FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
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Commission File No.2-331855
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GO-VIDEO, INC.
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(Exact name of registrant as specified in its charter)
Delaware 86-0492122
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7835 East McClain Drive
Scottsdale, Arizona 85260-1732
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(602) 998-3400
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
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 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]
Based upon the closing price of the stock quoted on the American Stock Exchange
on June 25, 1997 the aggregate market value of common stock held by
non-affiliates of the Registrant was approximately $17,854,028. See Item 5 of
this Form 10-K.
The number of shares of common stock outstanding as of June 25, 1997, was
11,902,685.
Documents Incorporated by Reference: Portions of the Registrant's Proxy
Statement relating to its Annual Meeting of Stockholders to be held August 21,
1997 are incorporated by reference in Part III of this Form 10-K.
Exhibit Index at page18
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TABLE OF CONTENTS
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PART I
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Item 1. Business............................................................................1
Executive Officers of the Registrant............................................... 9
Item 2. Properties.........................................................................10
Item 3. Legal Proceedings..................................................................10
Item 4. Submission of Matters to a Vote of Security Holders................................10
PART II
Item 5. Market for the Registrant's Common Stock and
Related Security Holder Matters...................................................11
Item 6. Selected Financial Data............................................................12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................13
Item 8. Financial Statements and Supplementary Data........................................17
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................................17
PART III
Item 10. Directors and Executive Officers of the Registrant.................................18
Item 11. Executive Compensation.............................................................18
Item 12. Security Ownership of Certain Beneficial Owners and Management.....................18
Item 13. Certain Relationships and Related Transactions.....................................18
PART IV
Item 14. Exhibits, Financial Statement, Schedules and Reports on Form 8-K...................18
SIGNATURES........................................................................S-1
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THIS ANNUAL REPORT ON FORM 10-K CONTAINS "FORWARD LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED AND SECTION 21E
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS REFER TO
FUTURE EVENTS OR INCLUDE TERMS SUCH AS: "THE COMPANY BELIEVES", "EXPECTS",
"INTENDS", AND OTHER USES OF FUTURE TENSES. SEE ITEM 1, ITEM 5, AND ITEM 7. ALSO
SEE "MANAGMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" IN PART II, ITEM 7 FOR A DISCUSSION OF IMPORTANT FACTORS THAT COULD
AFFECT THE VALIDITY OF ANY SUCH FORWARD LOOKING STATEMENTS. SUCH FACTORS INCLUDE
THE FOLLOWING: BUSINESS CONDITIONS AND GENERAL ECONOMIC CONDITIONS; COMPETITIVE
FACTORS, SUCH AS PRICING AND MARKETING EFFORTS OF RIVAL COMPANIES; TIMING OF
PRODUCT INTRODUCTIONS; SUCCESS OF COMPETING TECHNOLOGIES; ABILITY TO NEGOTIATE
REDUCED PRODUCT COSTS; AND THE PACE AND SUCCESS OF PRODUCT RESEARCH AND
DEVELOPMENT, PARTICULARLY WITH OVERSEAS DISTRIBUTORS OF THE DUAL-DECK AND THE
DIRECT VIEW DIGITAL TELEVISION DEVELOPMENT WITH LOEWE OPTA GMBH.
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PART I
ITEM 1. BUSINESS
Overview
Go-Video, Inc. ("Go-Video" or the "Company") designs, develops, and markets
consumer electronic video products. The Company believes that it and its
licensees are the exclusive North American distributors of VHS video cassette
player/recorders ("VCRs") with two decks built into one unit - the Dual-Deck(TM)
VCR. The Company patented the Dual-Deck system which incorporates proprietary
circuitry and software to perform duplicating, dual recording, editing, and
video view switching functions not available from single deck VCRs. The
Dual-Deck VCR has constituted substantially all of the Company's sales over the
last five fiscal years. The Company expanded its product line into home and
business security and surveillance products in April 1995.
Go-Video was incorporated in Arizona in 1984, completed its initial public
offering in 1986, and reincorporated in Delaware in 1987. In 1984, the Company
filed its first successful patent application that was ultimately issued in
August 1988 for the Dual-Deck VCR. The Company pursued a manufacturer and source
for critical components until 1989 when the Company entered into manufacturing
and license agreements with Samsung Corporation ("Samsung"), one of the world's
largest manufacturers of consumer electronics. Sales of the Dual-Deck VCR began
in June 1990. The Company obtained a second manufacturer in January 1996, when
it entered into a manufacturing agreement with Shintom Company Ltd. and Talk
Corporation ("Shintom").
The Company's executive office is located at 7835 East McClain Drive,
Scottsdale, Arizona, 85260-1732, and its telephone number is (602) 998-3400. The
Company has regional sales offices in Southlake, Texas and Clarkston, Michigan.
Business Strategy
The Company believes that the VCR market continues to offer opportunity for the
Company's core Dual-Deck VCR business line. The Company believes that it can
capitalize on its patented technology, engineering and industry know-how,
product distribution network, and reputation for bringing innovative products to
the consumer electronics marketplace to increase its market share through a
product development strategy of lowering prices and improving features while
protecting or increasing gross profit margins.
The more significant components of the Company's business strategy include:
Redesigning the Dual-Deck VCR Product Line and Broadening the
Distribution Channels. The Company introduced during its fiscal year ending
March 31, 1997 a new line of Dual-Deck VCRs, the GV60xx series, that have been
manufactured for the Company by Shintom. The GV60xx series includes a price
leader model, the GV6010, that is selling at retail for approximately 20% less
than the comparable model of the Company's previous model lines. With lower
retail prices of its Dual-Deck VCR model lines, the Company anticipates that it
will be able to open new retail accounts, including additional national
retailers with significant market share of the consumer electronics market and
thereby expand its already strong distribution network. The Company intends to
work with its suppliers to further reduce manufacturing costs of the Dual-Deck
VCR so that it may continue to reduce the retail price. The Company is currently
developing several models of a PAL (European television broadcasting format)
Dual-Deck VCR for distribution beginning in September 1997, although there can
be no assurance that the Company will successfully distribute such a product.
During the first quarter of fiscal year 1998, the Company and Shintom began a
nationwide introduction in Japan of its first international model. The Company
has refocused its video security line for commercial as well as home users. The
commercial market is expected to add new distribution that could include new
marketing partners that specialize in the video security business.
Acquiring and Developing Complementary Products and Technology. The
Company
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believes its ability to penetrate the retail consumer electronics marketplace
with the Dual-Deck VCR will provide opportunities for diversification and
revenue growth through the acquisition of synergistic product lines and/or
technology and through product development relationships with technology
partners. The resulting product lines can be integrated into the Company's
product development, marketing, sales and distribution assets. The Company made
its first such acquisition in April 1995 when it acquired the assets of Dublin
Companies (the "Dublin Acquisition"), a distributor of home and business video
security and surveillance products sold under the Private Eye(TM) label.
In addition, the Company is developing a distribution alliance with Loewe Opta,
a German manufacturer of television and home audio consumer electronics, for the
exclusive right to market and distribute high-end digital direct view
televisions in North America pending the commercial agreement between the two
Companies. The Company, if successful, anticipates that distribution of the
products could begin as early as calendar 1998. However, there is no assurance
that this will occur. The Company also began joint development of a prototype
LCD projection television with Prolux Corporation which, if developed, will be
targeted for the mid-range and high-end consumer and home theater markets. There
is no assurance that the joint development will produce a product that is both
technically and financially viable for distribution by the Company.
Because of the potential cost and opportunistic and highly variable nature of an
acquisition and product development strategy, there is no assurance that the
Company will be successful in pursuing additional diversification.
Industry Background
The consumer electronics industry is highly competitive, with declining prices
and improving quality and features. Manufacturing is dominated by Japanese and
Korean-based companies plus two European-based companies. Manufacturing
dominance is maintained by substantial technological and entry cost barriers.
Generally, sales of consumer electronic products in the United States are
becoming consolidated into national and regional consumer electronics chains and
mass merchants. Independent and smaller regional retailers are, in many regions
of the U.S., under considerable competitive pressures against larger retailers,
particularly in the lower and mid-priced consumer electronic product categories.
As a result, many of these stores concentrate on premium consumer electronic
products, such as high-end home theater systems and specialized audio components
and speakers. Go-Video's Dual-Deck VCRs and video security product lines are
sold primarily through national and regional consumer electronic chains, mass
merchant outlets, and warehouse clubs.
As a result of the industry consolidation, there are substantial hurdles for
bringing new products to the consumer electronic marketplace, particularly if
the company offering the product is not already distributing other consumer
electronic products. Retailers of consumer electronic products have considerable
negotiating power and generally require that suppliers have sufficient
financial, operational, and marketing wherewithal to provide a high level of
support for any product line carried by that retailer. Go-Video is one of few
companies over the last ten years that has been able to bring a new product line
and category into the consumer electronic home entertainment marketplace.
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Principal Products
Go-Video markets and distributes two main product lines: Dual-Deck VCRs and
video security products. During the fiscal year ended March 31, 1997, Dual-Deck
VCRs and related products and services accounted for nearly all of the Company's
revenues. The Company's Security Products Division accounted for less than 3% of
revenues during the fiscal year ended March 31, 1997.
Dual-Deck VCRs. Go-Video offers several models of Dual-Deck VHS/VHS
VCRs. Among other features, the Dual-Deck VCR allows the user to, with one touch
of a button, duplicate prerecorded video tapes while maintaining a near original
level of picture quality and to easily edit video tapes to eliminate unwanted
segments or to combine material from two or more tapes.
All current models of the VHS/VHS Dual-Deck VCRs contain the patented technology
and proprietary software of the "AmeriChrome" circuitry that facilitates
electronic signal preservation and transfer from deck to deck without external
wiring. AmeriChrome circuitry allows home consumers to create a high quality
duplicate of original VHS or VHS-C format videocassette tapes. AmeriChrome is an
improvement over the current technology of duplicating prerecorded video tapes
which requires that two single-deck videocassette recorders be externally wired
together by the consumer. Many prerecorded tapes contain electronic encoded
signals to take advantage of single deck VCR design weaknesses, resulting in
poor or unusable copies. AmeriChrome is not subject to such limitations.
The Dual-Deck VCR has been designed for home use as a full featured video
cassette recorder. Company-prepared literature and owner manuals caution
consumers that the Dual-Deck VCR should not be used in a manner which infringes
on the rights of owners of copyrighted material. However, the Company cannot
predict the likelihood that distribution of current or future Dual-Deck VCR
models will be challenged for any reason, or that laws governing home recording
devices will be amended or applied in the future so as to require changes to the
operation or performance of the Dual-Deck VCR. The Company believes that the
Dual-Deck VCR is the video equivalent or betterment of the dual-transport audio
tape deck, which has become an accepted audio industry standard, and that it
would have meritorious defenses to any challenge. The Company is not currently
developing a digital formatted player/recorder and is unable to predict the
impact on the Company of developing digital technologies.
The Company introduced its current line of Dual-Deck VCRs, the GV60xx series, in
the second quarter of fiscal 1997. The new series was introduced to update the
product line of VHS-to-VHS Dual-Deck VCRs with current technology and
manufacturing techniques, such that consumers can be offered a more popularly
priced product line. Features are designed so that consumers can enjoy a
convenient, easy-to-operate, multi-function Dual-Deck VCR. The GV60xx series
models are differentiated from one another by various designs and functions to
appeal to customer preferences. One of the models include high-fidelity MTS
stereo playback/recording and 4-head play/record for special effects. The 60xx
series includes two VCR decks "stacked" within one housing. The GV60xx series
compliments the Company's other current model line the GV40xx series which was
introduced in the second quarter of fiscal 1996.
