<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
-------------------------------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to __________________
Commission file number _________________ _____________________
CARVER CORPORATION
------------------
(Exact Name of Registrant as specified in its charter)
WASHINGTON 91-1043157
---------- ----------
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
20121 - 48TH AVENUE WEST, LYNNWOOD, WA 98036
---------------------------------------------
(Address of principal executive offices) (Zip Code)
(206) 775-1202
--------------
(Registrant's telephone number, including area code)
______________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
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 ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
AT MARCH 31, 1996, 3,687,330 SHARES OF $.01 PAR VALUE COMMON STOCK OF
THE REGISTRANT WERE OUTSTANDING.
Page 1 of 21 pages.
Exhibit Index appears at Page 16.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARVER CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 385,000 $ 261,000
Marketable securities 5,000 5,000
Accounts receivable, trade, net 3,155,000 2,304,000
Inventories 3,241,000 3,927,000
Current portion of note receivable 1,344,000 1,342,000
Prepaid expenses 478,000 377,000
------------ ------------
Total current assets 8,608,000 8,216,000
Property and equipment,
less accumulated depreciation 2,268,000 2,291,000
Other assets and deferred charges 170,000 167,000
------------ ------------
Total Asset $11,046,000 $10,674,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Notes payable $ 2,075,000 $ 1,216,000
Accounts payable 849,000 842,000
Accrued liabilities
Commissions and advertising 151,000 104,000
Payroll and related taxes 114,000 198,000
Warranty 73,000 73,000
Other 89,000 156,000
Current portion of long-term debt 691,000 696,000
------------ ------------
Total current liabilities 4,042,000 3,285,000
------------ ------------
Shareholders' equity
Preferred stock, par value $.01 per share
2,000,000 shares authorized, no shares
issued
Common stock, par value $.01 per share
20,000,000 shares authorized 37,000 37,000
Additional paid-in capital 15,940,000 15,940,000
Accumulated deficit (8,973,000) (8,588,000)
------------ ------------
Total shareholders' equity 7,004,000 7,389,000
------------ ------------
Total liabilities and shareholders' equity $11,046,000 $10,674,000
============ ============
</TABLE>
(SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS)
2
<PAGE>
CARVER CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-----------------------------------
<S> <C> <C>
Net sales $ 4,348,000 $ 5,230,000
Cost of sales 3,508,000 4,047,000
-------------- ---------------
Gross profit 840,000 1,183,000
Operating expense
Selling 639,000 990,000
General & administrative 424,000 482,000
Engineering, research & development 153,000 253,000
------------- --------------
1,216,000 1,725,000
------------- --------------
Loss from operations (376,000) (542,000)
Other income (expense)
Interest expense (54,000) (96,000)
Interest income 26,000 21,000
Other 19,000 (15,000)
------------- --------------
Net loss $ (385,000) $ (632,000)
============= ==============
Loss per share $ (0.10) $ (0.17)
============= ==============
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CARVER CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1996 1995
-------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(385,000) $ (632,000)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation and amortization 64,000 86,000
Changes in:
Accounts receivable (858,000) 508,000
Inventories 686,000 200,000
Prepaid expenses (95,000) 40,000
Accounts payable and accrued liabilities (96,000) 36,000
Other assets & deferred charges (9,000) (39,000)
------------- ----------
Net cash provided by operating activities (693,000) 199,000
------------- ----------
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment, net (35,000) (23,000)
Proceeds (increase) in note receivable (2,000) 2,000
------------- ----------
Net cash used by investing activities (37,000) (21,000)
------------- ----------
FINANCING ACTIVITIES:
Increase (decrease) in notes payable 859,000 (360,000)
Repayment of long-term debt (5,000) (5,000)
------------ ----------
Net cash provided by financing activities 854,000 (365,000)
------------ ----------
Increase of cash and cash equivalents 124,000 (187,000)
CASH AND CASH EQUIVALENTS:
Beginning of period 261,000 249,000
------------ ----------
End of period $ 385,000 $ 62,000
============ ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 54,000 $ 96,000
</TABLE>
4
<PAGE>
CARVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
NOTE 1 - SUMMARY OF FINANCIAL STATEMENT PREPARATION
In the opinion of management, the consolidated financial statements include all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the changes in financial position and results of operations for
the interim periods reported. The results of operations for any interim period
are not necessarily indicative of the results for the entire year.
