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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
EXCHANGE ACT OF 1934 from ____________ to ______________.
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.)
2465 MARYLAND ROAD, WILLOW GROVE, PA 19090
(Address of principal executive office) (Zip Code)
Registrant's telephone number: (215) 658-8900
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 August 14, 2001 there were 67,841,906 shares of the Registrant's Common
Stock outstanding.
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PART I. FINANCIAL INFORMATION
FORM 10-Q
AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
JUNE 30, SEPTEMBER 30,
2001 2000
--------- -------------
ASSETS
Current Assets:
Cash and cash equivalents ....................................... $ 20 $ 723
Restricted Cash ................................................. 432
Accounts receivable, less allowance for doubtful accounts of $633
and $381, respectively ........................................ 1,110 8,069
Inventories ..................................................... 75 1,843
Other current assets ............................................ 741 478
--------- ---------
Total current assets ..................................... 2,378 11,113
--------- ---------
Property and equipment, net ........................................ 638 909
Property acquired for lease transactions in process, net ........... 6,358 -
Lease receivables assigned to lenders .............................. 1,459 -
Other assets ....................................................... 254 294
--------- ---------
Total assets ............................................. $ 11,087 $ 12,316
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Line of credit .................................................. $ 606 $ 5,269
Accounts payable ................................................ 3,754 3,393
Accrued expenses and other current liabilities .................. 796 929
--------- ---------
Total current liabilities ................................ 5,156 9,591
--------- ---------
Nonrecourse debt ................................................... 6,762 -
Unearned revenue, net .............................................. 1,151 -
Stockholders' Equity (Deficit)
Common stock, $.01 par value; 200,000,000 shares authorized;
67,841,906 shares issued and outstanding ....................... 679 679
Additional paid-in capital ......................................... 174,698 174,698
Accumulated deficit ................................................ (177,359) (172,652)
--------- ---------
Total stockholders' equity (deficit) ..................... (1,982) 2,725
--------- ---------
Total liabilities and stockholders' equity (deficit) .... $ 11,087 $ 12,316
========= =========
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AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30 JUNE 30
-------------------------------- --------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net Sales ..................................... $ 1,836 $ 15,127 $ 24,006 $ 45,600
Cost of Sales ................................. 2,497 14,135 22,562 42,176
------------ ------------ ------------ ------------
Gross Profit ............................. (661) 992 1,444 3,424
Operating Expenses:
Selling, General and Administrative ........... 1,264 2,012 5,703 5,961
------------ ------------ ------------ ------------
Loss from Operations .......................... (1,925) (1,020) (4,259) (2,537)
Gain on Sale of Distribution Business ......... - - 229 -
Restructuring costs ........................... (310) - (310) -
Interest Expense, net ......................... (24) (83) (367) (258)
------------ ------------ ------------ ------------
Net Loss ...................................... $ (2,259) $ (1,103) $ (4,707) $ (2,795)
============ ============ ============ ============
Basic and Diluted Loss per Share .............. $ (0.03) $ (0.02) $ (0.07) $ (0.04)
------------ ------------ ------------ ------------
Shares used in computing Net Loss per share.... 67,841,906 67,841,906 67,841,906 67,841,906
------------ ------------ ------------ ------------
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AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
JUNE 30 JUNE 30
---------------------- ----------------------
2001 2000 2001 2000
------- ------- ------- -------
(UNAUDITED)
Cash flow from operating activities:
Net Loss ............................................................. $(2,259) $(1,103) $(4,707) $(2,795)
------- ------- ------- -------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation .................................................... 78 79 282 258
Increase (decrease) in allowance for doubtful accounts .......... 254 14 252 (51)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ...................... 4,098 (732) 6,707 (1,042)
(Increase) decrease in inventories .............................. 1,220 2,090 1,768 1,559
(Increase) decrease in other assets ............................. 161 (24) (223) (93)
(Increase) in lease receivables assigned to lenders ............. (604) - (1,459) -
(Increase) in property acquired for lease transactions .......... (1,815) - (6,358) -
Increase (decrease) in accounts payable and accrued expenses .... (714) (480) 228 256
Increase in nonrecourse debt .................................... 1,739 - 6,762 -
Increase in unearned revenue .................................... 720 - 1,151 -
------- ------- ------- -------
Net cash provided by (used in) operating activities ............. 2,878 (156) 4,403 (1,908)
Cash flow from investing activities:
Capital expenditures, net of disposals .......................... 36 (129) (11) (211)
Cash flow from financing activities:
Net borrowings (repayment) under lines of credit ............... (3,091) 541 (4,663) 2,091
------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents ................. (177) 256 (271) (28)
------- ------- ------- -------
Cash and cash equivalents at beginning of period ..................... 629 383 723 667
------- ------- ------- -------
Cash and cash equivalents at end of period ........................... $ 452 $ 639 $ 452 $ 639
======= ======= ======= =======
Supplemental Disclosures of Cash Flow Information
Interest:
During the nine months ended June 30, 2001 and 2000, the Company paid interest
of $422 and $258, respectively.
