<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended March 31, 1994
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: 0-19905
-------
Kenfil Inc.
(Exact name of registrant as specified in its charter)
Delaware 95-3973756
- ---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16745 Saticoy Street, Van Nuys, California 91406
- --------------------------------------------------------------
(Address of principal executive offices) (zip code)
(818) 785-1181
- --------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Shares of common stock outstanding at May 12, 1994:
Class: Common Stock, $0.01 par value 6,401,918
------
1
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KENFIL INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, March 31,
1993 1994
-------- ---------
(RESTATED
SEE NOTE 9)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 555 $ 720
Accounts receivable, net 34,297 20,777
Inventory 17,146 19,441
Income taxes receivable 213 1,258
Prepaid expenses and other
current assets 2,110 1,967
------- -------
Total current assets 54,321 44,163
Property and equipment - net 1,093 1,268
Other assets 636 356
------- -------
Total $56,050 $45,787
======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Line of credit $23,789 $16,267
Notes payable 2,064 6,056
Accounts payable 9,166 18,929
Accrued expenses and other
current liabilities 1,405 1,091
------- -------
Total current liabiliites 36,424 42,343
------- -------
Long-term debt 6,480 1,437
------- -------
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares issued or outstanding - -
Common stock, $.01 par value; 25,000,000 shares
authorized; 6,394,818 shares issued and outstanding
at June 30, 1993 and 6,401,918 at March 31, 1994 64 64
Additional paid-in capital 21,301 21,301
Accumulated deficit (8,219) (19,358)
------- -------
Total stockholders' equity 13,146 2,007
------- -------
Total $56,050 $45,787
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
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KENFIL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
---------------- ------------------
1993 1994 1993 1994
------- ------- -------- --------
(RESTATED (RESTATED
SEE NOTE 9) SEE NOTE 9)
<S> <C> <C> <C> <C>
Net sales $47,467 $ 27,699 $137,170 $124,171
Cost of goods sold 40,910 30,433 118,735 115,685
------- -------- -------- --------
Gross profit/(loss) 6,557 (2,734) 18,435 8,486
Selling, general and administrative
expenses 4,553 4,768 13,095 14,311
Earthquake loss 0 2,821 0 2,821
Restructuring charges 0 484 0 484
------- -------- ------- --------
Operating income (loss) 2,004 (10,807) 5,340 (9,130)
Interest expense - net 732 674 2,529 2,097
------- -------- ------- --------
Income (loss) before provision for income
taxes 1,272 (11,481) 2,811 (11,227)
Income tax provision (benefit) 457 (161) 1,063 (88)
------- -------- -------- --------
Net income (loss) $ 815 $(11,320) $ 1,748 $(11,139)
======= ======== ======== ========
Net income (loss) applicable to common
shares $ 1,178 $(11,320) $ 1,683 $(11,139)
======= ======== ======== ========
Net income (loss) per common and common equivalent
share $ .22 $ (1.77) $ .45 $ (1.74)
======= ======== ======== ========
Weighted average number of
common and common equivalent
shares outstanding 5,244 6,402 3,733 6,398
======= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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KENFIL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months
Ended March 31,
-------------------
1993 1994
-------- -------
(RESTATED
SEE NOTE 9)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,748 $(11,139)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Depreciation and amortization 181 194
Amortization of debt issuance costs 19 19
Deferred income taxes (271) 943
Changes in operating assets and liabilities:
Accounts receivable (8,441) 13,520
Inventory (7,920) (2,295)
Prepaid expenses and other current assets 747 (555)
Income taxes receivable 1,081 (1,045)
Accounts payable (2,518) 9,763
Accrued expenses and other current liabilities 176 (314)
-------- -------
Net cash (used in) provided by operating activities (15,198) 9,091
-------- -------
Cash flows from investing activities:
Purchases of property and equipment (162) (311)
Other assets 87 16
-------- -------
Net cash used in investing activities (75) (295)
-------- -------
Cash flows from financing activities:
Net borrowings (payment) under line of credit agreements 3,613 (7,522)
Repayment of senior subordinated note (4,000) (1,000)
Repayment of stockholder note (100) 0
Net borrowings (payments) under capital leases (58) (109)
Initial public stock offering 16,550 0
Offering costs related to public offering
of common shares (666) 0
-------- -------
Net cash (used in) provided by financing activities 15,339 (8,631)
Net increase in cash 66 165
Cash, beginning of period 243 555
-------- -------
Cash, end of period $ 309 $ 720
======== =======
Supplemental disclosures of cash flow information:
Interest payments $ 2,983 $ 2,012
Income tax payments $ 428 $ 0
</TABLE>
Supplemental disclosures of non-cash investing and financing activities:
A capital lease obligation of $188,000 was incurred for a lease for new
computer equipment during the nine month period ended March 31, 1993.
