FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission File No. 2-331855
Go-Video, Inc.
--------------
(Exact name of registrant as specified in its charter)
Delaware 86-0492122
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(State of Incorporation) (IRS E.I.N.)
7835 East McClain Drive, Scottsdale, Arizona 85260
-------------------------------------------- -----
(Address of principal executive offices) (Zip code)
(602) 998-3400
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(Registrant's telephone number, including area code)
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
----- -----
12,539,189 shares of Common Stock were outstanding as of February 12, 1998
<PAGE>
GO-VIDEO, INC.
INDEX
Page No.
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Part I. FINANCIAL INFORMATION
Consolidated Balance Sheets -- At December 31,
1997 and March 31, 1997 3
Consolidated Statements of Operations -- Three
and Nine Months Ended December 31, 1997 and
1996 4
Consolidated Statements of Cash Flows -- Nine
Months Ended December 31, 1997 and 1996 5-6
Notes to Consolidated Financial Statements - 7-10
Management's Discussion and Analysis of Results
of Operations and Financial Condition 11-14
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signatures S-1
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
ASSETS December 31, 1997 March 31, 1997
----------------- --------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 338,630 $ 302,788
Receivables - less allowance for doubtful accounts of
$450,000 and $130,000 respectively 6,838,173 7,125,384
Inventories 6,884,119 5,026,149
Prepaid expenses and other assets 101,877 35,353
------------ ------------
Total current assets 14,162,799 12,489,674
------------ ------------
EQUIPMENT AND IMPROVEMENTS:
Furniture, fixtures & equipment 586,689 563,246
Leasehold improvements 210,230 208,888
Office equipment 781,703 664,002
Tooling 1,344,260 1,296,260
------------ ------------
Total 2,922,882 2,732,396
Less accumulated depreciation and amortization 2,031,192 1,595,705
------------ ------------
Equipment and improvements - net 891,689 1,136,691
------------ ------------
DUAL-DECK VCR PATENTS, net of amortization of $49,233
and $45,894, respectively 62,618 67,626
GOODWILL, net of amortization of $42,616, and $34,092,
respectively 123,586 136,371
MARKET EXCLUSIVITY FEE 974,248 0
OTHER ASSETS 57,646 50,942
------------ ------------
TOTAL $ 16,272,586 $ 13,881,304
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 277,937 $ 1,226,644
Accrued expenses 1,323,242 980,163
Other current liabilities 1,092,330 1,122,940
Warranty reserve 126,000 173,000
Line of credit 2,571,799 1,964,103
Income tax payable 3,000 20,000
------------ ------------
Total current liabilities 5,394,308 5,486,850
------------ ------------
DEFERRED RENT 34,062 29,739
------------ ------------
LONG TERM OBLIGATIONS 113,664 180,059
------------ ------------
MANDATORY CONVERTIBLE SUBORDINATED DEBT 793,750 1,058,333
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock $.001 par value - authorized, 50,000,000 shares;
issued and outstanding, 12,494,439 and
11,837,285 shares, respectively 12,494 11,837
Additional capital 20,309,184 19,583,419
Accumulated deficit (10,384,876) (12,468,933)
------------ ------------
Total stockholders' equity 9,936,802 7,126,323
------------ ------------
TOTAL $ 16,272,586 $ 13,881,304
============ ============
</TABLE>
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------
(unaudited)
<TABLE>
<CAPTION>
For The Three For The Nine
Months Ended December 31, Months Ended December 31,
------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 14,207,693 $ 11,676,234 $ 36,292,084 $ 29,257,396
COST OF SALES 10,448,312 8,333,117 27,043,694 21,905,854
------------ ------------ ------------ ------------
Gross profit 3,759,381 3,343,117 9,248,390 7,351,542
------------ ------------ ------------ ------------
OTHER OPERATING COSTS:
Sales and marketing 1,584,704 1,136,385 3,693,195 2,910,912
Research and development 138,686 131,956 655,812 399,163
General and administrative 730,176 729,442 2,285,420 1,904,099
------------ ------------ ------------ ------------
Total other operating costs 2,453,566 1,997,784 6,634,427 5,214,174
