<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
December 31, 1995 0-4563
THE ENCORE GROUP, INC.
P.O. Box 69536
Portland, Oregon 97201
IRS Employer Identification Number: 93-0580867
Incorporated in the State of Oregon
Telephone Number: (503) 221-4255
Securities Registered Pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock
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 reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 31, 1996 is $366,771 (assuming only for purposes of this
computation that Directors and Officers may be affiliates). The aggregate
number of shares outstanding of the Registrant's common stock as of March 31,
1996 is 6,112,848.
__________________________
The total number of pages contained in this Form 10-K is 29.
The Exhibit Index is located at sequentially numbered page E-1.
<PAGE>
INDEX TO FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995
PART I PAGE
----
ITEM 1. Business 3
ITEM 2. Properties 4
ITEM 3. Legal Proceedings 4
ITEM 4. Submission of Matters to a Vote of Security Holders 4
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters 5
ITEM 6. Selected Financial Data 6
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
ITEM 8. Financial Statements and Supplementary Data 8
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 8
PART III
ITEM 10. Directors and Executive Officers of the Registrant 9
ITEM 11. Executive Compensation 10
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management 12
ITEM 13. Certain Relationships and Related Transactions 12
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 13
INDEX TO EXHIBITS E-1
FINANCIAL STATEMENTS F-1
2
<PAGE>
PART I (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ITEM 1. BUSINESS
GENERAL
The Encore Group, Inc. (the "Company" or "Registrant") was organized in
1969 in the state of Oregon and currently employs fourteen people. In 1995 the
Company consisted of its remaining active subsidiary, VDO-Pak, Inc. ("VDO-
Pak"), located in Port Orange, Florida. Over the past five years, the
Registrant's business operations involve the assembly of battery packs, power
cords and related accessories, and the distribution of batteries for video
cameras and cellular telephones.
The Registrant acquired VDO-Pak in 1989. VDO-Pak's operations primarily
consisted of providing power packs, rechargeable batteries, adapter cords,
chargers and other accessories in standard and custom designs for the cellular
telephone markets.
Additionally, in 1989 the Company acquired all of the stock of Vidcom
Manufacturing, Inc. ("Vidcom") located in Livonia, Michigan. Vidcom had been in
business since 1986 as a fabricator of nickel-cadmium batteries for the cellular
telephone industry. However, in 1991 the Company ceased operations, as it was
determined that there were no viable manufacturing operations due to the lack of
a customer base.
PRODUCTS AND MARKETS
The Company manufactures and resells a wide variety of power packs,
rechargeable batteries and adapter cords. The Company's products relate
primarily to the cellular phone industry, with the principal products being
cellular phone batteries, battery chargers, battery eliminators, power supplies
and cellular phone cases. The Company also assembles power cables for the
original equipment manufacturer ("OEM") market.
The Company's primary customers are cellular phone carriers, distributors,
dealers, and OEM's. The cellular telephone market represented 89% of net sales
in 1995, 91% in 1994 and 90% in 1993. For the year ended December 31, 1995, the
Company had sales to the following customers that individually exceeded 10% of
the Company's total sales: North Pointe Development, Cellular One and Nokia.
The Company's sales are geographically dispersed throughout the United
States, with a significant concentration in the eastern United States. Sales
are strongest in the fourth quarter as customers increase stock in preparation
of the Christmas season; sales typically decrease in the first quarter as
customers sell down their stock and reduce their Christmas inventories. At
December 31, 1995, backlog orders were approximately $105,000, which also
approximates the average backlog at any given point in time throughout the year.
Historically, VDO-Pak has operated profitably; however, earnings have not
been enough to offset the Company's debt and associated interest charges. This
has resulted in working capital deficits and net losses. Due to inadequate
working capital, VDO-Pak lost sales in 1995 due to an inability to purchase
inventory. Additional sales declines were attributed to a decline in retail
sales, as customers over-purchased in 1994. This resulted in a decline in sales
from approximately $3,000 in 1993 and 1994 to approximately $2,000 in 1995.
SUPPLIERS
Approximately 75% of the Company's purchases are from five suppliers.
Management believes a sufficient number of competent vendors are available to
supply the components, parts and subassemblies required for operations. Certain
minimum inventory levels are needed in order to meet customer delivery
requirements. In prior years, materials and components were purchased through
purchase orders in quantities capable of meeting an average of thirty days of
customer orders. However, during 1995 the Company's working capital deficit has
made it difficult to ensure the continuous allotment of goods from suppliers,
resulting in insufficient inventory to meet customer demand.
3
<PAGE>
ITEM 1. BUSINESS - CONTINUED
COMPETITION
The Registrant has a small share of the cellular telephone accessory
market, and is not currently involved in product development. The Company's
principal method of competing in its market is to provide superior service to
its customers, including high quality technical support and service warranties.
ITEM 2. PROPERTIES
The Registrant leases office space in Portland, Oregon. The current lease
is on an annual basis expiring February 28, 1997. VDO-Pak leases 8,000 square
feet of plant and office space in Port Orange, Florida, near Daytona. The
current lease was entered into in July 1995 expiring in August 1996. The
Company believes that adequate space is available for current operations under
the existing lease agreements.
In June 1988, the Registrant took title to commercial property in Gillette,
Wyoming as resolution of the land development project. In early 1991,
management made a decision to put the property up for sale. During the current
year, the Company wrote down the land to its estimated fair market value of $15.
