<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
CURRENT REPORT
on
FORM 8-K/A
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: November 14, 1994
AMERIQUEST TECHNOLOGIES, INC.
_____________________________________________________________________________
(Exact name of registrant as specified in charter)
Delaware
_____________________________________________________________________________
(State of other jurisdiction of incorporation)
1-10397 33-0244136
_____________________________________________________________________________
(Commission File Number) (IRS Employer Identification No.)
2722 Michelson Drive, Irvine, CA 92715
_____________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(714) 222-6000
_____________________________________________________________________________
(Registrant's telephone number, including area code)
______________________________________________________________________________
(Former name or former address, if changed since last report)
1
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
Effective November 14, 1994, AmeriQuest Technologies, Inc. ("AQS") issued
1,864,767 shares of its Common Stock and $3,473,312 in exchange for 100% percent
of the issued and outstanding equity securities of Ross White Enterprises, Inc.
d/b/a "National Computer Distributors" ("NCD").
NCD is a national value-added distributor of microcomputer systems,
peripherals and accessesories. Its key vendors include Acer, AST, Leading Edge
and Canon.
_____________________________
Item 5. Other Events
------------
AQS and Computer 2000 AG ("Computer 2000"), a company duly organized under
the laws of the Federal Republic of Germany, entered into an agreement dated
November 14, 1994 (the "Investment Agreement") pursuant to which Computer 2000
agreed to invest approximately $50 million in AQS in exchange for an
approximately 51 percent ownership interest in AQS, including shares already
owned by Computer 2000. The transaction has been approved by the boards of both
companies, and is subject to approval by the stockholders of AQS and to certain
regulatory approvals.
Under the terms of the Investment Agreement and the related Loan Agreement,
Computer 2000 will initially extend to AmeriQuest 2000, Inc., a Delaware
corporation and a wholly-owned subsidiary of AQS ("Sub"), a loan of $13 million
with an additional $5 million to follow within 45 days if Computer 2000 is
satisfied with a due diligence review of AQS's inventories and accounts
receivable (the "Loan"). Sub's repayment obligations under the Loan will be
satisfied by AQS's issuance to Computer 2000 of up to 8,108,108 shares of its
Common Stock at a conversion rate of $2.22 per share, subject however to
approval thereof by AQS's stockholders. The Investment Agreement further
provides that, subject to certain conditions, on or before September 1, 1995,
Computer 2000 will invest an additional $32 million in AQS in exchange for 14.1
million additional newly issued shares of its Common Stock, bringing Computer
2000's total ownership interest to approximately 22.9 million shares or 51% of
the total outstanding shares of AQS. The $32 million investment is contingent
upon a number of conditions, including but not limited to AQS's meeting certain
monthly and cumulative after-tax operating profitability conditions during the
first half of calendar 1995. AQS will also issue to Computer 2000 an option to
purchase additional shares of AQS in an amount equal to the number of AQS's
shares issuable upon exercise of currently outstanding options and warrants and
conversion of any other convertible securities. All newly issued shares of AQS
will be subject to resale restrictions under Rule 144 of the Securities Act of
1933, but will carry registration rights.
The preceding summary of certain of the material terms of the Investment
Agreement and Loan Agreement, which are attached hereto as Exhibits 2.03 and
2.04, respectively, is not intended to be complete and is qualified by reference
to the Investment Agreement and Loan Agreement.
2
<PAGE>
Item 7. Financial Statements and Exhibits
---------------------------------
(a) The financial statements of NCD required to be filed pursuant to Item
7(a) of Form 8-K are attached hereto and incorporated herein by this
reference.
(b) The pro forma financial information for NCD required to be filed
pursuant to Item 7(b) of Form 8-K and Rule 601 of Regulation S-K are
attached hereto and incorporated herein by this reference, including:
Pro Forma Condensed Balance Sheet at September 30, 1994
Pro Forma Condensed Statements of Operations for the fiscal year
ended June 30, 1994.
Pro Forma Condensed Statements of Operations for the fiscal
quarter ended September 30, 1994.
(c) Exhibit No. Description of Exhibit
----------- ----------------------
2.02* Agreement and Plan of Reorganization dated September
26, 1994 by, between and among AQS, Ross White
Enterprises, Inc. d/b/a "National Computer
Distributors" ("NCD") and the shareholders of NCD.
(Filed as Exhibit 2.02 to the Annual Report on
Form 10-K/A of AQS for the year ended June 30, 1994)
2.03* Investment Agreement dated as of November 14, 1994 by
and between AQS and Computer 2000 AG. (Filed with the
original Current Report on Form 8-K of AQS for November
14, 1994.)
2.04* Loan Agreement dated as of November 14, 1994 by and
between Computer 2000 AG and AmeriQuest 2000,Inc.
(Filed with the original Current Report on Form 8-K of
AQS for November 14, 1994.)
_______________________________
* Incorporated herein by this reference pursuant to Rule 12b-32 under the
Securities Exchange Act of 1934, as amended, and Rule 24 of the
Commission's Rules of Practice.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERIQUEST TECHNOLOGIES, INC.
/s/ Stephen G. Holmes
---------------------------------------------
Stephen G. Holmes
Secretary, Treasurer and
Chief Financial Officer
Dated: January 30, 1995
4
<PAGE>
KPMG PEAT MARWICK LLP
One Biscayne Tower Telephone 305 358 2300 Telefax 305 577 0544
Suite 2900
2 South Biscayne Boulevard
Miami, FL 33131
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Ross White Enterprises, Inc.:
We have audited the accompanying balance sheets of Ross White Enterprises, Inc.
(d/b/a National Computer Distributors) as of March 31, 1994 and 1993, and the
related statements of operations, stockholders' equity (deficit) and cash flows
for each of the years in the two-year period ended March 31, 1994. In connection
with our audits of the financial statements, we also have audited the financial
statement schedule. These financial statements and financial statement schedule
are the responsibility of the Company' s management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ross White Enterprises, Inc.
(d/b/a National Computer Distributors) as of March 31, 1994 and 1993, and the
results of its operations and its cash flows for each of the years in the two-
year period ended March 31, 1994 in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, present fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
July 21, 1994, except as to notes 7,
8, 11(b) and 1l(c) which are as of
September 27, 1994
F-1
<PAGE>
COOPERS COOPERS & LYBRAND L.L.P.
&LYBRAND
a professional services firm
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Ross White Enterprises, Inc.
We have audited the accompanying statements of operations, stockholders' equity
(deficit) and cash flows of Ross White Enterprises, Inc. (d/b/a National
Computer Distributors) for the year ended December 31, 1991. In connection with
our audit of the financial statements, we have also audited the financial
statement schedules listed in the index on page S-1 of this Form S-4. These
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audit.