The financial statements should be read with reference to "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained herein and the "Notes to Consolidated Financial Statements" set forth
in the Company's 10-K filing for the year ended December 31, 1995.
The Company has adopted SFAS 123 but will continue to apply APB 25 for the
measurement of stock options granted by the Company. The exercise price of all
options for purchase of shares of the Company's Common Stock have been equal to
the fair market value of the Company's stock on the date of grant.
NOTE 2 - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Raw materials $ 517,000 $ 893,000
Work-in-progress 1,145,000 1,284,000
Finished goods 1,579,000 1,750,000
---------- ----------
$3,241,000 $3,927,000
========== ==========
</TABLE>
NOTE 3 - EARNINGS PER SHARE
The earnings per share computations are based upon the weighted average number
of shares outstanding for the interim periods presented as set forth in Exhibit
11, "Computation of Earnings per Share." The earnings per share calculation for
periods in which a loss is recorded excludes common share equivalents because
the effect would be antidilutive.
5
<PAGE>
<TABLE>
<CAPTION>
NOTE 4 - PROPERTY AND EQUIPMENT
March 31, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Land $ 440,000 $ 440,000
Building & improvements 2,452,000 2,452,000
Equipment 2,019,000 2,019,000
----------- -----------
4,911,000 4,911,000
Less accumulated
depreciation (2,643,000) (2,620,000)
----------- -----------
$ 2,268,000 $ 2,291,000
=========== ===========
</TABLE>
NOTE 5 - INCOME TAXES - Effective January 1, 1993, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes",
under which income tax expense is determined using an asset and liability
approach. There was no effect on the Company's financial position or results of
operations as a result of implementing this accounting standard. Management is
of the opinion that it is not appropriate to record a benefit for net operating
loss carryforwards of approximately $13,580,000 at this time. As future
operating results improve, management will re-assess its position in this
matter.
NOTE 6 - COMMITMENTS - As of April 30, 1996, the Company has committed to
purchase approximately $3,100,000 of inventory expected to be received in 1996
from various offshore vendors.
NOTE 7 - CONTINGENCIES - See Customs Audit, Part 1, Item 2 "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
PART 1. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
FORWARD - LOOKING INFORMATION -
- -----------------------------
Statements in this report concerning future performance, achievements,
developments, expectations, events or trends, including the discussion of the
Company's strategy, product development and introduction plans and generation of
additional working capital, constitute forward-looking statements which are
subject to a number of risks and uncertainties which might cause actual results
to differ materially from those expressed or implied by such statements. These
include the risks and uncertainties under the caption "Risk Factors" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 and
those identified by the Company from time to time in other filings with the
Commission, press releases and other communications.
6
<PAGE>
RESULTS OF OPERATIONS -
- ---------------------
The following tables set forth items in the consolidated statement of income as
a percentage of net sales for the three-month periods ended March 31, 1996 and
1995.
<TABLE>
<CAPTION>
Percentage of Net Sales
-------------------------
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 80.7 77.4
------ ------
Gross profit 19.3 22.6
Operating expenses
Selling 14.7 18.9
General and administrative 9.8 9.2
Engineering, research and
development 3.5 4.9
------ ------
Loss from operations ( 8.7) (10.4)
Interest expense (1.2) (1.8)
Interest income 0.6 0.4
Other expense 0.4 (0.3)
------ ------
Net loss ( 8.9)% (12.1)%
====== ======
</TABLE>
RECENT DEVELOPMENTS -
- -------------------
CUSTOMS AUDIT. Between 60% to 65% of the Company's revenues in recent years are
- -------------
of products which are sourced from offshore suppliers primarily from the Far
East. Late in 1994 the United States Customs Service conducted an audit of the
Company's import operations. The Customs Service found that the Company had
made late duty payments totaling $99,000 on tooling between 1989 to 1993. On
March 9, 1995, the Customs Service issued to the Company a prepenalty notice
indicating that it will assess a penalty up to approximately $400,000. The
Company has provided documentation to the Customs Service which the Company
believes should significantly mitigate any penalty. In July 1995, the Company
paid the Customs Service $50,000 as an offer in compromise of the penalty.