Income taxes:
During the nine months ended June 30, 2001 and 2000, the Company made no
income tax payments.
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AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(1) BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements included herein
have been prepared by AmeriQuest Technologies, Inc.. ("AmeriQuest" or the
"Company") in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X 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 audited Consolidated Financial
Statements and Notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 2000 and the Company's Current
Report on Form 8-K filed on April 5, 2001, each as filed with the Securities and
Exchange Commission.
The results of operations and cash flows for the nine month period ended June
30, 2001 are not necessarily indicative of the results of operations or cash
flows which may be reported for the remainder of fiscal 2001.
(2) LOSS PER SHARE
The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings per Share". This statement requires the disclosure of both basic and
diluted earnings per share. Basic and dilutive shares outstanding for the three
and nine months ended June 30, 2001 and 2000 are the same, as all common stock
equivalents are anti-dilutive due to the net loss for the periods presented.
(3) LINES OF CREDIT
At June 30, 2001, the Company had borrowings of $606,000 against its line of
credit with Fleet Financial Corporation ("Fleet"), inclusive of outstanding but
unpresented checks. The Fleet credit facility expired on July 20, 2001 and has
not been renewed by Fleet. The Company did not repay its existing borrowings
under such line of credit prior to its expiration date, but Fleet has indicated
that it will allow the Company a reasonable period of time to liquidate the loan
in the ordinary course of business.
(4) LEASE ACCOUNTING TREATMENT
Property acquired for transactions in process represents partial completion or
delivery of property which the lessee of the Company's leasing subsidiary has
accepted on in-process lease transactions.
For capital leases that qualify as direct financing leases, the aggregate lease
payment receivables are recorded on the balance sheet in their aggregate. The
unearned income is recognized as direct financing revenue over the lease term.
For capital leases that qualify as sales-type leases, the Company recognizes
profit or loss at lease inception to the extent the fair value of the property
leased differs from the Company's carrying value. The discounted value of the
aggregate lease payment receivables is recorded as sales-type lease revenue. The
property cost and any initial direct costs are recorded as sales-type lease
costs.
The Company assigns, on a nonrecourse basis, the lease payment receivables to
various financial institutions at various interest rates. In the event of
default by a lessee, the lender has a first lien against the underlying leased
property with no further recourse against the Company. If this occurs, the
Company may not realize any future residual value in the leased property.
Certain lease transactions that were recorded as revenue in the preceeding two
fiscal quarters, upon a detailed review, have been adjusted to reflect more
appropriate and conservative treatment under recent GAAP pronouncements. The
adjustments were not material to the quarter in which they were reflected. The
financial statements for the period ended June 30, 2001 reflect the impact of
such deferral of revenue and related costs and expenses in the quarterly period
in which they were originally recorded.