Security Products and Accessories. While the Company currently markets
and distributes its security products line to many of the same retail and
catalog accounts through which it currently distributes Dual-Deck VCRs, it has
broadened its focus to include distributors and retailers who have not carried
the Company's products before and that specialize in the video security
business. The Company faces significant direct competition from other
manufacturers and distributors of similar video security products (see
"Competition").
The Company's video security product line includes closed-circuit television
(CCTV) products which are primarily used for security and general observation
and recording purposes. The product line includes cameras, monitors, time lapse
VCRs, VCR controllers, wireless video transmission systems, observation and
switching systems, motion sensors and post recording image processors. Through
variations of these products, a complete security solution can be designed to
work as an integrated system. The Company generally sells its security products
through its sales distribution network to both the professional and consumer
segments of the security and surveillance market. The consumer segment is the
Company's primary focus, allowing the Company to take full advantage of its
distribution network. All of the products are designed to be easily installed
and operated.
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Competition
The consumer electronics market is highly competitive and is characterized by
technological change and general price erosion. The Company's competitors have
substantially greater financial, manufacturing, and technical resources than
does the Company. Moreover, most of these companies have larger marketing,
sales, and distribution channels that also afford them a competitive advantage.
Dual-Deck VCRs. The Company believes that, over the remainder of the
decade, the VCR market in the United States will be relatively mature with a
majority of sales consisting of replacement, upgrade, and second-unit purchases.
While, to the Company's knowledge, no other company is selling a consumer
VHS-to-VHS Dual-Deck VCR in the United States, several companies have the
technical skill and practical ability to design, manufacture, and sell such a
product. "Double deck videocassette recorders" have been developed by potential
competitors of the Company. An English company, Amstrad, introduced a product
stacking two video cassettes within one housing, formatted for the European
television standard (PAL) and not compatible with U.S. television standards
(NTSC). Amstrad announced in July 1990 that it had no current plans to introduce
its product in the United States and announced in 1994 that it was ceasing all
distribution of its PAL units in Europe. Orion is believed to sell a PAL
formatted "double deck" VCR in Germany. In Japan, Panasonic has developed a
VHS-C to VHS VCR for editing VHS-C tapes, and Sony has developed an 8mm-to-VHS
VCR. Hitachi and other Japanese companies have marketed in Japan "twin loading"
VHS VCRs which load two tapes in succession to a single deck VCR transport
mechanism. There is no assurance that a potential competitor will not attempt to
introduce competing products in the United States in the future. However, the
Company intends to vigorously enforce its proprietary technology rights.
The Company believes that its principal North American competition is currently
from top-end single-deck VCRs offering a variety of features and available at
various prices, all of which are less expensive than comparable Dual-Deck VCRs.
Samsung has the right under its agreement with the Company, upon payment of a
royalty to the Company, to manufacture and sell, under certain conditions,
Dual-Deck VCRs incorporating the Company's proprietary technology, thereby
allowing Samsung to compete with the Company in its principal marketplace (see
"Licensing"). Samsung has not to date exercised its right to enter the North
American marketplace. The Company believes that if Samsung were to exercise its
right, the Company's net revenues and profitability could be affected in a
materially adverse manner. The Company has licensed to Samsung and Goldstar
USA., the worldwide nonexclusive right to manufacture, use, and sell the
8mm-to-VHS format Dual-Deck VCR (see "Licensing").
Video Security Products. Within the past decade as consumers and
businesses have become more concerned about personal and property security,
video security and surveillance systems have become more broadly accepted in the
retail marketplace and are now sold packaged and ready to install in a small
business or home environment. The Company believes that additional growth will
come through expanded product offerings, including addition of the products that
are more convenient to install and operate than current models. Competitors
compete on the basis of features, price, and ease and suitability to use. Major
competitors include Magnavox, Ultrak, Goldbeam, Vivitar, Linear, Focus, and
Polestar.
Licensing
The Company and Samsung Corporation entered into a License Agreement in February
1989 under which the Company granted Samsung, under certain conditions, the use
of its patented and proprietary technology to: (i) on an exclusive basis,
manufacture and distribute Dual-Deck VCRs in the Republic of Korea; (ii) the
right to manufacture Dual-Deck VCRs for the Company; (iii) on a non-exclusive
basis, manufacture and distribute Dual-Deck VCRs in all markets except the
United States and its territories;
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and (iv) on a non-exclusive basis, manufacture and distribute Dual-Deck VCRs in
the United States and its territories under Samsung's own trademark and trade
names. Sales of licensed Dual-Deck VCRs by Samsung to any party other than
Go-Video are subject to a per unit royalty based as a percentage of the net
selling price. To date, the Company has not received royalty payments under the
Agreement. The License Agreement requires that the Company offer improvements in
its Dual-Deck technology without additional fee or royalty to Samsung throughout
the life of the License Agreement and survives termination of the Manufacturing
Agreement unless such termination is for any cause attributable to Samsung.
Unless terminated earlier, the License Agreement expires in October 2004. The
Manufacturing Agreement is automatically renewed in one year increments unless
notice of cancellation is given at least six months prior to its expiration and
currently extends through February 1998 (see "Product Development and
Manufacturing").
In July 1994, the Company entered into an agreement with Goldstar U.S.A., Inc.
in which the Company granted Goldstar the non-exclusive, non-assignable,
non-transferable right and license to manufacture, sell and distribute worldwide
8mm-to-VHS VCRs. Payment for the license was received as a one-time fee in July
1994. The Goldstar agreement expires when the last of certain patents held by
the Company expire. The Company has no further obligation under the license
agreement and therefore the license fee was fully recognized as revenue in July
1994.
In April 1996, the Company agreed to license to Samsung, upon payment of a
one-time fee to the Company, the worldwide nonexclusive right to manufacture,
use, and sell the 8mm-to-VHS format Dual-Deck VCR. The Company has no further
obligations under the license agreement and therefore the license fee was fully
recognized as revenue in fiscal 1997.
Sales and Marketing
The Company's product lines are sold primarily to quality retailers, warehouse
clubs, catalogs, and direct mailers with the support of independent
manufacturer's representatives that represent specific geographic or channel
categories throughout North America and who also represent numerous other
consumer electronic companies. The Company sells its Dual-Deck product and
security product lines to over two hundred accounts in North America, including
some of the better known retailers, catalogs, and warehouse clubs such as
Circuit City, Sam's Club, Costco Warehouse, Damark, Fingerhut, Sears, The Good
Guys, Nobody Beats The Wiz, Montgomery Wards, Sun T.V., ABC Warehouse,
Rent-A-Center, Future Shop, Spiegel, Ultimate Electronics, Rex Stores, Capital
Audio, J.C. Penney, Fry's Electronics, Capital Sales, QVC, Steinbergs, Sound
Advice, Magnolia Hi-Fi, Herrington, American Appliance, P. C. Richards, and Tops
Appliance. The Company also distributes its Dual-Deck product line through
direct mail syndicator Roy Thomas, Inc. Many of these accounts currently carry
limited or no video security product lines. The Company's marketing methods
include attendance at trade shows, trade publication advertising, television
advertising, sales promotion and other sales support programs, and publicity.
The Company competes in the consumer electronics industry, which experiences
seasonal buying patterns with a majority of sales occurring between September
and January. The Company's product line is subject to the same seasonality,
although overall sales growth between 1990 and 1994 mitigated the effects of
seasonal sales. As the Company's product and distribution lines have become more
established, seasonal factors have become more evident in the Company's
operating results. Accordingly, the Company expects to experience peaks in its
sales during its third fiscal quarter.
The Company's terms of sale vary according to the quantity and price of units
purchased and the creditworthiness of the purchaser, but generally do not exceed
thirty days. Warranty terms vary according to the model offered. The most
extensive warranty currently offered is three months labor and one year parts
for both VCRs and video security products. The Company's initial Dual-Deck
model, the GV2000, which was sold during fiscal 1991 and subsequently replaced,
included a five year parts and
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labor warranty. The Company has service agreements for its current models of
Dual-Deck VCRs with service centers located throughout the United States and
also provides service work at its Scottsdale, Arizona location. The Company
believes it has established adequate reserves for its warranty contingencies.
Significant Customers
For the fiscal year ended March 31, 1997, Circuit City, Sams's Club, and Damark
represented 16%, 11%, and 10% of the Company's revenue respectively. For the
fiscal year ended March 31, 1996, sales to Circuit City represented 14% of the
Company's revenues. Although the Company's significant customers fluctuate over
time, the loss of a significant customer could have a materially adverse effect
on its operating results.
Backlog Orders
The Company's practice is to maintain sufficient inventories to fill orders
promptly and not to carry a backlog of orders. The Company did not have a
material level of backlog at June 25, 1997 or June 19 of the previous year.
Product Development and Manufacturing
The Company's product development activities consist of hardware and software
design and engineering as well as co-development and engineering of new products
with manufacturers and technology partners. The Company has focused its research
and product development on the development of the next generation of Dual-Deck
VCRs, development of a PAL format Dual-Deck VCR, development of unique features
and/or quality enhancements for the Company's new line of video security
products, development of a prototype LCD projection television with Prolux
Corporation, identifying technical changes necessary to distribute Loewe Opta's
digital direct view televisions in North America, and evaluation of potential
new products, acquisitions, or joint ventures.
All of the Company's products are manufactured for the Company by independent
manufacturers. The Company's line of Dual-Deck VCRs are manufactured for the
Company by Samsung and Shintom. The Company and Samsung entered into a
Manufacturing Agreement in February 1989 (see "Licensing") under which Samsung
manufactures VHS-to-VHS Dual-Deck VCRs to the Company's specifications in
conformity to the highest standards of quality maintained by Samsung in the
manufacturing of VCRs. Quality control and assurance is performed by Samsung at
the manufacturing facility and the Company samples and verifies product quality
by sample testing upon the products arrival in the United States. The Company
generally places purchase orders for Dual-Deck VCRs three months prior to
production in accordance with its forecasted needs. The Manufacturing Agreement
sets forth statistical defect tolerances and indicates that the costs of quality
defects above the level of standards is to be borne by Samsung. The Company
purchases the Dual-Deck VCRs from Samsung F.O.B. Korea using commercial import
letters of credit opened approximately thirty days prior to ship date. Payment
for the product is by draft due thirty days after the bill of lading (ship)
date. The Manufacturing Agreement is automatically renewed for one year periods
unless terminated by six months advance notice in writing from either party. The
Manufacturing Agreement currently extends to February 1998.
The Company entered into a second agreement with Samsung effective September 14,
1993, pursuant to which Samsung agreed to manufacture, and the Company agreed to
purchase, on a non-exclusive basis certain models of the Company designed
8mm-to-VHS Dual-Deck VCR. Under this manufacturing agreement, Samsung
manufactured 8mm-to-VHS Dual-Deck VCRs for the Company in conformity to the
highest standards of quality maintained by Samsung in the manufacturing of VCRs.
The Company will not purchase additional 8mm-to-VHS Dual-Deck VCRs under this
agreement. In April, 1996, the Company agreed to license to Samsung the
worldwide nonexclusive right to manufacture, use, and sell the 8mm-to-VHS format
Dual-Deck VCR.
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The Company and Shintom entered into a Manufacturing Agreement in January 1996
under which Shintom manufactures VHS-to-VHS Dual-Deck VCRs to the Company's
specifications in conformity to the highest standards of quality maintained by
Shintom in the manufacturing of VCRs. Quality control and assurance is performed
by Shintom at the manufacturing facility and the Company samples and verifies
product quality by sample testing upon the products arrival in the United
States. The Company generally places purchase orders for Dual-Deck VCRs three
months prior to production in accordance with its forecasted needs. The
Manufacturing Agreement sets forth statistical defect tolerances and indicates
that the costs of quality defects above the level of standards is to be borne by
Shintom. The Company purchases the Dual-Deck VCRs from Shintom F.O.B. Singapore
using an international wire transfer for payment of the merchandise upon
shipment of an order for Dual-Deck VCRs. The initial term of this manufacturing
agreement is two years. The manufacturing agreement is automatically renewed for
one year periods unless terminated by twelve months advance notice from either
party.