While the Company believes its offer will be accepted, there can be no
assurances of this. The Company's current cash flow position would not allow it
to pay a $400,000 penalty. (See "Management's Discussion and Analysis Financial
Condition and Results of Operations").
7
<PAGE>
SALE OF PROFESSIONAL AUDIO PRODUCT LINE. In November 1995, the Company sold all
- ---------------------------------------
of the tangible and intangible assets related to its professional audio products
line to Phoenix Gold International, Inc. ("Phoenix Gold"). The transaction
included a license which allows Phoenix Gold to use the name "Carver
Professional", and an agreement by the Company not to compete against Phoenix
Gold in the professional audio market for a period of five years from the date
of the sale. The transaction provided needed working capital and enabled the
Company to focus on its consumer product business, and further reduce staff and
related overhead. However, there can be no assurance that such benefits from
the sale will accrue to the Company. Cash generated by the transaction allowed
Carver to purchase previously deferred shipments of offshore-sourced consumer
products. ("Management's Discussion and Analysis of Financial Condition and
Results of Operations").
CIRCUIT CITY DISTRIBUTION AGREEMENT. Late in 1995, the Company entered into a
- -----------------------------------
distribution arrangement with Circuit City. Sales to Circuit City are projected
to be as much as 50%, or more, of the Company's revenue in 1996. However, the
Company has no prior sales experience with Circuit City on which to base its
projection and has no history of re-orders from Circuit City. Circuit City may
not be able to successfully market and sell the Company's products. Factors
which could affect the volume of sales by Circuit City include factors which
generally influence retail sales of electronic products. The agreement between
the Company and Circuit City may be terminated by either party for any reason
upon 30 days advance, written notice without penalty. In the event of an
unexpected termination of this agreement, the Company may not be able to change
its operations quickly enough to respond to a significantly lower level of
sales.
SEASONALITY. The markets for consumer audio equipment are moderately seasonal,
- -----------
with somewhat higher sales expected to occur in the last six months of the year.
The introduction of new products may affect this seasonality and quarter-to-
quarter comparisons. Demand for audio products also exhibits some cyclicality,
reflecting the general state of the economy and consumer expectations.
NET SALES AND NET LOSSES -
- ------------------------
Net sales for the quarter ended March 31, 1996 were $4,348,000, a decrease of
16.9% from net sales of $5,230,000 for the same period of 1995. In mid-November
1995, the Company sold its professional product line. First quarter 1995 net
sales included sales of professional products of $1,547,000 and OEM sales of
$263,000. In the first quarter of 1996, net sales of professional products were
$370,000 and the Company had no OEM sales. Contracts which represented 95% of
the Company's 1995 OEM sales were included in the assets sold with the
professional products line.
Sales of preamplifiers/tuners and loudspeakers increased by $187,000 or 34% and
$210,000 or 269%, respectively, from the same period last year. Sales of
receivers in the first quarter of 1996 decreased $210,000 or
8
<PAGE>
269% in the first quarter of 1996 compared to the first quarter of 1995. Sales
of consumer amplifiers decreased by $176,000 or 8% from the same period last
year.
Domestic sales of the Company's consumer products increased to $3,000,000 or 38%
compared to sales of $2,225,000 in the first quarter of 1995. Of the domestic
sales, approximately $1,800,000 or 59% were sales made by the Company to Circuit
City. Sales outside of the United States decreased approximately 48% from
$861,000 to $467,000 in the first quarter of 1996. The Company believes this is
attributable to limited availability of product to sell to its international
distributors. Approximately half of the Company's sales in the first quarter of
1996 were attributable to products which the Company sources offshore compared
to 46% for the first quarter 1995.
