ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2013, 2012, AND 2011
2013 2012 2011
ASSETS
Current assets:
Cash and cash equivalents $27,825,326 $ 2,823,576 $ 1,282,228
Accounts receivable, less allowance for doubtful accounts of
$420,710, $534,447, and $703,532, respectively - 11,548,624 14,522,393
Inventory - 24,005,885 28,351,131
Prepaid expenses and other current assets 129,492 1,252,102 1,310,364
Other receivables - 71,701 -
Deferred tax asset - 6,285,599 3,059,567
Total current assets $ 27,954,818 $ 45,987,487 $ 48,525,683
Property, plant and equipment $ - $ 5,177,477 $ 5,107,203
Less accumulated depreciation and amortization - (2,934,624) (2,573,958)
Property, plant and equipment, net $ - $ 2,242,853 $ 2,533,245
Other assets:
Deferred loan costs, net $ - $ 274,494 $ 398,719
Deposits - 224,460 924,460
Investment in Bellator 102,077 90,228 90,228
Total other assets 102,077 589,182 1,413,407
Total assets $ 28,056,895 $ 48,819,522 $ 52,472,335
(continued)
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2013 2012 2011
LIABILITIES AND STOCKHOLDERS’ EQUITY
(DEFICIENCY)
Current liabilities:
Accounts payable $ - $ 7,619,591 $ 9,888,998
Accrued expenses - 4,522,920 4,854,768
Income taxes payable - 50,485 867,300
Current portion of term loans - 4,000,000 2,535,208
Current portion of capital lease obligation - - 171,792
Liabilities related to discontinued operations 298,466 298,466 2,984,660
Total current liabilities $ 298,466 $ 16,491,462 $ 21,302,726
Non-current liabilities:
8% subordinated secured loans - 18,998,213 19,832,003
Secured line of credit - 7,167,015 16,725,304
Term loan payable, less current portion - - 4,000,000
Series A Preferred stock of subsidiary subject to
mandatory redemption; 13% cumulative, nonconvertible,
redeemable preferred stock, mandatory
redemption and liquidation value of $1,000 per share; 0
shares issued and outstanding at September 30, 2013
plus accumulated dividends of $0; 5,936 shares issued
and outstanding at September 30, 2012 plus cumulative
dividends of $5,867,750; 5,936 shares issued and
outstanding at September 30, 2011 plus cumulative
dividends of $5,093,760 - 11,803,750 11,029,760
Deferred tax liability - 403,746 383,158
Minority interest – related parties - 7,266,179 5,775,831
Total liabilities $ 298,466 $ 62,130,365 $ 79,048,782
Commitments and contingencies
Stockholders’ equity (deficiency):
Common stock, $0.01 par value; authorized –
100,000,000 shares; 26,744,913, 57,246,598, and
56,934,040, issued and outstanding as of September
30, 2013, 2012, and 2011 $267,612 $572,466 $569,340
Additional paid in capital $ 262,755,790 $ 288,426,728 $ 288,365,584
Accumulated deficit $ (235,235,946 ) $ (301,405,879 ) $ (314,681,795)
Treasury stock – 607,500 shares, at cost (29,027 ) (904,158 ) (829,576)
Total stockholders’ equity (deficiency) $ 27,758,429 $ (13,310,843 ) $ (26,576,447
Total liabilities and stockholders’ equity (deficiency) $ 28,056,895 $ 48,819,522 $ 52,472,335
See accompanying notes to consolidated financial statements.
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ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED SEPTEMBER 30, 2013, 2012, AND 2011
2013
2012
2011
COSTS AND EXPENSES
General and administrative $ 641,493 $ 1,327,362 $ 812,593
Total 641,493 1,327,362 812,593
Income from operations (641,493) (1,327,362) (812,593)
OTHER INCOME (EXPENSE)
Interest expense - - (38,843)
Gain on retirement of debt
Dividend and Interest Income
Gain on write off of Discontinued Operations
Gain on Sale of KES
Gain on Sale of Minority Interest
-
462,991
-
76,806,891
10,029,058
-
19,681
2,686,193
-
-
226,000
17,437
-
-
-
Loss on Sale of Investments (95,811) - (151,541)
Total Other Expense, net 87,203,129 2,705,874 53,053
Income from Continued Operations 86,561,636 1,378,512 (759,540)
Income Taxes – Continued Operations (7,240,430) 3,546,746 2,752,904
Net income from Continued Operations
Income from Discontinued Operations
Income Taxes – Discontinued Operations
Net Income – Discontinued Operations
INCOME FROM OPERATIONS, NET
79,321,206
(159,164)
-
(159,164)
79,162,042
4,925,258
10,358,952
(517,947)
9,841,005
14,766,263
1,993,364
11,820,746
(685,641)
11,135,105
13,128,469
MINORITY INTEREST 12,992,109 1,490,347 1,711,338
TOTAL NET INCOME $ 66,169,933 $ 13,275,916 $ 11,417,131
NET INCOME PER COMMON SHARE -
Basic $1.58 $0.23 $0.21
Diluted $1.47 $0.22 $0.21
NUMBER OF COMMON SHARES OUTSTANDING
Basic 41,995,756 57,090,319 53,331,807
Diluted 44,883,256 59,490,319 54,856,807
See accompanying notes to consolidated financial statements.