------------ ------------ ------------ ------------
Operating income 1,305,815 1,345,333 2,613,963 2,137,368
------------ ------------ ------------ ------------
OTHER (EXPENSE) REVENUES:
Interest income 2,408 2,454 6,667 14,308
Interest expense (215,072) (258,014) (493,079) (582,651)
Other income (expense) 100 (33,083) (8,494) 31,944
------------ ------------ ------------ ------------
Total other expense (212,564) (288,643) (494,906) (600,287)
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION FOR 1,093,251 1,056,690 2,119,057 1,537,081
INCOME TAXES
PROVISION FOR INCOME TAXES 20,000 20,000 35,000 20,000
------------ ------------ ------------ ------------
NET INCOME $ 1,073,251 $ 1,036,690 $ 2,084,057 $ 1,517,081
============ ============ ============ ============
NET INCOME PER COMMON SHARE $ .09 $ .09 $ .17 $ .13
============ ============ ============ ============
NET INCOME PER COMMON SHARE-
ASSUMING DILUTION $ .08 $ .09 $ .16 $ .13
============ ============ ============ ============
</TABLE>
4
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
For the Nine
Months Ended December 31,
-------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,084,056 $ 1,517,081
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 494,200 470,317
Loss on sale of equipment 10,320 3,000
Change in operating assets and liabilities
Receivables 287,212 642,212
Inventories (1,857,970) 25,724
Prepaid expenses and other assets (66,524) (78,302)
Other assets (6,705) 33,020
Accounts payable (948,707) (1,353,161)
Accrued expenses 343,079 191,199
Other current liabilities (30,610) (158,681)
Warranty reserve (47,000) 14,000
Other long-term liabilities 4,325 (49,834)
Income taxes payable (17,000) 20,000
----------- -----------
Net cash provided by operating activities 248,676 1,276,575
----------- -----------
INVESTING ACTIVITIES:
Market exclusivity fee (974,248) 0
Equipment and improvement expenditures (236,726) (291,893)
----------- -----------
Net cash used in investing activities (1,210,974) (291,893)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 456,839 44,995
Payment on capital lease obligations (66,395) (35,489)
Net borrowings (payments) under line of credit 607,696 (2,430,330)
Proceeds from issuance of mandatory convertible debt 0 1,350,000
Payment of financing costs 0 (25,000)
----------- -----------
Net cash provided (used) by financing activities 998,140 (1,095,824)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 35,842 (111,142)
CASH AND CASH EQUIVALENTS, beginning of period 302,788 313,916
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 338,630 $ 202,774
=========== ===========
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
SUPPLEMENTAL INFORMATION TO CASH FLOW
STATEMENT:
Interest paid $ 493,079 $ 582,641
=========== ===========
Income tax paid $ 52,000 $ 0
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Conversion of subordinated debt and accrued interest
to common stock $ 264,583
===========
</TABLE>
6
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------
GENERAL
- -------
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal reccurring accruals)
necessary to present fairly the financial position of the Company and the
results of its operations and changes in its financial position for the periods
reported. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the entire year.
Inventories at December 31, 1997 consisted of $654,563 of raw materials and
service parts and $6,229,556 of finished goods.
The Market Exclusivity Fee of approximately $974,000 represents the first four
installments of a fee to be paid by the Company to Loewe Opta GmbH for the
exclusive right to market and distribute Loewe Opta direct view televisions in
North America. The total fee will be amortized on a straight line basis over the
initial term of the agreement which ends on January 1, 2003. Amortization will
begin with deliveries of product to the Company, anticipated for the third
quarter of fiscal 1999.
Goodwill of approximately $170,000 resulting from the April 1995 acquisition of
the predecesor to the Company's Security Products Division is being amortized on
the straight line basis over ten years.
