UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, NW
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended 6/30/02
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission file number 2-69336
CRAMER, INC.
A Kansas Corporation IRS Employment I.D. #48-0638707
625 Adams Street
Kansas City, Kansas 66105 Telephone No. (913) 621-6700
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 No X (The issuer's annual report on Form 10-KSB for the year ended
--- ---
December 31, 2000 and the issuer's quarterly report on Form 10-QSB for the
quarter ended April 1, 2001 were filed late.)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 4,039,607 shares of common stock, no
par value as of July 31, 2002.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRAMER, INC.
BALANCE SHEET
UNAUDITED
(Amounts in Thousands, Except Share Data)
<Table>
<Caption>
6/30/02 12/31/01
------------ ------------
ASSETS
Current assets:
Cash 35 282
Accounts receivable, net of allowance of $30 884 563
Inventories, net of allowance of $105 897 721
Prepaid expenses and other current assets 264 325
------------ ------------
Total current assets 2,080 1,891
Property, plant and equipment
At cost 6,233 6,215
Accumulated depreciation (5,662) (5,595)
------------ ------------
571 630
Other assets:
Intangible pension asset 0 4
------------ ------------
Total Assets $ 2,651 $ 2,525
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Note payable 2,320 2,320
Accounts payable 750 485
Accounts payable-related party 229 101
Accrued liabilities 602 801
------------ ------------
Total current liabilities 3,901 3,707
Noncurrent liabilities:
Pension benefits payable 279 326
Other 218 218
------------ ------------
Total noncurrent liabilities 497 544
Stockholders' Equity (Deficit):
Common stock, no par value; authorized, 6,000,000 shares; issued and
outstanding 4,039,607 shares at July 31, 2002 and 4,041,400 at
December 31, 2001 3,820 3,820
Accumulated deficit (5,215) (5,198)
------------ ------------
(1,395) (1,378)
Minimum pension liability adjustment (352) (348)
------------ ------------
Net stockholders' equity (deficit) (1,747) (1,726)
------------ ------------
Total Liabilities and Stockholders' Equity (Deficit) $ 2,651 $ 2,525
============ ============
</Table>
See Notes to Condensed Financial Statements
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CRAMER, INC.
STATEMENTS OF OPERATIONS
UNAUDITED
(Amounts in Thousands, Except Per Share Data)
<Table>
<Caption>
QUARTER ENDED SIX MONTHS ENDED
6/30/02 7/1/01 6/30/02 7/1/01
------------ ------------ ------------ ------------
Net sales $ 2,217 $ 2,519 $ 4,249 $ 5,817
Cost of sales 1,471 1,807 2,796 4,381
------------ ------------ ------------ ------------
Gross profit 746 712 1,453 1,436
Operating expenses:
Selling expenses 338 497 716 1,021
General and administrative 390 341 703 638
------------ ------------ ------------ ------------
Total operating expenses 728 838 1,419 1,659
------------ ------------ ------------ ------------
Income (loss) from operations 18 (126) 34 (223)
Other income (expense):
Interest expense, net (28) (45) (58) (99)
Other, net 6 (126) 7 (126)
------------ ------------ ------------ ------------
Total other income (expense) (22) (171) (51) (225)
------------ ------------ ------------ ------------
Loss before income taxes (4) (297) (17) (448)
Income tax expense (benefit) 0 0 0 0
------------ ------------ ------------ ------------
Net loss $ (4) $ (297) $ (17) $ (448)
============ ============ ============ ============
Net loss per share based on weighted
average number of common equivalent
shares outstanding $ (0.00) $ (0.07) (0.00) $ (0.11)
Weighted Average Common Equivalent
Shares Outstanding Basic 4,039,607 4,041,400 4,039,607 4,041,400
Diluted 4,039,607 4,041,400 4,039,607 4,041,400
</Table>
There is no difference between Net Loss and Total Comprehensive Loss for the
quarter or six-month periods ending June 30, 2002 and July 1, 2001.
These interim financial statements contain all adjustments required for them to
be comparable to the annual financial statements issued on Form 10-KSB.