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ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
TWELVE MONTHS ENDED SEPTEMBER 30, 2013, 2012, AND 2011
Common Stock
Shares Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Treasury
Stock Total
Balances at September 30, 2010 49,729,574 $ 497,295 $ 284,717,264 $ (326,098,926) $ (829,576) $ (41,713,943)
Restructuring of 4% Preferred
Stock 3,774,632 37,746 1,849,569 1,887,315
Restructuring of 4% ALJ Note 3,429,834 34,299 1,680,619 1,714,918
Retirement of 2,928 Shares of KES
Treasury Stock (36,599) (36,599)
Share based compensation
Restricted Stock 29,528 29,528
Stock Options 125,203 125,203
Net Income 11,417,131 11,417,131
Balances at September 30, 2011 56,934,040 $ 569,340 $ 288,365,584 $ (314,681,795) $ (829,576) $ (26,576,447)
Share based compensation
Restricted Stock 200,000 2,000 43,997 45,997
Stock Options 105,930 1,059 17,214 18,273
Escheated Stock 6,628 67 (67) -
Treasury Stock (74,582) (74,582)
Net Income 13,275,916 13,275,916
Balances at September 30, 2012 57,246,598 $ 572,466 $ 288,426,728 $ (301,405,879) $ (904,158) $ (13,310,843)
Share based compensation -
Issuance of Restricted Stock 76,215 762 61,738 62,500
Exercise of Stock Options 200,000 2,000 44,000 46,000
Net Income 66,169,933 66,169,933
Repurchase of 30,000,000 shares
Retirement of Treasury Stock
(30,000,000)
(777,900)
(300,000)
(7,616)
(24,900,000)
(876,676)
875,131
(25,200,000)
(9,161)
Balances at September 30, 2013 26,744,913 $ 267,612 $ 262,755,790 $ (235,235,946) $ (29,027) $ (27,758,429)
See accompanying notes to consolidated financial statements.
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ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED SEPTEMBER 30, 2013, 2012, AND 2011
2013 2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income
Gain on Sale of KES $ 66,169,933 $ 13,275,916 $ 11,417,131
Adjustments to reconcile net loss to net cash used in
operating activities:
Gain on sale of KES (76,806,891) - -
Gain on sale of Minority Interest (10,029,058) - -
Payment of KES Acquisition Fees (8,036,882) - -
Discontinued Operations - Accumulated Deficit (159,164) - -
Share based compensation 62,500 18,273 154,731
Depreciation and amortization - 360,666 550,559
Provision for bad debts - (169,085) (126,650)
Gain on early extinguishment of 13% Preferred
Stock - - (147,941)
Gain on early extinguishment of 4% Notes Payable - - (132,351)
Gain on write off of liabilities related to
discontinued operations - (2,686,194) -
Amortization of loan costs - 124,225 -
Loss on investments - - 151,541
Minority interest - related parties 12,977,301 1,490,348 1,711,338
Changes in operating assets and liabilities:
(Increase) decrease in -
Accounts receivable, net - 3,142,854 (3,364,963)
Inventories - 4,345,246 (7,078,473)
Other assets - - -
Prepaid expenses (9,295) (13,439) 199,305
Deferred tax asset 5,881,853 (3,226,032) (3,059,567)
Deposits - 700,000 -
Increase (decrease) in -
Accounts payable - (2,269,407) 3,777,008
Income taxes payable (50,485) (816,815) 539,227
Accrued expenses (including unpaid cumulative
dividends on preferred stock and interest payable) - 442,142 3,176,708
Deferred tax liability - 20,588 383,158
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ (10,000,188) $ 14,739,286 $ 8,150,761
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Bellator $ (11,849) $ - $ -
Cash received from sale of KES 112,500,000 - -
Cash received from sale of Series B Stock in KES 126,845 - -
Cash received from retirement of 8% loans receivable 267,622 - -
Investment in Equipment - (70,274) -
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES $ 112,882,618 $ (70,274) $ -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net $ (7,167,015) $ (9,558,289) $ 3,544,198
Payments on capital lease obligations and contract
payables - (171,792) (152,233)
42
pa-1619029
Repayment on 8% Subordinated Loan (19,265,835) (833,790) (11,867,492)
Net proceeds from stock and options 46,000 45,997 -
Loan costs associated with refinancing - - (711,053)
Additional borrowings from 4% Preferred Stock - - 38,843
Repayment on 13% Preferred Stock (11,803,750) - -
Cash payment on extinguishment of 4% Preferred
Stock - - (277,600)
Cash payment on extinguishment of 4% notes payable - - (300,000)