The Company's sales of consumer products, although higher in the first quarter
of 1996 than in the corresponding period last year, have been adversely impacted
by the Company's strategy in 1995 of reducing its product line, especially those
at the low end of the price range and with low margins. Also, both domestic and
export sales have been and are continuing to be adversely effected by a severe
shortfall in working capital during most of 1995 and recently in 1996. Due
this shortfall, the Company has not been able to purchase enough of the products
which its sources offshore to consistently fill orders. This shortfall in
inventory exposes the Company to the risk that a portion of orders from its
dealer will be canceled due to the Company's inability to fill pending orders in
a timely manner. See "Liquidity and Capital Resources" below.
Net losses for the quarter ended March 31, 1996 were $385,000 (8.9% of net
sales) or $0.10 per share compared to a loss of $632,000 (12.1% of net sales) or
$0.17 per share in the first quarter of 1995.
GROSS PROFIT -
- ------------
Gross profit declined as a percent of net sales to 19.3% in the first quarter of
1996 from 22.6% in the first quarter of 1995. Professional product sales during
the first quarter of 1996 of $375,000 were made to the purchaser of the
Company's professional product line pursuant to an agreement entered into at the
time of the sale of the line. Pursuant to the agreement, the Company sells such
professional products at cost. The Company has satisfied its obligation to
manufacture and sell professional products to the purchaser of its professional
product line. In addition, approximately $1,800,000 in sales to Circuit City
were at a lower margin than the Company realizes on its sales to other domestic
customers. The Company believes that it may experience improvements in gross
profit as it increases its domestic production. Margins are expected to improve
as the Company purchases new products to be introduced in 1996 from offshore
vendors located outside of Japan. There can be no assurance that foreign
exchange rates, cost increases
9
<PAGE>
or other factors will not negatively impact margins on the Company's sourced
product. (See "Liquidity and Capital Resources".)
OPERATING EXPENSE -
- -----------------
Selling expense decreased by approximately $350,000 when comparing the first
quarter of 1996 to the first quarter of 1995. Continued efforts by the Company
to reduce expenses and the elimination of selling expenses attributable to the
Company's professional products line resulted in lower selling expense.
Assuming sufficient working capital is available, the Company expects selling
expense to increase slightly during the remainder of the year as it increases
its field support and media advertising.
General and administrative expense decreased by nearly $60,000 in quarter to
quarter comparisons, primarily as a result of reductions in staffing.
Research and development expense decreased by approximately $100,000 in the
first quarter of 1996 compared to the first quarter of 1995, primarily due to
lower personnel expense resulting from the sale of the Company's professional
products line.
OPERATING LOSS -
- --------------
The Company reported operating losses of $376,000 for the first quarter of 1996
compared with operating losses of $542,000 for the first quarter of 1995.
OTHER INCOME AND EXPENSE -
- ------------------------
Average borrowings were down in the first quarter of 1996 from the first quarter
of 1995, and interest expense decreased by approximately $42,000.
LIQUIDITY AND CAPITAL RESOURCES -
- -------------------------------
The Company's working capital on March 31, 1996 was $4,566,000 which included
cash and short term investments aggregating approximately $390,000. This
compares with working capital of $4,931,000 and cash and short-term investments
of $266,000 at December 31, 1995. At May 6, 1996, the Company's immediate
capital resources consisted of approximately $55,000 in cash (and cash
equivalents) and the credit facility described below. The losses incurred by the
Company over the last several years have eroded the Company's working capital so
that the Company is dependent on its revolving line of credit to finance
operations.
The Company has a $6,000,000 revolving line of credit, $1,000,000 of which can
be used to open commercial letters of credit. Borrowings under this agreement
are restricted to 70% of eligible accounts receivable and 50% of eligible
inventory. As a condition to its
10
<PAGE>
approval of the sale of the professional products line, the Company's lender
required that borrowings under the line of credit be reduced by an "Availability
Block" of $250,000 plus 20% of the gross proceeds from the sale of raw material
and work-in-process inventories used for professional products and sold as a
part of the sale of the professional product line. At May 6, 1996, the Company
had borrowed $1,504,693 of the $1,749,353 then available under this facility.
