<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
(Amendment No. 2)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1994
Commission File Number 1-10397
AmeriQuest Technologies, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0244136
- -------------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
2722 Michelson Drive, Irvine, CA 92715
- --------------------------------------- --------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number: (714) 222-6000
- --------------------------------------------------------------------------------
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 Section 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
---- ----
At September 30, 1994 there were 17,136,935 shares of the Registrant's
Common Stock outstanding.
1
<PAGE>
AmeriQuest Technologies, Inc.
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement Regarding Financial Information ........................... 3
Consolidated Condensed Balance Sheets
September 30, 1994 and June 30, 1994 ............................. 4
Consolidated Condensed Statements of Income
Three Months Ended September 30, 1994 and 1993 ................... 5
Consolidated Condensed Statements of
Cash Flows - Three Months Ended
September 30, 1994 and 1993 ...................................... 6-7
Consolidated Statements of Shareholders' Equity
September 30, 1994 ............................................... 8
Notes to Consolidated Condensed Financial
Statements - September 30, 1994 .................................. 9-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations..................12-13
PART II. OTHER INFORMATION ................................................ 14
SIGNATURES ................................................................ 15
</TABLE>
2
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1994
PART I. STATEMENT REGARDING FINANCIAL INFORMATION
The financial statements included herein have been prepared by
AMERIQUEST TECHNOLOGIES, INC. (The "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information normally included in the financial statements prepared in accordance
with generally accepted accounting principles has been omitted pursuant to such
rules and regulations. However, the Company believes that the financial
statements, including the disclosures herein, are adequate to make the
information presented not misleading. It is suggested that the financial
statements be read in conjunction with the Annual Report on Form 10-K for the
fiscal year ended June 30, 1994 as filed with the Securities and Exchange
Commission.
3
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands) September 30, June 30,
1994 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
RESTATED
(SEE NOTE 5)
CURRENT ASSETS
Cash $ 1,378 $ 3,200
Accounts receivable, less
allowances for doubtful
accounts of $452 and $477 42,687 24,708
as of September 30, 1994 and June 30,
1994, respectively
Inventories 47,291 24,165
Other current assets 1,668 1,627
-------- --------
93,024 53,700
PROPERTY AND EQUIPMENT, NET 5,831 4,078
INTANGIBLE ASSETS, NET 7,604 6,490
OTHER ASSETS 1,449 877
-------- --------
$107,908 $ 65,145
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 29,722 $ 23,408
Notes payable 43,211 23,059
Other current liabilities 5,358 2,361
-------- --------
Total current liabilities 78,291 48,828
SUBORDINATED NOTES PAYABLE - 3,175
-------- --------
DEFERRED INCOME TAXES 267 267
-------- --------
MINORITY INTEREST 1,178 -
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value;
authorized 30,000,000 shares; issued
and outstanding, 17,136,935 and
9,857,779 shares, respectively 171 99
Additional paid-in capital 43,683 27,345
Retained deficit (15,682) (14,569)
-------- --------
Total stockholders' equity 28,172 12,875
-------- --------
$107,908 $ 65,145
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended September 30,
--------------------------------
1994 1993
--------------------------------
<S> <C> <C>
RESTATED
(SEE NOTE 5)
NET SALES $ 49,476 $ 19,560
COST OF SALES 44,704 16,394
----------- ----------
Gross profit 4,772 3,166
----------- ----------
OPERATING EXPENSES
Selling, general and administrative 5,222 2,978
Research and development 3 50
----------- ----------
5,225 3,028
----------- ----------
Income (loss) from operations (453) 138
----------- ----------
OTHER (INCOME) EXPENSE
Other (income) expense (67) 2
Interest expense 727 74
----------- ----------
660 76
----------- ----------
Net income(loss) $ ( 1,113) $ 62
=========== ==========
Net income(loss) per common share and
common stock equivalent $ (0.10) $ 0.02
=========== ==========
Weighted average shares 11,622,873 3,341,373
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------
(Dollars in thousands) 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
RESTATED
(SEE NOTE 5)
<S> <C> <C>
Cash Flow from Operating Activities
Net income (loss) $ (1,113) $ 62
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 589 246
Provision for losses on accounts receivable 127 (67)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,269) (1,380)
(Increase) decrease in inventories and other (7,138) (781)
(Increase) decrease in other assets (40) (333)
Increase (decrease) in accounts payable and other 841 885
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (9,003) (1,368)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Flow from Investing Activities
Purchases of property and equipment (383) (124)
Net cash received from acquisition of business 302 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (81) (124)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Proceeds from line of credit borrowings 37,685 16,607
Principal payments on line of credit and capital leases (31,758) (15,387)
Proceeds from sale of common stock 1,335 200
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 7,262 1,420
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (1,822) (72)
Cash-beginning of the year 3,200 1,020
- ---------------------------------------------------------------------------------------------------------------------------------
Cash-end of the year $ 1,378 $ 948
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Supplemental Disclosures of Cash Flow Information
Interest on line of credit: During the periods ending September 30, 1994 and
1993, the Company paid interest costs of $727,000
and $74,000, respectively.