The Company is engaged in one business segment, the design, development,
marketing and licensing of electronic video communication products. The Company
currently derives most of its revenues from the design, marketing, sale, and
distribution of several models of its Dual-Deck videocassette recorder. For the
nine months ended December 31, 1997, Sam's Club, Circuit City, and Costco
Warehouse represented 24%, 14%, and 10% of the Company's revenue respectively.
Accounts receivable from Sam's Club, Circuit City, and Costco Warehouse were
$1,410,305, $1,012,903, and $600,811, respectively, at December 31, 1997.
Certain reclassifications have been made to the prior financial statements to
conform to the current classifications.
The Financial Accounting Standards Board recently issued SFAS No. 130 on
"Reporting Comprehensive Income" and SFAS No. 131 on "Disclosure about Segments
of an Enterprise and Related Information." The "Reporting Comprehensive Income"
standard is effective for fiscal years beginning after December 15, 1997. The
standard changes the reporting of certain items currently reported in the
stockholder's equity section of the balance sheet. The Company is currently
evaluating what impact this standard will have on the Company's financial
statements. The "Disclosure about Segments of an Enterprise and Related
Information" standard is effective for fiscal years beginning after December 15,
1997. This standard requires that public companies report certain information
about operating segments in their financial statements. It also establishes
related disclosures about products and services, geographic areas, and major
customers. The Company is currently evaluating what impact this standard will
have on its disclosures.
7
<PAGE>
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. The tax effects of significant items comprising
the Company's net deferred tax asset as of December 31, 1997 are as follows:
Deferred Tax Assets:
Current-reserves not currently
deductible $ 456,000
Noncurrent:
Differences between book & tax
basis of property $ 244,000
Operating loss carryforwards 6,787,000
Tax credit carryforwards 189,000
Other intangibles 95,000
-----------
Net Deferred Tax Asset 7,771,000
Valuation Allowance (7,771,000)
-----------
Net Deferred Asset $ -0-
===========
8
<PAGE>
SFAS No.128, "Earnings Per Share", requires a reconciliation of the numerator
and denominators of basic and diluted earnings per share as follows:
<TABLE>
<CAPTION>
For the Three Months Ended December 31, 1997
--------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS
Income available to $1,073,251 12,459,072 $.09
====
Common stockholders
Effect of Dilutive Securities
Options and Warrants 987,314
Convertible Subordinated Notes 18,000 783,333
---------- ----------
Diluted EPS
Income available to common
stockholders & assumed conversions $1,091,251 14,229,719 $.08
========== ========== ====
</TABLE>
Options and warrants to purchase 593,050 shares of common stock at various
prices were outstanding during the three months ended December 31, 1997 but were
not included in the computation of diluted earnings per share because the
exercise prices of the options and warrants were greater than the average price
of the common shares.
<TABLE>
<CAPTION>
For the Nine Months Ended December 31, 1997
-------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS
Income available to
Common stockholders $2,084,057 12,152,863 $.17
====
Effect of Dilutive Securities
Options and Warrants 675,112
Convertible Subordinated Notes 42,000 816,666
--------- ----------
Diluted EPS
Income available to common
stockholders & assumed conversions $2,126,057 13,644,641 $.16
========== ========== ====
</TABLE>
Options and warrants to purchase 776,003 shares of common stock at various
prices were outstanding during the nine months ended December 31, 1997 but were
not included in the computation of diluted earnings per share because the
exercise prices of the options and warrants were greater than the average price
of the common shares.
9
<PAGE>
For the three and nine months ended December 31, 1996, there was no material
difference between basic and diluted earnings per share.
