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 ________July_31,_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 Numbers______1-6686__and___2-37589______________________
_______________________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 July 31, 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____
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.
-2-
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial_Statements
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For The Nine Months
_______Ended__ July_ 31(a)__________
____1995___ __1994(c)__
NET SALES $ 6,271,102 $ 7,021,429
COST OF GOODS SOLD 4,151,279 4,634,143
GROSS PROFIT(b) $ 2,119,823 $ 2,387,286
SELLING AND ADMINISTRATIVE EXPENSES 2,207,894 2,367,891
$ (88,071) $ 19,395
OTHER INCOME(d) __230,642 ___19,285
$ 142,571 $ 38,680
INTEREST EXPENSE __264,327 __209,407
EARNINGS(LOSS) BEFORE INCOME TAXES $ (121,756) $ (170,727)
INCOME TAXES _____-0-__ ____-0-___
NET EARNINGS (LOSS) $ (121,756) $ (170,727)
========== ==========
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 $ (.13) $ (.18)
========== ===========
(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 nine months ended July 31, 1994,
was restated from 34.8% 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 interim period of 33.8% has been utilized for the
nine months ended July 31, 1995.
(c)The information for 1994 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 $230,642 of Other Income for the nine months ended July 31, 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.
-3-
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_July_31(a)_________
___1995____ ___1994____
NET SALES $ 2,170,158 $ 2,437,919
COST OF GOODS SOLD 1,461,324 1,609,027
GROSS PROFIT(b) $ 708,834 $ 828,892
SELLING AND ADMINISTRATIVE EXPENSES __732,363 __804,655
$ (23,529) $ 24,237
OTHER INCOME(c) ____7,992 ___ 4,341
$ (15,537) $ 28,578
INTEREST EXPENSE ___92,935 ___73,601
EARNINGS (LOSS) BEFORE INCOME TAXES $ (108,472) $ (45,023)
INCOME TAXES ___-0-___ ___-0-___
NET EARNINGS (LOSS) $ (108,472) $ (45,023)
========== ==========
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) $ (.05)
========== ==========
(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 July 31, 1994 was
restated from 32.6% 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 32.7% has been utilized for
the period ended July 31, 1995.
-4-
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial_Statements (continued)
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
July 31, October 31,
ASSETS ___1995____ __1994(a)__
CURRENT ASSETS
Cash $ 186,159 $ 97,500
Accounts receivable - net allowance
for doubtful accounts - (1995 -
$10,000, 1994 - $4,000) 792,004 892,587
Other receivables 6,519 74,417
Inventories - at the lower of cost
or market (first-in, first-out) 3,114,402 3,117,078
Prepaid expenses 110,678 82,453
Deferred Taxes ___10,749 ___10,749
Total current assets $ 4,220,511 $ 4,274,784
PROPERTY AND EQUIPMENT - AT COST
Land $ 190,874 $ 190,560
Buildings 921,160 921,160
Leasehold improvements 283,603 277,559
Fixtures and equipment 714,884 706,005
Autos and trucks __587,246 __640,007
$ 2,697,767 $ 2,735,291
Less accumulated depreciation and
amortization 1,763,805 1,682,541
$ 933,962 $ 1,052,750
OTHER ASSETS
Excess of cost over net assets of
companies acquired $ 499,583 $ 501,637
Other 115,857 116,099
Loan Origination Cost
Net of Amortization ___46,949 ___57,223
$ __662,389 $ __674,959
$ 5,816,862 $ 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.
-5-
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial_Statements (continued)
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
July 31, October 31,
LIABILITIES ___1995____ ___1994(a)_
CURRENT LIABILITIES
Notes payable to bank $ 1,803,025 $ 1,860,000
Current maturities of long-term
debt 96,370 120,497
Accounts payable 1,424,344 1,323,239
Accrued liablities __138,444 __144,782
Total current liabilities $ 3,462,183 $ 3,448,518
LONG-TERM DEBT
Notes, mortgages and leases payable $ 1,122,767 $ 1,209,009
Less current maturities ___96,370 __120,497
Total Long-Term Debt $ 1,026,397 $ 1,088,512
COMPENSATION PAYABLE $ __271,683 $ __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) (121,752) (248,972)
Balance at:
July 31, 1995 376,518
October 31, 1994 _________ __498,270
$ 5,816,862 $ 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.