See Notes to Condensed Financial Statements
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CRAMER, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in Thousands)
<Table>
<Caption>
Six Months Ended
6/30/02 7/1/01
------------ ------------
Cash flows from operating activities:
Net income (loss) $ (17) (448)
Adjustments to reconcile net income (loss) to net cash flows from operating
activities:
Depreciation and amortization 78 106
Changes in operating assets and liabilities:
Accounts receivable (321) 385
Inventories (178) 451
Prepaid expenses and other assets 61 (57)
Intangible pension asset 4 0
Accounts payable and accrued expenses 194 (223)
Other noncurrent liabilities (49) (29)
------------ ------------
Net cash flows from operating activities (228) 185
------------ ------------
Cash flows from investing activities:
Capital expenditures (19) (28)
------------ ------------
Net cash flows from investing activities (19) (28)
------------ ------------
Cash flows from financing activities:
Principal payments on notes payable 0 (157)
------------ ------------
Net cash flows from financing activities 0 (157)
------------ ------------
Net increase (decrease) in cash (247) 0
Cash at beginning of year 282 0
------------ ------------
Cash at end of quarter $ 35 $ 0
============ ============
Supplemental disclosures:
Cash paid during the period for:
Interest $ 58 $ 99
============ ============
Income tax $ 0 $ 0
============ ============
</Table>
See Notes to Condensed Financial Statements
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CRAMER, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Interim Financial Statements
The condensed interim financial statements included herein have been prepared by
Cramer, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "Commission"). The
financial statements reflect adjustments of a normal recurring nature that are,
in the opinion of management, necessary to present fairly such information.
Although the Company believes that the disclosures are adequate to make the
interim information presented not misleading, certain information and footnote
disclosures, including significant accounting policies, normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These interim financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Annual
Report on Form 10-KSB/A for the fiscal year ended December 31, 2001 filed by the
Company with the Commission on August 14, 2002 and incorporated by reference
herein. Quarterly operating results may vary significantly and are not
necessarily indicative of the results for the full year or any future period.
2. Legal Proceedings
The Company is a defendant in several lawsuits relating to product liability
claims arising from accidents allegedly occurring in connection with the use of
its products. The claims are covered by insurance and are being defended by the
Company's independent counsel or by counsel assigned by the Company's insurance
carriers. One such claim currently outstanding alleges damages of $375,000. The
Company has included a more complete discussion of product liability claims and
related accruals in Part II, Item 1 "Legal Proceedings" below.
The Company believes its products are safe and reliable when assembled, used and
maintained in a reasonable manner, and believes it adequately reserves against
its reasonably likely exposure under these claims based upon past experience.
3. Use of Estimates
Accounting estimates are an integral part of the financial statements and are
based on management's knowledge and experience about past and current events and
assumptions about future events. Certain accounting estimates are particularly
sensitive because of their significance to the financial statements and because
of the possibility that future events affecting them may differ significantly
from those expected. The most sensitive estimates affecting the financial
statements were the warranty and product liability accruals, and the inventory
reserve.
The Company offers product warranties with terms of up to fifteen years. The
majority of the Company's warranty claims relate to failed seating parts. The
Company estimates its accrual for future warranty costs based on durability
testing,
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engineering studies, actual costs incurred in prior years and historical sales
data. The warranty accrual decreased from $218,000 at March 31, 2002 to $213,000
at June 30, 2002. This decrease was the result of continued declining warranty
costs in the second quarter of 2002. This decrease can be attributed to more
aggressive management of warranty claims, which has resulted in fewer claims and
lower costs.
The reserve for obsolete and slow-moving inventory is based on management's
analysis of inventory turns, historical write-offs, future production plans
including any product line changes, and sales trends. There were no changes to
the inventory reserve, which remained at $105,000.
A discussion of the product liability accrual is included in Part II, Item 1,
Legal Proceedings.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Quarter ended June 30, 2002, compared to the quarter ended July 1,
2001:
Sales for the second quarter were $2,217,000, a decrease of 12% from
2001 second quarter sales of $2,519,000. The recent recession and
related reductions in capital expenditures by potential customers
resulted in a decline in seating sales of over $250,000. The furniture
industry as a whole has experienced a downturn in sales over the past
twelve months. Utility sales remained consistent, with a modest decline
in ladder sales offset by a slight increase in Kik-Step sales,
reflecting the continued strength of this product.