The Company's security product line is currently manufactured under purchase
orders by Goldbeam Electronics Inc., and Clover Electronics Inc, both Korean
manufacturing companies. The Company purchases security products from Goldbeam
F.O.B. Korea using commercial import letters of credit opened approximately
thirty days prior to ship date. Payment for the product is by sight draft.
Payment to Clover is based on negotiated terms between the Companies. The
Company is currently evaluating additional suppliers for its Security Products
Division.
Patents, Trademarks, and Proprietary Rights
In August 1988, the Company obtained United States Patent No. 4,768,110 entitled
"Videocassette Recorder(s) Having Dual Decks For Selective Simultaneous
Functions". The Company had by that date filed corresponding Japanese
applications, and has since filed additional U.S. and foreign patent
applications for enhancements related to the Dual-Deck VCR. The Dual-Deck VCR
technology is complex, and as a result the Company's patent claims are also
complex. In general terms, the patent covers a videocassette recorder system
that has two decks contained in one housing and that has switching combinations
which permit simultaneous and/or auxiliary functions to occur, such as allowing
one deck to record while the other plays. In July 1992, the Company obtained
U.S. Patent No. 5,124,807, entitled "Dual Deck Videocassette Recorder System",
featuring the further enhanced ability of a Dual-Deck VCR system to duplicate
high quality videocassette tapes with good fidelity and avoidance of copy
degradation.
During fiscal 1993, the Company was issued four new U.S. patents. The first
patent issued, No. 5,194,963, relates to a unique circuit that results in
high-quality duplication of a videocassette tape for in-home use. This circuit
is identified by the registered trademark "AmeriChrome7". A second patent, No.
5,216,552, relates to a unique Dual-Deck VCR video switching system with or
without a built-in tuner. The third patent, No. 5,216,499, relates to a Cable
Select Box Supplemental Splitter, identified by the trademark "Cable Ready
Plus". The fourth patent, No. 5,189,691, relates to a Dual-Deck VCR that
includes an answering machine logic that allows the VCR to be used to answer a
video telephone system.
During fiscal 1994, the Company was issued three new U.S. patents. The first
patent issued, No. 5,307,193, relates to a method of control over an infrared
controlled device such as a TV, VCR, or stereo without the use of an infrared
emitter. This method of control uses voltage-induced energy for direct control
of a device with or without a line of sight. A second patent, No. 5,177,618,
relates to additional AmeriChrome circuitry and identification and hardware
control in the presence of certain anticopy encoding on a videocassette. A third
patent, No. 5,249,087, relates to a rotating scanning device for use with
magnetic storage media. Other U.S. and foreign patent applications are currently
pending. There is no assurance that any additional patents will be granted to
the Company or that the Company's patents will provide meaningful protection
from competition. The Company intends to vigorously enforce its proprietary
technology rights.
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The Company has registered its "Go-Video" service mark and its "Go-Video",
"AmeriChrome", "Palm-Mate", "Private Eye", and "VCR-2" trademarks with the
United States Patent and Trademark Office and has registered "Go-Video" as a
trademark with the State of Arizona. The Company has filed for registration with
the United States Patent and Trademark Office for various other trademarks. The
Company has developed and owns the proprietary operating system software
relating to the Dual-Deck VCR. The Company believes that patents, trademarks,
trade names, and proprietary rights, once established, are generally important
in the consumer electronics market, and the loss, denial, or infringement of
such patents, trademarks, trade names, and proprietary rights could have a
materially adverse effect on the Company.
Environmental Matters
Although the Company is subject to various federal, state, and local
environmental laws and regulations, compliance with such laws and regulations
has not had a material effect on the Company.
Employees
As of June 25, 1997, the Company employed 51 full-time employees, including its
six executive officers. None of the Company's employees is represented by a
labor union. The Company considers its relations with its employees to be good.
8
<PAGE>
Executive Officers of the Registrant
- ------------------------------------
The following table sets forth certain information concerning the executive
officers of the Company.
Executive Officers:
- -------------------
<TABLE>
<CAPTION>
Name Age Positions
- ---- --- ---------
<S> <C> <C>
Roger B. Hackett 46 Chief Executive Officer, President, and Chief Operating Officer
Douglas P. Klein 36 Vice President, Chief Financial Officer, Secretary and Treasurer
Edward J. Brachocki 41 Vice President, Planning and Corporate Development
John R. Tweddale 54 Vice President, Sales
William C. Barthelemy 46 Vice President, Security Products Division
Kevin P. Sullivan 52 Vice President, Home Theater Division
</TABLE>
Roger B. Hackett was first elected to the Board of Directors in December 1992
and joined the Company as President and Chief Operating Officer in January 1993.
In March 1994, Mr. Hackett was elected Chief Executive Officer and Chairman of
the Board. Prior to joining the Company as President, Mr. Hackett served as an
executive officer of Serving Software Inc., a Minneapolis, Minnesota-based
provider of computer software used in the health care industry. In 1986, Mr.
Hackett founded the CAMS division of ATI Medical, Inc., a provider of "critical
care" medical equipment, and over six years developed CAMS into a leading
provider of bar-code-based information systems. In January 1992, Mr. Hackett
negotiated the sale of the CAMS division to Serving Software Inc., where he then
served as Vice President of the CAMS division until being named Senior Vice
President, Corporate Affairs in January 1993. He also served as a director of
Serving Software from January 1993 until September 1994 when Serving Software
was acquired by HBO & Co., a health care information systems company. Mr.
Hackett received a Bachelor of Science Degree in Business Administration from
Ohio State University.
Douglas P. Klein joined the Company in April 1993 as Assistant Treasurer and was
named Vice President, Finance and Treasurer in October 1993, Corporate Secretary
in April 1994, and Chief Financial Officer in September 1995. Mr. Klein was
previously employed from June 1983 through October 1992 by Continental Bank
N.A., Chicago, Illinois, where he served in various accounting and corporate
banking positions. From February 1991 through October 1992, Mr. Klein was
Portfolio Manager in the Large Corporate Division where he was responsible for
structuring, syndicating and managing credit and derivative exposure to
Continental's largest Midwestern-based clients. From January 1990 through
February 1991, Mr. Klein served as Portfolio Manager for the Investment Grade
Division. Earlier positions with Continental included Commercial Lending
Officer, Senior Credit Analyst, Senior Planning Analyst, and Senior Internal
Auditor. Mr. Klein received a Bachelor of Science Degree in Management from
Purdue University, and a Masters Degree in Management from the J.L. Kellogg
Graduate School of Management, Northwestern University.
Edward J. Brachocki joined the Company in February 1993 as Vice President,
Marketing, and was named Vice President, Corporate Development, in August 1994
and Vice President, Planning and Corporate Development in May 1997. From July
1992 until joining the Company, Mr. Brachocki was a Senior Associate for
MTA/EMCI, a Washington, D.C.-based consulting firm for the telecommunications
and cable television industries, where he advised clients on marketing issues
for technology-based consumer products. From November 1989 to June 1992, he was
Director of Marketing and Business Development for Goldstar Products Co., Ltd.
Prior to joining Goldstar, Mr. Brachocki served for two years as a consultant
and General Manager of Bliss Marketing, a Phoenix, Arizona-based marketing and
strategic planning company. Mr. Brachocki received a Bachelor of Science Degree
in Psychology from Fairfield University in Connecticut.
9
<PAGE>
John R. Tweddale joined the Company in August 1993 as Western Zone Vice
President, and was named to his current position of Vice President, Sales in
October 1996. From October 1989 until joining the Company, Mr. Tweddale was the
Owner and President of Advanced Marketing Inc., a consumer electronics
manufacturer's representative firm. From July 1986 to October 1989, Mr. Tweddale
served as Vice President, Sales for ByVideo Inc., a manufacturer of electronic
merchandising kiosks sold to national retailers. He has also held sales
management positions with Toshiba America, RCA and GTE Sylvania. Mr. Tweddale
received his Bachelor of Science Degree from Eureka College in Illinois.
William C. Barthelemy joined the Company in October 1996 as Vice President,
Security Products Division. From January 1990 until joining the Company, Mr.
Barthelemy was the Regional Sales Director for Sprint North Supply where he was
responsible for sales of security communications, telecommunications, and data
communications. From May 1987 to January 1990, Mr. Barthlelemy served as
Regional Sales Manager for Silent Knight Security Systems. Mr. Barthelemy
received his Bachelor of Science Degree in Management from the University of
Redlands in California.
Kevin P. Sullivan joined the Company in September 1991 as Vice President, Sales
and began serving as Vice President, Home Theater Division in May 1997. From
July 1990 until joining the Company, Mr. Sullivan was the principal of KPS &
Associates, a consumer electronics sales consulting firm. From 1983 through June
1990, Mr. Sullivan served in various sales management positions, most recently
as Vice President of Sales, for Mitsubishi Electronics' audio/video group, a
major manufacturer and distributor of consumer electronic products. Prior to his
nine years with Mitsubishi, Mr. Sullivan was President of Sullivan's, Inc.,
which distributed a broad line of brand name electronics equipment to dealers
throughout six New England states. He has also held sales management positions
with Sharp Electronics, Quasar Electronics, and the Magnavox Company. Mr.
Sullivan received a Bachelor of Science Degree from Fairfield University in
Connecticut.
Item 2. Properties
----------
The Company leases a 33,000 square foot executive office and warehouse facility
in north Scottsdale, Arizona, which is fully utilized, in good condition, and
adequate for the Company's needs. The lease began in January 1996 and has a term
of seven years, with one three year extension at the option of the Company.
Item 3. Legal Proceedings
-----------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of Security Holders during the fourth
quarter of the fiscal year ended March 31, 1997.
10
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
-----------------------------------------------------------------------
Matters
-------
The Company's Common Stock began trading on the American Stock Exchange on
September 26, 1990. Prior to September 26, 1990, the Company's Common Stock was
traded on the NASDAQ Market System. The following table sets forth the high and
low sales prices for the Common Stock during the period from April 1, 1995
through March 31, 1997, as reported to the Company by the AMEX. Sales prices do
not include commissions or other adjustments to the selling price.
Year Ended March 31, 1996 High Low
------------------------- ---- ---
First Quarter $ 1.9375 $ 1.5000
Second Quarter $ 1.8750 $ 1.5000
Third Quarter $ 2.0000 $ 1.1250
Forth Quarter $ 1.3750 $ 1.0000
Year Ended March 31, 1997 High Low
------------------------- ---- ---
First Quarter $ 1.3750 $ 1.0000
Second Quarter $ 1.5625 $ 0.9375
Third Quarter $ 1.5000 $ 1.0000
Forth Quarter $ 2.1250 $ 1.1250
As of March 31, 1997, the Company believes there were approximately 10,000
beneficial holders of the Company's Common Stock, including approximately 1,800
stockholders of record (certificate holders registered directly rather than on
account at various brokerages or trustees).
The Company has never paid cash dividends on its Common Stock, and it intends
for the foreseeable future to retain any earnings to support the growth of its
business. Any payment of cash dividends in the future, as determined at the
discretion of the Board of Directors, will be dependent on the Company's
financial condition, capital requirements, and other factors deemed relevant.
11
<PAGE>
Item 6. Selected Financial Data
-----------------------
The selected financial data of the Company set forth below, insofar as relates
to the period from August 1, 1991 to March 31, 1997, has been derived from the
Company's audited Consolidated Financial Statements, certain of which are
included elsewhere herein. This data should be read in conjunction with the
Consolidated Financial Statements, related Notes and other financial information
included elsewhere in this Annual Report on Form 10-K.