We conduced our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of the operations and the cash flows of Ross
White Enterprise, Inc. (d/b/a National Computer Distributors) for the year ended
December 31, 1991 in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Miami, Florida
February 5, 1992
F-2
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
BALANCE SHEETS
March 31, 1994 and 1993
<TABLE>
<CAPTION>
Assets 1994 1993
------ ----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 112,040 $ 26,051
Trade accounts receivable, net of
allowance for doubtful accounts of
$525,000 and $362,374 as of March 31,
1994 and 1993, respectively 20,095,152 9,004,041
Inventory, net 27,845,858 15,774,300
Notes receivable from stockholders,
current portion 66,630 43,750
Prepaid expenses 323,976 650,274
Income tax receivable 108,000 82,818
Other receivables 1,551,806 862,876
Deferred income taxes 115,000 115,000
----------- -----------
Total current assets 50,218,462 26,559,110
Property and equipment, net 707,526 467,186
Notes receivable from stockholders,
excluding current portion 430,858 507,208
Other assets 262,973 391,520
Costs in excess of net assets acquired,
net of accumulated amortization of
$18,280 and $16,406 as of March 31,
1994 and 1993, respectively 56,720 58,594
----------- -----------
$51,676,539 $27,983,618
=========== ===========
Liabilities and Stockholders' Equity (Deficit)
- - ----------------------------------------------
Current liabilities:
Accounts payable $21,569,708 $12,959,557
Bank overdrafts 7,294,232 971,711
Revolving credit agreement--current - 11,481,323
Accrued expenses 1,302,121 510,632
Obligations under capital leases,
current portion - 15,703
----------- -----------
Total current liabilities 30,166,061 25,938,926
Revolving credit agreement 18,762,663 -
Subordinated notes payable 2,687,366 2,591,187
Deferred rent 49,256 48,872
Obligations under capital leases - 23,555
----------- -----------
Total liabilities 51,665,346 28,602,540
Commitments and contingencies
Stockholders' equity (deficit):
Class A common stock, $.01 par value.
Authorized 10,000 shares; issued
and outstanding 183.67 shares 2 2
Class B common stock, $.05 par value.
Authorized 10,000 shares; no shares
issued and outstanding - -
Additional paid-in capital 1,841,700 1,841,700
Accumulated deficit (1,830,509) (2,460,624)
----------- -----------
Total stockholders' equity (deficit) 11,193 (618,922)
----------- -----------
$51,676,539 $27,983,618
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
STATEMENTS OF OPERATIONS
For the years ended March 31, 1994 and 1993, the three months ended
March 31, 1992 (unaudited) and the year ended December 31, 1991
<TABLE>
<CAPTION>
Year Year Three months Year
ended ended ended ended
March 31, March 31, March 31, December 31,
1994 1993 1992 1991
------------ ----------- ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Net sales $196,512,724 113,306,494 15,256,245 40,504,518
Cost of goods sold 181,870,822 107,449,045 14,055,803 36,176,457
------------ ----------- ---------- ----------
Gross profit 14,641,902 5,857,449 1,200,442 4,328,061
Selling, general and administrative expenses 11.297,683 6,700,869 1,081,704 3,595,856
Provision for doubtful accounts 911,545 637,275 - 115,264
------------ ----------- ------------ -----------
Operating profit (loss) 2,432,674 (1,480,695) 118,738 616,941
Other income (expense):
Interest expense (1,805,714) (1,255,652) (67,933) (307,530)
Interest income 3,155 - - -
------------ ----------- ------------ -----------
Income (loss) before income taxes 630,115 (2,736,347) 50,805 309,411
Income tax benefit - 275,723 - -
------------ ----------- ------------ -----------
Net income (loss) $ 630,115 (2,460,624) 50,805 309,411
============ =========== ============ ===========
Net income (loss) per common and common
equivalent share:
Primary $ 3,430 (13,395) 423 3,094
============ =========== ============ ===========
Fully diluted $ 2,859 (13,395) 423 3,094
============ =========== ============ ===========
Weighted average number of common and common
equivalent shares outstanding:
Primary 183.7 183.7 120.2 100
============ =========== ============ ===========
Fully diluted 220.4 220.2 120.2 100
============ =========== ============ ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the years ended March 31, 1994 and 1993,
the three months ended March 31, 1992 (unaudited)
and the year ended December 31, 1991
<TABLE>
<CAPTION>
Class A Class B Retained Total
Common stock Common stock Common stock Additional earnings Treasury stockholders'
------------- ------------- ------------ paid-in (Accumulated stock equity
Shares Amount Shares Amount Shares Amount capital deficit) (at cost) (deficit)
------ ------ ------ ------ ------ ------ ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1990 100 $ 100 - $ - - $ - 9,900 539,853 (50,000) 499,853
Distributions to
shareholders - - - - - - - (111,907) - (111,907)
Net income - - - - - - - 309,411 - 309,411
--- --- ------ -- --- --- --------- --------- ------ ---------
Balance at
December 31, 1991 100 100 - - - - 9,900 737,357 (50,000) 697,357
Retirement of common
stock (unaudited) (100) (100) - - - (49,900) - 50,000 -
Issuance of common
stock A (unaudited) - - 183.67 2 - - 878,708 - - 878,710
Termination of S
corporation status
(unaudited) - - - - - - 743,162 (743,162) - -
Distributions to
shareholders (unaudited) - - - - - - - (45,000) - (45,000)
Net income (unaudited) - - - - - - - 50,805 - 50,805
--- --- ------ -- --- --- --------- --------- ------ ---------
Balance at March 31, 1992
(unaudited) - - 183.67 2 - - 1,581,870 - - 1,581,872
Net loss - - - - - - - (2,460,624) - (2,460,624)
Issuance of stock
purchase warrants, net - - - - - - 259,830 - - 259,830
--- --- ------ -- --- --- --------- --------- ------ ---------
Balance at March 31, 1993 - - 183.67 2 - - 1,841,700 (2,460,624) - (618,922)
Net income - - - - - - - 630,115 - 630,115
--- --- ------ -- --- --- --------- --------- ------ ---------
Balance at March 31, 1994 - $ - 183.67 $ 2 - $ - 1,841,700 (1,830,509) - 11,193
=== === ====== == === === ========= ========= ====== =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
STATEMENTS OF CASH FLOWS
For the years ended March 31, 1994 and 1993, the three months ended
March 31, 1992 (unaudited) and the year ended December 31, 1991
<TABLE>
<CAPTION>
Three months
Year ended Year ended ended Year ended
March 31, March 31, March 31, December 31,
1994 1993 1992 1991
------------ ---------- ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 630,115 (2,460,624) 50,805 309,411
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 492,317 221,256 30,469 131,734
Provision for bad debts 911,545 637,275 - 115,264
Provision for inventory obsolescence 500,000 30,000 - -
Deferred tax asset (115,000) (115,000) - -
Gain on disposal of property and equipment (4,784) - - -