-6-
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 Nine Months
____Ended_July_31____
_1995__ _1994(a)
Cash flows from operating activities:
Net income (loss) $ (54,976) $(125,705)
Noncash items included in net income:
Depreciation and amortization 110,631 74,826
(Increase) decrease in:
Accounts and other receivables 168,481 (75,990)
Inventories (2,676) (370,518)
Prepaid expenses (28,225) (19,662)
Other Assets 242 0
Increase (decrease) in:
Accounts payable 101,105 694,064
Compensation payable (15,431) 0
Accrued liabilities (6,334) __8,000
Net cash provided by (used in)
operating activities $_272,817 $ 185,015
Cash flows from investing activities:
Proceeds from Sale of Assets $ 2,850
Purchase of property and equipment 17,966 (33,377)
Net cash provided by (used in)
investing activities $ 17,966 $ (30,527)
Cash flows from financing activities:
Debt reduction - Loans, Mtgs & Leases $(109,187) (63,311)
Net borrowings under line of credit (56,975) (97,000)
Net cash provided by (used in)
financing activities $(166,189) $(160,311)
Net increase (decrease) in cash $ 88,689 $ (5,823)
Cash - beginning _97,500 _69,195
Cash - ending $ 186,189 $ 63,372
======= =======
Schedule of noncash investing transactions
Acquisition of property and equipment $ 41,305 $ 33,377
Financing from long-term obligations _23,339 ______0
Cash payment for property
and equipment $ 17,966 $ 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.
-7-
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 July 31,
1995.
(2) Common Stock.
Options. There were no options to purchase shares of the
Issuer's Common Stock outstanding at July 31, 1995.
Warrants. There were no warrants for the purchase of shares of
the Issuer's Common Stock outstanding at July 31, 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
July 31, 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-
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 nine months reported herein on July 31, 1995 other
than a continued deteriation in the Issuer's earnings. As reported in the
Issuer's Current Report on Form 8-K, dated April 28, 1995, and more fully
discussed in Item 5 of this report, 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. Under the
Forbearance Agreement as subsequently amended, the agreement of Provident to
forbear from exercising its rights and remedies under the agreement shall
expire at 5:00 P.M. on September 30, 1995 ("Date of Termination") or sooner
in the event of additional defaults. 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 was attached to the Issuer's
Quarterly Report ended April 30, 1995 as Exhibit No. (10.9) and is
incorporated herein by reference and to the First and Second Amendments thereto
which were attached to the Issuer's Current Reports on Form 8-K dated June
30, and July 27, 1995, as Exibits Nos (10.10) and (10.11) respectively, and
are incorporated herein by reference and to the Third Amendment thereto which
is attached hereto as Exibit No (10.12) and incorporated herein by reference.
The Issuer is actively seeking a replacement credit facility
and has received a proposal from one lending institution and 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/or assets and has received a revised conditional propasal which is under
consideration by management. Nevertheless, Provident's actions are making
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 hereof.
At both fiscal year end 1994 and at July 31, 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 July 31, 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 July 31, 1995.
-9-
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) Nine_Months_Ended_July_31,_1995_and_1994
For the nine months ended July 31, 1995, there was a loss
of $121,756 (see item 2(a)(5) Other Income) compared to a loss of
$ 170,727 for the same period in 1994. The loss for the nine months ended
July 31, 1995 reflects a decrease in net sales primarily attributable to the
impact of mild winter weather during the first half of fiscal 1995 . Sales
were also impacted by the closing of five jobber locations during early July,
1995, which was reported in the Issuer's Current Report on Form 8-K dated
June 30, 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 nine months ended July 31, 1995
decreased $ 750,327 (11%) compared to the corresponding period in 1994.
