<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-10397
AMERIQUEST TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0244136
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 IMPERIAL PROMENADE, SANTA ANA, CA 92707
(Address of principal executive office) (Zip Code)
Registrant's telephone number: (714) 445-5000
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 report(s), and (2) has been subject to
filing requirements for the past 90 days.
Yes X No
--- ---
At December 31, 1995 there were 27,948,545 shares of the Registrant's
common Stock outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
AMERIQUEST TECHNOLOGIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1995
ITEM 1. FINANCIAL STATEMENTS
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, 1995 as filed with the Securities and Exchange
Commission.
Due to the change in year end to September 30, it may also be useful to
read the 10-Q for the transition period September 30, 1995.
2
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AMERIQUEST TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------- --------------
1995 1995
------------- --------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS
Current assets
Cash.................................. $ 1,045 $ 210
Accounts receivable, less allowance
for doubtful accounts of $8,306 and
$9,572 as of December 31 and
September 30, 1995 respectively...... 48,273 51,013
Inventories........................... 48,015 42,335
Other current assets.................. 842 975
-------- --------
Total current assets............... 98,175 94,533
-------- --------
Property and equipment, net............. 5,992 7,527
Intangible assets, net.................. 10,286 10,536
Other assets............................ 698 2,359
-------- --------
$115,151 $114,955
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable...................... $ 28,944 $ 36,216
Notes payable......................... 63,011 45,244
Other current liabilities............. 2,910 9,244
-------- --------
Total current liabilities.......... 94,865 90,704
-------- --------
Long-term obligations................... 6,907 6,686
-------- --------
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value;
authorized 5,000,000 shares; issued
and outstanding 2,622,355 and
2,596,525 shares as of December 31,
and September 30, 1995............... 53 26
Common stock, $.01 par value;
authorized 30,000,000 shares; issued
and outstanding 27,948,545 and
23,896,140 shares as of December 31,
and September 30, 1995............... 279 239
Additional paid-in capital............ 110,477 106,476
Accumulated deficit................... (97,430) (89,176)
-------- --------
Total stockholders' equity
(deficit)......................... 13,379 17,565
-------- --------
$115,151 $114,955
</TABLE> ======== ========
3
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AMERIQUEST TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
DECEMBER 31
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Net sales............................... $ 101,471 $ 123,529
Cost of sales........................... 93,788 117,052
----------- -----------
Gross Profit.......................... 7,683 6,477
Operating expenses
Selling, general and administrative... 11,118 9,596
Lease termination costs............... 3,700
=========== ===========
Loss from operations.................. (7,135) (3,119)
Interest expense...................... 1,119 1,937
----------- -----------
Net Loss................................ $ (8,254) $ (5,056)
=========== ===========
Net loss per common share and common
stock equivalent....................... $ (0.32) $ (0.25)
=========== ===========
Weighted average shares................. 25,917,411 19,834,322
=========== ===========
</TABLE>
4
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AMERIQUEST TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
DECEMBER 31
------------------------
1995 1994
----------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Cash Flow from Operating Activities
Net loss................................ $ (8,254) $ (5,056)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization......... 485 678
Provision for losses on accounts
receivable........................... 546 1,387
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable........................ 2,194 (6,913)
(Increase) decrease in inventories
and other......................... (5,547) (7,056)
(Increase) decrease in other assets 3,052 640
Increase (decrease) in accounts
payable and other................. (9,542) (10,899
-------- --------
Net cash used in operating activities... (17,066) (27,219)
-------- --------
Cash Flow from Investing Activities
Purchases of property and equipment... (91) (664)
Net cash paid for acquisition of
businesses, net of cash acquired..... -- (2,275)
-------- --------
Net cash used in investing activities... (91) (2,939)
-------- --------
Cash Flow from Financing Activities
Proceeds from line of credit
borrowings, net..................... 17,988 11,585
Proceeds from sale of preferred and
common stock........................ 4 3,602
Proceeds from subordinated debt...... 18,000
-------- --------
Net cash provided by financing
activities............................. 17,992 33,187
-------- --------
Decrease in cash........................ 835 3,029
-------- --------
Cash--beginning of the year............. 210 1378
-------- --------
Cash--end of the year................... $ 1,045 $ 4,407
======== ========
</TABLE>
Supplemental Disclosures of Cash Flow Information
Interest on line of credit:
During the three months ended December 31, 1995 and 1994, the
Company paid interest costs of $1,091,000 and $1,388,000
respectively.
