UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Quarter Ended March 31, 2000
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: 0-26620
ACCOM, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3055907
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1490 O'Brien Drive
Menlo Park, California 94025
(Address of principal executive offices)
Registrant's telephone number, including area code:
(650) 328-3818
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 at least the past 90 days.
Yes ____ No __X__
As of May 5, 2000, 10,186,799 shares of the Registrant's common stock, $0.001
par value, were outstanding.
<PAGE>
<TABLE>
ACCOM, INC.
FORM 10-Q For the Quarter Ended March 31, 2000
INDEX
Page
----
<S> <C> <C>
Facing sheet 1
Index 2
Part I. Financial Information (unaudited)
Item 1. a) Condensed consolidated interim balance sheets at March 31, 2000 and December 31, 1999 3
b) Condensed consolidated interim statements of operations for the three month periods 4
ended March 31, 2000 and March 31, 1999
c) Condensed consolidated interim statements of cash flows
for the three month periods ended March 31, 2000 and
March 31, 1999 5
d) Notes to condensed consolidated interim financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Item 3 Quantitative and Qualitative Disclosures About Market Risks 13
Part II. Other Information 14
Item 1 Legal Proceedings 14
Item 2 Changes in Securities and Use of Proceeds 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
Signature 16
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
ACCOM, INC.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
As of
---------------------------
March 31, December 31,
2000 1999
-------- --------
(Unaudited) (Note)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 193 $ 328
Accounts receivable, net 3,628 1,616
Inventories 4,132 5,112
Other current assets 564 580
-------- --------
Total current assets 8,517 7,636
Property and equipment, net 2,300 2,343
Intangibles, net 1,885 1,986
Restricted cash 1,795 --
Other assets 67 70
======== ========
Total assets $ 14,564 $ 12,035
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Bank borrowings - line of credit $ 735 $ 559
Current portion of notes payable 750 1,315
Accounts payable 2,129 2,560
Accrued liabilities 2,654 2,037
Customer deposits 865 965
-------- --------
Total current liabilities 7,133 7,436
Long-term portion of notes payable 3,275 3,261
Stockholders' equity:
Common stock, $0.001 par value; 40,000 shares authorized;
10,184 and 10,133 shares issued and outstanding on
March 31, 2000 and December 31, 1999, respectively 24,241 24,201
Notes receivable from stockholders (565) (630)
Accumulated deficit (19,520) (22,233)
-------- --------
Total stockholders' equity 4,156 1,338
-------- --------
Total liabilities and stockholders' equity $ 14,564 $ 12,035
======== ========
<FN>
Note: The condensed consolidated balance sheet at December 31, 1999, has been derived from the audited annual consolidated
balance sheet at that date but does not include all of the information and footnotes required by generally accepted
accounting principles for a complete consolidated balance sheet.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
</FN>
</TABLE>
-3-
<PAGE>
ACCOM, INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended
March 31,
-----------------------
2000 1999
-------- --------
Net sales $ 8,403 $ 9,538
Cost of sales 3,787 4,059
-------- --------
Gross profit 4,616 5,479
-------- --------
Operating expenses:
Research and development 1,796 1,945
Marketing and sales 2,236 2,100
General and administrative 653 807
-------- --------
Total operating expenses 4,685 4,852
-------- --------
Operating income (loss) (69) 627
Interest and other income (expenses), net (41) (111)
Sale of ELSET product line 2,888 --
-------- --------
Income before provision for income taxes 2,778 516
Provision for income taxes 54 2
-------- --------
Net income $ 2,724 $ 514
======== ========
Net income per share - basic $ 0.27 $ 0.05
======== ========
Net income per share - diluted $ 0.25 $ 0.05
======== ========
Shares used in computation of net
income per share - basic 10,136 10,122
======== ========
Shares used in computation of net
income per share - diluted 11,156 10,422
======== ========
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
-4-
<PAGE>
<TABLE>
ACCOM, INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,724 $ 514
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization 234 422
Gain on sale of ELSET product line (2,888) --
Changes in operating assets and liabilities, net of the effect of the sale
of the ELSET product line:
Accounts receivable (2,012) (898)
Inventories 980 1,498
Other current assets 16 (1,031)
Other assets 3 --
Accounts payable (431) (73)
Accrued liabilities (113) (425)
Customer deposits (100) 6
------- -------
Net cash provided by (used in) operating activities (1,587) 13
------- -------
Cash flows from investing activities:
Expenditures for property and equipment (34) (36)
Proceeds from disposal of property and equipment, net of the effect of the sale
of the ELSET product line 10 160
Increase in customer service inventories (164) --