Income Taxes: During the periods ending September 30, 1994 and
1993, the Company made no tax payments.
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
Noncash investing and financing activities (continued)
Business acquired: During the first quarter of 1995, the Company acquired
businesses summarized as follows:
<TABLE>
<S> <C>
Fair value of assets acquired 34,595
Liabilities assumed (19,520)
Common stock issued (15,075)
---------
Cash paid 0
Less cash acquired 302
---------
Net cash received from acquisition (302)
=========
</TABLE>
7
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
September 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Retained
Common Stock Paid-in (Deficit)
(Dollars in thousands) Shares Amount Capital Earnings
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at June 30, 1992 2,925,523 $ 29 14,757 $ (6,834)
Common stock issued to unrelated parties 143,000 2 286 -
Common stock issued for acquisitions 100,000 1 149 -
Exercise of employee stock options 12,187 - 18 -
Net income for the year ended June 30, 1993 - - - 236
- ------------------------------------------------------------------------------------------------------------------
Balances at June 30, 1993 3,180,710 $ 32 15,210 $ (6,598)
Common stock issued to unrelated parties 4,905,072 49 9,054 -
Exercise of employee stock options 41,667 1 70 -
Common stock issued for acquisitions 1,730,330 17 3,011 -
Net (loss) for the year ended June 30, 1994 - - - (7,971)
- ------------------------------------------------------------------------------------------------------------------
Balances at June 30, 1994 9,857,779 $ 99 $27,345 $(14,569)
Common stock issued to unrelated parties (Note 4) 532,000 5 1,325 -
Exercise of employee stock options 3,700 - 5 -
Common stock issued for acquisitions (Note 3) 6,743,456 67 15,008 -
Net (loss) for the three months ended - - - (1,113)
September 30, 1994
- ------------------------------------------------------------------------------------------------------------------
Balances at September 30, 1994 17,136,935 $171 $43,683 $(15,682)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
1) MANAGEMENT OPINION
In the opinion of management, the consolidated condensed financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position and results
of operations as of and for the periods presented.
2) EARNING PER SHARE
Primary earnings per common share and common share equivalent were computed
by dividing net income by the weighted average number of shares of common
stock and common stock equivalents outstanding during the quarter. Common
stock equivalents include the number of common shares issuable on exercise
of the outstanding warrants and stock options less the number of shares
that could have been purchased with the proceeds from the exercise of such
warrants or options based on the average price of the Company's common
stock during the quarter. Fully diluted earnings per common share was
immaterial. Common stock equivalents that increase earnings per share or
decrease loss per share were excluded from the computation.
3) ACQUISITIONS
The Company is pursuing a growth through acquisition strategy of acquiring
regional distributors with the ultimate goal of creating a national
distributor of value added computers, subsystems and peripherals.
The success of this strategy is dependent upon the ability of the Company
to effectively consolidate and integrate the operations of the acquired
businesses, combine different business cultures and obtain adequate
financing to complete acquisitions and fund working capital requirements.