Income taxes:
During the three months ended December 31, 1995 and 1994, the
Company made no tax payments.
5
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AMERIQUEST TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Additional Retained
Preferred Stock Common Stock Paid-in (Deficit)
(Dollars in thousands) Shares Amount Shares Amount Capital Earnings
<S> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1995 2,596,525 $26 23,896,140 $239 $106,476 $(89,176)
Exercise of employee stock options 82,500 1 3
Preferred stock issued for acquisitions 25,830 27 1,576
Common stock issued for acquisitions 3,969,905 39 2,422
Net (loss) for the three months ended
December 31, 1995 (8,254)
- -------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1995 2,622,355 $53 27,948,545 $279 $110,477 $(97,430)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
6
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AMERIQUEST TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(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) LOSS PER SHARE
Loss per common share and common share equivalent is computed on the basis
of the weighted average number of common shares outstanding. No effect is given
to stock options as they are anti-dilutive.
(3) FISCAL PERIODS
The Company's fiscal year is the 52- or 53-week period ending on the
Saturday nearest to September 30 and its fiscal quarters are the 13- or 14-week
periods ending on the Saturday nearest to December 31, March 31, June 30 and
September 30. For clarity of presentation, the Company has described year-ends
and presented as if the years ended on September 30 and quarter-ends presented
as if the quarters ended on December 31, March 31, and June 30. The 1994 and
1995 fiscal years are 52 weeks, while the quarters presented are 13 weeks in
duration.
The Company changed its fiscal year end to September 30 on September 30,
1995. The attached financials do not include the operations from July 1, 1995
through September 30, 1995.
(4) ACQUISITIONS
The Company has pursued a strategy of growth through acquisition by
acquiring regional distributors with the 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
cultures and obtain adequate financing to complete acquisitions and fund working
capital requirements. All of the Company's acquisitions completed during fiscal
years 1993 through 1995 have been accounted for in accordance with the purchase
method of accounting. The Company's Consolidated Financial Statements include
acquiree's results of operations from the effective acquisition dates.
The per share valuation of the Company's common stock issued in connection
with the following acquisitions represents a discount from the quoted market
price, based upon the weighted average discounts received on recently completed
private equity transactions. Management believes this method of valuation is
the best indication of fair value due to the Company's thin stock trading value
and small public float.
Regional distributors. During fiscal year 1994 and 1993, CDS Distribution,
Inc., a wholly owned subsidiary of the Company completed the acquisition of
several smaller regional distributors ("regional distributors"). Total
consideration given to complete these acquisitions was 1,730,330 shares of the
Company's common stock valued at $3 million. In fiscal 1995, as a result of the
acquisitions of Robec and NCD discussed below, these distributors were
considered to be redundant, resulting in their closure and the write off of
their intangibles of approximately $3.4 million.
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
distributed microcomputer software in both the
7
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U.S. and Asia. 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 preferred stock, subsequently
converted to common stock of the Company. During fiscal year 1995, the former
U.S. operations of Kenfil, including principally educational and entertainment
software distribution, were terminated by the Company. Total consideration given
for the Kenfil acquisition was 5,846,162 shares of the Company's common stock
valued at approximately $14 million, plus transaction costs of $785,000.
Robec, Inc. ("Robec"). As of September 1994, the Company acquired 50.1% 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 September 1995,
Robec's share holders approved the acquisition by AmeriQuest of the remaining
49.9% of Robec common stock not owned by the Company.