Statement of Operations
<TABLE>
<CAPTION>
Fiscal Year Eight Months
Ended March 31 Ended March 31 Fiscal Year Ended July 31
-------------- -------------- -------------------------
Data 1997 1996 1995 1994 1993 1992
- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sales $40,175,195 $34,646,406 $27,602,708 $41,192,644 $30,928,531 $16,188,205
Net
income (loss) 1,884,331 (2,871,170) 117,801 105,741 116,706 (1,362,956)
Net income
(loss) per share 0.17 ( 0.25) 0.01 0.01 0.01 (0.13)
Weighted
average
shares 11,407,553 11,304,261 11,194,200 11,090,549 10,592,326 10,395,879
</TABLE>
Balance Sheet
<TABLE>
<CAPTION>
March 31, July 31,
--------------------------------------- ---------------------------------------
Data 1997 1996 1995 1994 1993 1992
- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Current
assets $12,489,674 $ 9,630,183 $10,035,234 $10,165,288 $ 9,697,545 $ 7,180,602
Current
liabilities 5,486,850 6,236,720 3,184,011 3,608,489 3,967,437 1,335,679
Long-term
assets (net) 1,391,630 1,567,803 464,963 541,940 1,249,167 764,034
Long-term
liabilities 1,268,131 283,405 6,245 19,004 63,803 112,378
Total
assets 13,881,304 11,197,986 10,500,197 10,707,228 10,946,712 7,944,636
Total
liabilities 6,754,981 6,520,125 3,190,256 3,627,493 4,031,240 1,448,057
Stockholders'
equity 7,126,323 4,677,861 7,309,941 7,079,735 6,915,472 6,496,579
</TABLE>
12
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Overview
The Company was incorporated in May 1984 and was engaged in development-stage
activities until the fiscal year ended July 31, 1990, when it began its primary
operations of procuring and marketing the Dual-Deck VCR. The Company experienced
substantial losses from its formation through the fiscal year ended July 31,
1992. In February 1995, the Company changed its fiscal year end from July 31 to
March 31. Consequently, the following comparison of results of operations
includes a comparison of the fiscal years ended March 31, 1997 and 1996, a
comparison of the fiscal year ended March 31, 1996 and the eight month
transition period ended March 31, 1995, and a comparison of the fiscal years
ended March 31, 1996 and July 31, 1994.
Results of Operations
The table below highlights significant information in a percentage relationship
to net sales with regard to the Company's results of operations during the
periods indicated.
<TABLE>
<CAPTION>
Fiscal Year Eight Months Fiscal Year
Ended March 31 Ended March 31 Ended July 31
---------------- -------------- --------------
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 25.2% 15.5% 17.7% 15.7%
Sales and marketing exp 8.8% 11.7% 9.0% 7.5%
Research and development exp 2.8% 2.1% 1.5% 0.8%
General and administrative exp 7.1% 8.1% 5.4% 5.4%
Total operating expenses 18.6% 21.9% 15.9% 13.7%
Operating profit (loss) 6.6% (6.4%) 1.9% 2.0%
Other income (expense) (1.8%) (1.9%) (1.4%) (1.8%)
Net income (loss) 4.7% (8.3%) 0.4% 0.3%
</TABLE>
Fiscal year ended March 31, 1997 compared with the fiscal year ended March 31,
- --------------------------------------------------------------------------------
1996
- ----
Net sales increased 16.0% to $40.2 million for the fiscal year ended March 31,
1997 from $34.6 million during the fiscal year ended March 31, 1996. The
increase in net sales was primarily due to a 34.8% increase in net units sold
for the fiscal year ended March 31, 1997 compared to the fiscal year ended March
31, 1996 which was offset in part by a 14.0% decrease in the average revenue per
unit for the two periods. The increase in net units sold was primarily due to
increased consumer demand for the Company's lowest priced Dual-Deck VCR model,
which sold at most retail locations for $399, approximately 20% below the
comparable model it replaced from the previous fiscal year. The reduction in the
average revenue per unit was primarily due to the Company's product sales mix,
which included a higher percentage of its less expensive price leader models.
The Company anticipates that its average revenue per unit will continue to
decline as compared with prior periods as its product sales mix continues to
include higher percentages of its less expensive price leader models and its
product costs continue to decline. Sales of the Company's Security Products
Division, which was acquired in April 1995, were less than 3% of total net sales
for the fiscal year ended March 31, 1997.
Gross profit was $10.1 million and $5.4 million for the fiscal years ended March
31, 1997 and March 31, 1996 respectively, representing an 88.5% increase in
gross profit dollars. Gross profit as a percentage of net sales increased from
15.5% for the fiscal year ended March 31, 1996 to 25.2% for the fiscal year
ended March 31, 1997. The increase in gross profit as a percentage of net sales
was primarily due to higher sales margins realized on its current Dual-Deck VCR
model lines due to reduced manufacturing costs from both of the Company's
suppliers. In addition, during the fiscal year ended March 31, 1996, the Company
recorded a one time inventory adjustment for its now discontinued 8mm-to-VHS
product line which reduced gross profit dollars by approximately $1.3 million.
13
<PAGE>
Sales and marketing expenses decreased 13.0% to $3.5 million for the fiscal year
ended March 31, 1997 from $4.1 million for the fiscal year ended March 31, 1996.
As a percentage of net sales, sales and marketing expenses decreased from 11.7%
to 8.8% over the same period. The decrease in sales and marketing expense as a
percentage of net sales was primarily due to reduced spending on market
development funds and promotional items offset in part by expenses incurred for
the Company's national television advertising campaign during the fiscal year
ended March 31, 1997.
Research and development expenses increased 55.9% to $1.1 million for the fiscal
year ended March 31, 1997 from $0.7 million for the fiscal year ended March 31,
1996. The increase in research and development expenses was primarily due to
expenses incurred in connection with the Company's development of digital direct
view televisions. The Company anticipates that its current rate of spending on
the digital direct view television development and other product development
efforts will continue during the fiscal year ended March 31, 1998.
General and administrative expenses were $2.8 million for the fiscal years ended
March 31, 1997 and March 31, 1996. As a percentage of net sales, general and
administrative expenses decreased from 8.1% for the fiscal year ended March 31,
1996 to 7.1% for the fiscal year ended March 31, 1997. The decrease in general
and administrative expense as a percentage of net sales was primarily due to
increased sales during the fiscal year ended March 31, 1997.
As a result of the above, the Company recorded operating income of $2.7 million
for the fiscal year ended March 31, 1997 compared with an operating loss of $2.2
million for the fiscal year ended March 31, 1996. The Company recorded net other
expense of $0.7 million for the fiscal years ended March 31, 1997 and March 31,
1996.
The Company had net income of $1,884,331 for the fiscal year ended March 31,
1997, compared with a net loss of $2,871,170 for the fiscal year ended March 31,
1996. The Company recorded a provision for income taxes of $40,000 for the
fiscal year ended March 31, 1997. For the fiscal year ended March 31, 1996, the
Company did not recognize an income tax benefit due to recording a valuation
allowance to offset the potential tax benefit of the loss.
Fiscal year ended March 31, 1996, compared with the eight month transition
- --------------------------------------------------------------------------------
period ended March 31, 1995
- ---------------------------
Net sales were $34.6 million for the fiscal year ended March 31, 1996, compared
to $27.6 million for the eight month transition period ended March 31, 1995.
Average revenue per unit decreased 11.0% from the eight month transition period
ended March 31, 1995 to the fiscal year ended March 31, 1996 due primarily to
reduced selling prices on the Company's then current model line, the GV40xx
series (VHS/VHS Dual-Deck VCRs), compared with the GV30xx series offered during
the eight month transition period ended March 31, 1995. Sales of the Company's
Security Products Division, which was acquired in April 1995, were less than 3%
of total net sales for the fiscal year ended March 31, 1996.
Gross profit as a percentage of net sales was 15.5% for the fiscal year ended
March 31, 1996 and 17.7% for the eight month transition period ended March 31,
1995. The reduction in gross profit as a percentage of net sales was primarily
due to the discontinuation of the 8mm-to-VHS product line during the fourth
quarter of the fiscal year ended March 31, 1996. The Company reduced the price
on its 8mm-to-VHS product line and recorded a one-time adjustment for the
remaining inventory, which reduced gross profit dollars by approximately $1.3
million. The Company was unsuccessful in marketing the 8mm-to-VHS product at a
retail price that could provide adequate profit margins.
14
<PAGE>
Sales and marketing expenses were $4.1 million for the fiscal year ended March
31, 1996 and $2.5 million for the eight month transition period ended March 31,
1995. As a percentage of net sales, sales and marketing expenses increased from
9.0% to 11.7% over the same period. The increase in the percentage of net sales
was primarily due to sales and marketing expenses incurred in marketing the
Company's new line of security products.
Research and development expenses were $0.7 million for the fiscal year ended
March 31, 1996 and $0.4 million for the eight month transition period ended
March 31, 1995. As a percentage of net sales, research and development expenses
increased from 1.5% to 2.1% over the same period, primarily due to costs
incurred in connection with the Company's development of its GV60xx series and
of a prototype LCD projection television.
General and administrative expenses were $2.8 million for the fiscal year ended
March 31, 1996 and $1.5 million for the eight month period ended March 31, 1995.
As a percentage of net sales, general and administrative expenses increased from
5.4% for the eight months ended March 31, 1995 to 8.1% for the fiscal year ended
March 31, 1996. The increase was primarily due to compensation expense recorded
by the Company relating to a Separation Agreement for an executive officer and
increased consulting fees related to the implementation of its corporate
strategy.
As a result of the above, the Company recorded an operating loss of $2.2 million
for the fiscal year ended March 31, 1996 and an operating profit of $0.5 million
for the eight month transition period ending March 31, 1995. The Company
recorded other net expense of $0.7 million for the fiscal year ended March 31,
1996 and other net expense of $0.4 million for the eight month transition period
ended March 31, 1995.
The Company had a net loss of $2,871,170 for the fiscal year ended March 31,
1996, compared with net income of $117,801 for the eight month transition period
ended March 31, 1995. The Company did not recognize an income tax benefit for
either fiscal year due to recording a valuation allowance.
Fiscal year ended March 31, 1996, compared with fiscal year ended July 31, 1994
- -------------------------------------------------------------------------------
Net sales decreased 15.9% to $34.6 million for the fiscal year ended March 31,
1996 from $41.2 million for the fiscal year ended July 31, 1994. The decrease in
net sales was caused by a 9.7% reduction in unit sales and a 6.9% decrease in
average revenue per unit on the Company's Dual-Deck VCRs. The decrease in the
average revenue per unit was due primarily to reduced selling prices on the
Company' then current model line, the GV40xx series (VHS/VHS Dual-Deck VCRs),
compared with the GV30xx series offered during the fiscal year ended July 31,
1994. Sales of the Company's Security Products Division, which was acquired in
April 1995, were less than 3% of total net sales for the fiscal year ended March
31, 1996.
Gross profit was $5.4 million and $6.5 million for the fiscal years 1996 and
1994, respectively, representing a 16.8% decrease in gross profit dollars. Gross
profit as a percentage of net sales was 15.5% for fiscal 1996 and 15.7% for
fiscal 1994. The Company's average cost per unit decreased 6.7% from the fiscal
year ended July 31, 1994 to the fiscal year ended March 31, 1996. During the
fourth quarter of the fiscal year ended March 31, 1996, the Company reduced the
price on its 8mm-to-VHS product line and recorded a one-time adjustment for the
remaining inventory which reduced gross profit dollars by approximately $1.3
million. The Company was unsuccessful in marketing the 8mm-to-VHS product at a
retail price that could provide adequate profit margins.
Sales and marketing expenses increased 31.3% to $4.1 million in fiscal 1996 from
$3.1 million in fiscal 1994. As a percentage of net sales, sales and marketing
expenses increased from 7.5% to 11.7% over the same period. Contributing to the
increase were sales and marketing expenses incurred in marketing the Company's
new line of security products, increased printing costs relating to product
promotion, the addition of marketing personnel and increased in-store training
expenses.