Gross margins increased from $712,000, or 28%, in the second quarter of
2001 to $746,000, or 34% in the second quarter of 2002. Increased
margins as a percent of sales were the combined result of lower
material costs and significant overhead reductions. These overhead
reductions included a decrease in utilities, indirect labor and
maintenance costs, due in part to increased outsourcing of the
manufacture of certain products in 2002.
Selling expenses decreased from $497,000 in the second quarter of 2001
to $338,000 in the second quarter of 2002, a reduction of approximately
$159,000. A decrease in commissions and catalog program costs due to
lower sales contributed to over $50,000 of the decline. The remaining
decrease was related primarily to staff reductions and lower travel
costs.
General and administrative expenses increased $49,000 to $390,000
during the second quarter of 2002, compared to $341,000 in the second
quarter of 2001. Fees related to Rotherwood's provision of a securities
pledge as security for the bank line were the primary reason for the
increase. These fees totaled $40,000 in the second quarter of 2002 and
were not in effect during the second quarter 2001. Rotherwood has
agreed to accept common stock in payment of these fees at the rate of
one share for each $0.05 of the fee amount (800,000 shares per
quarter). Legal costs also increased in the second quarter, due in part
to favorable resolution of an employment matter and costs associated
with filing an amended Form 10-KSB and the proposed going private
transaction referred to in "Financial Condition, Liquidity and Capital
Resources".
Interest expense totaled $28,000 in the second quarter of 2002,
compared to $45,000 in the comparable period last year. This reduction
was the result of lower interest rates in 2002.
The Company incurred a net operating loss before tax of $4,000 in the
second quarter of 2002, compared to a loss of $297,000 in the second
quarter of 2001. Operating losses improved, despite declining sales,
due to reductions in overhead and improved margins.
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Six months ended June 30, 2002, compared to the six months ended July
1, 2001:
Sales for the first six months of 2002 were $4,249,000, a decrease of
27% from $5,817,000 in the first six months of 2001. The majority of
the decline related to reduced seating sales, particularly in the first
quarter of 2002. The recent recession and related reductions in capital
expenditures by potential customers have resulted in a significant
sales decline across the industry. In addition, the seating business is
highly competitive. Ladder sales experienced a modest decline due to
weakening catalog performance. Kik-Step sales increased by
approximately $50,000 in the first six months of 2002, compared to the
same period in 2001, reflecting the continued strength of this product.
Gross margins increased from $1,436,000 or 25% of sales, in the first
six months of 2001 to $1,453,000 or 34% of sales in the first six
months of 2002. Lower material costs and significant overhead
reductions resulted in a substantial increase in margins for both the
first and second quarters of 2002, compared to the first two quarters
of 2001. The overhead reductions included a decrease in utilities,
indirect labor, supplies and maintenance, due in part to increased
outsourcing of the manufacture of certain products in 2002. The Company
also focused on streamlining production processes, which contributed to
the decrease in indirect labor.
Selling expenses decreased from $1,021,000 in the first six months of
2001 to $716,000 in the first six months of 2002, a reduction of over
$300,000. The decrease in selling costs can be attributed to a decline
in commissions and catalog program costs as a result of lower sales, in
addition to staff reductions and lower travel costs. Selling expenses
were lower in both the first and second quarters of 2002 compared to
the prior year.
General and administrative expenses increased from $638,000 in the
first six months of 2001 to $703,000 in the first six months of 2002,
an increase of $65,000. Fees related to Rotherwood's provision of a
securities pledge as security for the bank line were the primary reason
for the increase. These pledge fees totaled $80,000 in the first six
months of 2002 and were not in effect during the first six months of
2001. Rotherwood has agreed to accept common stock in payment of these
fees. An increase in legal fees during the first six months of 2002 was
offset in part by reduced labor costs.
Interest expense totaled $58,000 in the first six months of 2002,
compared to $99,000 in the comparable period last year. This reduction
was the result of lower interest rates in 2002.
The Company incurred a net operating loss before tax of $17,000 in the
first six months of 2002, compared to a loss of $448,000 in the first
six months of 2001. Operating losses improved, despite declining sales,
due to reductions in overhead and improved margins.