The information presented within the financial statements should be read in
conjunction with the Company's audited Financial Statements for the fiscal year
ended March 31, 1997, and March 31, 1996 and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" from the 1997 Annual
Report on Form 10-K.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Three months ended December 31, 1997 compared with the three months ended
- --------------------------------------------------------------------------------
December 31, 1996:
- ------------------
Net sales increased 21.7% to $14.2 million during the three months ended
December 31, 1997 from $11.7 million during the three months ended December 31,
1996. The increase in net sales was primarily due to a 17% increase in units
sold of Dual-Deck VCR's (DDVCR's) and the addition of $1.2 million of net sales
from the Company's Security Product Division. The increase in net DDVCR units
sold and the increase in net sales of the Company's Security Products Division
was primarily due to the expansion of sales into the warehouse clubs. Sales of
the Company's Security Product Division were 8% of the total net sales.
Gross profit was $3.8 million and $3.3 million for the three months ended
December 31, 1997 and 1996, respectively, representing a 12.5% increase in gross
profit dollars. Gross profit as a percentage of net sales decreased to 26.5% for
the three month period ended December 31, 1997 from 28.6% for the three month
period ended December 31, 1996. The decrease in gross profit as a percentage of
sales was primarily due to a 3% decrease in average selling prices of its
DDVCR's during the three months ended December 31, 1997 compared to the three
months ended December 31, 1996 resulting from a shift in sales mix toward the
Company's lower cost models.
Sales and marketing expense increased 39.5% to $1.6 million for the three months
ended December 31, 1997 from $1.1 million for the three months ended December
31, 1996. As a percentage of sales, sales and marketing expenses increased from
9.7% in the three months ended December 31, 1996, to 11.2% in the three months
ended December 31, 1997. The increase in sales and marketing expense was
primarily due to a $320,000 adjustment recorded for bad debt expense for Nobody
Beats The Wiz, a retail customer of the Company who filed for bankruptcy in
December, and higher marketing expenses related to the expansion of the
Company's direct-to-consumer marketing activities.
Research and development expense was $0.1 million for the three months ended
December 31, 1997 and the three months ended December 31, 1996. As a percentage
of sales, research and development expense was 1.1% and 1.0% for the three
months ended December 31, 1996 and 1997, respectively.
General and administrative expense was $0.7 million for the three months ended
December 31, 1997 and December 31, 1996. As a percentage of net sales, general
and administrative expense decreased from 6.2% for the three months ended
December 31, 1996 to 5.1% for the three months ended December 31, 1997.
As a result of the above, the Company recorded operating profit of $1,305,815
for the three months ended December 31, 1997 compared with operating profit of
$1,345,333 for the three months ended December 31, 1996. The Company recorded
net other expense of $212,564 for the three months ended December 31, 1997
compared with net other expense of $288,643 for the same period of the prior
year. The decrease in net other expense was primarily due to the decrease in the
average effective interest rate on the Company's line of credit, offset in part
by an increase in the average daily loan outstanding during the three months
ended December 31, 1997 as compared to the three months ended December 31, 1996.
Net income for the three months ended December 31, 1997 was $1,073,251 compared
with net income of $1,036,690 for the three months ended December 31, 1996. The
Company recorded a provision for income taxes of $20,000 for the three months
ended December 31, 1997 and December 31, 1996
11
<PAGE>
representing its estimated alternative minimum tax liability.
Nine months ended December 31, 1997 compared with the nine months ended December
- --------------------------------------------------------------------------------
31, 1996:
- ---------
Net sales increased 24.0% to $36.3 million during the nine months ended December
31, 1997 from $29.3 million during the nine months ended December 31, 1996. The
increase in net sales was primarily due to a 30% increase in net units of
DDVCR's sold for the nine months ended December 31, 1997 compared to the nine
months ended December 31, 1996, offset in part by a 6% decrease in average
revenue per unit for the two periods. The increase in net units sold was
primarily due to increased demand for the Company's current model line of
DDVCR's, particularly the Company's lowest-priced DDVCR models, and the
expansion of sales into warehouse clubs. Net sales of the Company's Security
Products Division were approximately 6% of total net sales for the nine months
ended December 31, 1997.