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AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(5) SEGMENT INFORMATION
Beginning in fiscal 2000, the Company was organized into three segments:
fulfillment distribution, solutions and leasing. The fulfillment distribution
division sold product to VARs and systems integrators prior to the sale of
certain assets of that division on March 30, 2001. The solutions division
provides engineering, integration and implementation services to corporate
accounts in addition to the sales of products and applications to those
customers. The leasing subsidiary provides vendor lease financing programs for
various types of equipment and software dealers in addition to providing lease
financing directly to middle market corporations for technology, production and
other types of business equipment, nationwide. The Company evaluates and manages
these segments only at the sales and cost of sales level. Therefore, operating
income, total assets, depreciation and capital expenditures by division are not
presented.
On March 30, 2001, the Company consummated the sale of certain assets related to
its fulfillment distribution business to Seneca Data Distributors, Inc., a New
York corporation ("Seneca"), pursuant to an Asset Purchase Agreement. As a
result, as of the third quarter of fiscal 2001, the Company has two segments:
business solutions and leasing.
The following table represents information about the Company's divisions for the
nine months ended June 30, 2001 and 2000 (dollars in thousands):
2001 SALES GROSS PROFIT
- ---- ----- ------------
Fulfillment distribution .......... $ 19,886 $ 518
Leasing ........................... 159 147
Solutions ......................... 3,961 779
-------- --------
$ 24,006 $ 1,444
======== ========
2000 SALES GROSS PROFIT
- ---- ----- ------------
Fulfillment distribution .......... $ 38,477 $ 2,589
Leasing ........................... 276 50
Solutions ......................... 6,847 785
-------- --------
$ 45,600 $ 3,424
======== ========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The comments below contain certain forward-looking statements that are based on
current expectations. In light of the important factors that can materially
affect results, including those set forth above, the inclusion of
forward-looking information herein should not be regarded as a representation by
the Company or any other person that the objectives or plans of the Company will
be achieved. The Company may fail to grow the solutions business as expected;
the Company may fail to generate sufficient positive cash flow to stay in
business; the Company's sales force may fail to generate enough high margin
sales to offset the higher cost structure of providing expert business
solutions; the Company may encounter competitive, technological, financial,
legal and business challenges making it more difficult than expected to continue
as a solutions and leasing provider; competitive conditions within the computer
industry may change adversely; demand for the solutions provided by the Company
may weaken; the Company may be unable to retain existing key management, sales
and technical personnel; the Company's forecasts may not accurately anticipate
market demand; the Company's insistence on only accepting higher margin business
may not allow the Company to generate sufficient revenue to cover its fixed
operating expenses; and there may be other material adverse changes in the
Company's operations or business. A more comprehensive description of these
risks and other factors is set forth in the Company's Current Report on Form 8-K
filed on April 5, 2001.
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AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)
JUNE 30, 2001
SUMMARY
AmeriQuest currently markets, sells and provides business solutions to narrowly
defined target markets and lease financing to its corporate clients.
AmeriQuest's current strategy is to emphasize the sale of complete solutions to
its corporate clients and to provide a high level of value-added services,
including consultation on component selection, system assembly, configuration,
testing, logistics, start-up, installation, and technical support services. The
Company intends to focus on providing application solutions and implementation
to these corporate clients. The goal of this new focus is to significantly
improve the Company's margins as compared to the margins of the discontinued
fulfillment distribution business. Management believes that this change in
strategy, which is expected to significantly increase the Company's sales
margins, when coupled with planned decreases in expenses, may return AmeriQuest
to profitability, but there are numerous risks and uncertainties, including
those described above. No assurance can be given that the Company's strategy
will succeed or that the Company will become operationally profitable, and if
this strategy is not successful, the Company may not be able to continue in
business. Management will periodically review the need to further reduce costs
should gross profits, for any reason, not materialize in amounts sufficient to
cover the existing cost structure.