ITEM 3. LEGAL PROCEEDINGS
There were no items to report as of December 31, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders during
the fourth quarter of the fiscal year covered by this report. In November 1995,
the Registrant began preparing a proposed amendment to the Restated Articles of
Incorporation. This amendment, if approved by the shareholders, would result in
a 1-for-500 reverse split of the Registrant's common stock. This proposed
amendment was submitted to shareholders in the first quarter of 1996, with a
vote to be taken at a special meeting on April 23, 1996.
4
<PAGE>
PART II (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The common stock of the Registrant is traded over the counter and is not
registered on any exchange.
Following is the history of the high and low bid prices for the common
stock of the Registrant for the years 1995 and 1994, by quarters ended:
<TABLE>
<CAPTION>
1995 1994
--------------------------------------------
HIGH LOW HIGH LOW
--------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $ .06 $ .05 $ .05 $ .03
Second Quarter .06 .06 .06 .05
Third Quarter .06 .05 .06 .05
Fourth Quarter .05 .05 .06 .05
</TABLE>
The source of the above quotations is published by the National Daily
Quotation Service known as "the pink sheets", and may reflect interdealer
prices, without mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
No dividends have been paid since a 1983 stock dividend, and no cash or
other dividends are contemplated for the foreseeable future.
The number of outstanding shares of the Registrant's common stock as of
December 31, 1995 was 6,112,848.
As of December 31, 1995, there were 3,631 record holders of the
Registrant's common stock.
5
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 2,015 $ 3,113 $ 2,919 $ 3,590 $ 4,213
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net income (loss) $ (384) $ 55 $ (193) $ 134(1) $ (642)(1)
------ ------- ------- ------- -------
------ ------- ------- ------- -------
Net income (loss) per
common share: $ (.06) $ .01 $ (.03) $ .02 $ (.10)
------ ------- ------- ------- -------
------ ------- ------- ------- -------
Cash $ 8 $ 31 $ 30 $ 36 $ 27
Fixed assets, net 8 19 42 59 76
Other assets 1,036 1,304 1,391 1,630 1,732
------- ------- ------- ------- -------
Total assets $ 1,052 $ 1,354 $ 1,463 $ 1,725 $ 1,835
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Current liabilities $ 1,709 $ 1,645 $ 1,849 $ 1,918 $ 2,162
Pension liability 248 176 105 105 105
------- ------- ------- ------- -------
Total liabilities $ 1,957 $ 1,821 $ 1,954 $ 2,023 $ 2,267
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total stockholders' deficit $ (905) $ (467) $ (491) $ (298) $ (432)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Cash dividends per common
share $ - $ - $ - $ - $ -
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
_________________
(1) In 1991, the Company ceased operations and liquidated the remaining assets
of Videom Manufacturing, Inc. (Videon), a wholly owned subsidary located in
Livonia, Michigan. Vidcom's liquidation resulted in a restructuring charge of
$323 in the year ended December 31, 1991. During 1992, Vidcom was dissolved
and its remaining obligations were discharged, resulting in a restructuring
gain of $217 in the year ended December 31, 1992.
6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In 1995, the Company reported a consolidated net loss of $384 compared
to a consolidated net income of $55 in 1994 and a $193 consolidated net loss
in 1993. During 1995, the Company's operations consisted of VDO-Pak, Inc.
VDO-Pak's operations consist of supplying replacement batteries and
power-related accessories to the video and cellular telephone industries,
located primarily in the Eastern United States. Historically, VDO-Pak has
operated profitably, including a pretax profit of $44 in 1995. However,
earnings have not been enough to offset the Company's debt and associated
interest charges. This has resulted in working capital deficits and net
losses. Additionally, the Company has been out of compliance with its note
payable since January 31, 1992.
In the past month, the Company has been actively negotiating a
restructuring of its debt obligations with the bank. Additionally, the Company
is pursuing alternative sources of equity to allow the Company to increase VDO-
Pak's operating levels.
RESULTS OF OPERATIONS
The gross profit percentage for 1995 was 36% compared to 37% and 31% in
1994 and 1993, respectively. Sales declines during 1995 were a result of the
Company doing less cable assembly for original equipment manufacturers (OEM's)
and a lack of working capital for the purchase of inventory. The industry
continues to transition from bag phones, which utilize a single type of lead
acid battery, to hand held phones. Hand held phones utilize a variety of
battery types, increasing the number of batteries required to be in stock, which
results in even more stringent demands being placed on working capital.
The increase of $123 in non-operating expenses from 1994 to 1995 was a
result of a $45 writedown of real estate and a $75 reserve in stockholder
receivable.
The Company reported a consolidated net loss of $384, compared to a
consolidated income of $55 and consolidated loss of $193 in 1994 and 1993,
respectively. Despite VDO-Pak's earnings, they have not been enough to offset
the Company's debt and associated interest charges. This in addition to the
decline in sales is the reason for the losses in 1995 and 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to have a working capital deficit of $1,187 at
December 31, 1995. The deficit is directly attributable to the Company's
outstanding note payable with the Bank of California. The Company has no
further availability to borrow and the Company has not been in compliance with
the credit agreement since January 31, 1992. Although the Company does not have
a formal long-term agreement with the bank, the Company has continued to make
monthly principal payments of $2.5 plus interest at prime plus 2.5% (10.5% at
December 31, 1995) on the outstanding balance. The interest payments average
approximately $11 per month. Under the terms of the agreement with the bank,
the note payable is callable at any time, and the creditor may, at its option,
institute legal proceedings for repayment. The Company and principal
stockholder are currently negotiating with the bank to restructure their
obligation through the conversion of a portion of their obligation to equity or
equity-like instruments.