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivable (12,002,656) (7,902,648) 270,830 (510,141)
(Increase) decrease in inventory (12,571,558) (10,604,025) 435,610 (1,735,511)
(Increase) decrease in prepaid expenses 147,488 (324,064) (132,541) 22,263
(Increase) decrease in income tax receivable 89,818 (82,818) - -
(Increase) decrease in other receivables (688,930) 765,860 (301,070) -
(Increase) decrease in other assets 128,547 (284,471) (5,221) 74,774
Increase in accounts payable 8,610,151 6,795,423 232,661 2,999,293
Increase (decrease) in accrued expenses 825,203 (1,755,285) 1,950,384 20,304
Increase (decrease) in customer deposits - - (109,000) 26,316
Increase (decrease) in deferred rent 384 (30,994) (7,748) 34,537
------------ ----------- ----------- ----------
Net cash (used in) provided by operating
activities (13,047,360) (15,110,115) 2,415,179 1,488,244
------------ ----------- ----------- ----------
Cash flows from investing activities:
Purchase of property and equipment (458,194) (301,976) (4,391) (144,891)
Proceeds from disposal of property and equipment 4,500 - - 6,066
Issuance of notes receivable from stockholders - - (93,508) (27,829)
Proceeds from notes receivable from stockholders 22,440 6,250 - -
------------ ----------- ----------- ----------
Net cash used in investing activities (431,254) (295,726) (97,899) (166,654)
Cash flows from financing activities:
Payments on obligations under capital leases (39,258) (34,329) (7,849) (28,256)
Net borrowing under revolving credit agreement 7,281,340 11,460,713 - -
Principal payments on note payable - - (11,227) (10,740)
Increase in bank overdrafts 6,322,521 971,711 - -
Issuance of Class A common stock - - 1,000,000 -
Issuance of subordinated notes, net - 2,509,806 - -
Issuance of stock warrants - 259,830 - -
Payments under floor plan credit arrangement - - (3,600,000) (830,285)
Distribution to shareholders - - (45,000) (111,907)
------------ ----------- ----------- ----------
Net cash (used in) provided by financing
activities 13,564,603 15,167,731 (2,664,076) (981,188)
------------ ----------- ----------- ----------
</TABLE>
(Continued)
F-6
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
Three months
Year ended Year ended ended Year ended
March 31, March 31, March 31, December 31,
1994 1993 1992 1991
---------- --------- ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Net increase (decrease) in cash 85,989 (238,110) (346,796) 340,402
Cash and cash equivalents at beginning of year 26,051 264,161 610,957 270,555
---------- -------- -------- -------
Cash and cash equivalents at end of year $ 112,040 26,051 264,161 610,957
========== ======== ======== =======
Supplemental disclosure:
Interest paid $1,647,465 997,564 37,115 287,805
========== ======== ======== =======
Income taxes paid $ 133,000 125,400 - -
========== ======= ======== =======
</TABLE>
Supplemental disclosure of noncash investing activity: During fiscal 1993, the
Company recorded the notes receivable from stockholders at their present value,
resulting in a discount in the amount of $178,304. Amortization expense related
to the discount for the year ended March 31, 1994 and 1993, amounted to $2,684
and $-0-, respectively. In addition, $33,714 in management incentive bonuses,
included in accrued expenses, were applied against the notes receivable from
stockholders for the year ended March 31, 1994.
See accompanying notes to financial statements.
F-7
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
March 31, 1994 and 1993
(1) ORGANIZATION
Ross White Enterprises, Inc. (d/b/a National Computer Distributors) (the
"Company") is a retailer, wholesaler and distributor of computers,
peripherals and related accessories. The Company conducts its retail
operation under the name of Computer Image. All other operations are
conducted using the name National Computer Distributors.
(2) RESTATEMENT
The accompanying financial statements as of, and for the year ended March
31, 1993, have been restated. During fiscal 1994, the Company discovered it
had not recorded liabilities associated with the purchase of inventories
received prior to March 31, 1993; had not reversed certain vendor
receivable accounts after settlement; and had not recorded various
transactions with vendors in which purchases were netted against amounts
due to the Company. The result of the Company' s analysis, as verified by
the Company's independent accountants, was to record in fiscal 1993 an
adjustment to cost of goods sold in the amount of $2,747,803.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less at the time of purchase to be cash
equivalents. Cash equivalents totaled $30,000 and $-0- at March 31,
1994 and 1993, respectively, and are recorded at cost which
approximates market value.
(b) CASH MANAGEMENT SYSTEM
Under the Company' s cash management system, disbursements cleared by
the bank are reimbursed on a daily basis from the revolving credit
agreement. As a result, checks issued but not yet presented to the
bank are not considered reductions of cash or accounts payable.
Included in bank overdrafts is $7,186,558 and $964,301 at March 31,
1994 and 1993, respectively, for which checks are outstanding. Cash
receipts deposited into an agency account as part of the bank' s
revolving credit agreement are used to reduce the outstanding
borrowings under the revolving credit agreement. As a result, cash
received but unapplied against the outstanding borrowings are not
considered to be cash deposits. Deducted from the outstanding
borrowings under the revolving credit agreement is $2,373,006 and
$325,053 at March 31, 1994 and 1993, respectively, for unapplied cash
receipts.
(c) TRADE ACCOUNTS AND OTHER RECEIVABLES
Trade receivables consist primarily of amounts due from customers for
credit purchases. The Company provides a reserve for uncollectible
trade receivables. Other receivables consist of cooperative
advertising and other amounts earned based on annual promotional and
market development fund agreements with vendors. In general,
F-8
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
vendors provide the Company with various incentive programs. The funds
received under these programs are determined based upon the Company's
purchases or sales of the vendors' products and/or the inclusion of
the vendors' products in the Company's advertising and promotional
programs. Once earned, the funds are applied against product cost or
recorded as a reduction of advertising expense.
(d) INVENTORY
Inventory, which consists primarily of computer equipment and related
products, is stated at the lower of cost or market. Cost is determined
using the first-in, first-out (HFO) method, and is recorded net of
volume and purchase discounts and rebates. Market is based on net
realizable value. Appropriate consideration is given to deteriora-
lion, obsolescence and other factors in evaluating net realizable
value.
