DRAFT-OCTOBER 4, 2000 --------------------------------
OMB APPROVAL
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OMB NUMBER: 3235-0060
EXPIRES: MAY 31, 2000
ESTIMATED AVERAGE BURDEN
HOURS PER RESPONSE..........5.00
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UNITED STATES
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) October 12, 2000
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Motorcar Parts & Accessories, Inc.
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(Exact name of registrant as specified in its charter)
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New York 0-23538 11-2153962
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(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
2727 Maricopa Street, Torrance, California 90503
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 212-7910
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(Former name or former address, if changed since last report.)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
AUDITED MARCH 31, 2000 BALANCE SHEET. Attached to this Form 8-K as Exhibit
99.1 is the Company's recently-completed audited consolidated balance sheet
as of March 31, 2000 (the "2000 Balance Sheet"). The 2000 Balance Sheet gives
effect to a change in the Company's method of accounting for inventory that
the Company adopted for the year ended March 31, 2000. As explained in
Footnote D to the 2000 Balance Sheet, the Company has changed its prior
method of valuing inventory. In prior years, when the Company valued its
inventory at the lower of cost or market, market was determined by the
weighted average of the repurchase price of cores acquired from customers as
trade-ins and the price paid for cores purchased from brokers. Under the new
method, the Company determines market value based on comparisons to current
core broker prices, which prices are normally less than the core values
credited to customers' accounts when cores are returned to the Company as
trade-ins. In addition, an allowance for obsolescence is provided to reduce
the carrying [market] value of inventory to its estimated market value at
March 31, 2000 for purposes of valuing its inventory at March 31, 2000. As a
result of these changes, the carrying value for the Company's inventory was
reduced by approximately $33 million. After giving effect to these changes,
the Company had an accumulated deficit and total shareholders' equity at
March 31, 2000 of approximately $33.7 million and $17.4 million (or $2.69 per
share), respectively.
ANTICIPATED ISSUANCE OF ADDITIONAL FINANCIAL STATEMENTS. The Company and its
independent auditors continue to work on completion of the audit of the
Company's income statement and cash flow statement for the year ended March 31,
2000, which statements are required to be provided to the Company's principal
lender by November 30, 2000. Although there can be no assurance in this regard,
the Company currently believes that it will be able to meet this deadline. The
Company expects that its income statement for the year ended March 31, 2000 will
show a loss from operations, in addition to the loss associated with the
inventory writedown referred to in the preceding paragraph. Following completion
of the audit of the Company's income statement and cash flow statement for the
year ended March 31, 2000, the Company intends to file its Form 10-K for the
year ended March 31, 2000 with the Securities and Exchange Commission. As noted
below, however, this Form 10-K filing will not include all comparative
information for prior years.
Currently, the Company does not have audited financial statements for the year
ended March 31, 1999, and has not, therefore, filed its Form 10-K for the year
ended March 31, 1999 with the Securities and Exchange Commission. (As noted in
the Form 8-K dated March 1, 2000 and previously filed by the Company with the
Securities and Exchange Commission, the predecessor accounting firm withdrew
their report with respect to the Company's financial statements for the three
years ended March 31, 1998.) In connection with completion of the audit of the
Company's financial statements for the year ended March 31, 2000, the Company
intends to prepare and issue an audited balance sheet as of March 31, 1999.
Thereafter, the Company and its independent public accountants intend to
complete the audit of Company's income statement and cash flow statement for the
year ended March 31, 1999. No assurance can be given with respect to the length
of time it may take to complete the audit of the Company's financial statements
for the year ended March 31, 1999, and the Company may be unable to do so.
If the Company is unable to obtain an audited report with respect to its balance
sheet as of March 31, 1998 or March 31, 1997, the Company may not be in a
position to file its Form 10-K for the year ended March 31, 1999. The inability
to audit MPA's March 31, 1998 balance sheet may likewise make it impossible for
MPA to file Form 10-Qs, with all comparative information, for the quarters ended
June 30, 1999, September 30, 1999 or December 31, 1999.
PENDING INVESTIGATION BY THE SECURITIES AND EXCHANGE COMMISSION. On January 20,
2000, the SEC issued a formal order of investigation with respect to the
Company. In this order, the SEC authorized an investigation into, among other
things, the accuracy of the financial information previously filed with the
Commission and potential deficiencies in the Company's records and system of
internal control. The SEC investigation is proceeding. There can be no assurance
with respect to the outcome of the SEC's investigation.
The Company has not filed its Form 10-K for the years ended March 31, 1999 and
March 31, 2000 and its Form 10-Qs for the quarters ended June 30, 1999,
September 30, 1999 or December 31, 1999. The SEC is aware of this failure and
has reminded the Company that it has the authority to revoke or suspend the
Company's registration under the Securities Exchange Act of 1934 as a result of
this failure, which SEC action would prevent sales of the Company's common stock
through broker/dealers.
CLASS ACTION LAWSUIT. The Company is a defendant in a class action lawsuit
pending in the United States District Court, Central District of California.
The complaint in this action alleges that the Company misstated its earnings
in violation of securities laws over a three-year period and seeks damages on
behalf of all investors who purchased Company common stock from August 1,
1996 to July 30, 1999. The Company's insurance carrier has also filed a claim
against the Company and certain officers that seeks to invalidate coverage
for claims made against the Company's officers in the class action lawsuit.
See Footnote N to the 2000 Balance Sheet. The outcome of these cases cannot
presently be determined.
LIQUIDITY AND CAPITAL RESOURCES; DEFAULT UNDER BANK CREDIT AGREEMENT. The
Company finances its operations out of cash flow from operations together with
borrowings under its existing line of credit. Because of the Company's failure
to satisfy certain financial covenants, including minimum cash flow levels, or
to provide the bank with required financial information, the Company was in
default under its credit agreement. In connection with the bank's agreement to
waive these defaults, the Company agreed to reduce the maximum level of
borrowings under this line of credit from the original level of $38 million to
$33 million by March 31, 2001. This reduction will be made in monthly increments
of $500,000. While the Company has made net payments on its line of credit
totaling $1,750,000 over the past three months, and expects to be able to
generate sufficient cash flow from operations to satisfy the required reductions
in total borrowings under the bank credit agreement, there is no assurance that
it will be able to make such required reductions. The Company also agreed to
provide the bank, by December 15, 2000, with an approved expression of interest
from a third-party lender to refinance the loan under the bank credit agreement.
No assurance can be given that the Company will be able to provide such an
expression of interest to the bank.
RESULTS OF RECENT OPERATIONS. During the three months ended June 30, 2000, the
Company had a satisfactory level of sales activity and believes it operated on a
break-even or slightly profitable basis. The Company will release financial
information for the June 30, 2000 quarter after it has been reviewed by its
independent public accountants.
FORWARD-LOOKING STATEMENTS. This Form 8-K contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in forward-looking statements as a result of the
variability of business conditions, including the outcome of the SEC
investigation and class action lawsuit described above, changes in the Company's
relationships with its key customers and the Company's success at preparing its
financial information in a timely way, consistent with its obligations under the
Securities Exchange Act of 1934 and its bank credit agreement.
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 hereunto duly authorized.
MOTORCAR PARTS & ACCESSORIES, INC.
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(Registrant)
Date October 12, 2000 /s/ ANTHONY SOUZA
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(Signature)
Anthony Souza
President
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
Exhibit 99.1 Consolidated Statement of the Financial Position of
Motorcar Parts & Accessories, Inc. dated March 31, 2000.