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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(B) OF THE
SECURITIES EXCHANGE ACT OF 1934 FROM ______ TO ______ .
</TABLE>
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COMMISSION FILE NUMBER 1-10397
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AMERIQUEST TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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<C> <C>
DELAWARE 33-0244136
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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6100 HOLLYWOOD BOULEVARD, SUITE 700, HOLLYWOOD, FL 33024
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER: (954) 967-2397
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 January 31, 1997 there were 67,047,392 shares of the Registrant's Common
Stock outstanding.
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PART I. FINANCIAL INFORMATION
AMERIQUEST TECHNOLOGIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1996
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
September 30, 1996 as filed with the Securities and Exchange Commission.
2
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AMERIQUEST TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1996
------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 2,433 $ 2,300
Accounts receivable, less allowance for doubtful accounts
of $4,793 and $5,811 as of December 31, 1996 and
September 30, 1996, respectively....................... 46,637 56,492
Inventories, net of valuation allowance................... 37,425 38,019
Prepaid and other current assets.......................... 2,552 2,837
--------- ---------
Total current assets.............................. 89,047 99,648
--------- ---------
Property and equipment, net............................... 5,375 6,134
Intangible assets, net of accumulated amortization........ 9,286 9,546
Other assets.............................................. 809 1,044
--------- ---------
Total assets...................................... $ 104,517 $ 116,372
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Notes payable............................................. 75,868 77,446
Accounts payable.......................................... 33,718 36,152
Other current liabilities................................. 8,607 10,858
--------- ---------
Total current liabilities......................... 118,193 124,456
--------- ---------
Long term obligations..................................... 1,251 3,122
--------- ---------
Total liabilities................................. 119,444 127,578
--------- ---------
Commitments and Contingencies...............................
Shareholder's Equity:
Common stock, $.01 par value; authorized 200,000,000 shares;
67,047,392 shares issued and outstanding both at December
31, 1996 and September 30, 1996........................... 670 670
Additional paid-in capital.................................. 111,144 111,144
Accumulated deficit......................................... (126,741) (123,020)
--------- ---------
Total shareholders' equity (deficiency)........... (14,927) (11,206)
Total liabilities and shareholders' equity........ $ 104,517 $ 116,372
========= =========
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AMERIQUEST TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------------
1996 1995
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<S> <C> <C>
Net sales................................................... $ 89,329 $ 101,471
Cost of sales............................................... 81,594 93,788
----------- -----------
Gross profit.............................................. 7,735 7,683
Operating Expenses:
Selling, general and administrative....................... 9,067 10,360
Depreciation and amortization............................. 824 758
Restructuring and lease termination costs................. 400 3,700
----------- -----------
Loss from operations................................... (2,556) (7,135)
Interest expense............................................ 1,165 1,119
----------- -----------
Net income (loss)...................................... $ (3,721) $ (8,254)
----------- -----------
Net income (loss) per common share and common stock
equivalent................................................ $ (0.06) $ (0.32)
----------- -----------
Common and common equivalent shares outstanding (Note 2):
Weighted average shares outstanding.................... 67,047,392 25,917,411
=========== ===========
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AMERIQUEST TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31
-------------------
1996 1995
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<S> <C> <C>
Cash flow from operating activities:
Net loss.................................................... $(3,721) $ (8,254)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 824 758
Provision for losses on accounts receivable............... 414 546
Provision for losses on inventory......................... 311 753
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable................ 9,441 2,194
(Increase) decrease in inventories........................ 283 (6,433)
Increase (decrease) in accounts payable and accrued
expenses............................................... (4,685) (9,542)
(Increase) decrease in other.............................. (1,023) 3,133
------- --------
Net cash provided by operating activities.............. 1,844 (16,845)
------- --------
Cash flow from investing activities:
Capital expenditures, net of disposals.................... (133) (91)
------- --------
Net cash used for investing activities................. (133) (91)
------- --------
Cash flow from financing activities:
Net borrowings (repayment) under lines of credit.......... (1,578) 17,767
Other financing activities................................ 0 4
------- --------
Net cash used (provided) for financing activities...... (1,578) 17,771
------- --------
Net increase (decrease) in cash and cash equivalents........ 133 835
------- --------
Cash and cash equivalents at beginning of period............ 2,300 210
------- --------
Cash and cash equivalents at end of period.................. $ 2,433 $ 1,045
======= ========
</TABLE>
Supplemental Disclosures of Cash Flow Information
Interest on Lines of Credit:
During the three months ended December 31, 1996 and 1995, the Company
paid interest costs of $1,080,000 and $1,091,000 respectively.
Income taxes:
During the three months ended December 31, 1996 and 1995, the Company
made no federal income tax payments.
5
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AMERIQUEST TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL (DEFICIT)
---------- ------ ---------- -----------
<S> <C> <C> <C> <C>
BALANCES AT SEPTEMBER 30, 1996............ 67,047,392 $ 670 $111,144 $(123,020)
Net (loss) for the three months ended
December 31, 1996....................... -- -- -- (3,721)
---------- ----- -------- ---------
BALANCES AT DECEMBER 31, 1996............. 67,047,392 $ 670 $111,144 $(126,741)
========== ===== ======== =========
</TABLE>
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AMERIQUEST TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(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 not materially 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 or
September 30. For clarity of presentation, the Company has presented year-ends
as if the years ended on September 30; and quarter-ends are presented as if the
quarters ended on December 31, March 31, and June 30. The 1995 and 1996 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.