November 13, 1995, AmeriQuest completed the acquisition of Robec, Inc.
through a merger whereby Robec has become a wholly-owned subsidiary of
AmeriQuest. In the merger, AmeriQuest issued 3,969,905 shares of common stock
to Robec's shareholders and assumed options held by Robec's employees to
purchase 301,978 shares of common stock. Under the terms of the original
acquisition agreement, at the closing of the merger, certain principal
stockholders of Robec were entitled to receive 2,583,010 additional shares of
AmeriQuest common stock as partial consideration for shares of Robec common
stock previously exchanged; however, AmeriQuest did not have sufficient
authorized common stock to issue these additional shares. In lieu of the
issuance of these additional shares at the merger closing, the Robec principal
shareholders were issued shares of AmeriQuest preferred stock convertible into
2,583,010 shares of AmeriQuest common stock upon the approval of AmeriQuest's
shareholders and satisfaction by AmeriQuest of certain other conditions. The
preferred stock carries a stock dividend at an initial rate of 15% per annum.
The acceptance of the preferred stock in lieu of common shares represents an
accommodation by the former principal shareholders of Robec, permitting the
merger to go forward in advance of AmeriQuest stockholder approval of the
conversion of the preferred stock into common stock and the increase in
AmeriQuest's authorized common stock to a number of shares sufficient for the
conversion to be accomplished. Preferred shares include a liquidation
preference, a 10% per month penalty beginning April 30, 1996 if the preferred
shares are not converted and a mandatory redemption if not converted by
November 2000. Management believes the occurrence of these events to be remote
as AmeriQuest controls the required shares to complete the merger. Total
consideration is expected to be 8.2 million shares of the Company's common stock
valued at $8.5 million, plus transaction costs of $265,000.
National Computer Distributors ("NCD"). In November 1994, the Company
acquired all of 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. Total consideration
given in the NCD acquisition was 1,864,767 shares of the Company's common stock
valued at $4.1 million and cash of $3.4 million. Intangible assets recorded at
December 31, 1995 related to NCD are approximately $10 million.
In connection the issuance of the Company's common stock associated with the
NCD acquisition, the Company entered into a stock repurchase agreement with
holders of 661,586 shares of the Company's common stock. The holders of the
Company's common stock covered by this agreement have required the Company to
repurchase the stock at $3.50 per share.
Management believes that distribution channel access represents the most
significant intangible acquired in connection with the acquisitions discussed
above. Management assigned a 10-year economic life to this intangible asset as
that is the period of time that management expects to derive benefit from 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.
Intangible assets relate primarily to acquired distribution channels and
related vendor relationships and market positions. Intangibles are amortized
using the straight-line method from the date of
8
<PAGE>
acquisition over the expected period to be benefited, currently estimated at 10
years. In determining the appropriate amortization period the Company considered
the historical length of the acquiree's vendor relationships and the overall
size and quality of the vendors and their product offerings. On a quarterly
basis, the Company assesses the recoverability of intangible assets based upon
consideration of past performance and future expectations of undiscounted cash
flow on an acquisition by acquisition basis to the extent separately
identifiable, in accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long Lived Assets and For Long Lived
Assets to be Disposed of." To the extent separate assessment of such acquired
intangibles is no longer feasible (i.e. as a result of integrating multiple
acquisitions into a single business unit) such assessment is performed on a
combined basis as appropriate.
The following unaudited pro forma combined information shows the results of
the Company's operations for the three months ended December 30,1995 and 1994 as
though the acquisitions and the Computer 2000 equity investment all had occurred
as of the beginning of each respective period (in thousands except per share
data):
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31,
--------------------------
1995 1994
------------ -----------
<S> <C> <C>
Revenues.................. $ 101,471 $ 143,377
Gross profit.............. 7,683 8,060
Net loss.................. 8,254 5,451
Net loss per share........ $ .13 $ .09
Weighted average shares... 61,584,520 57,686,766
</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 or incremental costs which may occur as a result of the
integration and consolidation of the acquired companies.