Management intends to continue to pursue other financing alternatives, as
well as pursue potential purchases of profitable businesses to provide working
capital. The continued profitability of VDO-Pak, infusion of additional equity,
and the continuance of Bank of California to not call the note payable, are
essential to return the Company to profitable operating levels, which are
necessary if the Company is to continue as a going concern.
7
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements at December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995, and
the report of Moss Adams LLP, Independent Auditors, are included in this Annual
Report on Form 10-K on pages F-1 through F-13, as referenced below.
FINANCIAL STATEMENT INDEX
PAGE
----
INDEPENDENT AUDITOR'S REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS
Balance sheets -
December 31, 1995 and 1994 F-2
Statements of operations -
years ended December 31, 1995, 1994 and 1993 F-3
Statements of changes in stockholders' deficit-
years ended December 31, 1995, 1994 and 1993 F-4
Statements of cash flows -
years ended December 31, 1995, 1994 and 1993 F-5
Notes to consolidated financial statements F-6/F-11
FINANCIAL STATEMENT SCHEDULES F-12/F-13
Schedule for the years ended December 31, 1995,
1994 and 1993:
Schedule II - Valuation and qualifying
accounts and reserves F-13
All other schedules are omitted because they are either not required, not
applicable or the information has been included in the aforementioned
consolidated financial statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Registrant has had no changes in or disagreements with its accountants
on accounting and financial disclosures.
8
<PAGE>
PART III (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant's Restated Articles of Incorporation and Bylaws provide for
a Board of Directors consisting of not less than three nor more than seven
directors, with the exact number within this range to be determined from time to
time only by the Board of Directors. The current number of directors is five.
All directors stand for election annually. Officers are elected to a term of
one year or less, serve at the pleasure of the Board of Directors, and are
entitled only to such compensation as is fixed by the Board.
The Directors and Executive Officers of the Registrant as of December 31,
1995, are as follows:
<TABLE>
<CAPTION>
DIRECTOR OFFICER POSITIONS AND/OR
NAME SINCE SINCE OFFICES HELD AGE
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bruce L. Engel 1988 1991 Director; President and 55
Chief Executive
Teri E. Engel 1989 1989 Director; Corporate Secretary 46
Robert G. Fligg 1988 - Director 47
Fred J. Kupel 1995 - Director 66
Kenneth L. Wright 1995 1991 Director; Executive 46
Vice President
Chief Financial Officer
</TABLE>
The following family relationships exist among the directors or executive
officers: Bruce L. Engel and Teri E. Engel are husband and wife; Mr. Fligg's
spouse is a niece of Mr. Engel.
Bruce and Teri Engel are the beneficial owners of 10% or more of the equity
securities of an affiliate, Encore Industries, Inc. (Encore), an Oregon
corporation, of which Mr. Wright is also an officer. Encore is currently
inactive.
Mr. Engel was elected President and Chief Executive Officer on March 19,
1991. For over five years, Mr. Engel's principal employment has been as
President and Chief Executive Officer of WTD Industries, Inc., Portland, Oregon,
a manufacturer of lumber whose common stock is traded on the NASDAQ national
market system. Mr. Engel is also a director of WTD Industries and is President
of Encore.
Ms. Engel has been a director and Secretary of the Company since 1989. She
is also Corporate Secretary of Encore, and served as an executive officer and a
director of WTD Industries, Inc. from 1989 to 1994. From September 1993 to
March 1995, Ms. Engel was owner and general manager of the Eastmoreland Racquet
Club, Portland, Oregon. Subsequently Ms. Engel has been an owner/operator of
Independent Baseball, Inc.
Mr. Fligg has been employed since March of 1991, as Chief Financial Officer
of Dee Forest Products, Inc., in Hood River, Oregon, a manufacturer of
hardboard. He resigned as an Officer March 22, 1991, and was employed by the
Registrant as Corporate Secretary starting August 9, 1988. Effective November
19, 1988, he was elected to the additional office of Vice President-Finance.
Mr. Fligg held both positions until June 30, 1989, at which time he was elected
as Vice President, Treasurer and Assistant Secretary. Beginning in December
1986 and ending in June 1991, he served as Vice President, Treasurer of Encore.
9
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
Mr. Fred J. Kupel has been an independent management consultant for over
five years. Prior to 1989 he served as Chief Financial Officer and Corporate
Development Officer for various public and private corporations. He has served
the Company as a consultant since 1993.
Mr. Kenneth L. Wright was elected Executive Vice President on March 19,
1991. Prior to that date he was an independent management consultant. During
1987 and the balance of the prior five years, he was Chief Operating Officer
with Industrial Leasing Corporation, Portland, Oregon, a lessor of industrial
equipment. Mr. Wright is also an Officer of Encore, serving as Vice President.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-----------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
SECURITIES
OTHER RESTRICTED UNDERLYING ALL
NAME AND ANNUAL STOCK OPTIONS/ LTIP OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARs PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce L.