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash flow activity for the first six months of 2002 is presented in the
Statement of Cash Flows. During the first six months of 2002, the
Company used $228,000 in cash from its operating activities.
Accounts receivable totaled $884,000 at June 30, 2002 compared to
$563,000 at December 31, 2001. The increase was a result of higher
sales in June 2002 compared to December 2001. In addition, the June 30,
2002 balance included a $150,000 order that was collected in July 2002.
Inventories increased from $721,000 at December 31, 2001 to $897,000 at
June 30, 2002, a 24% increase. This increase related primarily to a
large seating order that was in production as of June 30, 2002.
Accounts payable increased $265,000 from December 31, 2001 to June 30,
2002. An increase in inventories in connection with several large
production orders mentioned above contributed to the increase in
accounts payable.
Accrued liabilities decreased $199,000 from December 31, 2001 to June
30, 2002. This decrease was due in part to a decline in accrued catalog
program costs and accrued insurance premiums.
Accounts payable, related party increased from $101,000 at December 31,
2001 to $129,000 at June 30, 2002. This increase was the result of
combined loan guarantee fees of $80,000 charged by Rotherwood for the
first two quarters of 2002, in addition to fees charged by Rotherwood
for the services of Greg Coward and Nick Christianson, who are not
compensated directly by the Company.
Capital expenditures of $19,000 during the second quarter of 2002
related to the purchase of additional plant equipment. In the first
quarter of 2002, management began exploring the feasibility of
relocating to a new facility that more closely matches the Company's
current size and manufacturing needs. The Company has signed a lease
for a 34,000 square foot facility and is planning to relocate in
September 2002. The minimum lease term is three years with the right to
extend for an additional eight years. Annual rent during the initial
term is $111,000/ year. The Company anticipates that relocating the
business could reduce operating overhead significantly and improve
production efficiency. However, there is no assurance we can sell or
lease our existing facility without spending significantly on
renovation.
The outstanding balance under the Company's bank line of credit
remained $2,320,000, the maximum amount allowed under the agreement,
throughout the second quarter of 2002. The combined facility is secured
by a $2,000,000 securities pledge by Rotherwood, the Company's parent,
and security interests in the assets of both Cramer and Pacer
Corporation, a company owned by Rotherwood. Cramer and Pacer are
co-borrowers on the total amount of the credit facility. In exchange
for Rotherwood's financial accommodation to the Company, the Company
agreed to pay Rotherwood a
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fee equal to 2% per quarter of the total amount of the pledge agreement
until the pledge agreement expires. As of June 30, 2002, the Company
had accrued $120,000 of such fees. The Company plans to pay for these
fees by issuing common stock at the rate of one share for each $0.05 in
fee amount, or 800,000 shares per quarter.
On June 28, 2002, the Company obtained an extension of the credit
facility through October 3, 2002. The Company is not in compliance with
the financial net worth covenant in the loan agreement governing the
credit facility. For this and other reasons, the Company is unable to
predict whether the bank will renew the credit facility when it matures
in October 2002.
Since the Company has no additional borrowing capacity and there is no
assurance the Company can obtain an extension of or increase in the
current credit facility or a substitute credit facility, the Company
intends to obtain needed additional capital by selling shares of common
stock to Rotherwood. Although the Company has no definitive agreement
with Rotherwood, the Company is planning to sell 18 million shares of
Common Stock to Rotherwood for cash at a purchase price of $0.05 per
share. This transaction would provide $900,000 in much needed capital
to the Company to support operations, reduce amounts owed under the
bank line of credit and enable the Company to continue its turnaround
plans. If Rotherwood makes an additional equity investment in the
Company, Rotherwood plans to take the Company private following a
short-form cash-out merger of the Company into Rotherwood. There is no
assurance the Company will be able to obtain any equity investment from
Rotherwood or any other investor. See Item 6- "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the
2001 Form 10-KSB/A filed on August 14, 2002 and incorporated by
reference herein for additional discussion of the credit facility and
the proposed transactions with Rotherwood.