A capital lease obligation of $58,000 was incurred for a lease for new
computer equipment during the nine month period ended March 31, 1994.
See accompanying notes to consolidated financial statements.
4
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KENFIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods
Ended March 31, 1994
1. General
The consolidated financial statements of Kenfil Inc. ("Kenfil" or the
"Company") include the accounts of Kenfil and its consolidated subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
The information for the three and nine months periods ended March 31, 1994
has not been audited by independent accountants, but includes all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for such periods.
The results of operations for the three and nine month periods ended March 31,
1994 are not necessarily indicative of results that might be expected for the
full fiscal year.
Certain information and footnote disclosures normally included in annual
financial statements have been omitted pursuant to the requirements of the
Securities and Exchange Commission, although the Company believes that the
disclosures included in these financial statements are adequate to make the
information not misleading. The consolidated financial statements as presented
herein should be read in conjunction with the audited consolidated financial
statements and notes thereto included in Kenfil's Form 10-K as filed with the
Securities and Exchange Commission.
The Company operates under a four week - four week - five week fiscal
quarter calendar such that each quarter ends at the close of business on a
Friday. All references to March 31, 1994 on the financial statements and
accompanying documents actually refer to the close of business for the
quarter which occurred on April 1, 1994.
2. Earthquake Loss
The January 17, 1994 earthquake in Southern California greatly affected the
Company. Virtually all sales activities were discontinued for approximately two
weeks subsequent to the earthquake. The effects of the earthquake continued to
impact the Company during the remainder of the quarter ended March 31, 1994, as
sales were substantially below pre-earthquake levels. Overall, the Company
sustained an earthquake loss of approximately $2.8 million, net of insurance
proceeds, consisting of damaged inventory and office equipment, and other
related costs. In addition, cash flow shortages caused by the earthquake made it
necessary for the Company to sell certain inventory below its cost to generate
cash flow for operations. The resulting sales volume declines has also caused
the overstock of certain software titles. The Company recorded a $4.3 million
provision during the third quarter to value its inventory at net realizable
value. (See Management's Discussion and Analysis).
3. Restructuring Charges
During the quarter ended March 31, 1994, the Company decided to consolidate
its warehouse operations and downsize its staff resulting in a restructuring
charge of $484,000, principally relating to severance costs and warehouse lease
termination costs.
5
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4. Earnings Applicable to Common Shares
Net income applicable to common shares represents the portion of the
Company's earnings applicable to its common stockholders. Such amount is
calculated for the three and nine month periods ended March 1993 by adjusting
net income by preferred stock dividends and the reversal of the equity put
obligation.
5. Earnings (loss) per Share
Earnings (loss) per share are computed using the weighted average number of
shares of common stock and dilutive common stock equivalents (stock options and
a warrant) outstanding during each period. For the three and nine months ended
March 1, 1993, the dilutive effect of the warrant is calculated using the
"equity method" as if the put warrant was converted, as this method is more
dilutive than if the related shares are not considered outstanding for earnings
per share purposes.
6. Borrowings
The Company had a senior line of credit facility with American National
Bank and Trust, which expired on April 30, 1994. Although the Company has
received a letter of non-renewal from the bank, the bank has extended the line
of credit through May 31, 1994. The Company is exploring alternative financing
sources. (See Liquidity and Capital Resources section for discussion of
potential acquisition of the Company by AmeriQuest Technologies, Inc.). There
can be no assurances that the facility will be extended beyond May 31, 1994,
that an alternative source of funds will be found, or that any such extension or
alternative source of funding will not be on terms less favorable to the Company
than the current facility. If the facility is not extended, or an alternative
source of funds is not found, the Company will not be able to repay the
outstanding balance under the facility which would have a material adverse
impact on its operations and financial condition.