Engel, CEO 1995 - - - - - - -
1994 - - - - - - -
1993 - - - - - - -
</TABLE>
No executive officer received cash compensation from the Registrant in 1995
in excess of $100,000.
Directors of the Registrant received no compensation for their services as
directors.
The Registrant has a cash bonus plan for officers and other key employees
of the Registrant and for managers and employees of its subsidiary. Under the
terms of the plan, the President is eligible to receive a quarterly bonus of 5%
of pretax profits earned by the Registrant and/or its subsidiary; other officers
and key employees share ratably on the basis of their base pay in a quarterly
bonus of 15% of consolidated pretax profits of the Registrant. Under this plan,
cash distributions of $11 were made during the year ended December 31, 1995, and
$24 were paid in 1994. Cash bonuses to subsidiary managers and employees is
based on a percentage of subsidiary pretax profits and are distributed ratably
each month.
10
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION - CONTINUED
PENSION PLAN
The Registrant has a defined benefit retirement plan (the "Plan") in which
participation has been frozen since 1990. Until 1990, employees of the
Registrant were automatically covered by the Plan provided they met certain
criteria. Normal retirement under the Plan is the first day of the month
following the employee's 65th birthday. An employee's retirement benefit is
determined according to his final average yearly pay over a five-year base
period, years of service and covered compensation. An employee could elect to
retire as early as 55, but his retirement benefits will be reduced. All
contributions to provide benefits under the Plan and all expenses are paid
entirely by the Registrant. A trust fund has been established to receive and
hold all Plan contributions, interest and other income to pay the benefits
provided by the Plan. There were no contributions made to the Plan in 1995 and
1994 for the Executive Officers named above.
Below is a table demonstrating the general method of calculation of
benefits upon retirement using the average of the highest compensation paid for
five years, exclusive of a portion of the lesser of the highest average
compensation or covered compensation:
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 25,000 $ 7,500 $ 8,750 $10,000 $11,250 $11,250
50,000 15,000 17,500 20,000 22,500 22,500
75,000 22,500 26,500 30,000 33,750 33,750
100,000 30,000 35,000 40,000 45,000 45,000
150,000 45,000 52,500 60,000 67,500 67,500
200,000 60,000 70,000 80,000 90,000 90,000
</TABLE>
STOCK OPTION PLAN
The Registrant has a stock option plan for key employees and directors that
provides for the granting of incentive stock options (within the meaning of
Section 422A of the Internal Revenue Code) or nonqualified stock options, to
purchase shares of the Registrant's common stock at 100% of the fair market
value at the date of the grant. The plan is administered by a committee of
three or more disinterested persons designated by the Board of Directors, and it
terminates on the earlier of January 8, 1999 or the issuance of the full number
of shares allocated. The aggregate number of shares for which options may be
granted under the plan is 700,000, subject to such adjustments as may be
necessary or appropriate upon the payment of stock dividends or by a split-up or
split-down of the stock. Option shares are made available from the authorized
but unissued shares of the Registrant's common stock. The plan includes
restrictions as to annual carryover limits on the fair market value of incentive
stock options, as well as provisions with respect to expiration, cancellation
and the surrender of any repayment for exercisable options.
All options granted under the plan through December 31, 1995 are
nonqualified options, have a maximum duration of ten years, and are exercisable,
cumulatively, in annual increments of 20% commencing six months after the date
of the grant.
As of December 31, 1995, no options have been granted for the Registrant's
stock. No options are expected to be issued in the foreseeable future.
11
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the number of shares of common stock
beneficially owned as of March 31, 1996 by (i) persons known to be beneficial
owners of more than five percent (5%) of the Registrant's common stock, (ii)
each of the directors, and (iii) all officers and directors as a group. Except
as otherwise indicated by footnote, the owner has sole voting and investment
power with respect to such shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- --------------------------------------------------------------------
<S> <C> <C>
Bruce L. and Teri E. Engel 2,010,724 (a) 32.89%
Bruce L. Engel 129,214 2.11%
Robert G. Fligg 1,000 .02%
Fred J. Kupel 20,000 .33%
Kenneth L. Wright 280,655 (c) 4.59%
------------- ------
All Directors and Officers
as a group (5 persons) 2,441,593 (b) 39.94%
------------- ------
------------- ------
</TABLE>
(a) Mr. and Mrs. Engel, whose business address is P.O. Box 5805, Portland, OR
97228, own these shares jointly and share voting and investment power.
(b) Shares subject to option under the Registrant's Stock Option Plan are
deemed to be outstanding only for the purpose of computing the percent of
class owned by the individual optionee.
(c) Mr. Wright owns these shares jointly with his spouse and shares voting and
investment power.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1995 the Company advanced to its President and Chief Executive
Officer, Bruce L. Engel, a total of $87.5. The stockholder repaid $13 of this
advance as of December 31, 1995. Subsequent to year-end, the stockholder is
working with the Bank of California to restructure his personal debts as well as
the Company's debt. There is no guarantee that the stockholder will be
successful in his efforts to restructure his debt. Accordingly, the Company has
fully reserved for the $74.5 balance at December 31, 1995. The Company recorded
this reserve as a non-operating expense.
12
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Refer to Financial Statement Index, Item 8, page 8.
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K during the last quarter of the
fiscal periods covered by this report.
