF
TERMINATION.
4.2 Existing Terms And Conditions. The LENDER'S
agreement to continue to advance proceeds of the REVOLVER, as modified herein,
is subject to all of the terms and conditions set forth in the LOAN DOCUMENTS,
as modified herein.
4.3. Modification Of Loan Agreement. The LENDER shall
have no obligation to advance any proceeds of the REVOLVER which would result in
the aggregate principal amount outstanding under the REVOLVER to exceed: (a)
One Million Nine Hundred Thirty-Seven Thousand Dollars ($1,937,000.00) at any
time between the date of this AGREEMENT and June 8, 1995, inclusive; (b) One
Million Eight Hundred Ninety-Nine Thousand Five Hundred Dollars
($1,899,500.00) at any time between June 9, 1995 and June 15, 1995, inclusive;
(c) One Million Eight Hundred Sixty-Two Thousand Dollars ($1,862,000.00) at any
time between June 16, 1995 and June 22, 1995, inclusive; and (d) One Million
Eight Hundred Twenty-Four Thousand Five Hundred Dollars ($1,824,500.00) at any
time between June 23, 1995 and the DATE OF TERMINATION.
Section 5. COOPERATION OF BORROWER. Following the DATE OF
TERMINATION the BORROWER shall fully and completely aid and assist the LENDER
in the disposition of the BORROWER'S assets securing the REVOLVER, including,
but not limited to, the collection of all of the BORROWER'S accounts receivable.
Section 6. EVENTS OF DEFAULT. In the event of a violation of any of the
terms or provisions of this AGREEMENT by the BORROWER, or the occurrence of any
event of default (other than the EXISTING DEFAULT) under any of the LOAN
DOCUMENTS, or the occurrence of any event or condition which with the giving of
notice, the passage of time, or both, would constitute an event of default under
any of the LOAN DOCUMENTS, the LENDER'S agreements to: (i) forbear from
exercising any or all of its rights or remedies under the LOAN DOCUMENTS as set
forth herein; and (ii) continue to advance proceeds of the REVOLVER, as modified
herein, shall automatically terminate, without notice to the BORROWER.
-20-
<PAGE>
Section 7. NO DEFENSES OR OFFSETS; RELEASE OF ANY CLAIMS.
In consideration for the agreements of the LENDER contained herein,
the BORROWER hereby acknowledges and agrees that it hereby forever waives and
releases any and all defenses (other than the specific agreement to forbear as
set forth in this AGREEMENT) or offsets, known or unknown to the BORROWER,
existing as of this date, which might restrict the immediate right of the LENDER
to require the payment in full of the REVOLVER or the initiation of enforcement
and collection proceedings against the BORROWER or against any or all of the
collateral securing the obligations of the BORROWER due to the LENDER. The
BORROWER hereby releases, waives, discharges and agrees to hold the LENDER and
its officers, directors, agents and employees harmless from any and all claims,
known or unknown, existing as of this date, which the BORROWER might have
against the LENDER or its officers, directors, agents or employees which in any
way relate, pertain or arise, directly or indirectly, from the
REVOLVER, the LOAN DOCUMENTS, this AGREEMENT, or which otherwise relate or
pertain to the collateral securing the obligations of the BORROWER due to the
LENDER or the transactions described in this AGREEMENT or the conduct of the
parties with respect thereto.
Section 8. RATIFICATION. Except as modified by the express provisions of
this AGREEMENT all terms and provisions of the LOAN DOCUMENTS are hereby
ratified and confirmed and shall remain in full force and effect.
Section 9. NO WAIVER. The BORROWER acknowledges and agrees that,
although the LENDER has agreed to forbear, upon the conditions contained
in this AGREEMENT, the LENDER does not waive the existence of the EXISTING
DEFAULT, and the execution and performance of this AGREEMENT shall not impair,
diminish or adversely affect the EXISTING DEFAULT as a basis for the exercise by
the LENDER of its rights and remedies, and the EXISTING DEFAULT shall continue
to be an Event of Default (as that term is defined in the LOAN DOCUMENTS)
despite the forbearance of the LENDER and the execution of this AGREEMENT.
Section 10. FEES AND EXPENSES. The BORROWER shall pay all of the
reasonable fees, costs, and expenses, including the LENDER'S reasonable counsel
fees and expenses, in connection with the negotiation and preparation of this
AGREEMENT. The BORROWER hereby authorizes the LENDER to debit the BORROWER'S
account with the LENDER to make payment of all such fees, costs and expenses.
Section 11. FINAL AGREEMENT. This AGREEMENT, together with the LOAN
DOCUMENTS, contain the final and entire agreement of the parties and shall be
binding upon and benefit the parties and their successors and assigns
Section 12. GOVERNING LAW. The performance and construction of this
AGREEMENT shall be governed by the laws of the State of Maryland.
-21-
<PAGE>
Section 13. AMENDMENT. This AGREEMENT may only be altered, modified or
amended by a writing executed by all of the parties hereto.