As of March 31, 1994, the Company was not in compliance with the inventory
turnover covenant, net worth covenant, interest coverage covenant and debt
coverage covenant under its senior line of credit. The bank has agreed to
forebear exercising certain of its remedies with respect to certain defaults
through May 31, 1994. Nevertheless, the Company has not obtained a waiver as to
such events of non-compliance. Under certain circumstances, such as if events of
non-compliance other than those as to which the bank has agreed to forebear
exercising its remedies occur prior to, or if the facility is not extended
beyond, May 31, 1994, the bank may exercise its remedies under the credit
facility, including declaring the outstanding amount of the loan immediately due
and payable, which would have a material adverse effect on the Company's
operations and financial condition.
The Company also has an outstanding senior subordinated note issued to
Chrysler Capital Corporation. As of March 31, 1994, the Company was not in
compliance with the inventory turnover covenant, net worth covenant, interest
coverage covenant and debt coverage covenant under its senior subordinated
6
<PAGE>
note. In addition, at the election of the senior lender, under the terms of the
subordination agreement, the Company was prohibited from making its interest
payment to Chrysler Capital which was due on March 21, 1994. The Company has not
obtained a waiver for such events of non-compliance. Under certain circumstances
the lender may exercise its remedies under the applicable note documents,
including declaring the outstanding amount of the note immediately due and
payable, which would have a material adverse effect on the Company's operations
and financial condition. The note payable has been reclassified to short-term on
the Company's consolidated balance sheet at March 31, 1994.
7. Income Taxes
Due to the losses incurred during the quarter ended March 31, 1994,
management recorded a valuation allowance of $943,000 to eliminate the Company's
deferred tax assets. This charge has been offset by the recognition of tax
benefits of $1,104,000 for which refunds will be received subsequent to March
31, 1994.
8. Subsequent Event
The Company has entered into an Agreement and Plan of Reorganization (the
"Agreement") with AmeriQuest Technologies, Inc. ("AmeriQuest") and certain
principal stockholders of Kenfil pursuant to which and subject to the terms and
conditions therein, AmeriQuest will acquire Kenfil. The Agreement is
incorporated by reference as Exhibit 2.1. Pursuant to the Agreement, certain of
Kenfil's stockholders (who together hold approximately 51.9% of the outstanding
common stock of Kenfil) would exchange (the "Exchange") their common stock of
Kenfil ("Kenfil Common Stock") for common stock of AmeriQuest ("AmeriQuest
Common Stock") at an exchange ratio of .34 shares of AmeriQuest Common Stock for
each share of Kenfil Common Stock. Subsequent to the Exchange, and after
appropriate stockholder approval, the remaining stockholders of Kenfil would
convert their Kenfil Common Stock into AmeriQuest Common Stock (at the same
ratio as in the Exchange) pursuant to a merger of a wholly-owned subsidiary of
AmeriQuest with and into Kenfil, which would result in Kenfil becoming a
wholly-owned subsidiary of AmeriQuest. Simultaneously with such merger, holders
of approximately $7.3 million of Kenfil subordinated debt will exchange their
debt for additional shares of AmeriQuest Common Stock. The transactions would
result in AmeriQuest issuing approximately 3.9 million shares of Common Stock to
the Kenfil stockholders and debtholders. The transactions are subject to a
number of conditions, such as obtaining necessary consents, regulatory approvals
and approvals of the stockholders of AmeriQuest and Kenfil.
9. Restatement
The accompanying unaudited condensed consolidated financial statements for
the three and nine month periods ended March 31, 1994 have been restated to
reflect an additional provision of $4,264,000 related to the realization of
certain inventory items.
The restatement resulted from management's detailed analysis of the
Company's realizability of its software titles performed in conjunction with
AmeriQuest's acquisition of Kenfil as discussed in Note 8 above. The effect of
this restatement is to decrease gross profit and increase the net loss by
$4,264,000 ($.67 per share) in the three and nine month periods ended March 31,
1994.
7
<PAGE>
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
For the Three and Nine Month Periods
Ended March 31, 1994
Overview
- --------
The January 17, 1994 Southern California earthquake severely impacted the
Company's operations and financial performance for the quarter ended March 31,
1994. Virtually all sales activities were discontinued for approximately two
weeks as damaged offices were repaired and fallen inventory was cleaned up and
segregated. The Company then had to complete a physical inventory of its Van
Nuys warehouse for what remained on the shelves.