Jobber location sales decreased $ 179,794 (5%) while the warehouse location
sales decreased $ 569,725 (16%) 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. Sales were also impacted by the closing of the five jobber stores
during early July, 1995. Comparable jobber store sales for ongoing operations
(with the five closed stores excluded) decreased by 48,397 (2%) as compared
to the corresponding period in 1994.
(2) Cost_of_Goods_Sold
The cost of goods sold for the nine month period ended July 31,
1995 decreased by $ 482,864 (10%) as compared to the nine month period ended
July 31, 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 nine month period
ended July 31, 1995 decreased 7% or $159,997 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 nine months ended July 31, 1995
increased $54,920 (21%) 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-
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) Nine_Months_Ended_July_31,_1995_and_1994_(continued)
(5) Other_Income
Other income for the nine months ended July 31, 1995
increased by $211,357 from $19,285 to $230,642 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_July_31,_1995_and_1994_
For the three months ended July 31, 1995, there was a loss
of $ 108,472 compared to a loss of $ 45,023 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 July 31, 1995
decreased $ 267,761 (11%) compared to the corresponding period in 1994.
Jobber location sales decreased $ 7,431 or 1% while the warehouse location
sales decreased $ 175,131 or 14% as compared to the same period in 1994. The
depressed sales for the third quarter were a result of the unseasonably mild
winter weather experienced during the first and second quarters of fiscal
1995. Sales were also impacted by the closing of the five jobber stores in early
July, 1995. Comparable jobber store sales for ongoing operations (with the
five closed stores excluded) increased by 6,103 (1%) as compared to the
coresponding period in 1994.
(2) Cost_of_Goods_Sold
The cost of goods sold for the three month period ended
July 31, 1995 decreased by $ 147,703 (9%) as compared to the three month
period ended July 31, 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 July 31, 1995 decreased 9% or $ 72,292 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 July 31, 1995
increased by 21% or $ 19,334 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 July 31, 1995
increased by 46% or $ 3,651 as compared to the corresponding period in 1994
due to the sale of fixed assets associated with the closure of the five
jobber stores in early July, 1995.
-11-
FORM 10-QSB
PART II
OTHER INFORMATION
Item 5. Other Information
As reported most recently in the Issuer's Current Report on the
Form 8-K, dated July 10, 1995 the Issuer has maintained a revolving line of
credit with the Provident Bank of Maryland ("Provident") since May 1992.
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 for the 12 months ended October 31, 1994, the Issuer
reported that although it was in default of certain ratio and cash flow
requirements under its credit agreement, Provident had agreed to 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 under the loan
agreement had been increased from 2% to 4% per annum above the bank's prime
rate effective January 9, 1995.
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
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 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 ("Forbearance Agreement") which was attached to the
April 30, 1995 Form 10-QSB as Exhibit No (10.9), whereby Provident agreed to
forbear from the immediate execise of its enforcement and collection rights
until 5:00 p.m. on June 30, 1995 and to continue to advance funds under the
revolving credit line as modified by the Forbearance Agreement. 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
the disposition of the Issuer's inventory were 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 to $1,824,500 for the
week ended June 30, 1995.
-12-
FORM 10-QSB
PART II
OTHER INFORMATION
Item 5. Other_Events_(continued)
As reported in the Issuer's Current Reports on Form 8-K, dated
June 30 and July 27, 1995, the Issuer and Provident agreed to Amendments to the
Forbearance Agreement, whereby Provident agreed to continue to forbear until
until 5:00 p.m. on August 31, 1995, to continue to advance
funds under the revolving credit line and to increase the credit line
as reduced by the Forbearance Agreement to $1,862,000 for the
period July 1, 1995 to the amended Date of Termination on
August 31, 1995. Except as specifically modified, all other terms and
provisions of the Forbearance Agreement remained in effect.
As of August 29, 1995, the Issuer and Provident agreed to a Third
Amendment to the Forbearance Agreement, whereby Provident agreed to continue
to forbear until 5:00 p.m on September 30, 1995 and the parties agreed that
all other terms and provisions of the Forbearance Agreement as previously
amended would remain in full force and effect. For a full and complete
description and understanding of the terms and conditions of the Third
Amendment to the Forbearance Agreement, reference should be made to the
amendment which is attached herto as Exhibit No. (10.12).