15
<PAGE>
Research and development expenses increased 123.2% to $0.7 million in fiscal
1996 from $0.3 million in fiscal 1994. The increase in research and development
expenses was due to costs incurred in connection with the Company's development
of its GV60xx series and of a prototype LCD projection television.
General and administrative expenses increased 27.3% to $2.8 million in fiscal
1996 from $2.2 million in fiscal 1994. As a percentage of net sales, general and
administrative expenses increased from 5.4% to 8.1% over the same period. The
increase was primarily due to compensation expense recorded by the Company
relating to a Separation Agreement for an executive officer and increased
consulting fees related to the implementation of its corporate strategy.
As a result of the above, the Company recorded an operating loss of $2.2 million
for fiscal 1996, compared with an operating profit of $0.8 million for fiscal
1994. The Company recorded other net expense of $0.7 million for fiscal 1996,
compared with other net expense of $0.7 million for fiscal 1994. The Company's
interest expense decreased from $0.8 million for fiscal 1994 to $0.6 million for
fiscal 1996. The decrease in interest expense was due to the reduction of the
average daily loans outstanding from fiscal 1994 to fiscal 1996, and
renegotiated, lower letter of credit fees, offset in part by an increase in the
average interest rate on loans caused by increases in the prime rate over the
earlier period. The reduction of interest expense was offset in part by the
decrease in interest income due to reduced interest on receivable balances from
customers.
The Company had a net loss of $2,871,170 in fiscal 1996, compared with net
income of $105,741 in fiscal 1994. The Company did not recognize an income tax
benefit for either fiscal year due to recording a valuation allowance.
Seasonality
- -----------
The Company's primary product lines compete within the consumer electronics
industry, which generally experiences seasonality in sales. Accordingly, the
Company generally expects to experience peaks in its sales from September
through January, which covers the holiday selling season.
Future Results
- --------------
The Company's expectations for results of operations and other forward-looking
statements contained in this annual report on Form 10-K, particularly statements
relating to sustainability of the profitable growth, expected results of
international sales efforts and expected results from the security products and
home theater markets, involve a number of risks and uncertainties. Among the
factors that could affect future operating results are the following: business
conditions and general economic conditions; competitive factors, such as the
pricing and marketing efforts of rival companies; timing of product
introductions; success of competing technologies; ability to negotiate reduced
product costs; and the pace and success of product research and development,
particularly with overseas distributors of the Dual-Deck and the direct view
digital television development with Loewe Opta GmbH.
Capital Resources and Liquidity
- -------------------------------
Net cash used in operating activities was $0.5 million for the fiscal year ended
March 31, 1997. The more significant factors composing the cash provided were a
$3.0 million increase in receivables and a $1.3 million decrease in accounts
payable, offset in part by net income of $1.9 million.
The increase in the receivable balance from March 31, 1996 to March 31, 1997 was
primarily due to increased sales in March 1997 compared with March 1996 as the
Company's average collection experience has generally remained consistent. The
decrease in the accounts payable balance is primarily due to reduced inventory
in transit at March 31, 1997.
16
<PAGE>
The Company had net working capital of $7.0 million and $3.4 million at March
31, 1997 and March 31, 1996, respectively. At March 31, 1997, the Company's
current ratio (current assets to current liabilities) was 2.3 to 1.
Samsung requires the Company, before shipment, to post a letter of credit for
the full amount of an order of Dual-Deck VCRs. The letters of credit for orders
to Samsung are drawn 30 days after shipment of the product, which in turn is
generally sold on open account. Shintom requires Company payment by
international wire transfer upon shipment of an order of Dual-Deck VCRs. The
Company's sales seasonality requires incremental working capital for investment
primarily in inventories and receivables during its peak selling season. The
primary source of funds over the fiscal year ended March 31, 1997 was borrowings
under the line of credit. The financing agreement was entered into in October
1992 and was last amended in November 1996. The maximum line of credit, as
amended, is $14.0 million, limited by a borrowing base determined by specific
inventory and receivable balances and provides for cash loans, letters of credit
and acceptances. The agreement, as amended, has a term of three years with a
prepayment (if applicable) fee of 1.0%. Loans are priced at prime plus 1.0%. The
lender is collateralized by all assets of the Company. The unused and available
line of credit at March 31, 1997 was approximately $5,375,000. The Company
capitalized $0.5 million of closing costs related to the origination and
amendment of the financing agreement. These costs were fully amortized at March
31, 1997. Management believes its current financial resources to be adequate to
support operations over the next twelve months
The Company sold $1.5 million of convertible subordinated notes in a private
placement with institutional holders in August 1996. The notes must be converted
to Common Stock within three years. In February 1997, notes with a principle
amount of $250,000 had been converted into Common Stock.
The Company expects to continue its current rate of research and development
expenses related to the digital direct view television project with Loewe Opta
and the continued development and enhancement of its Dual Deck VCR model lines.
The Company expects to incur a fee of approximately $2.0 million for the
exclusive right to market and distribute Loewe Opta direct view televisions in
North America pending the commercial agreement between the two companies. The
payment as now structured, would be due in installments over four quarters with
the first payment payable upon ratification of the commercial agreement.
Inflation
- ---------
Inflation has had no material effect on the Company's operations or financial
condition.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Pages F-1 through F-17
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------------
Financial Disclosure
--------------------
None
17
<PAGE>
|--------------------------------------------------------
| GO-VIDEO, INC.
| AND SUBSIDIARY
| Consolidated Balance Sheets
| March 31, 1997 and 1996,
| Consolidated Statements of Operations,
| Stockholders' Equity and Cash Flows
| Years Ended March 31, 1997 and 1996,
| Eight Month Period Ended March 31, 1995, and the
| Year Ended July 31, 1994, and
| Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Go-Video, Inc.
Scottsdale, Arizona
We have audited the accompanying consolidated balance sheets of Go-Video, Inc.
and subsidiary (the "Company") as of March 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended March 31, 1997 and 1996, the eight month period ended March 31,
1995 and the year ended July 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at March 31, 1997 and
1996, and the results of its operations and its cash flows for the years ended
March 31, 1997 and 1996, the eight month period ended March 31, 1995 and the
year ended July 31, 1994 in conformity with generally accepted accounting
principles.
May 1, 1997
F - 1
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
-------------------------
ASSETS (Note 11) 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 302,788 $ 313,916
Receivables - less allowance for doubtful accounts of
$130,000 in 1997 and 1996 7,125,384 4,147,143
Inventories (Note 4) 5,026,149 5,127,103
Prepaid expenses and other assets 35,353 42,021
----------- -----------
Total current assets 12,489,674 9,630,183
----------- -----------
EQUIPMENT AND IMPROVEMENTS (Note 9):
Furniture, fixtures and equipment 563,246 507,990
Leasehold improvements 208,888 173,157
Office equipment 664,002 483,861
Tooling 1,296,260 1,107,970
----------- -----------
Total 2,732,396 2,272,978
Less accumulated depreciation and amortization 1,595,705 1,100,386
----------- -----------
Equipment and improvements - net 1,136,691 1,172,592
DUAL-DECK VCR PATENTS - Net of amortization of
$45,894 and $40,041, respectively 67,626 76,710
GOODWILL - Net of amortization of $34,092 and
and $17,046, respectively 136,371 153,417
OTHER ASSETS - Net of amortization of $471,321
in 1996 50,942 165,084
----------- -----------
TOTAL $13,881,304 $11,197,986
=========== ===========
</TABLE>
(Continued)
F - 2
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
----------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,226,644 $ 2,512,594
Accrued expenses 980,163 375,972
Current portion of capital lease obligations (Note 9) 82,820 108,937
Other current liabilities (Note 5) 1,040,120 622,887
Warranty reserve - current 173,000 186,000
Income taxes payable 20,000
Line of credit (Note 11) 1,964,103 2,430,330
------------ ------------
Total current liabilities 5,486,850 6,236,720
WARRANTY RESERVE - Long-term 5,000
DEFERRED RENT 29,739 15,520
CAPITAL LEASE OBLIGATIONS (Note 9) 180,059 262,885
MANDATORY CONVERTIBLE SUBORDINATED DEBT (Note 6) 1,058,333
------------ ------------
Total liabilities 6,754,981 6,520,125
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 9)
STOCKHOLDERS' EQUITY (Note 7):
Common stock, $.001 par value - authorized, 50,000,000 shares; issued
and outstanding, 11,837,285 and 11,331,012 shares, respectively 11,837 11,331
Additional capital 19,588,421 19,054,796
Unamortized consulting services (5,002) (35,002)
Accumulated deficit (12,468,933) (14,353,264)
------------ ------------
Total stockholders' equity 7,126,323 4,677,861
------------ ------------
TOTAL $ 13,881,304 $ 11,197,986
============ ============
</TABLE>
See notes to consolidated financial statements. (Concluded)
F - 3
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended Eight Month
March 31, Period Ended Year Ended
---------------------------- March 31, July 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
SALES $ 40,175,195 $ 34,646,406 $ 27,602,708 $ 41,192,644
COST OF SALES 30,035,136 29,266,086 22,713,535 34,729,561
------------ ------------ ------------ ------------
Gross profit 10,140,059 5,380,320 4,889,173 6,463,083
------------ ------------ ------------ ------------
OTHER OPERATING COSTS:
Sales and marketing 3,539,828 4,068,170 2,480,610 3,097,989
Research and development 1,112,675 713,600 408,668 319,711
General and administrative expenses 2,836,019 2,809,573 1,486,543 2,207,637
------------ ------------ ------------ ------------
Total other operating costs 7,488,522 7,591,343 4,375,821 5,625,337
------------ ------------ ------------ ------------
Operating income (loss) 2,651,537 (2,211,023) 513,352 837,746
------------ ------------ ------------ ------------
OTHER REVENUES (EXPENSES):
Interest income 16,846 4,258 4,622 85,481
Interest expense (670,522) (648,804) (410,334) (804,888)
Other (73,530) (15,601) 10,161 (12,598)
------------ ------------ ------------ ------------
Total other expenses - net (727,206) (660,147) (395,551) (732,005)
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,924,331 (2,871,170) 117,801 105,741
PROVISION FOR INCOME
TAXES (Note 8) 40,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 1,884,331 ($ 2,871,170) $ 117,801 $ 105,741
============ ============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE $ 0.17 ($ 0.25) $ 0.01 $ 0.01
============ ============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 11,407,553 11,304,261 11,194,200 11,090,549
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F - 4
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1997 AND 1996, EIGHT MONTH PERIOD ENDED
MARCH 31, 1995 AND YEAR ENDED JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Unamortized
---------------------------- Additional Consulting Accumulated
Shares Amount Capital Services Deficit Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1993 (Note 7) $ 10,987,212 $ 10,987 $ 18,610,121 ($11,705,636) $ 6,915,472
Stock options exercised for cash 10,200 10 5,090 5,100
Private warrants exercised for cash 118,600 119 59,181 59,300
Registration costs - underwriters fees (5,878) (5,878)
Net income 105,741 105,741
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, JULY 31, 1994 (Note 7) 11,116,012 11,116 18,668,514 (11,599,895) 7,079,735
Stock options exercised for cash 157,000 157 97,468 97,625
Warrants issued for
consulting services 177,360 $ (177,360)
Amortization of consulting costs 14,780 14,780
Net income 117,801 117,801
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, MARCH 31, 1995 (Note 7) 11,273,012 11,273 18,943,342 (162,580) (11,482,094) 7,309,941
Stock options exercised for cash 58,000 58 45,542 45,600
Warrants issued for
consulting services 65,912 (65,912)
Amortization of consulting costs 193,490 193,490
Net loss (2,871,170) (2,871,170)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, MARCH 31, 1996 (Note 7) 11,331,012 11,331 19,054,796 (35,002) (14,353,264) 4,677,861
Stock options exercised for cash 104,000 104 115,276 115,380