Without the ability to ship out of its main warehouse for this time
period,the Company's working capital line of credit decreased significantly
without new sales to build collateral, causing a severe cash flow shortage. As a
result, the Company's ability to purchase needed inventory was hindered. In
addition, the Company's customers were slow to move orders back following the
business interruption, due to apprehension about the Company's ability to fill
orders. Accordingly, the earthquake continued to detrimentally impact the
Company's sales efforts throughout the quarter ended March 31, 1994. The cash
shortage required the Company to sell products at less than cost to generate
collateral for its borrowing base.
These declining sales trends are expected to continue into the Company's
fourth fiscal quarter.
Results of Operations
- ---------------------
Net sales decreased by $19.8 million (or 42%) for the quarter ended March
31, 1994 compared to the quarter ended March 31, 1993. For the nine month
period ended March 31, 1994 compared to this same period for the prior year, net
sales have decreased by $13.0 million (or 9%). Virtually all sales activities
were discontinued for approximately two weeks after the earthquake and were
substantially impacted for the remainder of the quarter. The decrease in net
sales for the three month period resulted primarily from a decline in sales to
CompUSA of approximately $13.3 million compared to the same quarter in the prior
year. In addition, sales of products of the Company's largest publisher,
WordPerfect Corporation, declined by $10.9 million compared to the same quarter
in the prior year. A portion of this decline would be included in the decrease
in sales to CompUSA. The Company will discontinue carrying products of
WordPerfect as of July 1, 1994. In addition, marketing service revenues declined
by approximately $1.3 million for the quarter ended March 31, 1994 compared to
this quarter for the prior year.
Gross profit decreased as a percentage of net sales from 13.8% to (9.9%)
for the quarter ended March 31, 1994 compared to this same period for the prior
year primarily due to an additional inventory realization provision of $4.3
million. This provision is based upon the Company's detailed review of its
software titles, performed in conjunction with its acquisition by AmeriQuest.
Reduced sales volumes experienced subsequent to the earthquake caused an
overstock of certain software titles. Gross profit for the nine month period
ended March 31, 1994 has decreased as a percentage of net sales from 13.4% to
6.8% compared to the same period for the prior year. This percentage decrease
was primarily
8
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attributable to the Company's cash flow problems caused by the business
interruption following the earthquake and the resulting third quarter writedowns
of certain software title to realizable value. The Company did not earn cash
discounts as it had in the past, it did not meet certain quarterly rebate
quotas, and had to sell certain products at a discount in order to generate cash
for operations. The Company increased its reserves for slow-moving
inventory by $6.1 million during the third Quarter 1994.
Selling, general and administrative (SG&A) expenses increased by $215,000
for the quarter ended March 31, 1994 compared to this period for the prior
year. For the nine month period ended March 31, 1994 as compared to this period
for the prior year, SG&A expenses have increased by $1.2 million due to
increased salary and wage expenses of $600,000 and increased international SG&A
costs of $500,000 caused by the growth of the Hong Kong and Malaysian
operations.
The Company incurred restructuring charges during the quarter ended March
31, 1994 of $484,000 due to consolidation of its warehousing facilities and the
downsizing of the workforce. This amount is principally comprised of lease
termination costs and severance expenses.
The Company sustained an earthquake loss of approximately $2.8 million, net
of insurance proceeds, comprised of damaged inventory and office equipment, and
related costs.
Operating income (loss) decreased by $12.8 million from a $2.0 million
income to a $10.8 million loss for the quarter ended March 31, 1994 compared to
this period for the prior year because of the decreased gross profit, additional
SG&A costs, plus the non recurring restructuring and earthquake costs during the
quarter ended March 31, 1994.
Interest expense-net decreased from $732,000 to $674,000 for the quarter
ended March 31, 1994 compared to this quarter for the prior year, and from $2.5
million to $2.1 million for the nine month period. These decreases were
primarily the result of the Company's principal payments of $4,000,000 made in
February, 1993 and $1,000,000 made in February, 1994 against its senior
subordinated note, and from $74,000 of interest income recognized in December,
1993 resulting from a state tax refund.
The Company's tax benefit for the quarter ended March 31, 1994 includes the
recognition of the benefit of loss carrybacks of $1,104,000 offset by the
elimination of the Company's deferred tax assets.