Effective April 1, 1993, the Company changed its accounting policy to
include in inventory certain indirect costs associated with
purchasing, handling and storage of inventories. The Company believes
this method better matches sales with these related costs. Previously,
the Company had expensed these costs as incurred. For the year ended
March 31, 1994, allocated purchasing, handling and storage costs
amounts to $742,457, with $101,177 of this amount capitalized in
inventory at March 31, 1994.
(e) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the
assets, using a standard life of five years. Leasehold improvements
are amortized on the straight-line method over the shorter of the
estimated useful lives of the improvements or the term of the related
leases. Gains or losses on disposition of property and equipment are
credited or charged to income.
(f) COSTS IN EXCESS OF NET ASSETS ACQUIRED
The costs of acquisitions in excess of the fair market value of net
assets acquired is being amortized over a 40-year period using the
straight-line method. Amortization expense amounted to $1,875, $1,875,
$469 and $1,875 for the years ended March 31, 1994 and 1993, the three
months ended March 31, 1992 (unaudited) and the year ended December
31, 1991, respectively.
(g) INCOME TAXES
Effective March 31, 1992, the Company was required to change its tax
status from an S corporation to a C corporation. Accordingly,
undistributed earnings on the date the sub-chapter S election was
terminated were reclassified to additional paid-in capital.
Effective April 1, 1992, the Company adopted the provisions of
Financial Accounting Standards Board's SFAS No. 109, Accounting for
Income Taxes. Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax basis.
F-9
<PAGE>
ROSS WH1TE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date. The adoption of SFAS No. 109 by the
Company had a cumulative effect of $13,700 on income (loss) from
operations for the year ended March 31, 1993.
(h) EMPLOYEE BENEFIT PLANS
Effective July 1989, as amended, the Company established a 401(k)
Profit Sharing Plan (the "Plan"). All employees who have completed at
least 12 months of service and attained the age of 21 are eligible.
The Plan allows vesting at 20 percent per year for five years,
beginning after the employees' second year of service. The Plan allows
employees to contribute between 2 percent and 15 percent of their
gross annual taxable salary. In fiscal year 1993, the Company made
matching contributions of 50 percent of that portion of the employee's
amount which did not exceed 10 percent of the employee's gross income.
Effective October 1, 1993, the Company can make a discretionary
matching and profit sharing contribution to the Plan subject to the
approval of the board of directors. The Plan is subject to restriction
on matching contributions for highly compensated employees. Total
employer contributions to the Plan were approximately $61,000,
$64,000, $7,000 and $19,000 during the years ended March 31, 1994 and
1993, the three months ended March 31, 1992 (unaudited) and the year
ended December 31, 1991, respectively.
(i) BUSINESS AND CREDIT CONCENTRATIONS
The Company sells its products primarily to value-added resellers,
dealers and computer retailers throughout the United States and
international markets. No single customer accounted for a significant
amount of the Company's sales, and there were no significant trade
accounts receivable from a single customer. The Company performs
ongoing credit evaluations of its customers and generally does not
require collateral. However, if deemed necessary, the Company may
require certain customers to pay on a cash-on-delivery basis. The
Company maintains reserves for potential credit losses.
Approximately $89.3 million or 45 percent, $73.8 million or 65
percent, $11.2 million or 73 percent and $28 million or 75 percent of
the Company's net sales during the years ended March 31, 1994 and
1993, the three months ended March 31, 1992 (unaudited) and the year
ended December 31, 1991, respectively, were derived from products
supplied by three to four vendors, each supplying 10 percent or
greater of net sales.
(j) INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Primary income (loss) per common and common equivalent share is
computed by dividing net income (loss) by the weighted average number
of common shares outstanding and common stock equivalents. Fully
diluted income (loss) per share has been computed based on the
assumption that the warrants, as discussed in note 8, will be
converted to common stock.
F-10
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
(k) RECLASSIFICATION
Certain amounts included in the financial statements have been
reclassified in order to provide consistent financial presentation.
(4) NOTES RECEIVABLE FROM STOCKHOLDERS
Notes receivable from stockholders consist of the following:
March 31,
------------------
1994 1993
---- ----
Unsecured notes from two stockholders/officers $ 497,488 550,958
Less current portion (66,630) (43,750)
------- -------
Long-term receivable, excluding current portion $ 430,858 507,208
======= =======
The notes receivable from two stockholders/officers are noninterest
bearing. The notes have been recorded at their present value utilizing an
imputed interest rate of 6.34 percent, resulting in an original discount of
$178,304 which will be recognized as interest income over the remaining
terms of the notes. During the years ended March 31, 1994 and 1993, $2,782
and $-0-, respectively, was recognized as interest income, with the
remaining unaccreted balance of $175,523 and $178,304 (included in other
receivables) at March 31, 1994 and 1993, respectively. The notes are
payable in the following quarterly installments, including principal and
interest: (i) $18,750 per quarter commencing June 30, 1994; (ii) $25,000
per quarter commencing June 30, 1995, (iii) and a lump sum payment of
$123,012 due on March 31, 2000. Principal payments are due as follows:
<TABLE>
<CAPTION>
Year ending
March 31, Amount
--------- ------
<S> <C>
1995 $ 66,63O
1996 83,39O
1997 78,280
1998 73,484
1999 68,980
Thereafter 126,724
-------
Total $ 497,488
=======
</TABLE>
F-11
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
(5) OTHER RECEIVABLES
Other receivables are primarily comprised of receivables due from vendors
consisting of the following:
<TABLE>
<CAPTION>
March 31,
---------------------
1994 1993
---- ----
<S> <C> <C>
Due from vendors:
Co-op $ 1,224,210 540,684
Returned merchandise 826,694 762,229
Volume rebates and price protection 2,558,142 307,725
--------- ---------
Subtotal 4,609,046 1,610,638
Other 327,596 322,192
Less amounts offset against accounts payable (3,384,836) (1,069,954)
--------- ---------
Other receivables $ 1,551,806 862,876
========= =========
</TABLE>
(6) PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
March 31,
---------------------
1994 1993
---- ----
<S> <C> <C>
Machinery and equipment $ 615,575 574,681
Furniture and fixtures 269,895 -
Leasehold improvements 446,786 401,564
Transportation vehicles 61,667 61,667
--------- ---------
1,393,923 1,037,912
Less accumulated depreciation and
amortization (686,397) (570,726)
--------- ---------
Property and equipment, net $ 707,526 467,186
========= =========
</TABLE>
Depreciation and amortization expense amounted to approximately $218,000,
$138,000, $3,000 and $130,000 during the years ended March 31, 1994 and
1993, the three months ended March 31, 1992 (unaudited) and the year ended
December 31, 1991, respectively.