------- -------
Net cash provided by (used in) investing activities (188) 124
------- -------
Cash flows from financing activities:
Borrowings and payments on line of credit, net 176 (3,916)
Repayment of notes payable (565) (300)
Proceeds from long-term notes 14 3,289
Issuance of common stock 40 --
Restricted cash (1,795) 1,132
Repayment of note receivable from stockholder 65 --
Net proceeds from sale of ELSET product line 3,705 --
------- -------
Net cash provided by financing activities 1,640 205
------- -------
Net increase (decrease) in cash and cash equivalents (135) 342
Cash and cash equivalents at beginning of period 328 --
======= =======
Cash and cash equivalents at end of period $ 193 $ 342
======= =======
<FN>
The accompanying notes are an integral part of these condensed consolidated interim financial statements
</FN>
</TABLE>
-5-
<PAGE>
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Preparation
The condensed consolidated interim balance sheet as of March 31, 2000,
and the condensed consolidated interim statements of operations and cash flows
for the three month periods ended March 31, 2000 and 1999, have been prepared by
the Company and are unaudited. In the opinion of management, all adjustments
(consisting of normal accruals) necessary to present fairly the financial
position as March 31, 2000 and the results of operations and cash for the three
month periods ended March 31, 2000 and 1999, have been made.
These condensed consolidated interim financial statements should be
reviewed in conjunction with the audited consolidated annual financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1999. The results of operations for the
three month period ended March 31, 2000, are not necessarily indicative of the
operating results for any future period.
Note 2. Comprehensive Income
Comprehensive income is equal to net income for the three month periods
ended March 31, 2000 and 1999.
Note 3. Inventories
Inventories consist of the following (in thousands):
March 31, December 31,
2000 1999
------ ------
Purchased parts and materials $1,322 $1,656
Work-in-process 1,452 1,634
Finished goods 30 369
Demonstration inventory 1,328 1,453
------ ------
$4,132 $5,112
====== ======
Note 4. Debt
The Company has a revolving line of credit ("line") with The Provident
Bank ("Provident") that allows for borrowings subject to the level of eligible
accounts receivable. Until March 31, 2000, borrowings were limited to a maximum
of $1,500,000. As a result of meeting a certain financial covenant, maximum
allowable borrowings increased to $2,000,000 after March 31, 2000. As of March
31, 2000, the Company had availability of $765,000 under the line; the balance
outstanding was $735,000.
Indebtedness under the line of credit accrues interest at Provident's
prime rate plus 125 basis points. All borrowings are due on March 1, 2003.
Borrowings are secured by all assets of the Company.
Borrowings under the line are subject to compliance with certain
financial covenants. As of March 31, 2000, the Company was in compliance with
these covenants.
On March 12, 1999, the Company completed a private placement of $3.5
million in senior subordinated convertible notes with a group of investors led
by the American Bankers' Insurance Group,
-6-
<PAGE>
Inc. ("ABIG"). The notes currently have a coupon rate of 8% per year, mature in
the year 2004, and are convertible, at any time, into shares of Accom common
stock at a price of $1.30 per share. The proceeds from these notes were used to
repay the balance then outstanding on a line of credit with LaSalle Business
Credit, Inc. that was in place at the time the proceeds were received.
The agreement between the Company and ABIG specifies that the Company
meet certain financial covenants. ABIG has the right to declare the notes
immediately due if the covenants are not met. As of March 31, 2000, the Company
was not in compliance with the covenants. On April 18, 2000, ABIG issued a
waiver for non-compliance as of March 31, 2000. In addition, on November 3,
1999, and February 10, 2000, ABIG amended and issued certain waivers to the
original agreement.
In conjunction with the sale of convertible notes, the Company and the
investors entered into an Investors Rights Agreement. The Investors Right
Agreement grants the investors, among other things, certain rights with respect
to the common stock of the Company issuable upon conversion of the notes.
The Company has a subordinated promissory note of $750,000 issued to
Scitex Digital Video, Inc. ("SDV") as partial consideration for the purchase of
certain assets and liabilities and the business of SDV in December 1998. Payment
of the note was due in April 2000. Principal was to be paid together with
interest in arrears on the unpaid principal balance at a variable rate equal to
the Merrill Lynch Money Market Rate. In April 2000, the Company paid SDV $89,000
as settlement of the note. The remaining balance due, approximately $710,000,
was retained by the Company for settlement of indemnification claims relating to
the purchase of SDV which were identified in the period following the
acquisition. SDV is evaluating the Company's claims.