Since 1993, the acquisitions of the Company have included:
COMPLETED BY JUNE 30, 1993
Vitronix, Inc. ("Vitronix")
As of March 1993, the Company acquired certain assets of Vitronix for
common stock of the Company. Vitronix is a distributor of computer
products and services, specializing in UNIX applications, and is based in
Boston, Massachusetts.
9
<PAGE>
COMPLETED BY JUNE 30, 1994
Management Systems Group ("MSG")
As of December 1993, the Company acquired certain assets and assumed
certain liabilities of MSG for common stock of the Company and certain
contingent consideration. MSG is a distributor of computer products and
services, specializing in systems and networking applications, and is based
in Long Island, New York.
Rhino Sales Company ("Rhino")
As of December 1993, the Company acquired the outstanding common stock of
Rhino for a combination of cash and common stock of the Company. Rhino is
a distributor of computer products and services, specializing in UNIX
applications, and is based in Fenton, Michigan.
Kenfil Inc. ("Kenfil")
As of June 1994, the Company acquired 51% of the outstanding common stock
of Kenfil for common stock of the Company. Kenfil distributes
microcomputer software and is based in Southern California.
IN PROCESS AT JUNE 30, 1994 (COMPLETED BY SEPTEMBER 30, 1994)
Kenfil Inc. ("Kenfil")
As of September 1994, the Company acquired the remaining outstanding 49% of
the common stock of Kenfil and converted certain trade and subordinated
debt of Kenfil for common and convertible preferred stock of the Company.
Robec, Inc. ("Robec")
As of September 1994, the Company acquired 51% of the outstanding common
stock of Robec for common stock of the Company. Robec is a distributor of
computer products and services, specializing in systems and UNIX
applications, and is based in Horsham, Pennsylvania.
IN PROCESS AT SEPTEMBER 1994
Robec, Inc. ("Robec")
The Company proposes to acquire the remaining 49% of the outstanding common
stock of Robec during 1995.
National Computer Distributors ("NCD")
As of September 1994, the Company entered into an agreement to acquire the
outstanding common stock of NCD for cash and common stock of the Company.
NCD is a distributor of computer products and services, specializing in
systems and connectivity applications, and is based in Fort Lauderdale,
Florida. This proposed transaction is expected to be completed in November
1994.
10
<PAGE>
The following summarizes the cost of the Company's acquisitions (dollars in
thousands):
<TABLE>
<CAPTION>
Common Shares Common Stock
Company Issued Consideration Cash Consideration
- ------- ------------- ------------- ------------------
<S> <C> <C> <C>
Completed by June 30, 1994
MSG 400,000 $ 700
Rhino 200,000 350 $50
Kenfil, 51% 1,130,330 1,978
--------- ----------
1,730,330 $ 3,028
--------- ----------
Completed by September 30, 1994
Kenfil, 49% 1,046,254 $ 2,400
Robec, 51% 1,402,805 2,453
Kenfil, vendors 2,400,037 4,200
Kenfil, debt conversion 1,894,360 3,315
--------- ----------
6,743,456 $ 12,368
--------- ----------
In process at September 30, 1994
Robec, 49% 1,397,195
NCD 1,864,767
</TABLE>
The acquisitions were accounted for using the purchase method and,
accordingly, the financial statements include the results of their operations
from the effective acquisition dates. As to common stock consideration, all
such acquisitions are reflected utilizing a per share valuation of $1.75,
representing management's estimate of the fair value of the Company's common
stock. This valuation is based upon prices obtained for large blocks of the
Company's common stock in recently completed private equity placement
transactions. This valuation represents a significant discount from quoted
market prices due to the thin public trading volume and small public float of
AmeriQuest common stock.
The contingent consideration granted to certain of the former owners of the
acquired businesses is dependent upon the attainment of certain defined
profit objectives of the acquired companies and consists of the right to
acquire common stock of the Company at previously agreed upon prices,
additional cash consideration or the issuance of additional common stock.
