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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 27, 1995 (June 30, 1995)
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CONQUEST INDUSTRIES INC.
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Delaware 1-10206 76-0206582
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(State or other (Commission File (IRS Employer
jurisdiction of No.) ID No.)
incorporation)
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6400 West Gross Point Road, Niles, Illinois 60714
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(Address of principal executive offices)
(708) 647-7500
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Registrant's telephone number, including area code
2215 E.M. Franklin Avenue, Austin, Texas 78723
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
Effective as of March 30, 1995, Conquest Industries Inc. (the
"Company") transferred all of the operating assets of its airline operations to
a new wholly-owned subsidiary of the Company known as Conquest Airlines Corp.
("CAC"), in consideration of the assumption by CAC of substantially all of the
liabilities of the Company relating to its airline operations. Subsequent to
such transfer of assets and assignment of liabilities, the Company continued to
seek a buyer for the airline operations, which were thereafter conducted by
CAC.
Effective as of June 30, 1995, the Company consummated the
sale of all of the capital stock of CAC to Air L.A., Inc. ("Air LA"), for
consideration consisting of a $3,000,000 convertible promissory note of Air LA,
and an additional 8% promissory note of Air L.A. in the principal amount of
$1,000,000. The Company also received from Air LA. an additional 8% promissory
note in the amount of $2,000,000, representing Air LA's assumption of certain
intercompany indebtedness previously owed by CAC to the Company. In
conjunction with the closing, the Company loaned to CAC the sum of $250,000,
which is repayable (together with interest at 8% per annum) out of the proceeds
of Air LA's next public or private equity offering, or otherwise on demand made
at any time after July 31, 1995. All of such promissory notes are secured by
all of the assets of Air LA and CAC, except that the $250,000 loan is secured
solely by the assets of CAC.
The $3,000,000 convertible promissory note will, upon Air LA's
authorization of preferred stock (anticipated to occur in August 1995),
automatically convert into $3,000,000 of non-dividend bearing convertible
preferred stock of Air LA, which in turn will be convertible, at the option of
the Company, commencing not later than December 31, 1995, into shares of common
stock of Air LA over a two-year period at prevailing market prices for such
common stock. Such convertible promissory note, and the preferred stock into
which it is convertible, entitles the Company, in its discretion, to elect two
members to the Board of Directors of Air LA.
Subject to certain mandatory prepayments out of the proceeds
of equity offerings by Air LA, the $1,000,000 promissory note and the
$2,000,000 promissory note issued as part of the sale of CAC will be repayable
in quarterly installments of $75,000 each (in the aggregate as between the two
notes) commencing not later than September 30, 1996, with all remaining unpaid
principal becoming due and payable in a balloon payment due June 30, 2000.
As part of the sale to Air LA, Air LA has agreed to cure the
existing defaults under the leases for the six aircraft being operated by CAC
at the time of the sale, although the Company will remain contingently liable
under such leases unless and until Air
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LA provides satisfactory deposits and/or other assurances to the lessors, in
order to obtain the release of the Company from the obligations under such
leases. Air LA's obligation to make the required lease payments and obtain the
release of the Company from liability under the leases is secured by a pledge
of the outstanding capital stock of CAC.
Air LA has received a financing commitment from a lender to
provide a refinancing of its indebtedness secured by all of its assets,
including the acquired assets owned by its CAC subsidiary. In light of its
significant recent losses from operations, the consummation of such debt
financing within the next 90 days, as well as a contemplated public offering of
Air LA equity securities in calendar 1995, may be of material importance to Air
LA's ability to both cure the Company's defaults to the CAC aircraft lessors
and to meet its purchase price obligations to the Company.
Item 5. Other Events.
In June 1995, the Company issued an aggregate of 2,094,500
shares of common stock of the Company in a private placement (the "1995 Private
Placement"), at a price of $1.41 per share, yielding total net proceeds to the
Company of approximately $2,900,000. The Company has utilized $350,000 of such
net proceeds to redeem (for $200,000) the outstanding shares of Series D
Preferred Stock of the Company, and to repay a $150,000 loan owed to an
affiliate of an executive officer (collectively, the "Bridge Repayment").
Also in June 1995, the Company reached agreements with certain
of its creditors whereby, subject to the effectiveness of a registration
statement in respect of such shares, and the further final agreement of such
creditors to accept such shares, creditors of the Company holding indebtedness
in the aggregate amount of approximately $1,400,000 have agreed to consider
accepting up to 700,000 shares of common stock of the Company in extinguishment
of such claims.