The Company also has a leasing subsidiary which assists AmeriQuest clients in
addition to other qualified lessees in obtaining lease financing for business
information products through third parties.
The Company had an operating loss of $595,000, excluding charges to cost of
goods sold of $901,000 and charges to SG&A expense of $429,000 related to the
sale of the Company's fulfillment distribution business, and net sales of
$1,836,000 for the quarter ended June 30, 2001, compared to an operating loss
of $1,020,000 and net sales of $15,127,000 for the quarter ended June 30, 2000.
For the quarter ended June 30, 2001, the Company had a net loss of $2,259,000
including restructuring cost of $310,000 related to the sale of the Company's
fulfillment distribution business compared to a net loss of $1,103,000 for the
quarter ended June 30, 2000.
At June 30, 2001, the Company had $452,000 in cash and had borrowings of
$606,000 against its existing line of credit. Borrowings against its expired
line of credit have been reduced to approximately $300,000 at August 14, 2001.
The substantial majority of the Company's cash balance, $432,000, is related to
customer deposits at its leasing subsidiary and its use is restricted.
Management has undertaken negotiations with certain vendors that primarily
supplied product to its former distribution business in order to provide a plan
to pay them in full over time. A number of those vendors have agreed, in
principle, to accept the Company's proposal to convert their unsecured trade
payable to a combination of preferred stock and unsecured long-term debt. The
Company has not completed or finalized any legal arrangements to implement such
proposals, has not accepted counter proposals, and will not do so until
agreement is reached with most of these vendors. Failure of the remaining
vendors to accept the Company's proposal will preclude the Company from
obtaining alternate sources of capital, should such capital be available at
terms acceptable to the Company. The Company must obtain alternate sources of
capital in order to both sustain and grow the business as it has been
restructured, to pay small balance past obligations and to repay that portion of
vendor debt that is expected to be converted to long term notes.
On April 17, 2001, Jon D. Jensen was appointed as President and Chief Executive
Officer, while also continuing as the Company's Chief Financial Officer,
replacing Alexander C. Kramer who remains a member of the Company's Board of
Directors. Mr. Kramer will also advise the Company in his capacity as Managing
Director of Listen Group Partners, LLC, a limited liability company jointly
owned by Messrs. Kramer and Jensen which owns 31,349,878 shares, or
approximately 46.9%, of AmeriQuest's outstanding common stock. The Company
believes that the interests of its stockholders will be best served if Mr.
Jensen and Mr. Kramer each focus their efforts on parallel courses of action to
restore the Company to profitability and growth; Mr. Jensen will work to foster
internal growth and profitability, while Mr. Kramer will pursue external growth
opportunities, including strategic acquisitions, to build AmeriQuest's solutions
business, although the Company has no current agreements pertaining thereto.
The Company has undertaken a number of measures to improve competitiveness.
Salary expense has been cut by 58% and other expenses have been reduced by
approximately 49% during the quarter ended June 30, 2001 as compared to the year
ago quarter ended June 30, 2000.These actions will reflect a lowered cost
structure in the fourth quarter of fiscal 2001. Also, the Company has narrowly
defined its business solution target markets to focus on asset management,
networking infrastructure and distribution management, which the Company expects
should improve the performance of this segment of the Company's business.
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AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT.)
JUNE 30, 2001
The following table sets forth certain items in the Consolidated Statements
of Operations as a percent of net sales.