Additional contingent consideration earned in connection with the attainment
of the profit objectives, if any, will be reflected as an increase in the
excess of cost over the fair value of net assets acquired. As to the
specific acquisitions of the Company, such potential contingent common stock
and cash consideration is less than $400,000 in the aggregate and is limited
to the MSG and Rhino acquisitions.
Management believes that the most significant intangible acquired is that of
the distribution channels. Management has assigned a 10 year economic life to
this intangible asset as that is the period of time that management expects
to derive benefit form the existing vendor relationships and market position.
Management determined that 10 years is an appropriate economic life based
upon the historical length of the acquiree's vendor relationships and the
overall size and quality of the acquiree's vendors and their product
offerings.
The purchase price allocations associated with the Kenfil and Robec
acquisitions are based upon the Company's preliminary estimates of the fair
value of net assets acquired. The Company is currently in the process of
completing its detailed analysis of the fair value of Kenfil and Robec net
assets acquired and therefore the related intangible assets included in the
accompanying financial statements may change as a result of the completed
analysis.
The pro forma effects of the acquisition as if they occurred at the beginning
of each period follow (dollars in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1994 1993
----------- -----------
<S> <C> <C>
Net sales $ 133,191 $ 158,316
Gross profit 11,493 17,301
Net (loss) (1,385) (26)
Net (loss) per common
share and common stock
equivalent $ (0.07) $ _
=========== ===========
Weighted average shares $20,647,186 $11,949,596
=========== ===========
</TABLE>
The pro forma results have been prepared for comparative purposes only and
are not necessarily indicative of the actual results of operations had the
acquisitions taken place at the beginning of the indicated period or the
results that may occur in the future. Furthermore, the pro forma results do
not give effect to cost savings which may occur as a result of the
consolidation of the acquired companies.
4) COMMON STOCK
Common stock issued to unrelated parties during the quarter ended September
30, 1994 consisted of 532,000 common shares issued to Computer 2000 AG, a
publicly traded German company, for cash proceeds of $1,330,000.
11
<PAGE>
In November 1994 the Company entered into an agreement to sell a controlling
interest, 51%, of it's common stock to Computer 2000. The aggregate proceeds
of $50 million are scheduled for receipt by the Company in late 1994 as to
$18 million and in September 1995 as to the remaining $32 million. Such
proceeds, when coupled with the existing cash and credit resources of the
Company, should allow for reasonable continued expansion of the operations of
the Company.
5) RESTATEMENT
The accompanying unaudited condensed consolidated financial statements for
the first quarter ended September 30, 1994, have been restated to reflect
certain duplicate operating costs associated with the recent KENFIL
acquisition as operating expenses of the Company, rather than purchase
accounting adjustments. The effect of the restatement is to increase selling,
general and administrative expenses by $700,000 and increase the loss from
operations and the net loss by this same amount. The net loss per share
increased from ($0.04) to ($0.10) as a result of this restatement.
The restatement resulted from management's continued review of its purchase
accounting policies regarding the KENFIL acquisition and the determination
that certain costs required to integrate the KENFIL business did not meet the
APB number 16 criteria for purchase accounting.
ITEM 2. MANAGEMENT'S' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
SUMMARY
The following table sets forth certain items in the Consolidated Condensed
Statements of Income as a percent of net sales.
<TABLE>
<CAPTION>
Percent of Net Sales
----------------------
Three Months Ended
September 30,
1994 1993
--------- ----------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 90.4% 83.8%
Gross profit 9.6% 16.2%
Selling, general and
administrative 10.6% 15.5%
Interest and other expense, net 1.3% 0.4%
Net income (loss) -2.2% 0.3%
</TABLE>
12
<PAGE>
AmeriQuest is following a business strategy of growth by acquisition, consistent
with the consolidation that is occurring in the maturing personal computer
marketplace. This strategy creates the following risks involving the ability to
successfully:
. Consolidate the operations of previously unaffiliated businesses, some of
which were unprofitable
. Combine the business cultures of diverse operations
. Obtain adequate capital resources to complete acquisitions and working capital
required for continuing operations
The following reflects the net changes in each specified account as regards the
implementation of the business strategy of the Company.