Repurchase and retirement of ALJ common stock (25,200,000) - -
Payments for Series B Stock of KES (10,480,919)
Repayments on PNC term loan (4,000,000) (2,000,000) (3,514,714)
Proceeds from issuance of PNC Term Loan - - 6,014,714
Proceeds from issuance of Lake Forest Term Loan - - 535,208
Repayments on Lake Forest Term Loan - (535,208) (533,275)
Repurchase of KES Treasury Stock - - (36,599)
Repurchase of ALJ Treasury Stock (9,161) (74,582) -
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES $ (77,880,680) $ (13,127,664) $ (7,260,003)
NET CASH PROVIDED BY (USED IN) OPERATING,
INVESTING AND FINANCING ACTIVITES $ 25,001,750 $ 1,541,348 $ 890,758
CASH AND CASH EQUIVALENTS
Net increase (decrease) $ 25,001,750 $ 1,541,348 $ 890,758
Balance at beginning of period 2,823,576 1,282,228 391,470
Balance at end of period $ 27,825,326 $ 2,823,576 $ 1,282,228
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 8,078,135 $ 3,401,357 $ 5,024,022
Income taxes paid $ 1,654,395 $ 3,059,919 $ 2,620,703
Noncash investing and financing transactions:
As part of the Company’s debt restructuring in 2011, the Company realized a gain of approximately $335,000 related to
principal and accrued interest forgiven. Of this gain, approximately, $25,000 was recognized in 2011. The remaining
portion of the gain from the restructure, approximately $310,000, was used to offset approximately $710,000 of loan and
legal fees which are being amortized over the life of the loan.
In June 2011, ALJ extinguished the remaining $2.1 million of 4% Note Payable for $300,000 in cash and 3,429,834 shares of
ALJ Common Stock.
In June 2011, ALJ exchanged 305,156 shares of ALJ Preferred Stock for 3,774,632 shares of ALJ Common Stock.
See accompanying notes to consolidated financial statements.
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pa-1619029
ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWELVE MONTHS ENDED SEPTEMBER 30, 2013, 2012, AND 2011
1. Organization and Basis of Presentation
The Accounting Standards Codification
In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards
(“SFAS”) No. 168, entitled The FASB Accounting Standards Codification of the Hierarchy of Generally Accepted
Accounting Principles (“GAAP”). In substance, SFAS No. 168 makes the FAS Accounting Standards Codification (“ASC”)
the sole source of authoritative accounting technical literature for nongovernmental entities. All accounting guidance that is
not included in the ASC now is considered to be non-authoritative. The ASC is effective for interim and annual reporting
periods ending after September 15, 2009. The Company adopted the ASC upon issuance, with no material impact to the
financial statements.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of ALJ Regional Holdings, Inc. (fka YouthStream
Media Networks, Inc., “ALJ”), and its former majority-owned subsidiary KES Acquisition Company (“KES”) (collectively,
the “Company”).
Commencing March 1, 2005, the Company has included the operations of a steel mini-mill located in Ashland, Kentucky,
which represents the only business segment in which the Company operated in the twelve months ended September 30, 2013,
in its consolidated financial statements. All inter-company items and transactions have been eliminated in consolidation.
Going Concern
Based on its current level of operations, the Company believes that its current cash resources will be adequate to fund its
operations for the next twelve months.
The Company’s management may also consider various strategic alternatives in the future, including the acquisition of new
business opportunities, which may be from related or unrelated parties. However, there can be no assurances that such efforts
will ultimately be successful. The Company may finance any acquisitions through a combination of debt and/or equity
securities.
2. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
ALJ is a holding company, whose primary asset was a majority share of KES, a steel mini-mill that manufactures and sells
steel bar flats.
Cash and Cash Equivalents
Cash and equivalents include all cash, demand deposits and money market accounts with original maturities of three months
or less.
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