(c) EXHIBITS
Refer to Exhibit Index.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE ENCORE GROUP, INC.
Date: 4/12/96 /s/ BRUCE L. ENGEL
------- ------------------------------
Bruce L. Engel
President, Principal
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the followed persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Date: 4/12/96 /s/ KENNETH L. WRIGHT
------- ------------------------------
Kenneth L. Wright
Executive Vice President and
Chief Financial Officer
Date: 4/12/96 /s/ BRUCE L. ENGEL
------- ------------------------------
Bruce L. Engel
Director
Date: 4/12/96 /s/ FRED J. KUPEL
------- ------------------------------
Fred J. Kupel
Director
Date: 4/12/96 /s/ ROBERT G. FLIGG
------- ------------------------------
Robert G. Fligg
Director
Date: 4/12/96 /s/ TERI E. ENGEL
------- ------------------------------
Teri E. Engel
Secretary and Director
14
<PAGE>
THE ENCORE GROUP, INC.
AND SUBSIDIARIES
INDEX TO EXHIBITS*
EXHIBIT NO. PAGE NO.
----------- --------
3 (i) Restated Articles of Incorporation by Reference to Exhibit
Incorporation [13] No. 3 of Form 10-Q for the Second
Quarter Ended June 30, 1989.
21 Subsidiaries of Registrant E-2
_______________________
* If you wish copies of any exhibits to the Form 10-K, please send us 25CENTS
per page for each exhibit you specify to cover our expenses in furnishing the
copies. The number of pages of each exhibit is indicated in brackets at the end
of each exhibit description. There is no charge for the Annual Report to
Shareholders. To request exhibits, write to The Encore Group, Inc., Office of
the Secretary, P.O. Box 69536, Portland, OR 97201.
E-1
<PAGE>
EXHIBIT 21
THE ENCORE GROUP, INC
AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
PERCENT
STATE OF OWNED BY
NAME OF SUBSIDIARY INCORPORATION REGISTRANT
- ------------------ ------------- ----------
VDO-Pak, Inc. Oregon 100%
E-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
The Encore Group, Inc.
We have audited the accompanying consolidated balance sheets of The Encore
Group, Inc. and its wholly owned subsidiary, VDO-Pak, Inc. (the "Company") as
of December 31, 1995 and 1994, and the related consolidated statements of
operations, changes in stockholders' deficit and cash flows, for each of the
years in the three-year period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Encore Group, Inc. and its subsidiary as of December 31, 1995 and 1994, and
the results of their operations and cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The information in Schedule II,
Valuation and Qualifying Accounts and Reserves on page F-13 is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. The financial statement schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules.
Such information has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company is currently not in compliance
with its note payable agreement and has a working capital deficit, which
raises substantial doubt about the Company's ability to continue as a going
concern. Management's plans concerning these matters are described in Note A.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Moss Adams LLP
-------------------------------
MOSS ADAMS LLP
Moss Adams, LLP
March 14, 1996
Beaverton, Oregon
F-1
<PAGE>
THE ENCORE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 8 $ 31
Accounts receivable, net 291 355
Inventory 200 305
Prepaid expenses 23 52
-------- --------
Total current assets 522 743
-------- --------
NON-CURRENT ASSETS
Land held for sale 15 60
Fixed assets, net 8 19
Goodwill, net 507 532
-------- --------
530 611
-------- --------
Total assets $ 1,052 $ 1,354
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 371 $ 274
Accrued liabilities 100 103
Note payable 1,238 1,268
-------- --------
Total current liabilities 1,709 1,645
PENSION LIABILITIES 248 176
-------- --------
Total liabilities 1,957 1,821
-------- --------
STOCKHOLDERS' DEFICIT
Common stock without par value, stated value
$1 per share, 10,000,000 shares authorized;
6,156,110 shares issued, 6,112,848
outstanding 6,113 6,113
Additional paid-in capital 20,975 20,975
Retained deficit (27,836) (27,452)
Pension liability adjustment (157) (103)
-------- --------
Total stockholders' deficit (905) (467)
-------- --------
Total liabilities and stockholders' deficit $ 1,052 $ 1,354
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-2
<PAGE>
THE ENCORE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
SALES $ 2,015 $ 3,113 $ 2,919
LESS COST OF SALES 1,283 1,965 2,026
---------- ---------- ----------
GROSS PROFIT 732 1,148 893
---------- ---------- ----------
SELLING, GENERAL & ADMINISTRATIVE
EXPENSES 808 908 959
---------- ---------- ----------
Operating income (loss) (76) 240 (66)
---------- ---------- ----------
NON-OPERATING REVENUES & EXPENSES
Other income - 1 1
Write-down of real estate
investment (45) - -
Other expense (112) (63) (20)
Interest expense (151) (123) (108)
---------- ---------- ----------
Total non-operating
revenues & expenses (308) (185) (127)
---------- ---------- ----------
NET INCOME (LOSS) $ (384) $ 55 $ (193)
---------- ---------- ----------
---------- ---------- ----------
PER SHARE
Net income (loss) per share $ (.06) $ .01 $ (.03)
---------- ---------- ----------
---------- ---------- ----------
Average common shares outstanding 6,112,848 6,112,848 6,112,848
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-3
<PAGE>
THE ENCORE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1995, 1994 AND 1993
(In thousands, except share amount)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------- ADDITIONAL PENSION
OUTSTANDING PAID-IN RETAINED LIABILITY
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT TOTAL
