<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from_______________to________________
Commission File Number 0-22982
NAVARRE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1704319
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7400 49TH AVENUE NORTH, NEW HOPE, MN 55428
(Address of principal executive offices)
Registrant's telephone number, including area code (612) 535-8333
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. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
COMMON STOCK, NO PAR VALUE - 13,487,880 SHARES AS OF OCTOBER 31, 1998
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NAVARRE CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
The Company has amended the following:
Consolidated balance sheets -
September 30, 1998 and March 31, 1998
The following lines for September 30, 1998 have been amended:
Common stock
Retained deficit
Consolidated statements of operations -
Three and six months ended September 30, 1998 and 1997
The following lines for September 30, 1998 have been amended:
Preferred nondetachable conversion feature and warrant valuation
Net earnings (loss) applicable to common shares
Loss per common shares: Basic and diluted
Notes to consolidated financial statements - September 30, 1998
The table has been amended for September 30, 1998
The Company has added language to Note B -
Net Earnings (Loss) Per Share explaining the effect on its
financial statements of the beneficial conversion features of its
Class A Convertible Preferred Stock and Accompanying Warrants
issued May 1, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - The following lines on the Financial Data Schedule have been
amended.
Property, plant and equipment
Common stock
Other stockholders' equity
Basic and diluted earnings or loss per share
SIGNATURES
The signature page is attached.
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
NAVARRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 MARCH 31, 1998
----------------------------------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 19 $ 23
Accounts receivable, less allowance for doubtful accounts
and sales returns of $3,419 and $2,412, respectively 74,234 52,383
Inventories 29,742 23,188
Note receivable, related parties 307 406
Refundable income taxes 2,265 2,265
Prepaid expenses and other current assets 1,047 962
----------------------------------------
Total current assets 107,614 79,227
Property and equipment, net of accumulated depreciation of
$4,074 and $3,647, respectively 3,147 2,957
Other assets:
Goodwill 1,013 1,174
Other assets 247 331
----------------------------------------
Total assets $112,021 $83,689
----------------------------------------
----------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable to bank $38,386 $32,445
Current maturities of long-term debt 241 162
Accounts payable 49,370 45,554
Accrued expenses 458 1,019
----------------------------------------
Total current liabilities 88,455 79,180
Long-term debt, less current maturities 125 181
Shareholders' equity:
Preferred stock, no par value:
Authorized shares - 10,000,000,
Issued and outstanding shares - 349,426 and none, respectively 4,586 ----
Common stock, no par value:
Authorized shares - 50,000,000,
Issued and outstanding shares - 13,447,880 and 7,009,170, respectively 58,481 8,113
Retained deficit (39,446) (3,558)
Unearned compensation (180) (227)
----------------------------------------
Total shareholders' equity 23,441 4,328
----------------------------------------
Total liabilities and shareholders' equity $112,021 $83,689
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</TABLE>
SEE ACCOMPANYING NOTES
NOTE: THE BALANCE SHEET AT MARCH 31, 1998 HAS BEEN DERIVED FROM THE AUDITED
FINANCIAL STATEMENTS AT THAT DATE BUT DOES NOT INCLUDE ALL OF THE INFORMATION
AND FOOTNOTES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR COMPLETE
FINANCIAL STATEMENTS.
3
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NAVARRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales:
Computer software $36,072 $31,822 $72,130 $58,329
Music 18,801 16,757 35,960 30,048
-------------------------------------------------------------------
54,873 48,579 108,090 88,377
Cost of sales 48,942 42,341 95,090 77,864
-------------------------------------------------------------------
Gross profit 5,931 6,238 13,000 10,513
Operating expenses:
Selling and promotion 1,735 1,284 3,344 2,555
Distribution and warehousing 913 632 1,767 1,295
General and administration 4,356 2,324 7,992 5,372
Depreciation and amortization 313 669 616 1,328
-------------------------------------------------------------------
7,317 4,909 13,719 10,550
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Income (loss) from operations (1,386) 1,329 (719) (37)
Other income (expense):
Interest expense (811) (656) (1,523) (1,215)
Other income 145 128 175 164
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Income (loss) before income taxes (2,052) 801 (2,067) (1,088)
Income tax (benefit) expense (780) 329 (785) (446)
Minority interest (147) 47 (110) 101
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Net earnings (loss) $(1,419) $ 519 $(1,392) $ (541)
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Preferred nondetachable conversion feature
and warrant valuation ---- ---- (34,229) ----
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Preferred dividend requirements (243) ---- (577) ----
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Net earnings (loss) applicable to common shares $(1,662) $ 519 $(36,198) $ (541)
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Loss per common share:
Basic $ (.15) $ .08 $ (4.01) $ (.08)
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Diluted $ (.15) $ .07 $ (4.01) $ (.08)
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Weighted average common and
common equivalent shares outstanding
Basic 11,034 6,902 9,033 6,902
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-------------------------------------------------------------------
Diluted 11,034 7,189 9,033 6,902
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</TABLE>
SEE ACCOMPANYING NOTES
4
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NAVARRE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
NOTE B - NET EARNINGS (LOSS) PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, EARNINGS PER SHARE, Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements.