(5) COMMON STOCK
In November 1994, AmeriQuest and Computer 2000 entered into an agreement
pursuant to which Computer 2000 agreed to invest approximately $50 million in
AmeriQuest in exchange for a majority ownership interest in AmeriQuest. Under
the agreement Computer 2000 initially loaned AmeriQuest $18 million.
In August 1995, Computer 2000 exchanged these notes for 810,811 shares of
AmeriQuest's Series A preferred stock (convertible into 8,108,110 shares of
common stock, subject to adjustment) and warrants to purchase 657,289 shares of
Series D preferred stock (convertible up to 6,572,890 shares of common stock,
subject to adjustment) exercisable at $.053 per share of Series D preferred
stock ($0.05 per share of common stock, on an as-if-converted to common stock
basis). In addition, Computer 2000 purchased from AmeriQuest, for $31.2
million, 1,785,714 shares of Series B preferred stock (convertible in to
17,857,140 shares of common stock) and warrants to purchase 746,186 shares of
Series D preferred stock (convertible up to 7,461,860 shares of common stock,
subject to adjustment) exercisable at $0.053 per share of Series D preferred
stock ($0.05 per share of common stock on an as-if-converted to common stock
basis). Assuming the exercise of warrants referred to above the conversion of
the preferred stock issuable upon such exercise and the conversion of the
preferred stock AmeriQuest will have issued 40 million shares of common stock at
an average purchase price of $1.25 per share.
Further, in consideration for Computer 2000's exchange of the notes of $18
million and Computer 2000's additional investment of $31.2 million, AmeriQuest
also granted to Computer 2000 pari passu
9
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rights with respect to other outstanding warrants, options and other rights to
acquire shares of AmeriQuest's Common Stock that AmeriQuest has previously
granted, or is obligated to grant in the future, to others:
(i) If AmeriQuest issues in connection with its acquisition of Robec any
shares in excess of 2,800,000 shares of common stock, including all shares
already issued and all shares issued in the future, including shares issued
upon the exercise of options or warrants granted, assumed or exchanged in
connection with the Robec acquisition, then Computer 2000 will have the
right, pursuant to certain warrants to be granted by AmeriQuest to purchase a
number of shares of Series E preferred stock as will be convertible into a
number of shares of common stock that will be equal to the number of
incremental shares that are issued in connection with the Robec acquisition.
The exercise price of the acquisition maintenance warrants will be $1.25 per
share of Series E preferred stock ($0.05 per share of common stock on an as-
if-converted to common stock basis).
(ii) In connection with a private placement in June 1995 AmeriQuest
issued common stock and warrants to investors, which included warrants to
purchase up to 5,148,574 shares of common stock at an exercise price of $1.05
per share. If and to the extent that any of the unit warrants are exercised,
then Computer 2000 will have the right, pursuant to certain warrants to be
issued by AmeriQuest, to purchase a number of Series F preferred stock that
will be convertible into a number of shares of common stock equal to the
shares issued upon the exercise of the unit warrants. The exercise price of
these warrants will be $5.25 per share of Series F preferred stock ($.525 per
share of common stock on an as-if-converted to common stock).
(iii) AmeriQuest granted to Computer 2000 an option to purchase a number
of shares of common stock that will be equal to the number of shares of
common stock that AmeriQuest issues upon exercise or conversion of all
currently outstanding options, warrants or other rights (other than shares
subject to the unit maintenance warrants and acquisitions maintenance) to
acquire (upon conversion or otherwise) any shares of common stock or other
equity securities of AmeriQuest. This option will be exercisable for the
same consideration and on the same terms as the consideration for which the
terms under which such additional shares are issued.
Assuming conversion of all preferred stock and the exercise of all warrants
and options, the Company would have approximately 96 million shares of common
stock outstanding, of which Computer 2000 would hold approximately 59 percent.