A second note in the amount of $1,315,000 was issued to Scitex Digital
Video, Inc. as partial consideration for the purchase of certain assets and
liabilities and the business of SDV in December 1998. During the quarter ended
March 31, 2000, the Company paid off this note by issuing payments to SDV of
$587,000, consisting of $565,000 in payments of principal and $21,000 in
payments of interest.
<TABLE>
Note 5. Net Income Per Share
The following table sets forth the computation of basis and diluted net
income (loss) per share (in thousands, except for per share amounts):
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
2000 1999
------- -------
<S> <C> <C>
Numerator
Numerator for basic net income per share-net income $ 2,724 $ 514
Effect of dilutive securities:
8% convertible notes 83 --
------- -------
Numerator for diluted net income per share-income available to stockholders
after assumed conversions $ 2,807 $ 514
Denominator
Denominator for basic net income per share-weighted average shares 10,136 10,122
Effect of dilutive securities:
Employee stock options 749 300
Warrants 72 --
8% convertible notes 199 --
------- -------
Denominator for diluted net income per share-weighted average shares and
assumed conversions 11,156 10,422
Basic net income per share $ 0.27 $ 0.05
======= =======
Diluted net income per share $ 0.25 $ 0.05
======= =======
</TABLE>
-7-
<PAGE>
Note 6. Segment Information
Management has organized the business into three market sub-segments under one
industry segment which includes activities relating to development,
manufacturing and marketing of digital video equipment. The chief operating
decision maker relies primarily on revenue to assess market segment performance.
The following table presents revenue by market (in thousands):
For the Three Months Ended
March 31,
---------
Market 2000 1999
------ ---- ----
Post-Production $4,716 $6,603
Distribution 2,613 1,887
Other 1,074 1,048
====== ======
$8,403 $9,538
====== ======
Substantially all of the Company's assets are in the United States. All sales to
external customers are accepted and approved in the United States.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with the
Company's Consolidated Financial Statements as of December 31, 1999 and 1998 and
September 30, 1998 and 1997 and for the twelve months ended December 31, 1999
and 1998, the three months ended December 31, 1999 and 1998 and the fiscal years
ended September 30, 1998 and 1997 included in its Annual Report on Form 10-K for
the year ended December 31, 1999.
Additionally, the following Management's Discussion and Analysis of
Financial Condition and Results of Operations contains certain forward-looking
statements. The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
Specifically, the Company wishes to alert readers that the factors set forth in
the Company's Annual Report on Form 10-K for the year ended December 31, 1999,
under the sections in Item 1 entitled "Manufacturing and Suppliers,"
"Competition," "Proprietary Rights and Licenses" and "Additional Factors That
May Affect Future Results," as well as other factors, could affect future
results and have affected the Company's actual results in the past and could
cause the Company's results for future years or quarters to differ materially
from those expressed in any forward-looking statements made by or on behalf of
the Company, including without limitation, those contained in this 10-Q report.
Forward-looking statements can be identified by forward-looking words such as
"may," "will," "expect," "anticipate," "believe," "estimate," and "continue" or
similar words.
Overview
Accom designs, manufactures, sells, and supports a complete line of
digital video signal processing, editing, and disk recording tools, primarily
for the worldwide professional video post- production, live broadcasting and
computer video post-production marketplaces. The Company's systems are designed
to be used by video professionals to create, edit and broadcast high quality
video content such as television shows, commercials, news, music videos and
video games.
