Audiovox 2003 Annual Report Download - page 25
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employees. We only have one employment contract, with Philip Christopher and
none with any other executive officers or key employees. The loss or
interruption of the continued full−time service of certain of our executive
officers and key employees could have a material adverse effect on our business.
In addition, to support our continued growth, we must effectively recruit,
develop and retain additional qualified personnel both domestically and
internationally. Our inability to attract and retain necessary qualified
personnel could have a material adverse effect on our business.
We Are Responsible for Product Warranties and Defects.
Even though we outsource manufacturing, we provide warranties for all of
our products for which we have provided an estimated liability. Therefore, we
are highly dependent on the quality of our suppliers. The warranties for our
electronics products range from 90 days to the lifetime of a vehicle for the
original owner. The warranties for our current wireless products generally range
from 12 to 15 months. In addition, if we are required to repair a significant
amount of product, the value of the product could decline while we are repairing
the product.
Our Capital Resources May Not Be Sufficient to Meet Our Future Capital and
Liquidity Requirements.
We believe that we currently have sufficient resources to fund our existing
operations for the foreseeable future through our cash flows and borrowings
under our credit facility. However, we may need additional capital to operate
our business if:
o market conditions change
o our business plans or assumptions change
o we make significant acquisitions
o we need to make significant increases in capital expenditures or
working capital
The Company's principal source of liquidity expires in July 2004, and the
Company is currently in negotiations with the bank to extend this facility. We
cannot assure you that we would be able to raise additional capital on favorable
terms, if at all. If we could not obtain sufficient funds to meet our capital
requirements, we would have to curtail our business plans. We may also raise
funds to meet our capital requirements by issuing additional equity, which could
be dilutive to our stockholders, though there can be no assurance that we would
be able to do this.
Restrictive Covenants in Our Credit Facility May Restrict Our Ability to
Implement Our Growth Strategy, Respond to Changes in Industry Conditions, Secure
Additional Financing and Make Acquisitions.
Our credit facility contains restrictive covenants that:
o require us to attain specified pre−tax income
o limit our ability to incur additional debt
o require us to achieve specific financial ratios
o restrict our ability to make capital expenditures or acquisitions
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