------ ------ ------- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 6,112,848 $6,113 $20,975 $(27,314) $ (72) $(298)
Net loss for 1993 - - - (193) - (193)
--------- ------ ------- -------- ----- -----
Balance, December 31, 1993 6,112,848 6,113 20,975 (27,507) (72) (491)
Net income for 1994 - - - 55 - 55
Pension liability adjustment - - - - (31) (31)
--------- ------ ------- -------- ----- -----
Balance, December 31, 1994 6,112,848 6,113 20,975 (27,452) (103) (467)
Net loss for 1995 - - - (384) - (384)
Pension liability adjustment - - - - (54) (54)
--------- ------ ------- -------- ----- -----
Balance, December 31, 1995 6,112,848 $6,113 $20,975 $(27,836) $(157) $(905)
--------- ------ ------- -------- ----- -----
--------- ------ ------- -------- ----- -----
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-4
<PAGE>
THE ENCORE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS RELATED TO OPERATING ACTIVITIES
Net income (loss) $(384) $ 55 $(193)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation 13 23 32
Allowance for stockholder receivable 75 - -
Amortization of goodwill 25 26 25
Pension liability adjustment (54) (31) -
Loss (gain) on disposal or writedown
of assets 45 (1) -
Accounts receivable 64 42 25
Inventory 105 19 199
Prepaid expenses and other 29 - (10)
Accounts payable 97 (138) (70)
Pension liability 72 71 -
Accrued liabilities (3) (36) 31
----- ----- -----
Net cash provided by operating
activities 84 30 39
----- ----- -----
CASH FLOWS RELATED TO INVESTING ACTIVITIES
Loan to stockholder (75) - -
Proceeds from sale of fixed assets - 2 -
Purchases of fixed assets (2) (1) (15)
----- ----- -----
Net cash provided by (used in)
investing activities (77) 1 (15)
----- ----- -----
CASH FLOWS RELATED TO FINANCING ACTIVITIES
Principal payments on notes payable (30) (30) (30)
----- ----- -----
Net cash used in financing
activities (30) (30) (30)
----- ----- -----
NET INCREASE (DECREASE) IN CASH (23) 1 (6)
CASH, beginning of year 31 30 36
----- ----- -----
CASH, end of year $ 8 $ 31 $ 30
----- ----- -----
----- ----- -----
INTEREST PAID $ 151 $ 119 $ 108
----- ----- -----
----- ----- -----
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-5
<PAGE>
THE ENCORE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(In thousands, except share and per share data)
NOTE A - BASIS OF PRESENTATION AND MANAGEMENT'S PLANS
The consolidated financial statements include the accounts of The Encore
Group, Inc., and its wholly owned subsidiary, VDO-Pak, Inc. (referred to
hereafter as the "Company"). All significant intercompany accounts and
transactions have been eliminated.
VDO-Pak, Inc.'s (VDO-Pak) operations consist of supplying replacement
batteries and power related accessories to the video and cellular telephone
industries, located primarily in the Eastern United States. Historically, VDO-
Pak has operated profitably, however, earnings have not been enough to offset
the Company's debt and associated interest charges. This has resulted in
working capital deficits and net losses. Additionally, the Company has been out
of compliance with its note payable since January 31, 1992 (See Note E).
In the past month, the Company has been actively negotiating a
restructuring of its debt obligations with the bank. Additionally, the Company
is pursuing alternative sources of equity to allow the Company to increase VDO-
Pak's operating levels.
The restructuring of outstanding debt obligations and an infusion of
additional equity, are essential to return the Company to profitable operating
levels, which are necessary if the Company is to continue as a going concern.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE - Collectibility of receivables is periodically
assessed by management. This assessment provides the basis for the allowance
for doubtful accounts and the related bad-debt expense. The allowance for
doubtful accounts was $31 and $32 at December 31, 1995 and 1994, respectively.
Assets for which the Company has credit risk are trade accounts receivables
which amount to $322 and $387 at December 31, 1995 and 1994, respectively. The
Company's trade customers are geographically dispersed throughout the United
States, with a significant concentration in the Eastern United States. The
Company performs ongoing credit evaluation of its customers' financial
conditions and generally requires no collateral from its customers. Three
customers accounted for approximately 60% of the Company's total sales in 1995
and 1994.
INVENTORY - Inventory is stated at the lower of cost (first-in, first-out
method) or market at December 31, 1995 and 1994. Inventory consists of
components and products for manufacture and resale. At December 31, 1995 and
1994, a reserve of $127 and $136.5, respectively, was provided to record slow-
moving inventory at its estimated net realizable value.
FIXED ASSETS - Fixed assets are stated at cost, net of accumulated
depreciation of $174 and $161 in 1995 and 1994, respectively. Expenditures for
additions to property and equipment are capitalized. The cost of repairs and
maintenance is expensed as incurred. Depreciation of property and equipment is
computed principally on the straight-line basis over the estimated useful lives
of the assets (generally three to eight years). Leasehold improvements are
amortized on the straight-line basis over the lesser of the term of the lease or
estimated useful lives of the improvements.
INCOME TAXES - Income taxes are recognized during the year in which
transactions enter into the determination of financial statement income with
deferred taxes provided for temporary differences between amounts of assets and
liabilities for financial reporting purposes and such amounts as measured by tax
laws.