The Issuer has continued to actively seek a replacement credit
facility and has received a proposal from one lending institution and has an
application pending with another lending institution which is completing
a due diligence audit of the Issuer. The Issuer has also received
expressions of possible interest in the purchase of the Issuer's shares
and/or assets, and has received a revised conditional proposal. Management is
presently reviewing the matter but has not yet determined whether its merits
further pursuit, including presentation to shareholders.
-13-
FORM 10-QSB
PART II
OTHER INFORMATION
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
As reported in the Issuer's Quarterly Report on Form 10-QSB for
the quarter ended April 30, 1995, a Current Report on Form 8-K dated April
28, 1995 was filed in early May, 1995 reporting, inter alia, on the letter
received from Provident Bank of Maryland ("Provident" or "Bank") 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. A Current Report on Form 8-K,
dated June 30, 1995, was filed on July 10, 1995 reporting on the amendment of
the Forbearance Agreement with Provident and the closing of five Jobber
Stores. A Current Report and Form 8-K dated July 27, 1995, was filed on August
10, 1995 reporting on the further Amendment of the Forbearance Agreement with
Provident and the resignations of the Issuer's treasurer and the appointment of
a controller.
-14-
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__ 9/14/95 ________________ /s/ Kurt J. Myers____________________________
Kurt J. Myers, Chairman of Board,
President and Chief Executive Officer
Date __9/14/95_________________ /s/ Nick J. Chacanias________________________
Nick J. Chacanias, Treasurer
-15-
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-
FORM 10-QSB
EXHIBIT INDEX FOR QUARTERLY REPORTS ON FORM 10-QSB (continued)
(10.9) Forbearance Agreement of Provided in Quarterly
June 5, 1995 with Provident Bank Report on Form 10-QSB
of Maryland for the quarter ended
4-30-95 and
incorporated herin by
reference
(10.10)Amendment to Forbearance Provided in Current
Agreement with Provident Report on Form 8-K,
Bank of Maryland dated 6-30-95 and
incorporated herein by
reference
(10.11)Second Amendment to Provided in Current
Forbearance Agreement Report on Form 8-K,
with Provident Bank of dated 7-27-95 and
Maryland incorporated herein by
reference
(10.12)Third Amendment to Attached Hereto
Forbearance Agreement
with Provident Bank
of Maryland
(11) Statement re computation of per share
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 Attached Hereto
(99) Additional Exhibits Not Applicable
-17-
FORM 10-QSB
AMALGAMATED AUTOMOTIVE INDUSTRIES INC.
AND SUBSIDIARIES
Exhibit No. (10.12)
THIRD AMENDMENT TO FORBEARANCE AGREEMENT
-----------------------------------------
THIS AMENDMENT TO FORBEARANCE AGREEMENT ("AMENDMENT") is made
as of August 29, 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 ("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 defaulted 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 was unable to repay the sums due under the
REVOLVER and 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 also requested
that the LENDER continue to advance proceeds of the REVOLVER
to the BORROWER.
In accordance with the terms and provisisons of a
Forbearance Agreement dated June 5, 1995 by and between the
BORROWER and the LENDER, as amended by and Amendment To Forbearance
Agreement dated June 30, 1995 and a Second Amendment To Forbearance
Agreement dated July 27, 1995 (collectively, "Forebearnce Agreement"),
the LENDER agreed: (a) to forbear from the exercise of its enforcement
and collection rights against the BORROWER until 5:00 p.m.
on August 31, 1995; and (b) continue to advance proceeds of the
REVOLVER to the BORROWEER, subject to the limitations
contained in the LOAN AGREEMENT and the FORBEARANCE
AGREEMENT, until 5:00 p.m. on August 31, 1995.
The BORROWER has requested an extension to the
FORBEARANCE AGREEMENT so that the lender would continue to
forbear and advance proceeds of the REVOLVER after August 31,
1995. The LENDER is willing to consent to the BORROWER'S
request subject to the terms and provisions of this
AMENDMENT.