If the bank does not renew or increase the credit facility and the
Company cannot obtain substitute or additional debt financing or obtain
an equity investment in the Company, the Company may be required to
seek bankruptcy protection or to cease operations.
FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, this report on
Form 10-QSB contains forward-looking statements that involve risk and
uncertainties. The Company's actual results could differ materially. In
connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, Cramer, Inc. reminds readers that there
are many important factors that could cause the Company's actual
results to differ materially from those projected in forward-looking
statements of the Company made by, or on behalf of, the Company. When
used in this Form 10-QSB and in other filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and
in oral statements made with the approval of an authorized executive
officer, words or phrases such as "will likely result", "expects", "are
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expected to", "will continue", "is anticipated", "estimate", "project"
or similar expressions are intended to identify forward-looking
statements. The Company wishes to caution readers not to place undue
reliance on such forward-looking statements.
There are a number of reasons why investors should not place undue
reliance on forward-looking statements. Among the risks and
uncertainties that could cause the Company's actual results for future
periods to differ materially from any forward-looking statements made
are the following:
o The inability of shareholders other than Rotherwood to
participate in any future upturn in the Company's operations
or financial condition, if the short-form merger is
consummated
o The Company's continuing declines in revenues and continuing
losses
o Questions about the Company's continuing viability as a going
concern and management's plans to address that issue
o Any failure of the Company's turnaround plan to achieve its
objectives
o The possibility that the bank will not renew the Company's
credit facility and that the Company could not obtain
substitute or additional debt financing, or obtain any equity
financing
o Rotherwood's intention to take the Company private
o Fluctuations or reductions in product demand and market
acceptance
o Continued adverse conditions in the office furniture industry
o The level of product development by the Company
o Capacity, facility and supply constraints or difficulties
o The possibility that Cramer's sister company will borrow more
funds than anticipated under the Rotherwood credit facility,
which would further reduce the Company's borrowing capacity
under the Company's credit facility
o The effect of new laws and regulations
o Unexpected additional expenses or operating losses
o Strong competition
o Reliance on certain vendors for key products and components
o Deferred plant maintenance and the cost of future maintenance
o If product and warranty liability claims exceed the amounts
reserved
o Control by insiders
The foregoing list of risks and uncertainties is not meant to be complete.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in several lawsuits relating to product
liability claims arising from accidents allegedly occurring in
connection with the use of its products. The claims are covered by
insurance and are being defended by the Company's independent counsel
or by counsel assigned by the Company's insurance carriers. These
claims are subject to a $50,000 deductible. The Company maintains
product liability insurance coverage with limits of $1 million per
occurrence and $2 million aggregate, plus $15 million in umbrella
coverage. After the Company has exhausted its deductible by paying a
total of $50,000 (whether in legal fees and expenses, settlement
amounts, damages awards, or any combination thereof) on any single
claim, its liability insurance carrier is obligated to pay any sums
owed for legal fees and expenses, settlement amounts and damages awards
in excess of $50,000 for that claim. The Company has been able to
offset settlement costs through amounts paid by co-defendants in
certain cases historically.
Over the last five fiscal years, the Company has averaged 3.7 new
claims per year. An average of approximately 50% of those claims
resulted in defense costs and settlement amounts or awards exceeding
$50,000. The average total cost of defense and settlement awards paid
by the Company over that period was $35,000 per claim. The number of
new claims made or lawsuits filed against the Company during years 2000
and 2001 were two and three, respectively. The Company's claims history
has leveled out over the past three years at two to three claims per
year.
The Company had six open claims at December 31, 2001 and five open
claims at June 30, 2002. During the second quarter of 2002, no new
claims were filed against the Company. On April 22, 2002, the Company
settled one of the six claims for $7,500. The total cost of legal fees
and settlement costs for this claim was $49,500. The Company does not
believe the remaining open claims will have materially different
average results than historical experience described above. None of the
claims allege damages in excess of policy limits. One of the claimants
alleges damages of $375,000 and is discussed below. While management
believes the Company has substantial defenses with respect to these
claims, the ultimate outcome of such litigation cannot be predicted
with certainty. Such claims are an ordinary aspect of the Company's
business and industry. The Company believes its products are safe and
reliable when assembled, used and maintained in a reasonable manner,
and believes it adequately reserves against its reasonably likely
exposure under these claims based upon past experience.