<TABLE>
The following table summarizes the Company's products and the primary
marketplaces they address:
<CAPTION>
--------------------------------------------------------- -------------------------------------------------------
MARKETS / Product Primary Applications
-----------------------------------------------------------------------------------------------------------------
<S> <C>
POST-PRODUCTION:
-----------------------------------------------------------------------------------------------------------------
Digital Signal Processors
-----------------------------------------------------------------------------------------------------------------
8150 Digital Digital switcher for on-line post-production editing
Switcher for commercials and long form television programs
-----------------------------------------------------------------------------------------------------------------
Digital Editors
---- --------------------- ------------------------------ -------------------------------------------------------
Axial(R) 3000 Edit controller for on-line post-production editing
for commercials and long form television programs
---- --------------------- ------------------------------ -------------------------------------------------------
Sphere(TM) Integrated non-linear editing workstation for long
and short form programs and commercials using
compressed video
---- --------------------- ------------------------------ -------------------------------------------------------
AFFINTY(TM) Integrated non-linear workstation for long and short
form programs and commercials using multiple streams
of uncompressed video
---- --------------------- ------------------------------ -------------------------------------------------------
Video Digital Disk Recorders
-----------------------------------------------------------------------------------------------------------------
APR(TM)/Attache On-line post-production editing and effects and
on-air playback of graphics for broadcast
---- --------------------- ------------------------------ -------------------------------------------------------
WSD(R)2Xtreme Desktop computer graphics and animation production
-----------------------------------------------------------------------------------------------------------------
DISTRIBUTION:
-----------------------------------------------------------------------------------------------------------------
Digital Signal Processors
-----------------------------------------------------------------------------------------------------------------
Dveous(TM) and Brutus Digital Video Effects systems for news and sports
---- --------------------- ------------------------------ -------------------------------------------------------
Axess(TM) Creation and broadcast distribution of news graphics
and short video segments
---- --------------------- ------------------------------ -------------------------------------------------------
Abekas(R)6000 Multi-user digital video server for broadcast
applications
---- --------------------- ------------------------------ -------------------------------------------------------
</TABLE>
-9-
<PAGE>
The Company's revenues are currently derived primarily from product
sales. The Company generally recognizes revenue upon product shipment. If
significant obligations exist at the time of shipment, revenue recognition is
deferred until obligations are met.
The Company's gross margin has historically fluctuated from quarter to
quarter. Gross margins are dependent on the mix of higher and lower-priced
products having various gross margin percentages and the percentage of sales
made through direct and indirect distribution channels.
Results of Operations
Three Months Ended March 31, 2000 and March 31, 1999
<TABLE>
The following table presents the Company's Condensed Consolidated
Interim Statements of Operations for the three months ended March 31, 2000 and
1999 as reported (dollar amounts in thousands, except per share data):
<CAPTION>
Three Months Ended
March 31, Increase (Decrease)
--------- -------------------
2000 1999 Amount Percent
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 8,403 $ 9,538 $(1,135) (11.9)%
Cost of sales 3,787 4,059 (272) (6.7)%
------- ------- ------- -------
Gross profit 4,616 5,479 (863) (15.8)%
Operating expenses:
Research and development 1,796 1,945 (149) (7.7)%
Marketing and sales 2,236 2,100 136 6.5%
General and administrative 653 807 (154) (19.1)%
------- ------- ------- -------
Total operating expenses 4,685 4,852 (167) (3.4)%
------- ------- ------- -------
Operating income (loss) (69) 627 (696) (111.0)%
Interest and other income (expenses), net (41) (111) 70 (63.1%)
Sale of ELSET product line 2,888 -- 2,888 N/A
------- ------- ------- -------
Income before provision for income taxes 2,778 516 2,262 438.4%
Provision for income taxes 54 2 52 2,600.0%
------- ------- ------- -------
Net income $ 2,724 $ 514 2,210 430.0%
======= ======= ======= =======
</TABLE>
The following table presents the Company's Condensed Consolidated
Interim Statements of Operations for the three months ended March 31, 2000 and
1999, as a percentage of net sales, as reported:
Three Months Ended
March 31,
---------------- Increase
2000 1999 (Decrease)
----- ---- ---
Net sales 100.0% 100.0% - %
Cost of sales 45.1% 42.6% 2.5%
----- ---- ---
Gross margin 54.9% 57.4% (2.5)%
Operating expenses:
Research and development 21.3% 20.4% 0.9%
Marketing and sales 26.6% 22.0% 4.6%
General and administrative 7.8% 8.4% (0.6)%
----- ---- ---
Total operating expenses 55.7% 50.8% 4.9%
----- ---- ---
Operating income (loss) (0.8)% 6.6% (7.4)%
Interest and other income (expenses), net (0.5)% (1.2)% 0.7%
Sale of ELSET product line 34.4% - % 34.4%
----- ---- ---
Income before provision for income taxes 33.1% 5.4% 27.7%
Provision for income taxes 0.7% - % 0.7%
----- ---- ---
Net income 32.4% 5.4% 27.0%
==== === ====
-10-
<PAGE>
Net sales. The decrease in net sales during the three months ended
March 31, 2000, from levels for the same period in 1999 was primarily due to
decreased sales in the post-production marketplace. Sales to countries outside
the United States and Canada for the three months ended March 31, 2000 and 1999,
represented 31.5% and 34.4% of net sales, respectively.