(7) REVOLVING CREDIT AGREEMENT
On April 27, 1992, as amended, the Company entered into a revolving line of
credit agreement ("revolver") with a bank that originally provided for
borrowings up to a maximum of $22.5 million through April 30, 1994, limited
to specified percentages of eligible accounts receivable and inventory,
with interest at prime plus 1.5 percent, payable on a monthly basis.
Borrowings under the revolving credit agreement are collateralized by the
Company's trade account receivable, inventories, property and equipment,
and general intangibles.
F-12
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
The revolver contains various affirmative and negative covenants, including
requiring the Company to maintain certain specified financial ratios,
including (a) ratio of earnings before taxes to interest; (b) total
liabilities less subordinated debt to total capitalization; (c) total bank
debt to total capitalization, and (d) maintain a minimum level of
capitalization. There are also restrictive covenants including those
covering the amount of dividends and lease obligations, the occurrence of
additional debt, and the amount of capital expenditures and acquisitions.
At March 31, 1994 and 1993, respectively, the Company had an outstanding
balance under the revolver of $18,762,663 and $11,481,323, with an
available balance of $1,364,331 and $2,018,677. The revolver provides for
an early termination fee of 2 percent of the reduction or termination of
the maximum commitment and an annual fee of 3/8 percent of the difference
between the maximum loan commitment and the average daily balance.
Interest expense under the foregoing financing arrangement was $1,346,642
and $805,000 during the fiscal years ended March 31, 1994 and 1993,
respectively.
At March 31, 1994, the Company was not in compliance with the following
covenant requirements arising under the revolving credit agreement and
entered into negotiations with its bank to amend and reinstate the credit
agreement: (i) ratio of total liabilities less subordinated debt to total
capital funds, as defined; (ii) ratio of bank debt to total capital funds;
(iii) ratio of earnings before interest and taxes to interest expense, as
defined; (iv) accounts payable average turnover; (v) expenditures related
to lease payments and capital expenditures; (vi) providing audited
financial statements within 90 days of year-end; (vii) maintaining adequate
books and records; (viii) incurrence of trade debt not more than 60 days
past due, and (ix) maintaining minimum total capital funds. On September 8,
1994, the Company received waivers from its bank which cured all violations
of debt covenants through August 11, 1994.
On August 11, 1994 and September 8, 1994, amendments to the revolving
credit agreement were executed. The amendments modified the financial
covenants relating to the (i) ratio of earnings before interest and taxes
to interest expense, as defined, to be not less than 1.75 to 1 as of the
last day of each quarter, and not less than 1 to 1 as of the last day of
each month other than the last day of each quarter; (ii) increased the
dollar limit on capital expenditures to $500,000 annually; (iii) limited
the aggregate lease payments for real or personal property to $1.75 million
per year; and (iv) required the Company to maintain total capital funds,
which is defined as total assets (excluding certain intangible assets and
shareholder loans) less total liabilities (excluding subordinated notes),
of not less than the amounts set forth below for the periods specified
plus, on a cumulative basis, an additional $250,000 for each quarter ending
after October 31, 1994:
Period Amount
------ ------
June 30, 1994 - September 29, 1994 $ 2,700,000
September 30, 1994 - October 30, 1994 2,950,000
October 31, 1994 and thereafter 5,000,000
F-13
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
In connection with the total capital funds covenant, the Company received a
representation from the majority stockholder to invest up to $1.5 million
in the Company by October 31, 1994 [see note 11(b) and 1l(c)].
In addition, the amended revolving credit agreement modified (i) the
interest rate to prime plus an applicable margin of either 1.5 percent or 3
percent, which is based on the Company' s ratio of total liabilities less
subordinated notes to total capital funds as determined the last day of
each month beginning August 31, 1994, and (ii) increased the early
termination fee to 3 percent of the maximum commitment. The maturity date
of the revolving credit agreement was extended through December 31, 1995.
(8) SUBORDINATED NOTES
On April 3, 1992, the Company issued 12 percent subordinated notes with
detachable stock purchase warrants with an aggregate principal amount of $3
million. Principal is to be paid in seven quarterly installments of
$250,000 commencing on June 30, 1995 with a final installment of $1.25
million due on March 31, 1997, with interest quarterly commencing on June
30, 1992. Interest expense on the subordinated notes was $360,000 and
$357,000 during the fiscal years ended March 31, 1994 and 1993,
respectively.
The detachable subordinated notes contain various affirmative and negative
covenants, including those covering the use of proceeds, the incurrence of
additional debt, the payment of dividends, the amount of capital
expenditures, and those requiring the Company to maintain certain specified
financial ratios. The Company failed to meet the following covenant
requirements which placed the Company in technical default at March31,
1994: (i) providing the holders with monthly financial statements along
with the chief financial officer' s certificate; (ii) providing the holders
with audited financial statements within 90 days of year-end along with
chief financial officer's certificate; (iii) maintaining adequate books and
records; (iv) maintaining total capital funds, as defined; (v) maintaining
a ratio of total revolving credit agreement debt to total capital funds;
(vi) maintaining a ratio of total liabilities, excluding the subordinated
notes, to total capital funds; (vii) maintaining a ratio of net earnings
before interest and taxes to total interest expense; (viii) capital
expenditure restrictions; (ix)complying with its obligations under the
revolving credit agreement; (x) accounts payable turnover, and (xi)
computation of financial covenants in accordance with GAAP. On August 10,
1994 and September 8, 1994, the Company obtained waivers to its
subordinated notes related to the above noted financial covenants. These
waivers were retroactive to March 31, 1994.
On August 11, 1994 and September 8, 1994, the subordinated notes' financial
covenants were amended on the same terms as the revolving credit
agreement's financial covenants, as fully described in note 7.
The detachable warrants can be converted to 20 percent (36.7340 shares) of
the issued and outstanding Class A common stock for an aggregate purchase
price of $1.00. The warrants may be exercised after April 3, 1992 and
expire on March 31, 1997. The warrants were assigned a value of $259,830,
net of deferred taxes and issuance costs, and are included as a component
of additional paid-in capital. In conjunction with the recording of the
stock purchase warrants, the Company established a related imputed original
issue discount on the
F-14
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
subordinated notes which approximated the market yield on the subordinated
notes, without the stock purchase warrants. The Company is accreting the
discount using the effective yield method over the life of the subordinated
notes. Amortization expense, which is included in interest expense,
amounted to $96,179 and $81,383 during the fiscal years ended March 31,
1994 and 1993, respectively. In addition, there are deferred loan fees in
the amount of $127,735 and $125,796 included in other assets as of March
31, 1994 and 1993, respectively. Amortization expense, which is included in
selling, general and administrative expenses, amounted to $41,699 and
$45,245 during the fiscal years ended March 31, 1994 and 1993,
respectively.