Prior to the Company's receipt of the net proceeds of the 1995
Private Placement and the Company's entering into the agreements with
creditors, the Company had received notification from the Listing
Qualifications Committee of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") that the Company no longer satisfied the
$1,000,000 minimum capital and surplus requirement (the "Minimum Equity
Requirement") for continued listing of its securities on the NASDAQ SmallCap
Market. As reflected in the attached pro forma balance sheet, after giving
effect to the 1995 Private Placement and the use of proceeds therefrom, the
Company believes that it once again satisfies the Minimum Equity Requirement
for continued listing of its securities on the NASDAQ SmallCap Market; and the
Company believes that it satisfies the Minimum Equity Requirement after
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making all required adjustments for the sale of CAC, and even assuming that
none of the creditors elects to accept shares of common stock in satisfaction
of their claims. The Company has been granted a temporary exception to the
Minimum Equity Requirement, and the Company intends to demonstrate to NASDAQ
renewed compliance with the Minimum Equity Requirement, so as to eliminate the
need for the temporary exception and be restored to unconditional status for
continued listing.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements: Not Applicable
(b) Pro Forma Financial Information: See attached pro forma consolidated
balance sheet of the Company and its subsidiaries as of May 31, 1995, after
giving pro forma effect to the receipt of the net proceeds of the 1995 Private
Placement, the Bridge Repayment out of such net proceeds, and the assumed
conversion of $1,400,000 of accrued liabilities into 700,000 shares of common
stock. Such pro forma consolidated balance sheet does not reflect any
adjustment in the carrying value of CAC.
(c) The following Exhibits were filed as exhibits to the Company's
Amendment No. 1 to Form S-1 Registration Statement filed with the Securities
and Exchange Commission on July 13, 1995, and are hereby incorporated herein by
reference:
1. Securities Purchase Agreement among the Company and the
purchasers of 2,094,500 shares of common stock in the 1995 Private Placement.
2. Stock Purchase Agreement and related exhibits and agreements
between the Company and Air LA, relating to the sale of CAC to Air LA.
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CONQUEST INDUSTRIES, INC., AND SUBSIDIARIES
(FORMERLY WICO HOLDING CORP.)
PRO-FORMA BALANCE SHEET
MAY 31, 1995
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Pro-Forma Adjustments
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Historical Dr. Cr. As Adjusted
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ASSETS
CURRENT ASSETS:
Cash $ 929,194(1) 2,900,000(3) 350,000 $ 3,479,194
Trade accounts receivable 4,527,758 4,527,758
Other receivables 216,327 216,327
Inventories 7,791,124 7,791,124
Prepaid expenses and other current assets 674,223 674,223
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TOTAL CURRENT ASSETS 14,138,626 2,900,000 350,000 16,688,626
MACHINERY AND EQUIPMENT--NET 976,619 976,619
DEFERRED TAX ASSET 1,257,900 1,257,900
INTANGIBLE AND OTHER ASSETS--NET 6,016,258 6,016,258
NET ASSETS OF DISCONTINUED OPERATIONS 4,250,000 4,250,000
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$ 26,639,403 $2,900,000 $ 350,000 $ 29,189,403
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 5,840,752(2) 1,400,000 $ $ 4,440,752
Accrued expenses 2,421,665 2,421,665
Current portion of long-term debt 1,500,000 1,500,000
TOTAL CURRENT LIABILITIES 9,762,417 1,400,000 -- 8,362,417
LONG-TERM DEBT 17,408,349 17,408,349
OTHER LIABILITIES 150,000(3) 150,000
DEFERRED INCOME TAXES -- --
STOCKHOLDERS' DEFICIT:
Series A Preferred Stock 755 755
Series D Preferred Stock 200,000(3) 200,000 --
Series B Preferred Stock 2,800,000 2,800,000
Common stock 91,587 (1),(2) 2,795 94,382
Additional paid-in capital 12,625,814 (1),(2) 4,297,205 16,923,019
Accumulated deficit (16,320,951) (16,320,951)
Treasury stock warrants -- --
Foreign currency translation adjustment (78,568) (78,568)
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(681,363) 200,000 4,300,000 3,418,637
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$ 26,639,403 $1,750,000 $4,300,000 $ 29,189,403
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CONQUEST INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO PRO-FORMA BALANCE SHEET
MAY 31, 1995
A: The Company's May 31, 1995 consolidated balance sheet has been
adjusted to give effect to the following events and transactions, all of which
occurred subsequent to May 31, 1995:
1) The receipt of net proceeds of approximately $2,900,000 as a
result of the private placement of 2,094,500 shares of the
Company's common stock at an issuance price of approximately
$1.41;
2) The repurchase of the Series D preferred stock and repayment
of a stockholder loan
3) The conversion of approximately $1,400,000 in trade
liabilities into 700,000 shares of the Company's common stock
4) In June 1995 the Company completed the sale of the common
stock of Conquest Air for $6,000,000 of securities of the
purchaser, Air L.A. The carrying value of the airline assets
($4,250,000) has not been adjusted in the accompanying
consolidated pro-forma balance sheet as management is in the
process of evaluating the values of the securities received in
the transaction.
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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 hereto duly authorized.
CONQUEST INDUSTRIES INC.
(Registrant)
Dated: July 27, 1995 By: /s/ Jerry Karlik
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Jerry Karlik, Chief Financial
Officer and Chief Accounting
Officer
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