The following table presents net sales dollar volume for the three
months ended March 31, 2000 and 1999, by market and related percentages of total
net sales (dollar amounts in thousands):
Three Months Ended
March 31,
---------
2000 1999
---- ----
Marketplace Amount Percent Amount Percent
- ----------- ------ ------- ------ -------
Post-Production $4,716 56.1% $6,603 69.2%
Distribution 2,613 31.1% 1,887 19.8%
Other 1,074 12.8% 1,048 11.0%
------ ----- ------ -----
$8,403 100.0% $9,538 100.0%
====== ===== ====== =====
Cost of sales. Cost of sales, as a percentage of sales, increased for
the three months ended March 31, 2000, from levels for the three months ended
March 31, 1999, as a result of lower average selling prices on sales of
disk-based products in the post-production marketplace, increased inventory
reserves, and increased expenses related to inventory variances.
Research and development. Research and development expenses for the
three months ended March 31, 2000, decreased over levels for the same period in
1999 primarily due to the decrease in headcount which resulted from the sale of
the ELSET virtual set product line in January 2000 and a decrease in consultant
expenses.
Marketing and sales. Marketing and sales expenses for the three months
ended March 31, 2000, increased over levels for the three months ended March 31,
1999, primarily due to increases in advertising, promotion and trade show
expenses.
General and administrative. The decrease in general and administrative
expenses for the three months ended March 31, 2000, from levels for the same
period in 1999 was primarily due to decreases in headcount, contract and
temporary workers, amortization of intangibles and the provision for bad debt.
Interest and other income, net. Interest and other income, net, for the
three months ended March 31, 2000, increased over levels for the three months
ended March 31, 1999, due to a decrease in the debt outstanding and an increase
in other income.
Provision for income taxes. For the three months ended March 31, 2000,
the provision for income taxes consists of tax expense calculated at 2% of
income before taxes. The effective rate of 2% is lower than the statutory rate
of 35% due to realization of net operating loss carryforwards. For the three
months ended March 31, 1999, the Company had an effective rate of 0% reflecting
the Company's net operating loss carryforward position.
-11-
<PAGE>
Liquidity and Capital Resources
Since inception, the Company has financed its operations and
expenditures for property and equipment through cash generated in operations,
the sale of capital stock and convertible debt, borrowings under a bank line of
credit and term loans.
As of March 31, 2000, the Company had $193,000 of cash and cash
equivalents.
Operating activities used $1.6 million in net cash in the three months
ended March 31, 2000 and provided $13,000 in net cash in the three months ended
March 31, 1999. Net cash used by operations in the three months ended March 31,
2000, was due primarily to an increase in accounts receivable. Additionally,
cash was provided by the sale of ELSET virtual set product line in January. Net
cash provided by operations in the three months ended March 31, 1999, was due
primarily to net income and a decrease in inventories offset primarily by an
increase in accounts receivable and other current assets. Proceeds from
long-term loans, together with cash provided by operating activities, were used
in financing activities for the repayment of amounts borrowed previously under a
line of credit.
On February 10, 2000, the Company signed an agreement with The
Provident Bank ("Provident"), an Ohio chartered bank, for a $2,000,000 revolving
line of credit ("line"). Interest accrues on outstanding borrowings at the
bank's prime rate plus 125 basis points. The credit line is secured by all
assets of the Company. Availability under the line is calculated based on
eligible accounts receivable. Borrowings under the line are subject to
compliance with certain financial covenants and as of March 31, 2000, the
Company was in compliance with these covenants. Borrowings were limited to a
maximum of $1,500,000 until March 31, 2000. Removal of this borrowing limit was
dependent on meeting a certain financial covenant which the Company
accomplished. As of March 31, 2000, $735,000 in borrowings was outstanding under
the line.
On March 12, 1999, the Company completed a private placement of $3.5
million in senior subordinated convertible notes with a group of investors led
by the American Bankers Insurance Group, Inc. ("ABIG"). The agreement between
the Company and the holders of the convertible notes was amended and certain
waivers granted on November 3, 1999, and February 10, 2000. An additional waiver
was granted on April 18, 2000. The notes currently have a coupon rate of 8% per
year, mature in 2004, and are convertible into shares of Accom common stock at a
price of $1.30 per share. Proceeds from the private placement were used to pay
the balance on a revolving line of credit with LaSalle Business Credit, Inc.
that was outstanding at the time the proceeds were received. The agreement
between the Company and ABIG specifies that the Company meet certain financial
covenants. ABIG has the right to declare the notes immediately due if the
covenants are not met. As of March 31, 2000, the Company was not in compliance
with the covenants. ABIG issued a waiver of non-compliance on April 18, 2000
relating to this incident of non-compliance.