PERCENT OF SALES
THREE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
--------------- ---------------
2001 2000 2001 2000
------ ------ ------ ------
Net sales ......................... 100.0 100.0 100.0 100.0
Cost of sales ..................... 136.0 93.4 94.0 92.5
Gross profit ...................... (36.0) 6.6 6.0 7.5
Selling, general and administrative 68.8 13.4 23.8 13.1
Gain on sale of distribution
business ......................... -- -- (1.0) --
Restructuring costs ............... 16.9 1.3
Interest expense, net ............. (1.3) (0.5) (1.5) (0.6)
Net Loss .......................... (123.0) (7.3) (19.6) (6.1)
QUARTERLY RESULTS
Sales for the quarter ended June 30, 2001 decreased by 88% from $15,127,000 for
the quarter ended June 30, 2000 to $1,836,000, as a result of the sale of
certain assets related to the Company's fulfillment distribution business to
Seneca and the Company's strategy to dramatically reduce the amount of low gross
profit sales, and was partially offset by improvement in revenue generated by
the leasing subsidiary. The Company expects that this strategy, as more fully
described in the Company's Current Report on Form 8-K filed on April 5, 2001,
will lead to significantly lower sales in fiscal 2001 as compared to fiscal
2000. Included in the sales for the quarter was sell through of $943,000 of
inventory at cost.
Cost of sales increased to 136% of sales for the quarter ended June 30, 2001
compared to 93.4% of sales in the same quarter for the prior year primarily as
a result of writedown of vendor receivables, provisions for inventory
writedowns and loss on sale of inventory. Excluding the sale of inventory at
cost and charges of $901,000 related to the sale of the Company's fulfillment
distribution business, cost of sales for the remaining business decreased to 73%
or an improvement in gross profit to 27%.
Selling, general and administrative expenses of $1,264,000 includes an increase
in allowances for doubtful collection of accounts receivable of $254,000;
provision for state sales tax expense of $133,000; and other expenses of $42,000
related to the sale of the Company's fulfillment distribution business.
Excluding such charges, the Company incurred SG&A expenses of $835,000 for the
quarter ended June 30, 2001 which compares to $2,012,000 for the quarter ended
June 30, 2000.
Restructuring costs of $310,000 included costs and expenses related to sale of
the distribution business including severance pay for employees, termination of
leases and disposal of abandoned assets.
Net interest expense of $24,000 in the quarter ended June 30, 2001 decreased as
compared to net interest expense of $83,000 for the quarter ended June 30, 2000,
due to a decrease in borrowings under the Company's line of credit.
No income tax benefit was recorded on the net operating loss for the nine months
ended June 30, 2001 and June 30, 2000 as valuation allowances were provided,
because it is more likely than not, as defined in SFAS 109, that deferred tax
benefits will not 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.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2001
Sales of $24,006,000 for the first nine months ended June 30, 2001 decreased
48%, or $21,594,000, compared to $45,600,000 for the first nine months of the
prior fiscal year. The decrease reflects the Company's strategy to dramatically
reduce the amount of low gross profit sales. The Company expects that this
strategy, as more fully described in the Company's Current Report on Form 8-K
filed on April 5, 2001, will lead to significantly lower sales in fiscal 2001
as compared to fiscal 2000.
Cost of sales, as a percentage of net sales, increased 1.5% to 94% for the nine
months ended June 30, 2001 compared to 92.5% for the nine months ended June 30,
2000. Cost of sales for the nine months ended June 30, 2001 include charges of
$901,000 associated with writedown of vendor receivables, provisions for
inventory writedowns and loss on sale of inventory related to the sale of the
Company's fulfillment distribution business.
Selling, general and administrative expenses of $5,703,000 decreased 4%, or
$258,000, when compared to $5,961,000 for the nine months ended June 30, 2000.
The decrease was due to the Company's cost reduction actions. The expenses
include an increase in allowances for doubtful collection of accounts
receivable of $254,000; provision for state sales tax expense of $133,000; and
other expenses of $42,000 related to the sale of the Company's fulfillment
distribution business.
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AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT.)