(4) COMMON STOCK
Assuming the exercise of all warrants and options outstanding on December
31, 1996, AmeriQuest would have approximately 96 million shares of Common Stock
outstanding on that date, of which Computer 2000 would hold approximately 58.4
percent.
(5) LINES OF CREDIT
At December 31, 1996, the Company's revolving lines of credit with
financial institutions totalled, in the aggregate, $76 million, and floor
planning arrangements with lines of credit totalled, in the aggregate, $20
million. Available and unused credit lines totalled $20 million at December 31,
1996.
The weighted average interest rate for all borrowings under the above
credit facilities was 6.4% at December 31, 1996 and September 30, 1996.
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AMERIQUEST TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
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,
--------------------
1996 1995
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<S> <C> <C>
Net sales.................................................. 100.0 100.0
Cost of sales.............................................. 91.3 92.4
Gross profit............................................... 8.7 7.6
Selling, general and administrative........................ 10.2 10.2
Depreciation and amortization.............................. 0.9 0.7
Restructuring charge....................................... 0.4 3.6
Interest and other expense, net............................ 1.3 1.2
(Loss) from operations..................................... (4.2) (8.1)
</TABLE>
In November 1996, the Company completed its move of corporate headquarters
to Florida, allowing for integration and improvement of efficiency of the
infrastructure of the company.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED DECEMBER 31, 1996
Sales decreased by 12% or $12,142,000 to $89,329,000 for the quarter ended
December 31, 1996 compared to $101,471,000 for the quarter ended December 31,
1995 due to the highly competitive market situation of the Company in the
distribution and export segments. In addition, the Company has begun an effort
to concentrate sales on a smaller more select group of vendors, thereby limiting
incremental but low margin revenues from ancillary vendors. The low sales volume
continues to be a concern for the future.
Cost of sales decreased to 91.3% of sales for the quarter ended December
31, 1996 compared to 92.4% of sales in the same quarter for the prior year as a
result of both an unexpectedly favorable product mix and improvements in
inventory and purchase management, which conditions are unlikely to recur.
Accordingly, gross profit improved to $7,735,000 from $7,683,000 for the
quarters ended December 31, 1996 and December 31, 1995, respectively.
Selling, general and administrative expenses of $9,067,000 decreased by
$1,293,000, compared to the expenditure of $10,360,000 or 10.2% of sales for the
same quarter of the prior year, but remained constant as a percent of sales for
the quarter ended December 31, 1996.
Depreciation and amortization of $824,000 increased from $758,000, or 0.7%
of sales, in the quarter ended December 31, 1995 to 0.9% of sales in the quarter
ended December 31, 1996 primarily as a result of increased expenditures for
information systems.
During the quarter ended December 31, 1996, the Company recorded a $400,000
reserve for the restructuring of the Company's operations, sales and
administrative staffing. During the quarter ended December 31, 1995, the Company
established a $3,700,000 reserve for discontinuance of a significant lease.
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AMERIQUEST TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Interest expense of $1,165,000 increased as a percent of sales to 1.3% in
the quarter ended December 31, 1996 compared to $1,119,000, or 1.2% of sales,
for the quarter ended December 31, 1995.
No income tax benefit was recorded on net operating losses either at
December 31, 1996 or December 31, 1995 as valuation allowances were provided,
because it is not more likely than not, as defined in SFAS 109, that deferred
tax benefits will be realized through operations. The valuation allowances
recorded against deferred tax assets are based on management's estimates related
to the Company's ability to realize these benefits. Appropriate adjustments will
be made to the valuation allowances if circumstances warrant in future periods.
Such adjustments may have a significant impact on the Company's financial
statements.
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 and seasonal fluctuations in market
demand 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
At December 31, 1996, the Company had $2,433,000 in cash and had borrowed
$75,868,000 against its existing lines of credit. The Company generated
$1,844,000 of cash from operating activities in the three months ended December
31, 1996.
All activities outside of the core business of domestic distribution are
currently being reviewed and management is investigating measures to improve the
situation of the overall company, including the possible disposition of assets.
To the extent that losses continue, management believes that further cost
reductions, including headcount and facilities, will be necessary for the
Company's continued operations. In the meantime, AmeriQuest and Computer 2000
continue to explore the optimum format for additional financing referred to in
the Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1996.
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AMERIQUEST TECHNOLOGIES, INC.
DECEMBER 31, 1996
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the three months ended
December 31, 1996.
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.
February 5, 1997
/s/ MICHAEL DRESSEN
Michael Dressen
Chief Executive Officer
February 5, 1997
/s/ HOLGER HEIMS
Holger Heims
Executive Vice President and
Chief Financial Officer
10
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<ARTICLE> 5
<LEGEND>
THIS 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-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,433
<SECURITIES> 0
<RECEIVABLES> 46,637
<ALLOWANCES> 0
<INVENTORY> 37,425
<CURRENT-ASSETS> 89,047
<PP&E> 5,375
<DEPRECIATION> 0
<TOTAL-ASSETS> 104,517
<CURRENT-LIABILITIES> 118,193
<BONDS> 0
0
0
<COMMON> 670
<OTHER-SE> 111,144
<TOTAL-LIABILITY-AND-EQUITY> 104,517
<SALES> 89,329
<TOTAL-REVENUES> 89,329
<CGS> 81,594
<TOTAL-COSTS> 81,594
<OTHER-EXPENSES> 10,291
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,165
<INCOME-PRETAX> (3,721)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,721)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,721)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