As of March 31, 2000, the Company had $1.8 million in Restricted Cash.
Restricted Cash was comprised of the following elements: (1) $480,000 in cash
deposits to be "swept" into an account controlled by Provident as part of the
Company's agreement with Provident to turn over all deposits received by the
Company to Provident to pay down the line of credit; (2) $400,000 held in an
escrow account at Provident until January 2001 to be used to satisfy any
indemnification claims by IMadGINE Video Systems Marketing, B.V. ("IMadGINE")
against the Company under the purchase agreement entered into between the
Company and IMadGINE in connection with the January 2000 sale to IMadGINE of the
assets related to the ELSET virtual set product line ("ELSET"); and (3) $915,000
held in an account controlled by the Company as part of an agreement between the
Company and ABIG to set aside funds from the sale of ELSET to (a) pay all debt
owed to Scitex Digital Video and (b) pay all transaction expenses related to the
sale of ELSET.
-12-
<PAGE>
The Company believes that its existing cash, cash equivalents and
credit facilities will be sufficient to meet its cash requirements for at least
the next twelve months. The Company believes that its operating plans are
reasonable and can be achieved. In the event that results from operations and
cash flows generated are less than planned, the Company will reevaluate its
operating plans and believes it will have the ability to delay or reduce
expenditures so as to not breach the covenants of its credit facilities or
require additional resources to ensure that the Company continues as a going
concern at least through March 31, 2001.
Although operating activities may provide cash in certain periods, to
the extent the Company grows in the future, its operating and investing
activities may use cash and, consequently, such growth may require the Company
to obtain additional sources of financing. There can be no assurance that any
necessary additional financing will be available to the Company on commercially
reasonable terms, if at all.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Accom develops its technology in the United States and sells its
products primarily in North America, Europe, and the Far East. As a result, the
Company's financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
As all of the Company's sales are currently made in U.S. dollars, a
strengthening of the dollar could make the Company's products less competitive
in foreign markets. The Company's interest expense on its credit line borrowings
with The Provident Bank is sensitive to changes in the general level of interest
rates. Due to the nature of the Company's debts, the Company has concluded that
there is currently no material market risk exposure. Therefore, no quantitative
tabular disclosures have been presented.
-13-
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27.1 Financial Data Schedule (EDGAR filed version only)
(b) Reports on Form 8-K.
On February 4, 2000, the Company filed a Current Report on
Form 8-K to report the sale on January 21, 2000, by the
Company and certain of its subsidiaries of substantially all
of their respective assets related to the ELSET virtual set
product line ("ELSET") to IMadGINE Video Systems Marketing,
B.V. ("IMadGINE"), a Dutch company that is a wholly owned
subsidiary of Orad Hi-Tec Systems, Ltd., an Israeli
corporation. IMadGINE also purchased the stock of Accom's
subsidiary, Accom Poland z o.o., a Polish corporation. The
Company and its subsidiaries also sold certain intellectual
property related to the ELSET business. The Company sold these
assets in exchange for $4,000,000 in cash and a warrant to
purchase 70,423 ordinary shares of Orad. On March 20, 2000,
the Company filed Form 8-K/A to report the pro forma financial
statements of the Company without ELSET included which had not
been included in the original 8-K filing.
On April 7, 2000, the Company filed Form 8-K/A to complete the
reporting of the Company's acquisition of the assets of Scitex
Digital Video, Inc. and certain of its affiliates on December
10, 1998. A Current Report on Form 8-K had been filed on
December 23, 1998, to first report the acquisition. The
Company did not file the audited
-14-
<PAGE>
historical financial statements of the acquired business and
the pro forma financial statements of the combined businesses
as an amendment to Form 8-K within 60 days of the original
filing because the audited historical financial statements of
Scitex Digital Video did not exist. The Company arranged to
have the historical financial statements of Scitex Digital
Video audited. These statements as well as the pro forma
financial statements of the combined businesses are reported
in the Form 8-K/A filed on April 7, 2000.
-15-
<PAGE>
SIGNATURE
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.
ACCOM, INC.
By: /s/ JUNAID SHEIKH
--------------------------------
(Junaid Sheikh)
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ DONALD K. McCAULEY
--------------------------------
(Donald K. McCauley)
Senior Vice President, Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 12, 2000
-16-
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