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 June 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 - 12,202,580 SHARES AS OF JULY 31, 1998
NAVARRE CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
The Company has amended the following:
Consolidated balance sheets -
June 30, 1998 and March 31, 1998
The following lines for June 30, 1998 have been amended:
Common stock
Retained deficit
Consolidated statements of operations -
Three months ended June 30, 1998 and 1997
The following lines for June 30, 1998 have been amended:
Depreciation and amortization
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 - June 30, 1998
The table has been amended for June 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.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
NAVARRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
JUNE 30, 1998 MARCH 31, 1998
---------------------- ------------------------
(UNAUDITED) (NOTE)
ASSETS
Current assets:
Cash $ 27 $ 23
Accounts receivable, less allowance for doubtful accounts
and sales returns of $2,481 and $2,412, respectively 63,325 52,383
Inventories 27,156 23,188
Note receivable, related parties 337 406
Refundable income taxes 2,265 2,265
Prepaid expenses and other current assets 1,033 962
---------------------- ------------------------
Total current assets 94,143 79,227
Property and equipment, net of accumulated depreciation of
$3,832 and $3,647, respectively 2,933 2,957
Other assets:
Goodwill 1,094 1,174
Other assets 204 331
---------------------- ------------------------
Total assets $98,374 $83,689
---------------------- ------------------------
---------------------- ------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable to bank $29,248 $32,445
Current portion of long-term debt 114 162
Accounts payable 44,874 45,554
Accrued expenses 596 1,019
---------------------- ------------------------
Total current liabilities 74,832 79,180
Long-term debt, less current maturities 153 181
Shareholders' equity:
Preferred stock, no par value:
Authorized shares - 10,000,000,
Issued and outstanding shares - 1,523,810 and none, respectively 19,002 ----
Common stock, no par value:
Authorized shares - 50,000,000,
Issued and outstanding shares -7,012,128 and
7,009,170, respectively 42,350 8,113
Retained deficit (37,760) (3,558)
Unearned compensation (203) (227)
---------------------- ------------------------
Total shareholders' equity 23,389 4,328
---------------------- ------------------------
Total liabilities and shareholders' equity $98,374 $83,689
---------------------- ------------------------
---------------------- ------------------------
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.
NAVARRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
1998 1997
----------------------- ------------------------
Net sales:
Computer software $ 36,058 $ 26,507
Music 17,159 13,291
----------------------- ------------------------
53,217 39,798
Cost of sales 46,148 35,523
----------------------- ------------------------
Gross profit 7,069 4,275
Operating expenses:
Selling and promotion 1,609 1,271
Distribution and warehousing 854 663
General and administration 3,636 3,298
Depreciation and amortization 303 409
----------------------- -----------------------
6,402 5,641
----------------------- ------------------------
Income (loss) from operations 667 (1,366)
Other expense:
Interest expense (712) (559)
Other income 30 36
----------------------- ------------------------
Income (loss) before income taxes (15) (1,889)
Income tax benefit (5) (775)
Minority interest 37 54
----------------------- ------------------------
Net earnings (loss) $ 27 $ (1,060)
Preferred nondetachable conversion feature
and warrant valuation (34,229) ---
Preferred dividend requirements (334) ---
----------------------- ------------------------
Net loss applicable to common shares $ (34,536) $ (1,060)
----------------------- ------------------------
----------------------- ------------------------
Loss per common share:
Basic and diluted $ (4.93) $ (.15)
----------------------- ------------------------
----------------------- ------------------------
Weighted average common and
common equivalent shares outstanding
Basic and diluted 7,010 6,902
----------------------- ------------------------
----------------------- ------------------------
SEE ACCOMPANYING NOTES
NAVARRE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 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 period ending June 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)
THREE MONTHS ENDED
JUNE 30,
1998 1997
-------------- --------------
Numerator:
Net earnings $ 27 $(1,060)
Less preferred nondetachable conversion feature
and warrant valuation (34,229) ----
Less preferred dividend requirements (334) ----
-------------- --------------
Adjusted net loss applicable to common stock $(34,536) $(1,060)
Denominator:
Denominator for basic earnings per
share--weighted-average shares 7,010 6,902
Dilutive securities:
Preferred stock ---- ----
Employee stock options ---- ----
Denominator for diluted earnings
per share--adjusted
weighted-average shares 7,010 6,902
-------------- --------------
Basic earnings (loss) per share (4.93) (.15)
-------------- --------------
-------------- --------------
Dilutive earnings (loss) per share (4.93) (.15)
-------------- --------------
-------------- --------------
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