The Company discusses each claim with its product liability counsel to
determine the merits of the case and the most likely outcome. In some
cases, it is too early to make that assessment. The Company determines
a reserve for specific claims based on average claims history, the
specific merits of the case, the amount of damages alleged, the costs
incurred to
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date and the amount of the insurance deductible. The Company recorded a
reserve for specific claims of $105,000 at December 31, 2001 and at
June 30, 2002.
In addition to reserves for specific cases, the Company estimates its
exposure for unasserted claims and records additional reserves using
the claims history discussed above as well as recent trend insights.
The Company had received notice of six incidents for which no claims
had been asserted at December 31, 2001 and did not receive notice of
any additional unasserted claims during the second quarter of 2002. The
Company maintained a reserve for unasserted claims of $113,000 at
December 31, 2001 and at June 30, 2002. The underlying assumptions
regarding claims history and average costs per claim did not change
during the second quarter of 2002. Accordingly, the Company did not
change its reserve for unasserted claims. Although the Company's claims
history has stabilized in recent years, the Company cannot be certain
that future claims experience will be consistent with historical claims
experience. An increase in the frequency or average cost of future
claims could increase the Company's exposure to product liability
expense. However, the maximum total legal defense and settlement costs
for each claim is limited to the $50,000 deductible.
On February 25, 1998, the Company was served with a suit filed by
Pauline and Daniel Robitaille ("Plaintiff") in the Superior Court of
Massachusetts, Norfolk County. On October 20, 2000, the Plaintiff made
a demand of $375,000 against the Company. The Plaintiff claims she was
injured when she fell from a three-step ladder manufactured and/or
distributed by the Company, suffering a foot injury. The Company's
$50,000 insurance deductible is now exhausted and the Company's
insurance carrier has assumed defense of this claim. All future legal
expenses, including attorney's fees, settlement and any verdict against
the Company, are the responsibility of the Company's insurer.
The Company was assessed $117,500 in penalties by OSHA as a result of
an inspection conducted in 2000 and signed a settlement agreement from
OSHA which calls for scheduled payments totaling $23,000 through
February 1, 2004 (see "Patents, Trademarks and Government Regulation"
in Item 1 of the 2001 10-KSB/A filed on August 14, 2002 and
incorporated by reference herein).
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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ITEM 5. OTHER INFORMATION
Going Private Transaction
As a result of the Company's tenuous cash/liquidity position and its need for
additional capital to execute its restructuring plans, the Company plans to
enter into an investment transaction with Rotherwood. Rotherwood intends to
purchase 18 million shares of newly issued Company common stock for a cash
purchase price of $0.05 per share. This equity investment of $900,000 would
allow the Company to reduce its bank debt, enable the Company to move to a
smaller, more efficient facility and pursue other initiatives in connection with
its turnaround plan. There can be no assurance that this equity investment will
support the turnaround. Upon Rotherwood's purchase of the shares, combined with
the issuance of 800,000 shares of common stock per quarter in payment of a
letter of credit/pledge fee to Rotherwood, Rotherwood would own more than 90% of
the Company's outstanding shares of common stock. Rotherwood then plans to cause
a "short-form" merger to occur during the year 2002 in which each outstanding
share of the Company's common stock owned by shareholders other than Rotherwood
would be converted into the right to receive a cash payment of $0.05 per share
for an aggregate cash consideration of $98,000, after which Rotherwood plans to
take the Company private. The Company plans to amend its articles of
incorporation to increase its authorized shares of common stock from 8,200,000
to 74,200,000 shares to permit Rotherwood to acquire the 18 million shares of
common stock and permit Cramer to pay the 800,000 share quarterly letter of
credit/pledge fee. Rotherwood intends to enter into such a transaction, but is
not subject to any binding obligation to do so.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
99.1 Certification of Principal Executive Officer
99.2 Certification of Principal Financial Officer
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.
CRAMER, INC.
(Registrant)
Date: August 20, 2002
W. Gregory Coward
Chief Executive Officer
Nicholas M. Christianson
Interim Chief Financial Officer
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