Stock grant 35,466 36 42,080 42,116
Private placement (Note 6) 60,000 60 27,306 27,366
Conversion of subordinated
debt (Note 6) 206,807 206 224,063 224,269
Exercise of warrants issued in
conjunction with private
placement (Note 6) 100,000 100 124,900 125,000
Amortization of consulting costs 30,000 30,000
Net income 1,884,331 1,884,331
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, MARCH 31, 1997 (Note 7) 11,837,285 $ 11,837 $ 19,588,421 $ (5,002) $(12,468,933) $ 7,126,323
============ ============ ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F - 5
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended Eight Month Year
March 31, Period Ended Ended
--------------------------- March 31, July 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,884,331 ($2,871,170) $ 117,801 $ 105,741
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization 623,407 1,149,677 212,881 934,783
Provision for losses on accounts receivable (5,761) 5,000 25,000
(Gain) loss on sale of equipment (834) 1,752 6,454
Changes in operating assets and liabilities - net of acquisition:
Receivables (2,978,241) 558,914 1,275,546 22,490
Inventories 100,954 98,708 (1,159,871) (441,335)
Prepaid expenses and other assets 6,668 45,256 2,360 (53,335)
Patents 3,230 (1,363) (14,135)
Other assets 73,308 27,868 11,614
Accounts payable (1,285,950) 1,652,476 (1,186,515) 854,830
Accrued expenses 604,191 (29,890) 13,735 10,022
Other current liabilities 417,233 369,942 80,402 70,543
Warranty reserve (18,000) 68,000 7,990 (34,310)
Income taxes payable 20,000
Other long-term liabilities 14,219 14,274 (10,759) (16,299)
----------- ----------- ----------- -----------
Net cash (used in) provided by operating activities (535,484) 1,078,683 (641,430) 1,482,063
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment and improvement expenditures (467,938) (1,454,261) (51,794) (140,870)
Cash acquired from acquisition 39,951
----------- ----------- ----------- -----------
Net cash used in investing activities (467,938) (1,414,310) (51,794) (140,870)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 295,098 45,600 97,625 64,400
Registration costs (17,500) (5,878)
Net (repayments) borrowings under line of credit (466,227) 779,438 657,910 (1,288,533)
Payment on capital lease obligations (108,943)
Net proceeds from issuance of mandatory
convertible debt 1,350,000
Payment of financing costs (60,134) (85,000) (60,000) (90,619)
Payment of debt assumed in acquisition (257,314)
----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities 992,294 482,724 695,535 (1,320,630)
----------- ----------- ----------- -----------
</TABLE>
(Continued)
F - 6
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended Eight Month Year
March 31, Period Ended Ended
---------------------- March 31, July 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
NET (DECREASE) INCREASE IN
CASH EQUIVALENTS (11,128) 147,097 2,311 20,563
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 313,916 166,819 164,508 143,945
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 302,788 $ 313,916 $ 166,819 $ 164,508
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid for income taxes $ 20,000
=========
Cash paid for interest $ 391,625 $ 567,257 $ 326,771 $ 625,069
========= ========= ========= =========
Common shares issued for consulting services $ 75,000
=========
Warrants issued for consulting services (Note 7) $ 65,912 $ 177,360
========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Conversion of subordinated debt and accrued interest
to common stock (Note 6) $ 224,269
=========
Capital lease obligations entered into by the Company $ 399,435
=========
In connection with the acquisition:
Liabilities assumed $ 361,120
=========
Fair value of assets acquired, including
$39,951 in cash $ 190,657
=========
Excess of cost over fair value of acquired assets $ 170,463
=========
</TABLE>
See notes to consolidated financial statements. (Concluded)
F - 7
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1997 AND 1996, EIGHT MONTH PERIOD ENDED
MARCH 31, 1995 AND THE YEAR ENDED JULY 31, 1994
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Go-Video, Inc. and subsidiary (the "Company") develops, designs, engineers
and markets consumer electronic video products. The Company currently
contracts with independent consumer electronics manufacturers to produce
its products to its specific standards. The Company normally receives such
products at its Scottsdale, Arizona facility. Distribution of its products
occurs upon receipt of customer orders.
The following are the significant accounting and financial policies used
in the preparation of the consolidated financial statements of the
Company.
a. Change in Year-End - In February 1995, the Company adopted a March
31 year-end.
b. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Go-Video Productions, Inc.
(the "Subsidiary"), which has not initiated operations.
c. Cash and cash equivalents consisted of the following at March 31:
1997 1996
Money market funds $263,133 $285,824
Cash in checking accounts 39,655 28,092
-------- --------
Total $302,788 $313,916
======== ========
Cash and cash equivalents have initial maturity dates of three
months or less and are stated at cost which approximates market.
d. Inventories are stated at the lower of cost (first-in, first-out) or
market.
e. Equipment and improvements are stated at cost. Depreciation is
calculated by the straight-line method over the estimated useful
lives of the assets of two to five years. Amortization, by the
straight-line method, of leased furniture and improvements to leased
property is based upon the term of the applicable lease or the
estimated useful lives of such assets, whichever is less. Tooling
costs primarily relate to Dual-Deck VCRs. Depreciation of tooling is
calculated using the number of new units sold (not to exceed two
years) as the tooling costs relate directly to the manufacturing of
the new units.
f. Dual-Deck VCR patents represent professional fees and other costs
incurred in connection with obtaining patents for the Dual-Deck VCR.
The patent costs are amortized by the straight-line method over the
estimated life of the patents.
F - 8
<PAGE>
g. Goodwill represents the excess of the cost of the acquired company
over the fair value of the net assets at the date of acquisition.
Goodwill is amortized using the straight-line method over a period
of ten years.
h. Revenue Recognition - Sales of products are recognized once the
product is shipped to the customer and the title passes.
i. Income Taxes - The Company files a consolidated tax return. As of
August 1, 1993, the Company adopted the Financial Accounting
Standards Board's ("FASB") Statement of Financial Accounting
Standard ("SFAS") No. 109, Accounting for Income Taxes, which
requires the use of the liability method of accounting for deferred
income taxes.
j. Net income (loss) per common share is computed by dividing net
income (loss) by the weighted average number of common shares
outstanding during each fiscal year. The amounts, under the modified
treasury stock method, do not give consideration to outstanding
stock options and warrants because, in aggregate, their effects
would be anti-dilutive in all periods presented.
k. New Accounting Pronouncements - In October 1995, the FASB issued
SFAS No. 123, Accounting for Stock Based Compensation. This Company
has not changed to the fair value method and will continue to use
Accounting Principles Board Opinion No. 25 for measurement and
recognition of employee stock based transactions. Pro forma
information reflecting the fair value method is presented in Note 7.
Beginning in 1997, the Company will be required to implement SFAS
No. 128, Earnings Per Share, which requires, among other matters,
presentation of basic earnings per share, which is calculated
utilizing only weighted average common shares outstanding. The
Company does not believe that the adoption of the statement will
have a material effect on earnings per share.
l. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles necessarily
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
m. Product Concentration - The market for the Company's products is
characterized by changing technology and short product life cycles.
The Company has derived substantially all of its revenues from the
sale of Dual-Deck VCRs throughout the United States.
n. Certain reclassifications have been made to the prior year financial
statements to conform to the classifications used in the 1997
presentation.
2. COMPANY OPERATIONS
The Company was incorporated in May 1984 and was engaged in development
stage activities until late in the fiscal year ended July 31, 1990, when
the Company began its primary operations of distribution and marketing
Dual-Deck VCRs, which are being manufactured for the Company by Samsung
Electronics Company Ltd. ("Samsung") and Shintom Company Ltd., and Talk
Corporation ("Shintom & Talk"). The Company also distributes and markets a
line of video security products.
F - 9
<PAGE>
Sales and Marketing - The Company's current marketing strategy is to sell
Dual-Deck VCRs and video security products with the support of independent
sales representatives that represent specific geographic territories
throughout the United States and who also represent many other brand name
consumer electronic products. The Company currently sells its product
lines directly to retailers nationwide including numerous national and
regional chains, catalog accounts, specialty stores, and Armed Services
PXs.
During fiscal 1997, sales to the Company's three major customers totaled
$6,395,000, $4,377,000 and $4,137,000, respectively. These amounts
represent 16%, 11% and 10%, respectively, of the Company's 1997 sales.
Accounts receivable from these customers totaled $437,000, $2,441,000 and
$1,484,000, respectively, at March 31, 1997.
During fiscal 1996, sales to the Company's major customer totaled
$4,879,000. This amount represents 14% of the Company's 1996 sales.
Accounts receivable from this customer totaled $1,072,000 at March 31,
1996.
During the eight month period ended March 31, 1995, sales to the Company's
major customer totaled $3,552,650. This amount represents 13% of the
Company's 1995 sales.
During fiscal 1994, sales to the Company's two major customers totaled
$6,749,000 and $4,425,000, respectively; these amounts represent 16% and
11%, respectively, of the Company's 1994 sales.
3. DUAL-DECK VCR MANUFACTURING AND LICENSING
On February 28, 1989, the Company entered into an agreement with Samsung,
pursuant to which Samsung agreed to manufacture Dual-Deck VCRs to the
Company's design and specification ("Manufacturing Agreement"). As part of
its arrangement with Samsung, the Company has licensed to Samsung the use
of the Company's proprietary and patented technology: (1) the right to
manufacture Dual-Deck VCRs for the Company; (2) on an exclusive basis, the
right to manufacture, use and sell Dual-Deck VCRs in the Republic of
Korea; (3) on a non-exclusive basis, the right to manufacture, use and
sell the Dual-Deck VCRs in all markets except the United States and its
territories; and (4) on a non-exclusive basis, the right to sell Dual-Deck
VCRs under its own trademark and trade name in the United States and its
territories. Under the license agreement, the Company is entitled to
receive royalties calculated as a percentage of net sales of Dual-Deck
VCRs by Samsung or its sublicensees. The license agreement has a term of
15 years but may be terminated by the Company if the Manufacturing
Agreement is terminated for any cause attributable to Samsung. The Company
has received no royalties to date from Samsung under this agreement.
Under the Manufacturing Agreement, Samsung manufactures Dual-Deck VCRs for
the Company pursuant to the Company's specifications. Quality control and
assurance is performed by Samsung at the manufacturing facility, and the
Company verifies product quality by sample testing in the United States.
The Manufacturing Agreement sets forth statistical defect tolerances, and
indicates that the costs of any quality defects above the level of
standards will be borne by Samsung. Generally, the Company purchases
Dual-Deck VCRs from Samsung FOB Korea. The Manufacturing Agreement is
automatically renewed for one year periods unless terminated by written
notice from either party and currently extends until at least February 28,
1998.
F - 10
<PAGE>
Effective July 11, 1994, the Company entered into an agreement with
Goldstar, pursuant to which the Company has granted Goldstar the
non-exclusive, non-assignable, non-transferable right and license to
manufacture, sell and distribute worldwide 8mm/VHS format VCRs ("License
Agreement") for a one-time payment. The License Agreement expires when the
last of certain patents held by the Company for the 8mm/VHS format VCRs
expire. The Company has no further obligation under the License Agreement
and, therefore, the license payment was fully recognized as revenue in
July 1994.
On January 9, 1996, the Company entered into an agreement with Shintom &
Talk pursuant to which Shintom & Talk have agreed to manufacture Dual-Deck
VCR's to the Company's design and specification. The agreement sets forth
statistical defect tolerances, and indicates that the costs of any quality
defects above the level of standards will be borne by Shintom & Talk.
Generally, the Company will purchase Dual-Deck VCRs FOB Singapore. The
initial term of the Manufacturing Agreement is two years. The agreement
will automatically renew for one year periods unless terminated by either
party.