The line is collateralized by substantially all assets of the Company and bears
interest at the prime lending rate plus 2%. On January 15, 1996, the lender
agreed to make temporary advances to the Company in amounts up to $1,000,000
over the amount otherwise available under the formulas described above. The
Company granted its lender a deed of trust on Carver's Lynnwood, Washington
facility as security for the temporary accommodation. The Company has borrowed
$250,000 against this over-line all of which must be repaid on May 31, 1996. The
Company's line of credit expires on July 31, 1996. In February 1996, management
met with the representatives from its lender to discuss the renewal of its line
of credit. Based on this discussion, the Company believes that its lender will
renew the line of credit for a two year term. The lender has also indicated a
willingness to extend the temporary over-line for an additional 120 day period.
However, there can be no assurance that the Company will be able to renew its
line of credit or obtain an extension of the over-line or that it will able to
do either on a timely basis or on favorable terms.
The Company's inventory has decreased $690,000 from December 31, 1995 primarily
due to raw materials and finished goods. Accounts receivable have increased
$850,000 from the end of 1995 due to the timing of shipments of products to one
of the Company's customers and past due receivables from Phoenix Gold
International, Inc. the purchaser of the professional product line.
As the Company's borrowing base is dependent on its inventory and receivables,
the borrowing availability has contracted to a level at which the Company has
experienced a cash shortfall and has been forced to delay the payment of its
accounts payable which could impair its relationship with its vendors and which
has delayed receipt of major source product purchases. During most of 1995 the
Company operated under a severe cash shortage which caused it to push out
payments to vendors, and defer the purchase of source product for several
months. The Company believes that many of its trade creditors and source
product vendors may not allow the Company to significantly delay payment of its
payables. Consequently, the Company believes that several of its major
suppliers will change payment terms to require prepayment or letters of credit.
More restrictive payments terms will further restrict the Company's working
capital and further delay its ability to produce and source products. The
inability of the Company to source product overseas will cause it to be unable
to fill orders from its dealers. The Company estimates that it could lose
approximately $5.5 million in projected sales in 1996 due to lack of
availability of product unless additional working capital is generated. The
decline in accounts receivable and inventories caused by this shortage of
working capital will further reduce the amount of
11
<PAGE>
borrowings available to the Company under its line of credit, thus worsening the
problem. The continued viability of the Company is dependent on it obtaining
additional working capital in the very near future.
The Company's working capital requirements include funds needed to purchase
inventories of raw materials and source product and finance day to day
operations, and repayment of the $250,000 over-line by May 31, 1996, unless
extended. A significant amount of the Company's accounts payable are past due.
The Company's available sources of working capital consist of cash flow from
operations and a small amount of expected available borrowings under its credit
facility. The Company believes that it will not be able to satisfy a number of
its obligations in May 1996.
The Company has entered into a Letter of Intent with Renwick Capital Management,
a New York-based Investment fund. The Letter of Intent contemplates an infusion
of capital of approximately $3.45 million in return for shares of a new issue of
preferred stock convertible into shares of the Company's Common Stock and
warrants, which, if fully exercised and converted, would involve the issuance of
1.7 million additional shares of Common Stock of 47% of the current shares
outstanding. Because the Letter of Intent is subject to negotiations of
definitive agreements and satisfaction of a number of closing conditions, there
can be no assurances that the negotiations will result in definitive agreements
acceptable to the Company and the prospective investor or that closing
conditions can be satisfied.
The Company has entered into an agreement for the sale of its headquarters in
Lynnwood, Washington. The Purchase and Sale agreement contains several
contingencies which the Purchaser must remove before the sale can be closed.
There can be no assurance that the prospective Purchaser will remove the
contingencies or that the sale will be consummated. Even if the Purchaser
removes the contingencies, the sale is unlikely to generate additional cash for
the Company's operations before December 1996.