On September 26, 1994, the Company entered into an Agreement and Plan of
Reorganization which provided for the repayment of the subordinated notes
and accrued unpaid interest thereon [(see note 1l(c)].
(9) INCOME TAXES
As of April 1, 1992, the date the Company was required to change its tax
status from an S corporation to a C corporation, the Company adopted SFAS
No. 109. The adoption of SFAS No. 109 had a cumulative effect of $13,700
for the year ended March 31, 1993.
Total income tax attributable to the recovery of detachable stock purchase
warrants, which resulted in a reduction in additional paid-in capital for
the tax effect associated with the issuance of stock warrants, amounted to
$191,176 for the year ended March 31, 1993.
The provision for income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
March 31,
----------------
1994 1993
---- ----
<S> <C> <C>
Current:
Federal $ - (70,713)
State and local - (12,105)
---- --------
- (82,818)
Deferred:
Federal - (164,710)
State and local - (28,195)
---- --------
- (192,905)
---- --------
Total income tax
expense (benefit) $ - (275,723)
==== ========
</TABLE>
(Continued)
F-15
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
Income tax expense (benefit) from continuing operations differed from the amount
computed by applying the statutory federal income tax rate of 34 percent, to
income (loss) before income taxes as a result of the following:
<TABLE>
<CAPTION>
March 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Computed expense (benefit) $ 214,239 $(930,358)
Increase (decrease) resulting from:
Establishment of valuation allowance - 719,663
State tax benefit - (40,300)
Other - (24,728)
Income tax expense (benefit) associated
with net operating loss carryforward (214,239) -
--------- ---------
Income tax expense (benefit) $ - $(275,723)
========= =========
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
March 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Deferred tax asets:
Accounts receivable, principally due to allowance for
doubtful accounts $ 199,369 $ 81,879
Inventories, principally due to reserves for obsolete
inventory and additional costs inventoried for tax pur-
poses pursuant to the Tax Reform Act of 1986 188,000 12,822
Deferred rent, principally due to accrual for financial
reporting purposes 18,520 18,163
Accrued vacation expense, principally due to accrual for
financial reporting purposes 10,111 9,994
Property and equipment, principally due to differences in
depreciation 5,852 -
Net operating loss carryforwards, principally due to
correction of errors in the prior years 474,052 919,308
--------- ---------
Total gross deferred tax assets 895,904 1,042,166
Less valuation allowance (544,129) (719,663)
--------- ---------
Net deferred tax assets 351,775 322,503
--------- ---------
</TABLE>
(Continued)
F-16
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
March 31,
--------------------
1994 1993
--------- -------
<S> <C> <C>
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation $ - $ (5,135)
Prepaid expenses, principally due to referral
for financial reporting purposes (119,225) (50,435)
Subordinated notes, principally due to an
unamortized discount associated with the
issuance of detachable stock warrants (117,550) (151,933)
--------- ---------
Total gross deferred tax liabilities (236,775) (207,503)
--------- ---------
Net deferred tax asset $ 115,000 $ 115,000
========= =========
</TABLE>
At March 31, 1994, the Company had available net operating loss
carryforwards of $1.26 million for federal and state income tax purposes,
which expire in 2008. A valuation allowance attributable to the net
operating loss carryforward has been established as of March 31, 1994 and
1993 in the amount of $359,052 and $719,663, respectively. Upon a
subsequent acquisition Internal Revenue Code Section 382 could limit the
utilization of net operating loss carryforwards in future periods.
The valuation allowance for deferred tax assets as of March 31, 1994 and
1993 was $544,129 and $719,663, respectively, a decrease of $175,534. In
assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment.
(10) COMMITMENTS AND CONTINGENCIES
(a) LEASES
Substantially all of the Company's facilities, including distribution
centers and retail stores are leased under long-term leases accounted
for as operating leases. In addition, the Company leases office
equipment and vehicles. Under the terms of the leases, the Company is
required to maintain adequate insurance coverage.
The real estate leases generally contain provisions for increases
based on the Consumer Price Index, and contain options to renew at the
then fair rental value. Certain leases provide for scheduled rent
increases or for rent-free periods. In these cases, the Company
recognizes the aggregate rent expense on a straight-line basis over
the lives of the leases, including the rent-free period, resulting in
deferred rent credits of $49,256 and $48,872 as of March 31, 1994 and
1993, respectively, which are being amortized over the terms of the
related leases.
F-17
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
Future minimum annual rental payments required under operating leases that
have initial or remaining noncancelable lease terms in excess of one year
as of March 3l, 1994 are as follows:
<TABLE>
<CAPTION>
Year ended Amount
---------- -----------
<S> <C>
1995 $1,375,700
1996 1,208,805
1997 1,159,965
1998 730,472
1999 177,630
----------
Total minimum lease
payments $4,652,572
==========
</TABLE>
Rent expense included in selling, general and administrative expenses
amounted to approximately $959,000, $725,000, $136,000 and $531,000 for the
years ended March 31, 1994 and 1993, the three months ended March 31, 1992
(unaudited) and the year ended December 31, 1991, respectively.
(b) LEGAL MATTERS
The Company is subject to claims and legal actions that arise in the
ordinary course of their business. Management believes that the ultimate
liability, if any, with respect to these claims and legal actions will not
have a material effect on the financial position or results of operations
of the Company.
(C) RELATED PARTY AGREEMENTS
In March 1992, the Company entered into two five-year consulting agreements
with a stockholder and a subordinated note holder, respectively, which
provides for an aggregate annual fee of $150,000 for services performed for
the Company.
In March 1992, the Company entered into employment agreements with two
stockholders/officers which expire in March 1997. The aggregate annual
average base compensation under such agreements is approximately $390,000.
The respective employment agreements provide such stockholders/officers
with the use of automobiles, full medical coverage, reimbursement for life
insurance policies, paid vacations, cash incentive bonuses, stock incentive
bonus, additional special equity (stock) incentive and substantial
severance pay if the Company terminates the stockholders/officers without
cause. In addition, 25 percent of the incentive bonuses are applied against
the notes receivable from stockholders (see note 4).