Gross profit was $9.2 million and $7.4 million for the nine months ended
December 31, 1997 and 1996, respectively, representing a 26.9% increase in gross
profit dollars. The increase in gross profit dollars was primarily due to higher
unit sales of the current DDVCR model lines. Gross margins generally remained
consistent with the comparable period, increasing slighty to 25.5% for the nine
month period ended December 31, 1997 from 25.1% for the nine month period ended
December 31, 1996.
Sales and marketing expense increased 26.8% to $3.7 million for the nine months
ended December 31, 1997 from $2.9 million for the nine months ended December 31,
1996. As a percentage of sales, sales and marketing expenses increased from 9.9%
in the nine months ended December 31, 1996, to 10.2% in the nine months ended
December 31, 1997. The increase in sales and marketing expense was primarily due
to an adjustment of $320,000 for bad debt expense for Nobody Beats The Wiz, a
retail customer of the Company who filed for bankruptcy in December, increased
marketing for the Security Products Division, and increased commission expense
due to higher sales.
Research and development expenses increased 64.3% to $0.7 million for the nine
months ended December 31, 1997 from $0.4 million for the nine months ended
December 31, 1996. As a percentage of sales, research and development expense
increased from 1.4% for the nine months ended December 31, 1996 to 1.8% for the
nine months ended December 31, 1997. The increase in research and development
expense was primarily due to increased personnel expense and increased expenses
incurred in connection with the Company's development of digital direct view
televisions.
General and administrative expenses increased 20.0% to $2.3 million for the nine
months ended December 31, 1997 from $1.9 million for the nine months ended
December 31, 1996. As a percentage of sales, general and administrative expense
decreased from 6.5% for the nine months ended December 31, 1996 to 6.3% for the
nine months ended December 31, 1997. The increase in general and administrative
expense was primarily due to increased personnel expense and increased travel
during the nine months ended December 31, 1997.
As a result of the above, the Company recorded operating profit of $2,613,963
for the nine months ended December 31, 1997 compared with operating profit of
$2,137,368 for the nine months ended December 31, 1996. The Company recorded net
other expense of $494,906 for the nine months ended December 31, 1997 compared
with net other expense of $600,287 for the same period of the prior year. The
decrease in net other expense is primarily due to the decrease in the average
effective interest rate on its line of credit, offset in part by an increase in
the average daily loan outstanding during the nine months ended December 31,
1997 as compared to the nine months ended December 31, 1996.
12
<PAGE>
Net income for the nine months ended December 31, 1997 was $2,084,057 compared
with net income of $1,517,081 for the nine months ended December 31, 1996. The
Company recorded a provision for income taxes of $35,000 and $20,000 for the
nine months ended December 31, 1997 and December 31, 1996, respectively,
representing its estimated alternative minimum tax liability.
Seasonality
- -----------
The Company's primary product lines compete within the consumer electronics
industry, which generally experience seasonality in sales. Accordingly, the
Company generally expects to experience peaks in its sales from September
through December, which covers the holiday selling season.
Future Results
- --------------
The Company's expectations for results of operations and other forward-looking
statements contained in this report on Form 10-Q, particularly the timing of the
Loewe Opta GmbH product introduction and the successful completion of the
California Audio Labs transaction and the integration of the two companies,
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 manufacturing
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 provided by operating activities was $0.2 million for the nine months
ended December 31, 1997 compared to cash provided by operations of $1.3 million
for the nine months ended December 31, 1996. The more significant factors
comprising the net cash provided were $2.1 million of net income and $0.5
million of depreciation and amortization offset in part by a $1.9 million
increase in inventory. The increase in the inventory balance from March 31, 1997
to December 31, 1997 was primarily due to the increased number of inventory
models carried by the Company at December 31, 1997 compared to March 31, 1997.
The Company had net working capital of $8.8 million and $7.0 million at December
31, 1997 and March 31, 1997, respectively. At December 31, 1997, the Company's
current ratio (the ratio of current assets to current liabilities) was 2.6 to 1.