(6) NOTES PAYABLE
The Company maintains lines of credit with financial institutions which in
the aggregate provide for revolving credit of over $66 million at December
31, 1995, and floor planning arrangements with lines of credit totaling $45
million. Available lines total 38 million at December 31, 1995. During the
quarter the line of credit with U.S. banks were replaced with bank lines from
four German-based banks at Libor based financing. The lines are guaranteed by
Computer 2000 through June 30, 1996. Management expects that with Computer
2000's direct and indirect help current working arrangements will allow the
Company to meet its obligations and capital needs as they arise through, 1996.
If the Company is unsuccessful in extending current lines of credit management
believes that equity capital will be obtainable to fund working capital needs.
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
DECEMBER 31,
------------------------
1995 1994
----------- ----------
<S> <C> <C>
Net sales............................. 100.00% 100.00%
Cost of sales......................... 92.43% 94.76%
Gross profit.......................... 7.57% 5.24%
Selling, general and
administrative(1)................... 14.60% 7.77%
Interest and other expense, net....... 1.11% 1.57%
(Loss) from operations................ (8.13%) (4.09%)
</TABLE>
(1) Including lease termination costs of $3.7 million or 3.6% of sales.
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AmeriQuest has followed a business strategy of growth by acquisition in
recent years, 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, all but
one of which were unprofitable
. Combine the business cultures of diverse operations
. Obtain adequate capital resources to complete acquisitions and provide
working capital required for continuing operations
Current strategy is to complete the consolidation and integration of
previously acquired companies which will include reducing costs and improving
productivity.
RESULTS OF OPERATIONS
For the three months ended December 31, 1995 sales declined $22 million due
to the closing of non profitable sales centers and competition. Subsequent to
December 1994 the company closed numerous field sales offices, its domestic
software distribution operation and sold its Singapore operation. Sales in
ongoing business has declined also due to a significant vendors withdrawal from
the U.S. market and competitive pressures.
Cost of sales as a percentage of sales declined due to a continued effort to
increase margins, a lower charge for inventory obsolescence and the closure of
various unprofitable operations. The company continues to encounter heavy price
competition throughout the market place.
Selling general and administrative expenses increased in absolute dollars
compared to the prior year due to the loss on sublease of a significant property
of $3.7 million, the inclusion of the NCD acquisition beginning November 1994
and increased costs necessary to integrate the Robec and NCD acquisitions.
Integration costs include training, travel and additional data processing costs
to consolidate and upgrade systems.
Interest expense decreased to $1.1 million reflecting lower interest rates on
debt outstanding and the use of proceeds from the issue of stock to Computer
2000 to reduce debt.
No income tax benefit was recorded on net operating losses due to net
operating loss carryforwards from prior years.
VARIABILITY OF QUARTERLY RESULTS
Historically, the Company has experienced variability in its net sales and
operating margins on a quarterly basis and expects these patterns to continue in
the future. Management believes that the factors influencing quarterly
variability include: (i) the overall growth in the microcomputer industry;
(ii) shifts in short-term demand for the Company's products resulting, in part,
from the introduction of new products or updates of existing products; and (iii)
the fact that virtually all sales in a given quarter result from orders booked
in that quarter. Due to the factors noted above, as well as the fact that the
Company participates in a highly dynamic industry, the Company's revenues and
earnings may be subject to material volatility, particularly on a quarterly
basis.
LIQUIDITY OF CAPITAL RESOURCES
During the quarter ended December 31, 1995, the Company has generated cash to
meet its operating needs by borrowing against bank lines of credit. At December
31, 1995, the Company had $1,045,000 in cash.
11
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and had borrowed approximately $63 million against its existing lines of credit.
During the quarter ended December 31, 1995, the Company used $17 million of cash
in operating activities, compared to the use of $27 million in the same quarter
of the last year. The significant amount of cash used in operating activities
resulted from operating losses and investment in working capital required to
support daily business activity.