4. INVENTORIES
Inventories consisted of the following at March 31:
1997 1996
Service replacement parts and raw materials $ 581,283 $ 324,739
Finished goods 4,444,866 4,802,364
---------- ----------
Total $5,026,149 $5,127,103
========== ==========
5. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following at March 31:
1997 1996
Compensation and related benefits $ 728,302 $ 401,241
Sales returns reserve 310,505 220,000
Other 1,313 1,646
---------- ----------
Total $1,040,120 $ 622,887
========== ==========
6. MANDATORY CONVERTIBLE SUBORDINATED DEBT
The Company sold $1,500,000 of convertible subordinated notes (the
"Notes") in a Private Placement with institutional holders in August 1996.
The Private Placement included six Units, each consisting of one 10%
Convertible Subordinated Note in the principle amount of $250,000 and
warrants to purchase 100,000 shares of common stock at $1.25 per share
(Note 7). The Notes bear interest at 10% per annum, accrued quarterly,
paid annually in shares of common stock. At the Unit Holder's election at
any time, or the Company's election following the third anniversary of the
issuance of the Units, each Note will be convertible into shares of common
stock. The warrants have been valued at $230,000.
F - 11
<PAGE>
In connection with the Private Placement, the Company also issued 120,000
warrants to purchase common shares at $1.25 per share and 60,000 shares of
common stock to the placement agent with a fair value of $46,000 and
$75,000, respectively. In addition, professional fees in the amount of
approximately $236,000 were incurred by the Company in connection with the
Private Placement.
In February 1997, Notes with a principle amount of $250,000 were
converted. The transaction, including interest, resulted in the issuance
of 206,807 shares of common stock to note holders. In addition, 100,000
warrants held by a note holder were exercised to purchase 100,000 shares
of common stock at a price of $1.25 per share.
7. STOCKHOLDERS' EQUITY
Stock Warrants - On October 15, 1992, the Company issued warrants to a
broker to purchase 44,444 shares of the Company's common stock in partial
consideration for services performed. The warrants are exercisable for
five years from November 16, 1992. As of March 31, 1997, none of these
warrants had been exercised.
During the year ended March 31, 1996, and the eight month period ended
March 31, 1995, the Company entered into four separate consulting
agreements. In exchange for services, the Company issued 110,000 and
300,000 warrants, respectively, for each period. Each warrant entitles the
holder to purchase one share of the Company's common stock. The warrants
are exercisable for four years, commencing one year after the date of
grant. The associated consulting costs for one of the agreements are being
amortized ratably over the term of the contract. The consulting costs for
the other three agreements have been fully amortized as of March 31, 1996.
Unamortized consulting costs at March 31, 1997 were $5,002.
A summary of warrant activity is as follows:
Warrants Warrant
Outstanding Price per Share
Balance, July 31, 1994 2,408,395 $2.250 - $8.250
Issued 300,000 1.688 -
---------- ------ ------
Balance, March 31, 1995 2,708,395 1.688 - $8.250
Issued 110,000 1.563 - $1.688
Expired (185,000) 3.375 - $4.200
---------- ------ ------
Balance, March 31, 1996 2,633,395 1.563 - $8.250
Issued (Note 6) 720,000 1.250
Exercised (100,000) 1.250
Expired (2,146,951) 4.950 - $8.250
---------- ------ ------
Balance, March 31, 1997 1,106,444 $1.250 - $3.125
========== ====== ======
Stock Option Plans - Effective December 1986, the Company adopted a
Nonstatutory Stock Option plan. Pursuant to the terms of the plan, only
employees of the Company are eligible to participate. Eligibility is
determined by a committee (the "Committee") appointed by the Board of
Directors to administer the plan. The Company reserved 2,000,000 shares of
its common stock to be granted under the plan.
F - 12
<PAGE>
Effective November 1989, the Board of Directors approved the 1989
Nonstatutory Stock Option Plan. Pursuant to the terms of the plan, only
full-time employees and directors of the Company or any entity in which
the Company has at least 50% ownership are eligible to participate.
Eligibility is determined by the Committee which administers the plan. The
Company has reserved 500,000 shares of its common stock to be granted
under the 1989 plan.
Effective November 1991, the Company's stockholders approved the Go-Video,
Inc. 1991 Employee Stock Option Plan. This plan provides for the granting
of incentive and nonqualified stock options to eligible officers and
employees of the Company as determined by the plan Committee who
administers the plan. The Company reserved 500,000 shares of its common
stock to be granted under the plan.
Effective December 1993, the Company's stockholders approved the Go-Video,
Inc. 1993 Employee Stock Option Plan. The plan provides for the granting
of incentive and nonqualified stock options to officers and key employees
of the Company as determined by the 1993 plan committee who administers
the plan. The Company reserved 500,000 shares of its common stock to be
granted under the plan.
Options granted under the above plans expire up to ten years after the
date of grant. The exercise price of such shares, as determined by the
committees on the date of grant, may be equal to or in excess of the fair
market value of the Company's registered common stock on the date of
grant. Options that expire or terminate prior to exercise are added to the
shares available for future grants.
Effective November 1991, the Company's stockholders approved a
Nonstatutory Directors' Stock Option Plan. The plan provides for the
automatic annual grant of stock options to the Chairman of the Board and
directors of the Company. The Company reserved 500,000 shares of its
common stock to be granted under the plan. During fiscal 1996, the Company
reserved an additional 250,000 shares to be granted under the plan.
Options granted under the plan expire ten years after the date of grant.
The exercise price of such shares is the fair market value on the date of
grant. Participants are entitled to exercise such options at any time six
months after date of grant. Options that expire or terminate prior to
exercise are added to the shares available for future grants.
A summary of changes in stock options is as follows:
Option Weighted Average
Shares Option Price
Balance, July 31, 1994 1,627,880 $ 2.11
Granted 280,000 1.81
Exercised (157,000) 0.62
Cancelled (106,000) 3.00
---------- --------
Balance, March 31, 1995 1,644,880 1.96
Granted 240,000 1.58
Exercised (58,000) 0.79
Cancelled (49,900) 3.13
---------- --------
Balance, March 31, 1996 1,776,980 1.92
Granted 453,253 1.11
Exercised (104,000) 1.11
Cancelled (378,800) 1.62
---------- --------
Balance, March 31, 1997 1,747,433 $ 1.83
========== ========
F - 13
<PAGE>
The following information, aggregated by option price ranges, is
applicable to those shares outstanding at March 31, 1997:
<TABLE>
<S> <C> <C> <C>
Range of exercise prices $.50 - $1.00 $1.25 - $3.00 $4.00 - $8.50
Shares outstanding in range 353,800 1,373,933 19,700
Weighted-average exercise price $ .81 $1.98 $4.35
Weighted average remaining contractual life 7.85 6.93 3.35
Shares currently exercisable 353,800 1,330,600 19,700
Weighted average exercise price of shares
currently exercisable $ .81 $2.08 $4.35
</TABLE>
The Company applies Accounting Principle Board Opinion No. 25 and related
Interpretations in accounting for its stock option plans. Accordingly, no
compensation cost has been recognized based on the fair value at the grant
dates for awards under those plans. Consistent with the method of SFAS No.
123, the Company's net income (loss) and net income (loss) per share for
the years ended March 31, 1997 and 1996 would have been reduced to the pro
forma amounts indicated below:
1997 1996
Net income (loss) - as reported $ 1,884,331 $ (2,871,170)
============ =============
Net income (loss) - pro forma $ 1,639,516 $ (3,055,234)
============ =============
Net income (loss) per share - as reported $ 0.17 $ (0.25)
============ =============
Net income (loss) per share - pro forma $ 0.14 $ (0.27)
============ =============
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes options pricing model with the following
weighted-average assumptions used for grants: no dividend yield; expected
volatility of 52.8%; risk-free interest rate of 7%; and expected lives of
4 years.
401(k) Plan - Effective January 1, 1996, the Company established a 401(k)
plan for its employees. Employees may contribute between 1% and 16% of
their total compensation to the Plan. The Company may make matching
contributions, on a discretionary basis, equal to a percentage of an
employee's covered compensation contributed to the Plan for the year. In
addition, the Company may make an annual profit sharing contribution to
the Plan. The Company's contribution to the Plan for the years ended March
31, 1997 and 1996 was $35,724 and $8,054, respectively.
8. INCOME TAXES
The Company adopted SFAS No. 109, Accounting for Income Taxes, effective
August 1, 1993. SFAS No. 109 requires an asset and liability approach for
financial accounting and reporting for income taxes. The effect on the
Company of adopting SFAS No. 109 is offset completely by a valuation
allowance as noted below.
The provision for income taxes in 1997 consists solely of alternative
minimum tax. Income taxes related to income have been eliminated through
the utilization of net operating loss carryforwards.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes,
and (b) operating loss and tax credit carryforwards.
<PAGE>
The tax effect of significant items comprising the Company's net deferred
tax asset for the years ended March 31 are as follows:
1997 1996
Current - reserves not currently deductible $ 602,000 $ 461,000
Non-current:
Difference between book and tax basis of property 254,000 353,000
Operating loss carryforwards 6,787,000 7,722,000
Tax credit carryforwards 189,000 189,000
Contribution carryforwards - 9,000
Other intangibles 95,000 95,000
----------- -----------
Net deferred tax asset 7,927,000 8,829,000
Valuation allowance (7,927,000) (8,829,000)
----------- -----------
Net deferred asset $ - $ -
=========== ===========
At March 31, 1997, for income tax purposes, the Company had available the
following net operating loss and investment and research and development
tax credit carryforwards:
Net Investment Research and
Operating Tax Development
Date of Expiration Loss Credit Tax Credit
2000 $1,700
2001 $300
2002
2003 $1,027,000 3,400
2004 3,420,000 3,200
2005 7,336,000 22,400
2006 602,000 60,400
2007 1,513,000 97,600
2008 723,000
2009 493,000
2010 20,000
2011 1,602,000
2012 11,000
----------- ------ --------
Total $16,747,000 $1,700 $187,300
=========== ====== ========
9. COMMITMENTS AND CONTINGENCIES
The Company leases equipment, furniture and office space under capital and
operating lease agreements having initial periods ranging from two to
seven years. The Company currently has an operating lease for a 33,000
square foot facility. The term of the lease is seven years and began on
January 26, 1996. Monthly rentals are based on a fixed schedule which
provides for periodic rental adjustments during the lease term. Upon
expiration of the initial term of the lease, the Company has the option to
extend the term for an additional three years.
F - 15
<PAGE>
At March 31, 1997, future minimum payments required under noncancelable
operating leases and the present value of future minimum capital lease
payments with terms in excess of one year are as follows:
Future
Minimum
Operating
Capital Lease
Leases Payments
1998 $ 100,550 $ 294,850
1999 100,550 296,896
2000 85,938 307,126
2001 9,843 309,174
2002 319,400
Thereafter 266,180
---------- ----------
Total 296,881 $1,793,626
Less imputed interest-rates ranging from 11% to 14% 34,002 ==========
----------
Present value of minimum capital lease obligations 262,879
Less current portion of capital lease obligations 82,820
----------
Long-term portion of capital lease obligations $ 180,059
==========
The Company's rental expense for the years ended March 31, 1997 and 1996,
the eight month period ended March 31, 1995 and year ended July 31, 1994
was $306,528, $321,389, $118,155 and $194,442, respectively.
10. RELATED PARTY TRANSACTIONS
During the years ended March 31, 1997 and 1996, the eight month period
ended March 31, 1995 and the year ended July 31, 1994, the Company paid
its directors $124,346, $150,151, $48,750 and $156,198, respectively, for
directors' fees, legal services and consulting services rendered.
