ATV Systems Inc. Tuesday said it plans to merge with Pegasus Industries Inc., a Torrance-based real estate conglomerate, and other businesses controlled by the same group of investors who last month promised to infuse $15 million cash into ATV, a Santa Ana computer maker.
The Pegasus merger is scheduled to take place after ATV concludes the previously announced financing deal with the group of investors, which ATV has thus far refused to identify. That financing package is designed to retire longstanding debts and renew the company's product-development efforts.
ATV officials said companies involved in the merger plan have assets that will complement and support its aggressive growth plans.
ATV, which makes counter-top computer systems for hotels and restaurants, has total liabilities of $25 million and assets of just $9.5 million. "We have always been undercapitalized," said Frank Gleason, ATV's executive vice president and chief financial officer. He said the company would use the capital infusion for research and development and to pay its debts.
"Pegasus was looking to quickly become a much larger company via the acquisition and merger route," said John Pope, Pegasus financial vice president, in an interview. He said the merger with ATV will give Pegasus a larger operating base and provide it with cash flow.
Pegasus, which went public two months ago, has $17 million in assets. It owns about $14 million worth of real estate in Southern California. Its remaining $3 million in assets include a 100% interest in a Pacoima, Calif., construction company that specializes in street and traffic light installation, and interests in various other companies, according to Pope. Pope said the company is profitable, but first-quarter financial results have not been released. He said Pegasus, which has 11 employees, expects to remain in Torrance and operate as a wholly owned subsidiary of ATV. The merger is scheduled to be completed by the end of July, following an audit and review of ATV's 1985 fiscal year report.
Finac Inc., a Torrance company that owns stock in Pegasus, is acting as a financial adviser to ATV in the refinancing deal. Pope said Finac brought the two companies together.
$30-Million Loss in '84
Following an ambitious diversification strategy, ATV lost $30 million in fiscal 1984, ended March 30, on revenues of $52.2 million. However, during the last year, the company shed money-losing subsidiaries, focused its efforts on integrated restaurant and hotel computer systems and reduced its work force. As a result, ATV has been profitable in the first nine months of the current fiscal year, posting profits of $877,000 on revenues of $25.8 million.
ATV's Gleason said ATV will issue an undisclosed number of its shares to Pegasus stockholders. The separate $15-million financing agreement calls for the investors to receive convertible debentures redeemable over the next 10 years.
ATV and Pegasus stock is traded over-the-counter. Pegasus common stock has been selling for about $1 per share in recent weeks. ATV shares sold for $1.25 on the over-the-counter market Tuesday.