F-6
<PAGE>
NOTE B - SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
AMORTIZATION OF GOODWILL - Goodwill relates to the original acquisition of
VDO-Pak and is amortized on a straight line basis over the expected benefit of
20 years. Accumulated amortization was $143 and $118 at December 31, 1995 and
1994, respectively. Management periodically assesses the recoverability of
goodwill and believes the existing amortization schedule is appropriate at
December 31, 1995.
INCOME (LOSS) PER SHARE - Income (loss) per share is based on the weighted
average number of shares of common stock outstanding during each period.
USE OF ESTIMATES - The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
RECLASSIFICATION - During 1995, certain accounts have been reclassified to
conform to the current year's presentation. These reclassifications had no
effect on net income.
NOTE C - LAND HELD FOR SALE
In June 1988, the Company took title to commercial property in Gillette,
Wyoming as resolution of the land development project. During the current year,
the Company wrote down this asset by $45, to reflect the property at its
estimated fair market value of $15 at December 31, 1995.
NOTE D - OFFICER RECEIVABLE
During the current year the Company advanced the majority stockholder
$87.5, of which $13 has been repaid. Subsequent to year-end, the stockholder
began working with the Bank of California to restructure his personal debts as
well as the Company's debt. There is no guarantee that the stockholder will be
successful in his efforts to restructure his debt. Accordingly, the Company has
reserved for the entire balance of $74.5 at December 31, 1995. This reserve was
recorded as a non-operating expense.
NOTE E - NOTE PAYABLE
The Company continues to have a working capital deficit of $1,187. This
deficit is directly attributable to the Company's outstanding note payable with
the Bank of California. The Company has no further availability to borrow since
the Company is not in compliance with the credit agreement that required payment
of this note on January 31, 1992. Although the Company does not have a formal
long-term arrangement with the current lender, the Company has continued to make
monthly principal payments of $2.5 plus interest on the outstanding balance.
The balance on the note totaled $1,238 at December 31, 1995. The Company and
principal stockholder are currently negotiating with the bank to restructure
their obligation through the conversions of a portion of their obligation to
equity or equity like instrument.
Interest is calculated at prime plus 2% (10.5% at December 31, 1995). The
line is guaranteed by the principal stockholder and is secured by accounts
receivable, inventory, and the principal stockholders' common stock holdings in
the Company. The weighted average interest rate for 1995, 1994 and 1993 was
10.95%, 9.25% and 8.5%, respectively.
It is not practicable to estimate the fair value of the Company's short-
term debt, as the note is due on demand.
F-7
<PAGE>
NOTE F - ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1994
---- ----
Accrued salaries and payroll taxes $ 15 $ 31
Professional fees 12 12
Other 73 60
---- ----
$100 $103
---- ----
---- ----
</TABLE>
NOTE G - INCOME TAXES
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the financial statement
and tax basis of assets and liabilities at the applicable enacted tax rates.
There was no income tax expense or benefit recorded in 1995, 1994 or 1993.
The provision for income taxes is different than the amount computed using
the applicable statutory federal income tax rate, with the differences
summarized below:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes $ (384) $ 55 $(193)
------- ------- -----
------- ------- -----
Tax expense (benefit) at statutory rates $ (130) $ 19 $ (66)
Change in valuation allowance 130 (19) 66
------- ------- -----
$ - $ - $ -
------- ------- -----
------- ------- -----
</TABLE>
Net deferred taxes consist of the following components as of December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Pension liability $ 84 $ 60
Allowance for doubtful accounts 10 11
Inventory reserve 43 43
Loss carryforwards and
investment tax credits 5,760 5,653
------- -------
5,897 5,767
Less valuation allowance (5,897) (5,767)
------- -------
$ - $ -
------- -------
------- -------
</TABLE>
F-8
<PAGE>
NOTE G - INCOME TAXES - CONTINUED
As of December 31, 1995, the Company has federal and state net operating
loss (NOL) carryforwards of approximately $16,915 and $3,587, respectively,
available to offset its future income tax liability. The NOL carryforwards
expire as follows:
<TABLE>
<CAPTION>
YEAR FEDERAL STATE
OF EXPIRATION AMOUNT AMOUNT
------------- ------ ------
<S> <C> <C>
1997 $ 1,555 $ -
1998 2,971 -
1999 1,598 -
2000 3,675 -
2001 2,010 -
2002 373 124
2003 2,373 1,103
2004 16 16
2005 1,280 1,280
2006 611 611
2008 161 161
2010 292 292
------- ------
$16,915 $3,587
------- ------
------- ------
</TABLE>
Additionally, the Company has an investment tax credit carryforward of
approximately $9. This carryforward expires, if not utilized, through 1999.
Management periodically reviews the items comprising the net deferred tax
assets as to the likelihood of their future deductibility for assessing the need
for a valuation allowance. As of December 31, 1995, the deferred tax assets
have been completely offset by a valuation reserve. The valuation reserve was
established due to the uncertainty surrounding the continued operations of the
Company (see Note A).
NOTE H - LEASE AND RENTAL COMMITMENTS
The Company leases its principal office space on an annual basis, expiring
February 28, 1997. The current lease provides for an annual rent of
approximately $23. Additionally, VDO-Pak entered into a lease on July 1995, for
plant and office space, which expires in August 1996. Annual rent and fees are
approximately $35 per year. There were no future minimum payments under
noncancellable operating leases and rental agreements with initial terms of one
year or more at December 31, 1995. Rental expense totaled $55 in 1995, $53 in
1994 and $51 in 1993.