11. FINANCING AGREEMENT
In October 1992, the Company entered into a financing agreement which was
last amended and restated on November 1, 1996. The maximum line of credit
is $14,000,000, limited by a borrowing base determined by specific
inventory and receivable balances, and provides for cash loans, letters of
credit and acceptances. The agreement, as amended, has a term of three
years. Interest is charged at prime (8.5% at March 31, 1997) plus 1%. The
Company pays a monthly fee on the unused balance of the line of credit of
.25% per year. The line of credit is collateralized by all assets of the
Company. The line of credit is estimated to approximate fair value as the
actual rate is consistent with the rate estimated to be currently
available for debt of similar terms.
F - 16
<PAGE>
Certain information relative to the line of credit is as follows:
<TABLE>
<CAPTION>
Years Ended Eight Month
March 31, Period Ended Year Ended
------------------------ March 31, July 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
Maximum amount of loans
outstanding during the period $6,183,219 $6,518,547 $4,823,777 $6,733,854
Average daily loans outstanding
during the period 2,676,475 2,733,610 1,313,401 3,131,461
Average effective interest rate 10.40% 11.25% 10.60% 8.5%
</TABLE>
Amortization expense of costs incurred in connection with obtaining,
amending and renewing the financing agreement for the years ended March
31, 1997 and 1996, the eight month period ended March 31, 1995 and the
year ended July 31, 1994 was $65,833 and $81,547, $83,662 and $179,819,
respectively. At March 31, 1997, all such costs have been fully amortized.
The Company had letters of credit of $136,000 outstanding at March 31,
1997. The unused and available line of credit at March 31, 1997 was
approximately $5,375,000.
12. BUSINESS COMBINATION
On April 1, 1995, the Company acquired the net assets of Dublin Companies,
a home and business video security products marketer and distributor. The
transaction was accounted for using the purchase method. The fair value of
assets acquired and liabilities assumed was $190,657 and $361,120,
respectively. The excess of cost over the fair value of assets acquired of
$170,463 was recorded as goodwill. The goodwill is being amortized on a
straight-line basis over a period of ten years. The acquired company
became the Security Products Division of Go-Video, Inc.
* * * * * *
F - 17
<PAGE>
PART III
Item 10. Directors, and Executive Officers of the Registrant
---------------------------------------------------
The information regarding executive officers required by Item 10 is furnished
under "Executive Officers of the Registrant" in Part I of this Report. The other
information required by Item 10 is hereby incorporated by reference from the
Company's definitive proxy statement relating to its annual meeting of
stockholders to be held on August 21, 1997 (the "Proxy Statement").
Item 11. Executive Compensation
----------------------
Information on executive compensation is incorporated herein by reference from
the Registrant's Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
Information on security ownership of certain beneficial owners and management is
incorporated herein by reference from the Registrant's Proxy Statement.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Information on certain relationships and related transactions is incorporated
herein by reference from the Registrant's Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
<TABLE>
<CAPTION>
Page or
Method of Filing
----------------
<S> <C> <C>
(a) Financial Statements:
(1) Report of Deloitte & Touche LLP. Page F-1
(2) Financial Statements and Notes to Financial Statements of the Page F-2
Company for the fiscal years ended March 31, 1997 and 1996, the
eight month period ended March 31, 1995, and the fiscal year ended July 31, 1994.
</TABLE>
(b) Financial Statement Schedules:
Schedules have been omitted because of the absence of conditions under which
they are required or because the required material information is included in
the Financial Statements or Notes to the Financial Statements included herein.
(c) Exhibits
The following exhibits are filed as part of this Report.
18
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page or
No. Description Method of Filing
--- ----------- ----------------
<S> <C> <C>
3.1 Certificate of Incorporation of the Company Incorporated by
reference to Exhibit 3-A
of S-1 No. 33-17277
3.2 Bylaws of the Company Incorporated by
reference to Exhibit 4-B
to S-2 No. 33-38445
4.1 Specimen Certificate representing Common Stock Incorporated by
reference to Exhibit 4-A
to S-1 No. 33-17277
4.2 Specimen Warrant Certificate Incorporated by
reference to Exhibit 4-
B to S-1 No. 33-17277
4.4 Form of Warrant Certificate Incorporated by
reference to Exhibit 4.3
to the Company's S-2
Registration and Filing
No. 333-15731 filed
November 7, 1996
4.5 Form of Mandatory Convertible Subordinated Note Incorporated by
reference to Exhibit 4.3
to the Company's S-2
Registration and Filing
No. 333-15731 filed
November 7, 1996
10.2 Assignment of U.S. Patent Rights to Go-Video, Inc., Incorporated by
by R. Terren Dunlap and Richard A. Lang, dated reference to
October 11, 1985 Exhibit 10-B(1) to S-1
No. 33-17277
10.3 Assignment of Japanese Patent Rights to Go-Video, Inc., Incorporated by
by R. Terren Dunlap and Richard A. Lang, dated reference to Exhibit
August 5, 1987 10-B(2) to S-1 No.
33-17277
10.4 Assignment of U.S. Patent Rights to Go-Video, Inc., Incorporated by
by R. Terren Dunlap, John Berkheimer, and Dwayne reference to Exhibit
Woodmas, dated August 4, 1988 10-B(3) to Annual
Report on Form10K for
the fiscal year ended
July 31, 1988 (the
"1988 10K")
10.5 Assignment of U.S. Patent Rights to Go-Video, Inc., Incorporated by
by R. Terren Dunlap, John Berkheimer, and reference to Exhibit
Richard Otto, dated September 9, 1988 10-B(4) to Company's
1988 10K.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C>
10.6 * Form of 1987 Nonstatutory Stock Option Plan, as amended Incorporated by
reference to Exhibit 4-A
to S-8 No. 33-18428
10.7 * Form of 1989 Nonstatutory Stock Option Plan, as amended Incorporated by
reference to Exhibit
10-C (2) to S-2 No.
33-33033
10.8 * Form of 1991 Directors' Nonstatutory Stock Option Plan, Incorporated by
as amended reference to Exhibit
28.1 to S-8 No.
33-49924 and Exhibit
A to the Company's
1995 Proxy Statement.
10.9 * Form of 1991 Employee Stock Option Plan Incorporated by
reference to Exhibit
28.1 to S-8 No. 33-49926
10.10 Financing Agreement between Go-Video, Inc. Incorporated by
and Congress Financial Corporation, dated reference to Exhibit
October 12, 1992. 4-D to Annual Report
Form 10K for fiscal
year ended July 31,
1992.
10.11 Settlement Agreement, Manufacturing Agreement, Incorporated by
License and Technical Assistance Agreement and Mutual reference to
Release between Go-Video, Inc., and Samsung Exhibit 10-E(10) to
Electronics Co. Ltd., dated February 28, 1989. S-1 No. 33-18433
10.14 ** Manufacturing Agreement between Go-Video, Inc. Incorporated by
and Samsung Corporation, dated September 14, 1993. reference to
Exhibit 10.14 to
1993 10K.
10.16 * Separation Agreement between Roger B. Hackett Incorporated by
and Go-Video, Inc., dated August 2, 1993. reference to
Exhibit 10.16 to
1993 10K.
10.17 ** License Agreement between Go-Video Inc. Incorporated by
and Goldstar U.S.A., Inc., dated July 11, 1994. reference to
Exhibit 10.17 to
Annual Report Form
10K for fiscal year
ended July 31, 1994
(the "1994 10K").
10.22 Office Lease Agreement between Go-Video Inc. Incorporated by
and 78 McClain, L.L.C., for premises at 7835 East reference to
McClain Drive, Scottsdale, AZ., dated November Exhibit 10.22 to
15, 1994. Quarterly Report
Form 10Q for the
quarter ended
January 31, 1995.
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C>
10.23 Purchase Agreement between Go-Video Inc. Incorporated by
and Dublin Companies reference to
Exhibit 10.23 to
the Transition
Report 1995
10K.
10.24 *Form of 1993 Employee Stock Option Plan Incorporated by
reference to
Exhibit 10.24 to
the Transition
Report 1995
10K.
10.26 **Manufacturing Agreement between Go-Video, Inc. Incorporated by
and Shintom Co. Ltd. and Talk Corporation, dated reference to
January 9, 1996. Exhibit 10.26 to
Quarterly Report
Form 10Q for the
quarter ended
December 31, 1995.
10.27 **First Amendment to Manufacturing Agreement between Incorporated by
Go-Video, Inc. and Samsung Corporation dated reference to Exhibit
April 1, 1996. 10.27 to the 1996 10K.
10.29 Amended and Restated Loan and Security Agreement between Incorporated by
Go-Video Inc. and Congress Financial dated November 1, 1996. Reference to Exhibit
10.29 to the Quarterly
Report Form 10Q for the
Quarter ended December
31, 1996.
21 List of Subsidiaries Incorporated by
reference to Exhibit 22
to Annual Report Form
10K for fiscal year
ended July 31, 1988.
23 Independent Auditor's Consent Filed Herewith
27 Financial Data Schedule Filed Herewith
</TABLE>
- --------------------------------------------------------------------------------
* Management contract or compensatory plan
** Confidential treatment requested
(d) Reports on Form 8-K:
The Company did not file any 8-K reports during the fourth quarter of
the fiscal year ended March 31, 1997.
21
<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.
GO-VIDEO, INC.
By /s/ Roger B. Hackett
------------------------------
Roger B. Hackett
Chairman of the Board of Directors,
Chief Executive Officer, President,
and Chief Operating Officer
Dated: June 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name and Signature Title Date
------------------ ----- ----
<S> <C> <C>
/s/ Roger B. Hackett Chairman of the Board of June 25, 1997
- ---------------------------- Directors, Chief Executive Officer,
Roger B. Hackett President, and Chief Operating Officer
(principal executive officer)
/s/ Douglas P. Klein Vice President, Chief Financial Officer, June 25, 1997
- ---------------------------- Secretary and Treasurer
Douglas P. Klein (principal financial and
accounting officer)
/s/ Thomas F. Hartley, Jr. Director June 25, 1997
- ----------------------------
Thomas F. Hartley, Jr
/s/ Thomas E. Linnen Director June 25, 1997
- ----------------------------
Thomas E. Linnen
/s/ Ralph F. Palaia Director June 25, 1997
- ----------------------------
Ralph F. Palaia
/s/ William T. Walker, Jr. Director June 25, 1997
- ----------------------------
William T. Walker, Jr.
/s/ Carmine F.Adimando Director June 25, 1997
- ----------------------------
Carmine F. Adimando
</TABLE>
S-1
INDEPENDENT AUDITORS' CONSENT
Board of Directors
Go-Video, Inc.
Scottsdale, Arizona
We consent to the incorporation by reference in Registration Statements No.
33-18428 on Form S-8, No. 33-39859 on Form S-8, No. 33-49924 on Form S-8, No.
33-49926 on Form S-8, No. 33-58720 on Form S-3 and No. 333-15731 on Form S-2 of
our report dated May 1, 1997 appearing in this Annual Report on Form 10-K of
Go-Video, Inc. for the year ended March 31, 1997.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
June 23, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 302,788
<SECURITIES> 0
<RECEIVABLES> 7,125,384
<ALLOWANCES> 130,000
<INVENTORY> 5,026,149
<CURRENT-ASSETS> 12,489,674
<PP&E> 1,136,691
<DEPRECIATION> 1,595,705
<TOTAL-ASSETS> 13,881,304
<CURRENT-LIABILITIES> 5,486,850
<BONDS> 0
11,837
0
<COMMON> 0
<OTHER-SE> 7,114,486
<TOTAL-LIABILITY-AND-EQUITY> 13,881,304
<SALES> 40,175,195
<TOTAL-REVENUES> 40,192,041
<CGS> 30,035,136
<TOTAL-COSTS> 30,035,136
<OTHER-EXPENSES> 7,488,522
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 670,522
<INCOME-PRETAX> 1,924,331
<INCOME-TAX> 40,000
<INCOME-CONTINUING> 1,884,331
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,884,331
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