EFFECTS OF INFLATION AND CHANGES IN FOREIGN CURRENCY EXCHANGE RATES
- -------------------------------------------------------------------
Due to the competitive conditions in the market for consumer electronics,
historically the Company has been limited in its ability to increase prices for
its products in amounts sufficient to offset increased production and operating
costs. The Company increased prices for its domestic products in January 1995
and its export products in July 1995 an average of 5%. The Company intends to
continue to monitor costs and its market and adjust prices taking into
consideration the Company's costs and competitive conditions. All sales of the
Company's products are in U.S. dollars.
Approximately 47% of the Company's net sales in 1995 and 50% year to date in
1996 were of products designed by and/or manufactured to the Company's
specifications by overseas suppliers. The Company purchased a substantial
portion of these products at an agreed per unit price payable in Japanese yen.
Accordingly, the weakening in the value of the dollar versus the yen has had an
adverse effect on the Company's gross margin in 1995. The Company's 1996 plan
presently is for 58% of
12
<PAGE>
its revenues to be from product sourced offshore. It is presently the Company's
intention to replace certain Japanese built products in the second and third
quarters of 1996 with product sourced from countries that do not require payment
in Japanese Yen. However, the transition to alternate suppliers may involve
quality control issues, delays in delivery dates or other transitional problems.
Historically, the Company has had a policy of generally hedging its foreign
currency exposure between the date orders are placed with overseas suppliers and
the date at which payment is made. Due to credit restrictions under its line of
credit, the Company is not hedging at this time, and therefore does have
exposure to currency fluctuations which might adversely effect its gross profits
in 1996. At May 6, 1996, the Company had committed to the purchase of
approximately $3.1 million of inventory scheduled for delivery in 1996. Of this
amount, approximately $1.0 million is denominated for payment in Japanese Yen.
A 15% appreciation in Yen against the U.S. dollar would increase the amount
which the Company has committed to purchase by approximately $150,000 to a total
of $1,150,000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
------------------
None.
ITEM 2. CHANGES IN SECURITIES.
----------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
--------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
ITEM 5. OTHER INFORMATION.
------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
(a) Exhibit 10.39
Thirteenth Amendment to the Accounts Financing Agreement dated
March 28, 1996 Congress Financial Corporation (Northwest) and the
Company.
13
<PAGE>
(b) Exhibit 10.40
Fourteenth Amendment to the Accounts Financing Agreement dated
April 29, 1996 between Congress Financial Corporation (Western)
and the Company.
(c) Exhibit 11
Computation of Earnings per Share
(d) Reports on Form 8-K
None.
14
<PAGE>
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 thereunto duly authorized.
CARVER CORPORATION
Dated: May 15, 1996 /s/John P. World
--------------------------
John P. World
Executive Vice President,
General Manager and
Principal Accounting Officer
15
<PAGE>
CARVER CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT TITLE PAGE
- -------------------------------------------------------------------------
<S> <C> <C>
10.39 Thirteenth Amendment to the Accounts Financing 17
Agreement dated March 28, 1996 Congress Financial
Corporation (Northwest)and the Company.
10.40 Fourteenth Amendment to the Accounts Financing 19
Agreement dated April 29, 1996 between Congress
Financial Corporation (Western)and the Company.
11 Computation of Earnings Per Share 21
</TABLE>
16
<PAGE>
EXHIBIT 10.39
March 28, 1996
Congress Financial Corporation (Northwest)
101 S.W. Main Street, Suite 725
Portland, OR 97204
Re: Thirteenth Amendment to Accounts Financing Agreement
----------------------------------------------------
Ladies and Gentlemen:
This Thirteenth Amendment to Accounts Financing Agreement, dated as of
the 28th day of March, 1996 (this "Amendment") is for the purpose of amending
the Accounts Financing Agreement [Security Agreement] which we entered into on
or about December 20, 1990, as it has been previously amended (the "Accounts
Financing Agreement").