NOTE I - RETIREMENT PLAN
The Company has a noncontributory defined benefit retirement plan covering
certain former corporate employees. During 1990, the Company froze the
participation in the plan with the intention of eventually terminating the plan.
As of December 31, 1995, there are only seven past employees who are covered
under the plan. The assets held by the plan are primarily invested in a mutual
fund that invests in a diversified portfolio of equity securities, corporate
bonds, and short-term investments.
F-9
<PAGE>
NOTE I - RETIREMENT PLAN - CONTINUED
The components of net periodic pension expense for the year ended December
31 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost $ - $ - $ -
Interest cost 44 41 47
Actual return on assets (74) (19) (47)
Unrecognized net (gain) loss 4 3 3
Deferred asset (gain) loss 44 (12) 12
------ ------ ------
Net periodic pension expense $ 18 $ 13 $ 15
------ ------ ------
------ ------ ------
</TABLE>
The funded status of the plan at December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Accumulated benefit obligation,
including vested benefit obligation
of $660,254 at December 31, 1995 $ 660 $ 588
----- -----
----- -----
Plan assets at fair market value $ 412 $ 412
Projected benefit obligation (660) (588)
----- -----
Funded status (248) (176)
Unrecognized net (gain) loss 157 103
Adjustment for minimum liability (157) (103)
----- -----
Accrued pension liability $(248) $(176)
----- -----
----- -----
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligations was 7% for 1995 and 8% for
1994. The expected long-term rate of return on assets was 7% and 8% for 1995
and 1994, respectively.
NOTE J - STOCK OPTION PLAN
The stockholders ratified a stock option plan in 1989 for key employees
and directors that provides for the granting of incentive stock option
(within the meaning of Section 422A of the Internal Revenue Code) or
nonqualified stock options to purchase shares of the Company's common stock
at the fair market value at the date of grant. Pursuant to the plan, options
to purchase 700,000 shares may be issued. All options are nonqualified and
have a maximum duration of ten years. There are no outstanding options
eligible for exercise as of December 31, 1995.
F-10
<PAGE>
NOTE K - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The unaudited quarterly financial information for the years ended December
31, 1995 and 1994, is as follows:
<TABLE>
<CAPTION>
1995 QUARTER ENDED
-------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Sales $ 380 $ 449 $ 506 $ 680
-------- -------- --------- --------
-------- -------- --------- --------
Gross profit $ 160 $ 165 $ 183 $ 224
-------- -------- --------- --------
-------- -------- --------- --------
Net loss $ (83) $ (63) $ (50) $ (188)
-------- -------- --------- --------
-------- -------- --------- --------
Per share - net loss $ (.01) $ (.01) $ (.01) $ (.03)
-------- -------- --------- --------
-------- -------- --------- --------
</TABLE>
<TABLE>
<CAPTION>
1994 QUARTER ENDED
-------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Sales $ 662 $ 629 $ 781 $ 1,041
-------- -------- --------- --------
-------- -------- --------- --------
Gross profit $ 260 $ 228 $ 273 $ 387
-------- -------- --------- --------
-------- -------- --------- --------
Net income (loss) $ (10) $ (20) $ 11 $ 74
-------- -------- --------- --------
-------- -------- --------- --------
Per share - net loss $ - $ - $ - $ .01
-------- -------- --------- --------
-------- -------- --------- --------
</TABLE>
F-11
<PAGE>
FINANCIAL STATEMENT SCHEDULES
F-12
<PAGE>
SCHEDULE II
THE ENCORE GROUP, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
AS OF DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-------------------------
BALANCE AT CHARGED BALANCE AT
BEGINNING TO COSTS RESERVES END OF
DESCRIPTION OF PERIOD AND EXPENSES ACQUIRED DEDUCTIONS PERIOD
- ----------- ---------- ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1995:
Allowance for doubtful accounts $ 32 $ - $ - $ 1 $ 31
---------- ---------- -------- --------- ---------
---------- ---------- -------- --------- ---------
December 31, 1994:
Allowance for doubtful accounts $ 45 $ - $ - $ 13 $ 32
---------- ---------- -------- --------- ---------
---------- ---------- -------- --------- ---------
December 31, 1993:
Allowance for doubtful accounts $ 73 $ - $ - $ 28 $ 45
---------- ---------- -------- --------- ---------
---------- ---------- -------- --------- ---------
</TABLE>
F-13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 8
<SECURITIES> 0
<RECEIVABLES> 291
<ALLOWANCES> 0
<INVENTORY> 200
<CURRENT-ASSETS> 522
<PP&E> 23
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,052
<CURRENT-LIABILITIES> 1,709
<BONDS> 0
0
0
<COMMON> 6,113
<OTHER-SE> (7,018)
<TOTAL-LIABILITY-AND-EQUITY> (905)
<SALES> 2,015
<TOTAL-REVENUES> 2,015
<CGS> 1,283
<TOTAL-COSTS> 2,091
<OTHER-EXPENSES> 157
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151
<INCOME-PRETAX> (384)
<INCOME-TAX> 0
<INCOME-CONTINUING> (384)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (384)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
