From CAVR sec filling>>PRIVATE PLACEMENT OF SECURITIES - On April 13,
1998, the Company expects to close
an interim financing pursuant to which it will sell 3,000,000 shares of its common stock,
par value
$0.01 (the "Common Stock") to Renwick Special Situations Fund, L.P (the "Bridge
Financing").
The price of the Common Stock is $0.125 per share and the Company will receive
gross proceeds
of $375,000 from the sale of Common Stock. Prior to completion of this financing, the
Company
requested that the Nasdaq Stock Market ("Nasdaq") waive the shareholder approval
requirement
of Rule 4460(i)(1) of Nasdaq's Marketplace Rules with respect to the Bridge Financing
pursuant to
Rule 4460(i)(2). On March 20, 1998, Nasdaq informed the Company that it had
approved the
Company's request subject certain conditions, including; (i) approval by the independent
members
of the Board of Directors of the Company's reliance on this exception, (ii) the
Company's notice to
all shareholders, not less than ten days before issuance of the Common Stock, of the
Company's
omission in seeking shareholder approval of the financing, and (iii) issuance of a press
release
concerning the circumstances surrounding the waiver request and the terms of the
transaction.
CARVER CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(CONTINUED)
NOTE 2 - MANAGEMENT'S PLAN, FINANCING AND LIQUIDITY
(CONTINUED)
NONCOMPLIANCE WITH CERTAIN NASDAQ REQUIREMENTS - Nasdaq
had
previously advised the Company that it did not meet Nasdaq's new minimum public float
and bid
price continued listing requirements, of $5,000,000 and $1.00 per share, respectively.
The
Company has until May 28, 1998 to satisfy these requirements. The inability of the
Company to
comply with these listing requirements likely will result in the delisting of the Company's
common
stock from Nasdaq. Delisting of the Company's common stock would likely have an
adverse effect
on the liquidity, trading price and ability to obtain quotations on a timely basis for the
common
stock. If the Company's common stock should cease to be listed on Nasdaq, it may
continue to be
quoted in the OTC Bulletin Board.
CONVERTIBLE PREFERRED STOCK - Late in the second quarter and during the
third quarter
of 1996, the Company sold 1,411,764 shares of Series A Cumulative Convertible
Preferred Stock
("Preferred Shares") and issued five-year warrants ("Warrants") to acquire up to
300,000 shares of
the Company's Common Shares pursuant to a Stock Purchase Agreement (the
"Agreement") with
Renwick Capital Management, Inc. and certain Renwick affiliates ("Renwick"). The
Shares of
Preferred Stock and Warrants are convertible into or exercisable for 1,711,764 shares
of
Common Stock, or approximately 46% of the current shares outstanding.
The price of the Preferred Shares was $2.125 per share and each Preferred Share is
convertible at
any time at the option of the holder into one Common Share, subject to certain potential
antidultion
adjustments. The Preferred Shares are entitled to an 8% compounding annual dividend
payable
quarterly. In the first and second year, such dividends have been paid with Common
Shares.
The holders of the Preferred Shares are entitled to one vote for each share of Common
Shares into
which the Preferred Shares are convertible. In addition, the holders of the Preferred
Shares are
entitled to elect two representatives to the Company's Board of Directors and
preference in
liquidity. The preferred shareholders may be deemed to have acquired control of the
Company,
and accordingly, certain actions by the Company require the approval of at least a
majority of the
preferred shareholders.
The exercise price of the Warrants is $1.50 per share of Common Shares, if exercised
from the
date of the initial closing through a date two years from the date of the initial closing,
$1.75 for the
next year, $2.00 for the next year and $2.125 for the final year, all subject to certain
potential
antidilution adjustments.
SHORT-TERM BORROWINGS - The Company has an agreement with a financial
institution
which provides for working capital advances up to $6,000,000. A maximum of
$1,000,000 of this
line may be used to secure letters of credit. Funds available under this agreement are
restricted,
however, to 70% of eligible accounts receivable and 50% of inventories. Advances are
collateralized by substantially all assets of the Company and bear interest at the prime
lending rate
plus 2%. The outstanding balance on the line of credit was $2,094,000 and $1,110,000
at
December 31, 1997 and 1996, respectively. In addition, the Company has an
$150,000 letter of
credit outstanding at December 31, 1997. The agreement expires on July 31, 1998, and
the lender
has notified the Company that it will not renew the agreement.
Maximum and average amounts outstanding during the year ended December 31, 1997
were
$2,044,000 and $1,007,000, respectively. The weighted average interest rate at
December 31,
1997 was 10.5% and the weighted average interest rate during the year, computed
monthly, was
10.44%.
I'd like to know a little more about ("Renwick")
I am not knocking this co., as it may do real well. But, there is significant overhang.
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