For valuable consideration, receipt and sufficiency of which are
acknowledged, we agree as follows:
The first sentence of Paragraph 9.1 of the Accounts Financing
Agreement is amended to provide as follows:
"9.1 This Agreement shall remain effective and
shall continue in force and effect for a term
ending June 30, 1996 (the "Renewal Date") and from
year to year thereafter, unless sooner terminated
pursuant to the terms hereof."
2. To induce you to accept this Amendment, we make the following
representations, warranties, and covenants:
(a) Each and every recital, representation, and warranty contained in
this Amendment and the Accounts Financing Agreement is correct as of the
date of this Amendment.
(b) No event has occurred or is continuing which constitutes or, with
the giving of notice, the passage of time, or both, would constitute, an
Event of Default under the Accounts Financing Agreement.
3. As consideration for the accommodation reflected in this
Amendment, we shall pay to you a fee in the sum of $1,000, which you are
authorized to deduct from our loan account.
4. We shall pay all expenses, including attorney fees, which you
incur in connection with the preparation and implementation of this Amendment
and any related documents.
5. Except as specifically provided above, the Accounts Financing
Agreement remains fully valid, binding, and enforceable according to its terms.
17
<PAGE>
6. We waive and discharge any and all defenses, claims,
counterclaims, and offsets which we may have against you and which have arisen
or accrued up to the date of this Amendment. We acknowledge that you and your
employees, agents and attorneys have made no representations or promises to us
except as specifically reflected in this Amendment and in the written agreements
which have been previously executed. In this connection, we specifically waive
the provisions of California Civil Code (S) 1542, which provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release,
which, if known by him, must have materially
affected his settlement with the debtor.
Very truly yours,
CARVER CORPORATION
By /s/John P. World
-----------------
Its Executive Vice President & General Manager
------------------------------------------
The undersigned guarantor acknowledges that Congress Financial
Corporation (Northwest) ("Congress") has no obligation to provide it with notice
of, or to obtain its consent to, the terms of this Amendment. The undersigned
guarantor nevertheless hereby (i) acknowledges and agrees to the terms and
conditions of this Amendment; (ii) acknowledges that its guaranty remains fully
valid, binding and enforceable; and (iii) waives any and all defenses, claims,
counterclaims and offsets against Congress which may have accrued to date. In
connection with these waivers, the undersigned guarantor specifically waives the
provisions of California Civil Code (S) 1542, which provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release,
which, if known by him, must have materially
affected his settlement with the debtor.
USS CORPORATION, dba US Sound
By /s/ John P. World
-----------------
Its Secretary
---------
ACCEPTED AND AGREED:
CONGRESS FINANCIAL CORPORATION (NORTHWEST)
By /s/ Drew Stawin
---------------
Its Vice President
--------------
18
<PAGE>
EXHIBIT 10.40
April 29, 1996
Congress Financial Corporation (Northwest)
101 S.W. Main Street, Suite 725
Portland, OR 97204
Re: Fourteenth Amendment to Accounts Financing Agreement
----------------------------------------------------
Ladies and Gentlemen:
This Fourteenth Amendment to Accounts Financing Agreement, dated as of
the 29th day of April, 1996 (this "Amendment") is for the purpose of amending
the Accounts Financing Agreement [Security Agreement] which we entered into on
or about December 20, 1990, as it has been previously amended (the "Accounts
Financing Agreement").
For valuable consideration, receipt and sufficiency of which are
acknowledged, we agree as follows:
The first sentence of Paragraph 9.1 of the Accounts Financing
Agreement is amended to provide as follows:
"9.1 This Agreement shall remain effective and
shall continue in force and effect for a term
ending July 31, 1996 (the "Renewal Date") and from
year to year thereafter, unless sooner terminated
pursuant to the terms hereof."
2. To induce you to accept this Amendment, we make the following
representations, warranties, and covenants:
(a) Each and every recital, representation, and warranty contained in
this Amendment and the Accounts Financing Agreement is correct as of the
date of this Amendment.