<TABLE>
<CAPTION>
Increase (Decrease) During
Quarter Ended September 30,
Compared to June 30, 1994
----------------------------
<S> <C>
Sales
Due to acquisitions 20,817
Continuing operations 4,042
Restructuring -
Net change 24,859
Gross Profit
Due to acquisitions 1,913
Continuing operations (79)
Restructuring -
Net change 1,834
Operating Expenses
Due to acquisitions 1,845
Continuing operations (2,483)
Net change (1,338)
Other (Income) Expense
Due to acquisitions (357)
Continuing operations (57)
Restructuring -
Net change 300
Net Income
Due to acquisitions (289)
Continuing operations 2,461
Net change 2,782
</TABLE>
The working capital for these changes has generally been provided by bank credit
line facilities and the issuance of common stock as to acquisitions.
13
<PAGE>
RESULTS OF OPERATIONS
For the three months ended September 30, 1994, net sales increased appreciably
as contrasted to the same period in the prior year due to the operational
activities resulting from the acquisition of MSG, Rhino, Kenfil and Robec, which
were not owned and thus not included in the operations of the Company at
September 30, 1993.
An aggregate warranty and returns reserve of approximately $1 million is
reflected in the balance sheet of AmeriQuest at September 30, 1994. Inasmuch as
the Company began its distribution operations in December 1993, the effect of
market development funds received through September 30, 1994 was not
significant.
Costs of sales as a percentage of net sales increased significantly for the
three months ended September 30, 1994, when compared to the same period one year
ago principally since the operations of the acquired businesses are distribution
oriented with lower margins than those achieved by the value added storage
operations in which the Company was engaged in 1993 and which operations
continue but represents a much lower portion of consolidated operations.
Selling, general and administrative costs as a percentage of net sales decreased
for the three months ended September 30, 1994 when compared to the same period
one year ago, principally because the acquired operations of the Company require
less selling and administrative support than the operations in place a year ago.
Interest expense increased substantially for the three months ended September
30, 1994, when compared to the same period one year earlier, reflecting the
increased financing associated with the acquired operations.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has generated cash to meet its needs from operations, sales
of common stock and bank borrowings. At September 30, 1994, the Company had
$1.4 million in cash, and had borrowed approximately $43.2 million against its
existing lines of credit. The Company's continued product distribution emphasis
and proposed expansion will require substantial additional capital resources.
At September 30, 1994, AmeriQuest has working capital lines of credit of over
$50 million, including a $20 million facility extended to Robec, Inc.
Borrowings under these facilities bear interest at from 1 to 3 percent over the
prime rate and are limited to specified percentages of AmeriQuest's eligible
accounts receivable (a borrowing base in excess of $20 million) and inventories
(a borrowing base of over $20 million).
The management of the Company expects to implement a cost reduction and
efficiency program for its core distribution operations during fiscal year 1995
in an effort to eliminate the continuing impact of those attributes which
created the cash loss from operations of $8.4 million realized in 1994. This
program will focus on centralized administrative operations, product procurement
efficiencies and a continuing cost/benefit analysis of resource allocation. No
material commitments are in place as to required capital expenditures at
September 30, 1994.
14
<PAGE>
As AmeriQuest introduced products which carry higher gross margins than do the
commodity products which historically accounted for much of AmeriQuest's
revenues, available working capital was invested in higher levels of inventories
in fiscal year 1994 and 1995.
