Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. AMPAL-AMERICAN ISRAEL CORP (731859) 10-Q published on Nov 13, 2012 at 3:06 pm
Reporting Period: Sep 29, 2012
The Company’s ability to continue as a going concern is contingent upon its ability to obtain the Court’s approval of a reorganization plan and its ability to successfully implement such plan, among other things. As a result of the Chapter 11 case, the realization of assets and the satisfaction of liabilities are subject to uncertainty. As a debtor-in-possession under Chapter 11, Ampal may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Court or as otherwise permitted in the ordinary course of business, for amounts other than those reflected in the accompanying consolidated financial statements. Further, the plan of reorganization could materially change the amounts and classifications of assets and liabilities reported in the historical consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern or as a consequence of the Chapter 11 case. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. There is no assurance that the Filing will allow the Company to continue as a going concern in the future.
In July 2012, Financial Accounting Standard Board ("FASB") issued Accounting Standards Update No. 2012-2 ("ASU 2012-2") which amended the guidance for the testing of indefinite-lived intangible assets for impairment, similar to the goodwill amendment issued in September 2011. These amendments provide an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the fair value of an indefinite-lived intangible asset is less than its carrying amount. Such qualitative factors may include the following: macroeconomic conditions; industry and market considerations; cost factors; overall financial performance; and other relevant entity-specific events. If an entity elects to perform a qualitative assessment and determines that an impairment is more likely than not, the entity is then required to perform the existing two-step quantitative impairment test, otherwise no further analysis is required. An entity also may elect not to perform the qualitative assessment and, instead, proceed directly to the two-step quantitative impairment test. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted.
The NASDAQ Listing Qualifications Staff issued (i) a delist determination letter on August 21, 2012 based upon the rejection of the Company’s plan for coming into compliance with the $2,500,000 minimum stockholders’ equity listing requirement and (ii) a delist determination letter on August 30, 2012 based upon the Filing, and the Company subsequently appealed the proposed delisting to the NASDAQ Listing Qualifications Hearings Panel (the “Panel”). The Company’s hearing before the Panel was held on October 4, 2012. By letter dated October 19, 2012, the Company was notified that the Panel had determined to continue the listing of the Company’s Class A Stock on The NASDAQ Capital Market, subject to the Company’s timely satisfaction of certain milestones relating to the Company’s debt restructuring efforts under the Company’s Chapter 11 case and the Company’s compliance with the requirements for initial listing on The NASDAQ Capital Market upon its emergence from Chapter 11 bankruptcy, ultimately, by no later than February 18, 2013
As a result of the Chapter 11 case, the Company has adopted the provisions of reorganization accounting, which does not change the application of GAAP with respect to the preparation of its financial statements. However, this guidance does require that financial statements, for periods including and subsequent to a Chapter 11 filing, distinguish between transactions and events that are directly associated with the reorganization proceedings and the ongoing operations of the business, as well as additional disclosures. Effective August 29, 2012, expenses, gains and losses directly associated with the reorganization proceedings are reported as reorganization items, net in the accompanying consolidated statements of operations. In addition, liabilities subject to compromise in the Chapter 11 case are distinguished from fully secured liabilities not expected to be compromised and from post-petition liabilities in the accompanying consolidated balance sheet as of September 30, 2012. Where there is uncertainty about whether a secured claim is undersecured or will be impaired under the plan, the Company has classified the entire amount of the claim as a liability subject to compromise. Such liabilities are reported at amounts expected to be allowed, even if they settle for lesser amounts. These claims remain subject to future adjustments, which may result from: negotiations; actions of the Court; disputed claims; rejection of executory contracts and unexpired leases; the determination as to the value of any collateral securing claims; proofs of claim; or other events.
Trading in our Class A Stock during the pendency of the Chapter 11 case is highly speculative and poses substantial risks. Our Class A Stock may be cancelled and holders of such Class A Stock may not receive any distribution with respect to, or be able to recover any portion of, their investments.
Although we cannot say for certain whether holders of our Class A Stock will be eligible to receive any distributions on account of those holdings under a plan of reorganization or, if applicable, in a liquidation, it is exceedingly likely that these equity interests will be cancelled and extinguished in connection with confirmation of a plan of reorganization by the Court and the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests. In the event of cancellation of these equity interests, amounts invested by such holders in our outstanding equity securities will not be recoverable. As a result, our currently outstanding Class A Stock would have no value. Trading prices for our Class A Stock may bear little or no relationship to the actual recovery, if any, by the holders thereof in the Chapter 11 case. Accordingly, we urge extreme caution with respect to existing and future investments in our Class A Stock.