The Company's sales seasonality requires incremental working capital for
investment primarily in inventories and receivables, which the Company currently
funds through a line of credit with Congress Financial. 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,
expires in November 1999 with a prepayment (if applicable) fee of 1.0%. Loans
are priced at the lender's prime lending rate plus 1.0%. The lender is
collateralized by all assets of the Company. The unused and available line of
credit at December 31, 1997 was approximately $7.1 million. 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
December 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. Notes outstanding after
August 1999 must be converted to
13
<PAGE>
common stock at the option of the Company. As of December 31, 1997, $375,000 of
the notes had been converted into common stock.
The Company entered into an agreement with Loewe Opta GmbH of Kronach, Bavaria,
Germany, to develop and market a line of digital television products designed
specifically for the North American Market. The initial agreement is effective
through January 1, 2003 with built in five year extensions. The Company will
incur fees totaling $1.7 million and Deutsche Marks 1,050,000 (approximately
$580,000 as of February 12, 1998) for the exclusive right to market and
distribute Loewe Opta direct view televisions in North America. The fee, as
structured, is due in installments through August 1998. The Company expects to
receive the first shipments of product from Loewe during the third quarter of
its fiscal year 1999.
The Company announced on January 4, 1998 that it intends to acquire California
Audio Labs, LLC. California Audio designs, develops, manufactures and
distributes digital audio and video products marketed to the high-performance
home theater market under the California Audio Labs and Cinevision brand names.
The anticipated purchase price is $775,000 plus assumption of liabilities of
$1.3 million. The closing of the transaction is subject to the parties executing
a definitive purchase agreement, entering into a manufacturing and licensing
agreement, and other standard conditions. The Company expects to incur increased
expenses related to the integration and development of the California Audio Labs
business.
The Company leases a 33,000 square foot executive office and warehouse facility
in north Scottsdale, Arizona, which is fully utilized and in good condition. The
lease began in January 1996 and has a term of seven years, with one three year
extension at the option of the Company. The Company is currently considering its
space requirements in relation to its business plan which anticipates increased
needs for personnel, office, and warehousing space. As such, the Company may be
required to seek additional space, which would increase the Company's overall
rental costs.
Inflation
- ---------
Inflation has had no material effect on the Company's operations or financial
condition.
14
<PAGE>
Part II. OTHER INFORMATION
None
Item 6. Exhibits and Reports on Form 8-K
27 Financial Data Schedule
NONE
15
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
GO-VIDEO, INC. (Registrant)
Date: February 12, 1998 By /S/ ROGER B. HACKETT
----------------------
Roger B. Hackett
Chairman of the Board,
Chief Executive Officer,
President and Chief Operating Officer
Date: February 12, 1998 By /S/ DOUGLAS P. KLEIN
----------------------
Douglas P. Klein
Chief Financial Officer, Vice President,
Secretary and Treasurer
(principal financial and
accounting officer)
S-1
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 338,630
<SECURITIES> 0
<RECEIVABLES> 6,838,173
<ALLOWANCES> 450,000
<INVENTORY> 6,884,119
<CURRENT-ASSETS> 14,162,799
<PP&E> 2,922,882
<DEPRECIATION> 2,031,192
<TOTAL-ASSETS> 16,272,586
<CURRENT-LIABILITIES> 5,394,308
<BONDS> 0
0
0
<COMMON> 12,494
<OTHER-SE> 9,924,308
<TOTAL-LIABILITY-AND-EQUITY> 22,784,945
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<TOTAL-REVENUES> 36,298,751
<CGS> 27,043,694
<TOTAL-COSTS> 27,943,694
<OTHER-EXPENSES> 6,634,427
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 493,079
<INCOME-PRETAX> 2,119,057
<INCOME-TAX> 35,000
<INCOME-CONTINUING> 2,084,057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,084,057
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.16
</TABLE>
