Some snippets from the ADSP 10-Q filed on 11/15:
Amounts drawn
under the Revolver are based on a formula of eligible accounts receivable and
inventory. Approximately $1,115,164 of the Revolver balance was paid in July and
August as the Company had insufficient eligible accounts receivable and
inventory to support amounts drawn.
. . .
On May 14, 1999 the Company executed an amendment to its agreement with
Transamerica that included a waiver for certain financial covenants the Company
was not in compliance with as of December 31, 1998 and March 31, 1999 and
amended covenants for 1999 and 2000. With the execution of this amendment all
previous financial covenants have been waived.
. . .
Amended covenants consist of the
following: . . .
o Net losses before taxes for the year ending December 31, 1999 are not
to exceed $10,000,000. . . As of September 30, 1999 the Company is in compliance with these covenants.
However, per the 10Q, loss for the first 9 months ended 9/30 was $9,258,737. ADSP cured the obvious impending problem within days after the quarter was completed by eliminating the yearly loss covenant:
On October 18, 1999 the Company executed a further amendment to the credit
agreement that substantially reduces the amended financial covenants that the
Company must be in compliance with as of and for the year ending December 31,
1999. The only financial covenants which remain are as follows:
o As of December 31, 1999, working capital shall be no less than $2,000,000.
o The ratio of current assets to current liabilities shall not be less than
1.25 to 1.00.
o Tangible net worth shall not be less than $2,000,000.
o Gross profit margins for the year ending December 31, 1999 shall not be
less than 35%.
All in all, thin ice here.
Gary Korn
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