After the end of the quarter ended December 31, 1998 the Company determined its
financial statements for the quarters ended June 30 and September 30, 1998
should be restated to reflect the allocation of proceeds to the beneficial
conversion features of the Company's Class A Convertible Preferred Stock and
accompanying warrants. Based on the Company's stock price on May 1, 1998, the
date of issuance of the Class A Convertible Preferred Stock, these securities
are deemed to have contained beneficial conversion features that must be
recognized as a dividend paid to preferred stockholders. Revenues, expenses,
net loss, total assets and total shareholders' equity are not affected by this
restatement. The Company is conforming its financial statements with the
Financial Accounting Standards Board's Emerging Issues Task Force - Topic D60
("Accounting for the Issuance of Convertible Preferred Stock and Debt Securities
with a Nondetachable Conversion Feature") issued March 13, 1997, and considering
the Task Force's Working Group discussions and tentative conclusions reported on
Issue 98-5, November 1998, which provide that any discounts resulting from an
allocation of proceeds to the beneficial conversion feature and warrants are
analogous to a dividend, and should be recognized as a return to the preferred
stockholders over the minimum conversion period (from date securities are issued
to date they are first convertible). As noted above the value of the
Nondetachable Conversion Feature and accompanying warrants was $34,228,583.
Preferred stock, preferred stock warrants and employee stock options are not
included in the periods ending September 30, 1998 calculation because they are
anti-dilutive.
The following table sets forth the computation of basic and diluted earnings per
share:
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Numerator:
Net earnings (loss) $ (1,419) $ 519 $ (1,392) $ (541)
Less preferred nondetachable conversion feature
and warrant valuation ---- ---- (34,229) ----
Less preferred dividend requirements (243) ---- (577) ----
---------------------------- ----------------------------
Adjusted net earnings (loss) applicable to common stock $ (1,662) $ 519 $ (36,198) $ (541)
Denominator:
Denominator for basic earnings per
share--weighted-average shares 11,034 6,902 9,033 6,902
Dilutive securities:
Preferred stock ---- ---- ---- ----
Preferred stock warrants ---- ---- ---- ----
Employee stock options ---- 287 ---- ----
Denominator for diluted earnings
per share--adjusted
weighted-average shares 11,034 7,189 9,033 6,902
---------------------------- ----------------------------
Basic earnings (loss) per share $ (.15) $ .08 $ (4.01) $ (.08)
---------------------------- ----------------------------
---------------------------- ----------------------------
Dilutive earnings (loss) per share $ (.15) $ .07 $ (4.01) $ (.08)
---------------------------- ----------------------------
---------------------------- ----------------------------
</TABLE>
5
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NAVARRE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NAVARRE CORPORATION
(Registrant)
Date: February 12, 1999 By /s/ Eric H. Paulson
-----------------------
Eric H. Paulson
Chairman of the Board,
President and
Chief Executive Officer
Date: February 12, 1999 By /s/ Charles E. Cheney
-------------------------
Charles E. Cheney
Treasurer and Secretary,
Executive Vice President,
and Chief Financial Officer
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 19
<SECURITIES> 0
<RECEIVABLES> 74,541
<ALLOWANCES> 1,711
<INVENTORY> 29,742
<CURRENT-ASSETS> 107,614
<PP&E> 7,221
<DEPRECIATION> 4,074
<TOTAL-ASSETS> 112,021
<CURRENT-LIABILITIES> 88,455
<BONDS> 0
0
4,586
<COMMON> 58,481
<OTHER-SE> (39,446)
<TOTAL-LIABILITY-AND-EQUITY> 112,021
<SALES> 108,090
<TOTAL-REVENUES> 108,090
<CGS> 95,090
<TOTAL-COSTS> 13,719
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 480
<INTEREST-EXPENSE> 1,523
<INCOME-PRETAX> (2,067)
<INCOME-TAX> (785)
<INCOME-CONTINUING> (719)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,392)
<EPS-PRIMARY> (4.01)
<EPS-DILUTED> (4.01)
</TABLE>
