Audiovox 2004 Annual Report Download - page 140

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Audiovox Specialized Applications, LLC And Subsidiary
Notes To Financial Statements
Note 3. Leasehold Improvements and Equipment
The cost of leasehold improvements and equipment and the related accumulated
depreciation at November 30, 2004 and 2003 are as follows:
2004 2003
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
Leasehold improvements $ 587,833 $ 854,694
Machinery and equipment 898,251 925,890
Tooling and molding 755,984 1,827,151
Transportation equipment 361,550 410,958
Office furniture and fixtures 259,745 209,560
Computer equipment 574,313 701,817
Booth displays 124,224 197,595
Construction in progress 12,750 5,500
−−−−−−−−−−−−− −−−−−−−−−−−−−
3,574,650 5,133,165
Less accumulated depreciation 1,797,220 3,633,621
−−−−−−−−−−−−− −−−−−−−−−−−−−
$ 1,777,430 $ 1,499,544
============= =============
Note 4. Pledged Assets and Notes Payable
The terms of a loan agreement with a bank permit the Company to borrow a maximum
of $17,000,000, subject to a borrowing base determined by eligible accounts
receivable and inventories as defined by the agreement. At November 30, 2004 no
amount was outstanding under this agreement. Borrowings under the agreement bear
interest at prime minus 1.25% or LIBOR plus an applicable margin, at the
Company's option, are collateralized by accounts receivable, inventories, and
equipment, and are due on demand. In connection with the agreement, the Company
is subject to certain financial covenants.
Note 5. Major Vendors
For the years ended November 30, 2004, 2003, and 2002, the Company purchased
approximately 60%, 60%, and 50% of its products for resale from five vendors,
four of which were the same in all three years.
Note 6. Transactions with Related Parties and Lease Commitments
The Company is affiliated with various entities through common ownership by one
of its members, Audiovox. Transactions with Audiovox for the years ended
November 30, 2004, 2003, and 2002 are approximately as follows:
2004 2003 2002
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
Net product sales $ 213,000 $ 519,000 $ 1,898,000
Royalty revenue 2,103,000 3,253,000 3,140,000
Purchases 1,302,000 2,886,000 1,916,000
The Company has a royalty agreement with Audiovox whereby the Company earns a 3%
royalty on the member's purchases of certain mobile video product from a third
party. The related revenue has been included in net sales on the income
statement.
Exhibit 99.1
11