F-18
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
(11) SUBSEQUENT EVENTS
(a) EQUITY INFUSION
On June 30, 1994, the Company sold an aggregate of 11.54 shares of
Class A common stock, $.01 par value per share, for an aggregate
consideration of $351,958 to various members of management of the
Company.
(b) MAJORITY STOCKHOLDER'S FINANCING ARRANGEMENT
On September 2, 1994, the Company received a representation from the
majority stockholder that they are prepared to provide, and will
provide the Company with additional subordinated indebtedness and/or
capital contributions in the aggregate amount up to $1.5 million,
which amount should be sufficient to enable the Company to meet, as of
October 31, 1994, the financial covenants as described in notes 7 and
8. On September 26, 1994, the Company entered into an Agreement and
Plan of Reorganization which may modify the majority stockholder's
financing arrangement [(see note 11(c)].
(c) MERGER WITH AMERIQUEST TECHNOLOGIES, INC.
On September 26, 1994, the Company entered into an Agreement and Plan
of Reorganization with AmeriQuest Technologies, Inc. ("AmeriQuest"), a
publicly held company, for the acquisition of the Company by
AmeriQuest pursuant to a merger of the Company into a wholly-owned
subsidiary of AmeriQuest. In connection with the merger, the Company's
common stock and warrants will be exchanged for approximately 1.86
million newly issued shares of AmeriQuest common stock, $3.5 million
in cash, and the purchase by AmeriQuest of the subordinated notes at
face value plus accrued unpaid interest thereon (see note 8). The
merger is subject to the approval of the bank (as defined in note 7)
and any United States federal or state governmental commission, board
or other regulatory body which are required for the consummation of
the merger on or before October 14, 1994 (the "effective date").
In addition, AmeriQuest shall infuse at least $1.5 million into the
Company and shall provide to the majority stockholder a written
conformation that from and after the effective date of the merger, the
majority stockholder would have no further obligation to provide debt
or equity financing to the Company [see note 1l(b)].
F-19
<PAGE>
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma condensed combined financial statements
reflect the proposed Merger under the purchase method of accounting.
AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET
SEPTEMBER 30, 1994 (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT SHARES)
<TABLE>
<CAPTION>
AMERIQUEST
TECHNOLOGIES, PRO-FORMA PRO-FORMA PRO FORMA PRO FORMA
INC. ROBEC INC. ADJUSTMENTS COMBINED NCD ADJUSTMENTS COMBINED
------------- ---------- ----------- ---------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash................... $ (151) $ 1,529 -- $ 1,378 $ 127 $ 3,608 (G)(H) $ 5,113
Accounts receivable,
net................... 25,485 17,202 -- 42,687 21,203 -- 63,890
Inventories............ 30,434 16,857 -- 47,291 27,369 -- 74,660
Income taxes
receivable............ -- -- -- -- 24 -- 24
Prepaid expenses and
other................. 1,106 562 -- 1,668 1,920 -- 3,588
---------- ------- ------ ---------- ------- ------- ----------
Total current assets. 60,874 36,150 -- 93,024 50,643 3,608 147,275
PROPERTY AND EQUIPMENT,
NET.................... 4,043 1,788 -- 5,831 965 -- 6,796
INTANGIBLE ASSETS, NET.. 6,426 -- -- 6,426 56 8,934 (G)(H) 15,416
OTHER ASSETS............ 1,142 307 -- 1,449 695 -- 2,144
---------- ------- ------ ---------- ------- ------- ----------
$ 72,485 $38,245 $ -- $ 106,730 $52,359 $12,542 $ 171,631
========== ======= ====== ========== ======= ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable....... $ 16,389 $13,333 -- $ 29,722 $27,715 -- $ 57,437
Notes payable.......... 31,669 11,542 -- 43,211 20,593 (11,287)(G)(H) 52,517
Other.................. 343 1,955 2,360 (A) 4,658 54 2,954 (G)(H) 7,666
---------- ------- ------ ---------- ------- ------- ----------
Total current
liabilities......... 48,401 26,830 2,360 77,591 48,362 (8,333) 117,620
---------- ------- ------ ---------- ------- ------- ----------
LONG-TERM DEBT.......... -- -- -- -- 2,737 (2,737) --
OTHER NONCURRENT
LIABILITIES............ -- -- -- -- -- -- --
DEFERRED INCOME TAXES... 112 155 267 267
STOCKHOLDERS' EQUITY
Preferred stock, $.01
par value; authorized
10,000,000 shares; no
shares issued and
outstanding........... -- -- -- -- -- -- --
Common stock, $.01 par
value; authorized
30,000,000 shares;
issued and
outstanding
17,136,935 shares..... 143 -- 28 (A) 171 -- 115 (G)(H) 286
Common stock, $.01 par
value; authorized
10,000,000 shares;
issued and
outstanding 4,599,180
shares................ -- 46 (46)(A) -- -- -- --
Common stock, $.01 par
value; authorized
10,000,000 shares;
issued and
outstanding
195 shares............ -- -- -- -- -- -- --
Additional paid-in
capital............... 34,811 17,015 (8,143)(A) 43,683 2,096 22,661 (G)(H) 68,440
Retained deficit....... (14,982) (5,801) 5,801 (A) (14,982) (836) 836 (G)(H) (14,982)
---------- ------- ------ ---------- ------- ------- ----------
Total stockholders'
equity.............. 19,972 11,260 (2,360) 28,872 1,260 23,612 53,744
---------- ------- ------ ---------- ------- ------- ----------
$ 68,485 $38,245 $ -- $ 106,730 $52,359 $12,542 $ 171,631
========== ======= ====== ========== ======= ======= ==========
OUTSTANDING COMMON
SHARES................. 14,336,935 17,136,935 28,649,810
========== ========== ==========
</TABLE>
F-20
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR YEAR ENDED JUNE 30, 1994
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AMERIQUEST KENFIL ROBEC PRO FORMA PRO FORMA
TECHNOLOGIES, INC. INC. INC. NCD ADJUSTMENTS COMBINED
------------------ -------- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET SALES............... $ 87,593 $138,759 $168,446 $218,808 $ -- (E) $613,606
COST OF SALES........... 75,023 128,843 155,836 202,114 -- 561,816
--------- -------- -------- -------- ------ ----------
Gross profit........... 12,570 9,916 12,610 16,694 -- 51,790
OPERATING EXPENSES
Selling, general and
administrative........ 14,144 24,653 22,985 13,259 1,095 (B) 76,136
Restructuring charge
and earthquake
loss(D)............... 5,700 3,430 -- -- -- 9,130
--------- -------- -------- -------- ------ ----------
Income (loss) from
operations............ (7,274) (18,167) (10,375) 3,435 (1,095) (33,476)
OTHER INCOME (EXPENSE)
Other income........... 31 40 -- -- 71
Interest expense....... (728) (2,626) (1,613) (1,908) 930 (C) (5,945)