Inventory and receivables increased during the period due to the Robec and NCD
acquisitions. Acquired inventory and receivables were recorded at their
estimated fair market value. Inventory reserves decreased during the period due
to the liquidation of aged inventory. Inventory reserves are summarized
below:
<TABLE>
<CAPTION>
Quarter ended September 30,
(Dollars in thousands)
1994 1993
------- ------
<S> <C> <C>
Inventory at September 30,
net of reserve $42,687 $8,695
------- ------
Beginning balance 2,633 7,600
Charged to expense 868 150
Deductions from disposition - (500)
------- ------
Ending balance $ 3,501 $7,250
------- ------
</TABLE>
In November 1994 the Company entered into an agreement to sell a controlling
interest, 51%, of it's common stock to Computer 2000 AG, a publicly held German
company in the same line of business. The aggregate proceeds of $50 million are
scheduled for receipt by the Company in late 1994 as to $18 million and in
September 1995 as to the remaining $32 million. The $32 million investment is
contingent upon a number of conditions, including AmeriQuest's meeting certain
monthly and cumulative after-tax operating profitability conditions during the
first half of calendar 1995. If AmeriQuest does not meet these profitability
conditions, Computer 2000 will have the option to make the $32 million
investment. Such proceeds, when coupled with the existing cash and credit
resources of the Company, should allow for reasonable continued expansion of the
operations of the Company.
Management believes that its existing product lines will enable AmeriQuest to
generate sufficient cash through operations, supplemented by the periodic use of
its lines of credit, to finance a continuation of AmeriQuest's existing business
over the next twelve months. However, as AmeriQuest continues planned
acquisitions, significant cash resources will be required to effect this effort.
There is no assurance that required funds for planned acquisitions will be
available, or that sufficient funds can either be obtained or if available, that
such funds can be secured at commercially acceptable rates of costs.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
AmeriQuest is both a plaintiff and defendant from time-to-time in
lawsuits incidental to its business. The management of AmeriQuest
believes that none of such current proceedings individually or in the
aggregate, will have a material adverse effect on AMERIQUEST. While
not expected to be of material effect to the Company, Kenfil Inc. vs.
---------------
RLI Insurance Company, Superior Court of the State of California,
----------------------
County of Los Angeles, No. BC 108564 filed July 12, 1994, involves
litigation instituted by Kenfil Inc. to recover additional monies for
the damage it incurred in the Northridge earthquake of January 17,
1994. The defendant cross-claimed on August 12, 1994 for return of
the $840,000 it had paid on claims submitted by Kenfil Inc., based
on affidavits from former Kenfil employees alleging that they had
been instructed following the earthquake to intentionally destroy
additional inventory. The defendant's theory is that it is not
obligated to even cover that portion of the damage cause by the
earthquake because of the possible fraud involved with such actions;
while the management of Kenfil maintains that only that portion of
damages actually incurred by the earthquake were submitted as claimed
losses. There exists a question of fact as to whether the actions of
Kenfil's employees were instigated by upper-level management and a
question of law as to whether the lower-level managers of Kenfil are
able to take ultra vires actions which can be attributed to Kenfil.
The testimony to date appears fragmented and uncorroborated, such that
a close examination of the evidence deduced to date reveals no clear
evidence that would allow one to conclude that the defendant was in
any way defrauded. Additionally, it appears that the defendant
insurance company failed to terminate the contract upon discovery of
the alleged "fraud," and merely chose to not renew the contract upon
its expiration. Although there are pictures available to prove the
actual damage immediately following the earthquake, no assurance can
be given that the defendant will not ultimately prevail. The ability
of Kenfil Inc. to satisfy any possible future judgement is dependent
on the results of its future operations. However, such a judgement
would not directly impact the other subsidiaries of AmeriQuest nor
AmeriQuest itself.
Item 2. Changes in Securities.
----------------------
None.
Item 3. Defaults upon Senior Securities.
--------------------------------
None.
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
Exhibit 27--Financial Data Schedule
(b) Reports on Form 8-K
None
16
<PAGE>
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.
AMERIQUEST TECHNOLOGIES, INC.
-----------------------------
(Registrant)
Date: April 4, 1995 By: /s/ HAROLD L. CLARK
----------------- -----------------------------------
Harold L. Clark
Chief Executive Officer
Date: April 4, 1995 By: /s/ STEPHEN G. HOLMES
----------------- -----------------------------------
Stephen G. Holmes
Chief Financial Officer
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1994
<CASH> 1,378
<SECURITIES> 0
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0
0
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</TABLE>