Section 14. TIME. Time is of the essence with respect to all aspects of
this AGREEMENT.
Section 15. JURISDICTION. The BORROWER consents to the jurisdiction of
any of the courts of the State of Maryland as to any issues related to this
AGREEMENT, including the validity, enforceability and interpretation hereof,
which require judicial resolution.
Section 16. NO NOVATION. This AGREEMENT shall not cause a novation of
the BORROWER'S obligations under any of the LOAN DOCUMENTS. In addition, this
AGREEMENT shall not release, affect or impair the priority of any security
interests and liens held by the LENDER in any assets of the BORROWER.
Section 17. DELIVERY BY TELEFACSIMILE. This AGREEMENT may be
delivered by telefacsimile and a telefacsimile of any party's signature hereto
shall constitute an original signature for all purposes.
Section 18. WAIVER OF JURY TRIAL. The BORROWER agrees that any suit,
action or proceeding, whether claim or counterclaim, brought or instituted by
any party to this AGREEMENT or by any of their successors or assigns, on or with
respect to this AGREEMENT or any of the LOAN DOCUMENTS or which in any way
relates directly or indirectly to the obligations of the BORROWER to the LENDER
under the REVOLVER or the dealings of the parties with respect thereto, shall be
tried only by a court and not by a jury. The BORROWER expressly waives any
right to a trial by jury in any such actions or proceedings.
IN WITNESS WHEREOF, the parties executed and sealed this AGREEMENT as
of the date first above written.
WITNESS/ATTEST: LENDER:
PROVIDENT BANK OF MARYLAND
A Maryland Banking Corporation
/s/ Patrick E. Killpatrick By: /s/ Thomas B. Freeze (SEAL)
---------------------- -----------------------
Assistant Vice President Name: Thomas B. Freeze
Title: Vice President
-22-
<PAGE>
WITNESS/ATTEST: BORROWER:
AMALGAMATED AUTOMOTIVE INDUSTRIES,
INC.,
a Pennsylvania Corporation
/s/ Timothy L. McMasters By: /s/ Kurt J. Myers (SEAL)
-------------------- --------------------
Treasurer Name: Kurt J. Myers
Title: President/C.E.O.
ACME AUTO PARTS, INC.,
A Pennsylvania Corporation
/s/ Timothy L. McMasters By: /s/ Kurt J. Myers (SEAL)
-------------------- --------------------
Treasurer Name: Kurt J. Myers
Title: President/C.E.O.
LAM CORPORATION,
A Pennsylvania Corporation
/s/ Timothy L. McMasters By: /s/ Kurt J. Myers (SEAL)
-------------------- --------------------
Treasurer Name: Kurt J. Myers
Title: President/C.E.O.
TALMENS PROPERTIES, INC.,
A Pennsylvania Corporation
/s/ Timothy L. McMasters By: /s/ Kurt J. Myers (SEAL)
-------------------- --------------------
Treasurer Name: Kurt J. Myers
Title: President/C.E.O.
-23-
<PAGE>
<PAGE>
FORM 10-QSB
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
Exhibit No. (11) - Statement re computation
of per share earnings
Statement of Computations of Earnings Per Share
Six Months Ended April 30,
--------------------------
1995 1994
------ ------
Net earnings(loss) applicable to common stock $ (13,287) $ (125,705)
======== ========
Earnings (loss) per common share and/or
common share equivalents $ (.01) $ (.13)
======== ========
Weighted average number of common
shares and/or common share
equivalents outstanding 943,187 943,187
======== ========
Three Months Ended April 30,
----------------------------
1995 1994
------ ------
Net earnings(loss) applicable to common stock $(114,182) $ (13,549)
======== ========
Earnings(loss) per common share $ (.12) $ (.01)
======== ========
Weighted average number of common shares 943,187 943,187
======== ========
-24-
<PAGE>
FORM 10-QSB
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
Exhibit No. (11) - Statement re computation
of per share earnings
(continued)
Computation of Weighted Average Number of Shares
Six Months Ended April 30, 1995
Months Share
Balance Maintained Months
------- ---------- ------
Common shares outstanding
beginning of period 943,187 6 5,659,122
Weighted average number
of common shares 943,187
=========
Six Months Ended April 30, 1994
Months Share
Balance Maintained Months
------- ---------- ------
Common shares outstanding
beginning of period 943,187 6 5,659,122
Weighted average number
of common shares 943,187
=========
-25-
<PAGE>
FORM 10-QSB
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
Exhibit No. (11) - Statement re computation
of per share earnings
(continued)
Computation of Weighted Average Number of Shares
Three Months Ended April 30, 1995
Months Share
Balance Maintained Months
------- ---------- ------
Common shares outstanding
beginning of period 943,187 3 2,829,561
Weighted average number of
common shares 943,187
========
Three Months Ended April 30, 1994
Months Share
Balance Maintained Months
------- ---------- ------
Common shares outstanding
beginning of period 943,187 3 2,829,561
Weighted average number of
common shares 943,187
========
-26-