In November 1994, AmeriQuest and Computer 2000 entered in to an agreement
pursuant to which Computer 2000 agreed to invest approximately $50 million in
AmeriQuest in exchange for a majority ownership interest in AmeriQuest. Under
the agreement Computer 2000 initially loaned AmeriQuest $18 million. In August
1995, Computer 2000 exchanged the $18 million note and provided the Company with
additional cash proceeds of approximately $31.2 million in exchange for the
issuance by AmeriQuest of certain shares of AmeriQuest's preferred stock,
convertible into common stock and warrants, all subject to adjustment for
certain defined activities. Further, as consideration for Computer 2000's
exchange of $18 million note and Computer 2000's additional investment of $31.2
million, AmeriQuest also granted to Computer 2000 certain pari passu rights with
respect to other outstanding warrants, options and other rights to acquire
shares of AmeriQuest's common stock that AmeriQuest has previously granted, or
is obligated to grant in the future, to others. After the completion of the
Computer 2000 equity investment, Computer 2000's ownership of the Company
approximated 51 percent. Computer 2000 holds warrants allowing it to increase
its ownership in the Company to approximately 59 percent. The Company used
these proceeds to repay trade debt and borrowings under its line of credit
agreements.
November 13, 1995, AmeriQuest completed the acquisition of Robec, Inc.
through a merger whereby Robec has become a wholly-owned subsidiary of
AmeriQuest. In the merger, AmeriQuest issued 3,969,905 shares of common stock
to Robec's shareholders and assumed options held by Robec's employees to
purchase 301,978 shares of common stock. Under the terms of the original
acquisition agreement, at the closing of the merger, certain principal
stockholders of Robec were entitled to receive 2,583,010 additional shares of
AmeriQuest common stock as partial consideration for shares of Robec common
stock previously exchanged; however, AmeriQuest did not have sufficient
authorized common stock to issue these additional share. In lieu of the
issuance of these additional shares at the merger closing, the Robec principal
shareholders were issued shares of AmeriQuest preferred stock convertible into
2,583,010 shares of AmeriQuest common stock upon the approval of AmeriQuest's
shareholders and satisfaction by AmeriQuest of certain other conditions. The
preferred stock carries a stock dividend at an initial rate of 15% per annum.
The acceptance of the preferred stock in lieu of common shares represents an
accommodation by the former principal shareholders of Robec, permitting the
merger to go forward in advance of AmeriQuest stockholder approval of the
conversion of the preferred stock into common stock and the increase in
AmeriQuest's authorized common stock to a number of shares sufficient for the
conversion to be accomplished.
The Company maintains lines of credit with financial institutions which in
the aggregate provide for revolving credit of over $66 million at December
31, 1995, and floor planning arrangements with lines of credit totaling $45
million. Available lines total 38 million at December 31, 1995. During the
quarter the line of credit with U.S. banks were replaced with bank lines from
four German-based banks at Libor based financing. The lines are guaranteed by
Computer 2000 through June 30, 1996. Management expects that with Computer
2000's direct and indirect help current working arrangements will allow the
Company to meet its obligations and capital needs as they arise through, 1996.
If the Company is unsuccessful in extending current lines of credit management
believes that equity capital will be obtainable to fund working capital needs.
12
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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 thereunto duly authorized.
AMERIQUEST TECHNOLOGIES, INC.
-----------------------------
(Registrant)
Date: February 14, 1996 By: /s/ Mark C. Mulford
---------------------
Mark C. Mulford
Executive Officer and acting
Chief Financial Officer
12
<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> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 1,045
<SECURITIES> 0
<RECEIVABLES> 48,273
<ALLOWANCES> 0
<INVENTORY> 48,015
<CURRENT-ASSETS> 98,175
<PP&E> 5,992
<DEPRECIATION> 0
<TOTAL-ASSETS> 115,151
<CURRENT-LIABILITIES> 94,865
<BONDS> 0
0
53
<COMMON> 279
<OTHER-SE> 13,047
<TOTAL-LIABILITY-AND-EQUITY> 115,151
<SALES> 101,471
<TOTAL-REVENUES> 101,471
<CGS> 93,788
<TOTAL-COSTS> 93,788
<OTHER-EXPENSES> 14,818
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,119
<INCOME-PRETAX> (8,254)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,254)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,254)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