--------- -------- -------- -------- ------ ----------
(697) (2,586) (1,613) (1,908) 930 (5,874)
--------- -------- -------- -------- ------ ----------
Income (loss) before
taxes................. (7,971) (20,753) (11,988) 1,527 (165) (39,350)
PROVISION FOR INCOME
TAXES.................. -- 17 (814) -- -- (797)
--------- -------- -------- -------- ------ ----------
Net income (loss)(D)... $ (7,971) $(20,770) $(11,174) $ 1,527 $ (165) $ (38,553)(D)
========= ======== ======== ======== ====== ==========
Net income (loss) per
common share and common
share equivalent....... $ (1.33) $ (1.45)
========= ==========
Common and common
equivalent shares...... 5,973,511 26,652,076
========= ==========
</TABLE>
F-21
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AMERIQUEST ROBEC PRO FORMA PRO FORMA
TECHNOLOGIES, INC. INC. NCD ADJUSTMENTS COMBINED
------------------ ------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
NET SALES............... $ 38,676 $33,151 $61,364 $ -- (E) $ 133,191
COST OF SALES........... 34,672 30,398 56,628 -- 121,698
---------- ------- ------- ----- ----------
Gross profit.......... 4,004 2,753 4,736 -- 11,493
OPERATING EXPENSES
Selling, general and
administrative....... 3,624 3,401 3,582 274 (B) 10,881
---------- ------- ------- ----- ----------
Income (loss) from
operations........... 380 (648) 1,154 (274) 612
OTHER INCOME (EXPENSE)
Other income.......... 67 -- -- -- 67
Interest expense...... (627) (301) (669) 233 (C) (1,365)
---------- ------- ------- ----- ----------
(560) (301) (669) 233 (1,298)
---------- ------- ------- ----- ----------
Income (loss) before
taxes................ (180) (949) 485 (41) (685)
PROVISION FOR INCOME
TAXES.................. -- -- -- -- --
---------- ------- ------- ----- ----------
Net income (loss)..... $ (180) $ (949) $ 485 $ (41) $ (685)
========== ======= ======= ===== ==========
Net income (loss) per
common share and common
share equivalent....... $ (0.02) $ (0.02)
========== ==========
Common and common
equivalent shares...... 11,622,873 29,691,169
========== ==========
</TABLE>
F-22
<PAGE>
FOOTNOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following footnotes reflect the assumptions made in the preparation of
the Pro Forma Condensed Consolidated Financial Statements.
(A) To effect the purchase of Robec, AmeriQuest will issue approximately
2,800,000 shares of AmeriQuest Common Stock in exchange for 4,459,000
shares of Robec common stock and to eliminate Robec's historical equity.
The AmeriQuest Common Stock is assumed to have a market value of $1.75 per
share at the time of the transaction for a total purchase price of
$4,900,000. Such shares are reflected in the accompanying pro forma
financial statements as outstanding Common Stock. No assurance can be
given that the number of shares to be issued to the Robec shareholders
will not be a greater number than that reflected herein, as the exact
number of shares is subject to adjustment based on the market value of
AmeriQuest Common Stock on the business day prior to the closing. See
"Information Regarding the Merger--The Merger."
(B) To record goodwill amortization over a 10 year life.
(C) Savings of interest expense on notes payable and long-term debt retired
through the issuance of AmeriQuest Common Stock, interest ranging from
9.5% to 13.91%. See Footnotes (G) and (H) below.
(D) The restructuring charge of $5,700,000 included in AmeriQuest's historical
statement of operations relates principally to the write-off of certain
former personal computer joint venture operations. The restructuring
charge and earthquake loss of $4,296,000 included in Kenfil's historical
financials includes charges of $3,430,000 for losses sustained in the
Southern California earthquake and restructuring charges of $866,000
relating to severance costs and lease termination costs. The restructuring
charge of $336,000 included in Robec's historical statement of operations
relates to a reduction in office and warehouse space.
(E) On July 8, 1994, AmeriQuest reacquired 345,091 shares of its Common Stock
from Mr. James D'Jen, a former officer and director of AmeriQuest, as down
payment on an obligation of Mr. D'Jen to exchange 350,000 shares of
AmeriQuest Common Stock, in exchange for all (100%) of the common stock of
AmeriQuest's Singapore subsidiary, CMS Enhancements (S) PTE Ltd. The
Singapore subsidiary is a distributor of commodity disk drives. Sales for
this Singapore subsidiary approximate $20 million annually, with an
approximate breakeven in operating results. Upon the receipt of the
balance of the shares due from Mr. D'Jen, AmeriQuest will be divested of
its Singapore subsidiary.
(F) During fiscal year 1994 AmeriQuest acquired two companies, the impact of
which would be an increase of approximately $20 million in revenues for
the six months not reflected in historical results, with an approximate
breakeven in operating results.
(G) To effect the purchase of NCD, AmeriQuest issued 1,864,767 shares of
AmeriQuest Common Stock plus paid cash of $6,674,263 (including the
redemption of subordinated indebtedness of approximately $3 million) in
exchange for all 195 outstanding shares of NCD common stock and to
eliminate NCD's historical equity. The AmeriQuest Common Stock is assumed
to have market value of $1.75 per share at the time of the transaction for
a total purchase price, including debt redemption, of $9,937,605. This
purchase price exceeds the fair value of the net assets acquired resulting
in goodwill of approximately $8.9 million. Such shares are reflected in
the accompanying pro forma financial statements as outstanding common
stock owned by AmeriQuest.
(H) The $18 million advanced from Computer 2000 AG to the Company for the
purchase of 8.1 million shares of AmeriQuest Common Stock is reflected as
equity in the accompanying pro forma financial statements. This
transaction is subject to approval by AmeriQuest's shareholders. Computer
2000 has agreed, subject to certain conditions, to invest an additional
$32 million for an approximately 51 percent ownership interest in
AmeriQuest, including shares already owned by AmeriQuest and assuming
consummation of the Merger. See "Businesses of the Companies--Recent
Developments." In addition, AmeriQuest completed a private placement of
equity securities in October, 1994 providing net proceeds of $3,608,000.
The aggregate proceeds were used to fund the cash portion of the NCD
purchase price, repayment of notes payable and the redemption of NCD's
subordinated indebtedness.
F-23