Recent Developments
- -------------------
The Company has entered into an Agreement and Plan of Reorganization (the
"Agreement") with AmeriQuest Technologies, Inc. ("AmeriQuest") and certain
principal stockholders of Kenfil pursuant to which and subject to the terms and
conditions therein, AmeriQuest will acquire Kenfil. The Agreement is
incorporated by reference as Exhibit 2.1. Pursuant to the Agreement, certain of
Kenfil's stockholders (who together hold approximately 51.9% of the
9
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outstanding common stock of Kenfil) would exchange (the "Exchange") their common
stock of Kenfil ("Kenfil Common Stock") for common stock of AmeriQuest
("AmeriQuest Common Stock") at an exchange ratio of .34 shares of AmeriQuest
Common Stock for each share of Kenfil Common Stock. Subsequent to the Exchange,
and after appropriate stockholder approval, the remaining stockholders of Kenfil
would convert their Kenfil Common Stock into AmeriQuest Common Stock (at the
same ratio as in the Exchange) pursuant to a merger of a wholly-owned subsidiary
of AmeriQuest with and into Kenfil, which would result in Kenfil becoming a
wholly-owned subsidiary of AmeriQuest. Simultaneously with such merger, holders
of approximately $7.3 million of Kenfil subordinated debt will exchange their
debt for additional shares of AmeriQuest Common Stock. The transactions would
result in AmeriQuest issuing approximately 3.9 million shares of Common Stock
to the Kenfil stockholders and debtholders. The transactions are subject to a
number of conditions, such as obtaining necessary consents, regulatory approvals
and approvals of the stockholders of AmeriQuest and Kenfil. On April 5, 1994,
the Company announced it has signed an agreement with AmeriQuest Technologies
for AmeriQuest to acquire the Company. Under the terms of the agreement, the
Company's stockholders will be entitled to receive .34 shares of AmeriQuest
common stock for each share of the Company's common stock. The transaction is
subject to meeting various conditions including obtaining necessary consents,
regulatory approvals, shareholder approvals, and obtaining a working capital
line of credit for the combined companies.
10
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Liquidity and Capital Resources
During the nine months ended March 31, 1994, current assets decreased by
$10.2 million dollars, principally due to a $13.5 million decrease in accounts
receivable caused by lower sales levels, offset by an increase in inventory of
$2.3 million, which was caused by the Company increasing inventory in the prior
quarter in anticipation of enhanced sales to CompUSA which did not materialize
in the three months ended March 31, 1994 offset by additional reserves for
slow-moving inventory of $6.1 million. The Company's line of credit decreased
by $7.5 million dollars for the nine months ended March 31, 1994 due to the
reduction of the accounts receivable collateral base. Accounts payable increased
during this period by $9.8 million due to reduced availability under the line of
credit.
The Company has a senior line of credit facility with American National
Bank and Trust Company of Chicago. The facility is secured by a lien on
substantially all of the Company's assets. The available amount fluctuates based
on an asset borrowing base, with a maximum facility currently of $20.0 million,
and bears interest as of March 31, 1994 at the bank's corporate base rate (6.25%
at March 31, 1994) plus 1.5%. The facility is a committed facility that expired
on April 30, 1994 and although the Company has received a letter of non-renewal
from American National Bank and Trust, the bank has extended the facility
through May 31, 1994. The Company is exploring alternative financing sources.
In connection with the proposed acquisition by AmeriQuest, the Company and
AmeriQuest are in the process of seeking financing for the combined companies.
If this financing is completed, the Company's senior line of credit will be
repaid in full. There can be no assurances that such new financing though the
acquisition can be completed, the existing facility extended beyond May 31,
1994, alternative source of funds found, or that any such extension or
alternative source of funding will not be on terms less favorable to the Company
than the current facility. If the acquisition and new financing is not
completed, the facility is not extended beyond May 31, 1994, or alternative
financing not found, the Company will not be able to repay the outstanding
balance under the facility which would have a material adverse impact on its
operations and financial condition.