JUNE 30, 2001
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 information technology industry; (ii) shifts in short-term demand
for the Company's solutions; and (iii) the fact that sales in a given quarter
result from an increasing lead time as proposals may be presented to clients in
either the current or previous quarter before work may commence. Due to the
factors noted above, as well as the fact that the Company participates in a
highly dynamic industry, the Company's net sales and earnings may be subject to
material volatility, particularly on a quarterly basis. In addition, the
decisions to close former businesses could involve unforseeable additional
expenses and impede the prospects for the Company to obtain the additional sales
needed to consistently achieve operating profitablity.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, the Company had $452,000 in cash and had borrowings of
$606,000 against its existing line of credit. The substantial majority of the
Company's cash balance, $432,000, is related to customer deposits at its leasing
subsidiary and its use is restricted. Borrowings against its expired line of
credit has been reduced to approximately $300,000 at August 14, 2001.
The Company generated $2,878,000 of cash from operating activities in the
quarterly period ended June 30, 2001, primarily due to the overall decrease in
accounts receivable and inventory, which is a result of the Company's desired
strategy to reduce the amount of low gross profit sales. This strategy, as more
fully described in the Company's Current Report on Form 8-K filed on April 5,
2001, will lead to significantly lower accounts receivable balances in fiscal
2001 than in fiscal 2000. The cash provided by operations was utilized to
decrease net borrowings against the Fleet line of credit by $3,091,000.
The Fleet credit facility expired on July 20, 2001 and was not renewed by Fleet.
The Company did not repay its existing borrowings under such line of credit
prior to its expiration date, but Fleet has indicated that it will allow the
Company a reasonable period of time to liquidate the loan in the ordinary course
of business following the loan termination date. The sale of the assets related
to the Company's distribution business will significantly reduce the Company's
future cash and borrowing needs. Moreover, the Company does not currently
believe that, following the sale of the distribution business assets, it will
have to replace the bank line of credit in the near term. In the event that the
Company desires to enter into a new line of credit, there is no assurance that a
bank line of credit would be available, or if available, could be secured on
terms favorable to the Company.
On July 30, 2001, the Company announced that Listen Group Partners, LLC, a
limited liability company jointly owned by Messrs. Kramer and Jensen which owns
31,349,878 shares, or approximately 46.9%, of AmeriQuest's outstanding common
stock. intends to sell up to 670,000 shares of the Company's common stock under
Rule 144 of the Securities Act of 1933 at market prices: All of the funds
generated from these sales, after an allowance for taxation, will be used to
fund a loan to AmeriQuest. The loan will bear interest at the "Applicable
Federal Rate" as determined by the IRS. As of August 14, 2001, no funds have yet
been lent to the Company.
As of June 30, 2001, the Company has $4,272,000 in outstanding accounts payable.
As cash resources that remain are sufficient only to maintain the current
business, management has undertaken negotiations with certain vendors that
primarily supplied product to its former distribution business in order to
provide a plan to pay them in full, over time. A number of those vendors have
agreed, in principle, to accept the Company's proposal to convert their
unsecured trade payable to a combination of preferred stock and unsecured
long-term debt. The Company has not completed or finalized any legal
arrangements to implement such proposals, has not accepted counter proposals,
and will not do so until agreement is reached with most of these vendors.
Failure of the remainiong vendors to accept the Company's proposal will preclude
the Company from obtaining alternate sources of capital, should such capital be
available at terms acceptable to the Company and the Company may not have
sufficient liquidity to pay its debts as they become due.
The Company believes, in the near term, that cash on hand and working capital,
until collection of outstanding accounts receivable in sufficient amounts to
repay outstanding borrowings is achieved, will be adequate for the Company to
meet its current financial obligations. However, the Company must obtain
alternate sources of capital in order to both grow the business as it has been
restructured, to pay past obligations and to repay that portion of vendor debt
that is expected to be converted to long term notes.
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AMERIQUEST TECHNOLOGIES, INC.
JUNE 30, 2001
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On April 5, 2001, the Company filed a Current Report on Form 8-K
regarding the sale of certain assets related to its fulfillment distribution
business to Seneca.
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.
August 14, 2001
/s/ Jon D. Jensen
Chief Executive Officer
(Principal executive officer
and principal accounting officer)
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