(b) No event has occurred or is continuing which constitutes or, with
the giving of notice, the passage of time, or both, would constitute, an
Event of Default under the Accounts Financing Agreement.
3. We shall pay all expenses, including attorney fees, which you
incur in connection with the preparation and implementation of this Amendment
and any related documents.
4. Except as specifically provided above, the Accounts Financing
Agreement remains fully valid, binding, and enforceable according to its terms.
5. We waive and discharge any and all defenses, claims,
counterclaims, and offsets which we may have against you and which have arisen
or accrued up to the date of this Amendment. We acknowledge that you and your
employees, agents and attorneys have made no representations or promises to us
except as specifically reflected in this Amendment and in the written agreements
which
19
<PAGE>
have been previously executed. In this connection, we specifically waive the
provisions of California Civil Code (S) 1542, which provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release,
which, if known by him, must have materially
affected his settlement with the debtor.
Very truly yours,
CARVER CORPORATION
By /s/ John P. World
-----------------
Its Executive Vice President & General Manager
------------------------------------------
The undersigned guarantor acknowledges that Congress Financial
Corporation (Northwest) ("Congress") has no obligation to provide it with notice
of, or to obtain its consent to, the terms of this Amendment. The undersigned
guarantor nevertheless hereby (i) acknowledges and agrees to the terms and
conditions of this Amendment; (ii) acknowledges that its guaranty remains fully
valid, binding and enforceable; and (iii) waives any and all defenses, claims,
counterclaims and offsets against Congress which may have accrued to date. In
connection with these waivers, the undersigned guarantor specifically waives the
provisions of California Civil Code (S) 1542, which provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release,
which, if known by him, must have materially
affected his settlement with the debtor.
USS CORPORATION, dba US Sound
By /s/ John P. World
-----------------
Its Secretary
---------
ACCEPTED AND AGREED:
CONGRESS FINANCIAL CORPORATION (NORTHWEST)
By /s/ Drew Stawin
---------------
Its Vice President
--------------
20
<PAGE>
EXHIBIT 11
CARVER CORPORATION AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------------ ------------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
NET LOSS $ (385,000) $ (632,000)
---------- ------------
Weighted average number of
shares outstanding 3,686,830 3,678,674
Add shares issuable from the
assumed exercise of options * *
----------- -----------
Weighted average number of shares
outstanding, as adjusted 3,686,830 3,678,674
---------- -----------
LOSS PER SHARE $ (0.10) $ (0.17)
========== ===========
</TABLE>
*Effect on loss per share is antidilutive
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM. FORM 10-Q
FOR PERIOD ENDED 3/31/96 IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 385,000 261,500
<SECURITIES> 5,000 5,000
<RECEIVABLES> 3,278,000 2,570,000
<ALLOWANCES> 123,000 266,000
<INVENTORY> 3,241,000 3,927,000
<CURRENT-ASSETS> 8,608,000 8,216,000
<PP&E> 4,911,000 4,911,000
<DEPRECIATION> 2,643,000 2,620,000
<TOTAL-ASSETS> 11,046,000 10,674,000
<CURRENT-LIABILITIES> 4,042,000 3,285,000
<BONDS> 0 0
0 0
0 0
<COMMON> 37,000 37,000
<OTHER-SE> 6,967,000 7,352,000
<TOTAL-LIABILITY-AND-EQUITY> 11,046,000 10,674,000
<SALES> 4,348,000 18,428,000
<TOTAL-REVENUES> 4,348,000 18,428,000
<CGS> 3,508,000 15,038,000
<TOTAL-COSTS> 3,508,000 15,038,000
<OTHER-EXPENSES> 1,115,000 6,247,000
<LOSS-PROVISION> 56,000 447,000
<INTEREST-EXPENSE> 54,000 335,000
<INCOME-PRETAX> (385,000) (3,157,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (385,000) (3,157,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (385,000) (3,157,000)
<EPS-PRIMARY> (0.10) (0.86)
<EPS-DILUTED> (0.10) (0.86)
</TABLE>