As of March 31, 1994, the Company was not in compliance with the inventory
turnover covenant, net worth covenant, interest coverage covenant and debt
coverage covenant under its senior line of credit. The bank has agreed to
forebear exercising certain of its remedies with respect to certain defaults
through May 31, 1994. Nevertheless, the Company has not obtained a waiver as to
such events of non-compliance. Under certain circumstances, such as if events
of non-compliance other than those as to which the bank has agreed to forebear
exercising its remedies occur prior to, or if the facility is not extended
beyond, May 31, 1994, the bank may exercise its remedies under the credit
facility, including declaring the outstanding amount of the loan immediately due
and payable, which would have a material adverse effect on the Company's
operations and financial condition.
As of March 31, 1994, the Company had an outstanding balance of
approximately $16.3 million on its credit facility, with approximately $750,000
available for borrowing.
11
<PAGE>
The Company also has an outstanding unsecured senior subordinated note
issued to Chrysler Capital Corporation. The note bears interest payable
semi-annually at a fixed rate of 13.91% per annum. The Company repaid $4 million
of principal of the original $10 million note on February 4, 1993, from its
public offering proceeds and paid $1.0 million in February 1994, leaving a
remaining balance of $5 million as of March 31, 1994. Principal payments of $1.0
million are due and payable on each of January 31, 1995 and 1996 and of $3.0
million on January 31, 1997. As of March 31, 1994, the Company was not in
compliance with the inventory turnover covenant, net worth covenant, interest
coverage covenant and debt coverage covenant under its senior subordinated note.
The Company has not obtained a waiver for such events of non-compliance. Under
certain circumstances the lender may exercise its remedies under the applicable
note documents, including declaring the outstanding amount of the note
immediately due and payable, which would have a material adverse effect on the
Company's operations and financial condition. This liability has been
reclassified to short-term on the Company's balance sheet.
In the event that the existing credit facility is not renewed, extended or
replaced on improved terms, and any necessary waivers not obtained, the Company
anticipates experiencing cash flow shortages which would most likely have a
material adverse effect on the Company's financial position and operations.
The Company believes that inflation has not had a material effect on its
operations.
12
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PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings.
------------------
None.
ITEM 2: Changes in Securities.
----------------------
None.
ITEM 3: Defaults Upon Senior Securities.
--------------------------------
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources"
ITEM 4: Submission of Matters to a Vote of Security-Holders.
----------------------------------------------------
None.
ITEM 5: Other Information.
------------------
None.
ITEM 6: Exhibits and Reports on Form 8-K:
---------------------------------
(a) Exhibits
2.1 Agreement and Plan of Reorganization, by and between Kenfil Inc.
and AmeriQuest Technologies, Inc. and certain other persons, dated
as of March 31, 1994 (previously filed as Exhibit 2.1 to Kenfil's
Current Report on Form 8-K dated April 14, 1994 and incorporated
herein by reference).
10.1 Amendment 5 and Forbearance Agreement dated April 29, 1994 in regard
to the Company's Loan and Security Agreement with American National
Bank and Trust.
10.2 Stock Pledge Agreement dated April 29, 1994 between the Company
and American National Bank and Trust.
(b) Reports
None during the quarter ended March 31, 1994, however the Company
filed a report on Form 8-K dated April 14, 1994 in regard to the
Agreement and Plan of Reorganization with AmeriQuest Technologies,
Inc.
13
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 8, 1995
Kenfil Inc.
By /s/ Stephen G. Holmes
----------------------
Stephen G. Holmes
Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
Exhibit *Sequentially
Number Description Numbered Page
- ------- ----------- -------------
2.1 Agreement and Plan of Reorganization, by and between
Kenfil Inc., and AmeriQuest Technologies, Inc. and
certain other persons, dated as of March 31, 1994
(previously filed as Exhibit 2.1 to Kenfil's Current
Report on Form 8-K dated April 14, 1994 and incorporated
herein by reference).
10.1 Amendment No. 5 and Waiver and Forbearance Agreement
to Amended and Restated Loan and Security Agreement
dated as of April 29, 1994 between American National
Bank and Trust Company and Kenfil Inc.
10.2 Stock Pledge Agreement between American National Bank
and Trust Company and Kenfil Inc.
*This information appears only in the manually signed original of this Form 10-Q
filed with the Securities Exchange Commission.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> MAR-31-1994
<CASH> 720
<SECURITIES> 0
<RECEIVABLES> 20,777
<ALLOWANCES> 0
<INVENTORY> 19,441
<CURRENT-ASSETS> 44,163
<PP&E> 1,268
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,787
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0
0
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</TABLE>