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
Section 1. RECITALS. The parties acknowledge the
accuracy of the Recitals to this AMENDMENT and agree that the
Recitals are hereby incorporated into this AMENDMENT and made
a part hereof.
Section 2. AMENDENT TO FORBEARANCE AGREEMENT. Subsection 3.1 of
the FORBEARANCE AGREEMENT, as previously amended, is hereby amended by
deleting the date "August 31, 1995" and substituting in lieu thereof
the date "September 30, 1995."
Section 3. OTHER TERMS. Except as specifically modified
herein, all other terms and provisions of the FORBEARANCE AGREEMENT,
as previously amended, remain in full force and effect and are hereby
ratified and confirmed.
Section 4. INCORPORATION. The terms, provisions and
agreements of the FORBEARANCE AGREEMENT are hereby
incorporated herein by reference and made a part hereof.
Section 5. 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 preparation and negotiation of this
AMENDMENT. 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 6. FINAL AGREEMENT. This AMENDMENT, the
FORBEARANCE AGREEMENT and the LOAN DOCUMENTS (as that term is
defined in the FORBEARANCE AGREEMENT) contain the final
entire agreement of the parties and shall be binding upon and
in order to the benefit of the parties hereto and their
respective successors and assigns.
<PAGE>
Section 7. GOVERNING LAW. The performance and
construction of this AMENDMENT shall be governed by the laws
of the State of Maryland.
Section 8. AMENDMENT. Any further amendment of the
FORBEARANCE AGREEMENT must be in a writing executed by all
other parties hereto.
Section 9. TIME OF THE ESSENCE. Time is of the essence
with respect to all aspects of the FORBEARANCE AGREEMENT, as
amended by this AMENDMENT.
Section 10. JURISDICTION. The BORROWER consents to the
jurisdiction of any of the courts of the state of Maryland as
to any issues related to the FORBEARANCE AGREEMENT as
modified by this AMENDMENT, including the validity,
enforceability and interpretation hereof, which require
judicial resolution.
Section 11. DELIVERY BY TELEFACSIMILE. This AMENDMENT
may be delivered by telefacsimile and a telefacsimile of any
party's signature hereto shall constitute an original
signature for all purposes.
Section 12. WAIVER OF JURY TRIAL. The BORROWER agrees
that any suit, action or proceeding, whether claim or
counterclaim brought or instituted by any party to the
FORBEARANCE AGREEMENT or by of its heirs, successors or
assigns, on or respect to the FORBEARANCE AGREEMENT, as
amended by this AMENDMENT, or any of the LOAN DOCUMENTS, or
which in anyway related 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 have executed this
AMENDMENT with the specific intention of creating a document
under seal.
WITNESS/ATTEST: BORROWER:
AMALGAMATED AUTOMOTIVE INDUSTRIES,
INC., A Pennsylvania Corporation
/s/ Nick J. Chacanias By: /s/ Kurt J. Myers (SEAL)
------------------------ ----------------------
Treasurer Name: Kurt J. Myers
Title: President/CEO
<PAGE>
ACME AUTO PARTS, INC.,
A Pennsylvania Corporation
/s/ Nick J.Chacanias By: /s/ Kurt J. Myers (SEAL)
------------------------ ----------------------
Treasurer Name: Kurt J. Myers
Title: President/CEO
LAM CORPORATION,
A Pennsylvania Corporation
/s/ Nick J. Chacanias By: /s/ Kurt J. Myers (SEAL)
------------------------ ----------------------
Treasurer Name: Kurt J. Myers
Title: President/CEO
TALMENS PROPERTIES, INC.,
A Pennsylvania Corporation
/s/ Nick J. Chacanias By: /s/ Kurt J. Myers (SEAL)
------------------------ ----------------------
Treasurer Name: Kurt J. Myers
Title: President/CEO
LENDER:
PROVIDENT BANK OF MARYLAND,
A Maryland Banking Corporation
/s/ Patrick E. Killpatrick By: /s/ Thomas B. Freeze (SEAL)
-------------------------- ----------------------
Name: Thomas B. Freeze
Title: Vice President
