Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. MERISEL INC /DE/ (724941) 10-Q published on May 15, 2013 at 4:03 pm
Reporting Period: Mar 30, 2013
Gross Profit – Total gross profit was $5,250 for the three months ended March 31, 2013 compared to $4,077 for the three months ended March 31, 2012. The increase in total gross profit of $1,173 or 28.8% is primarily attributable to improving its production capabilities at the Carlstadt facility. The Company experienced some inefficiency in the use of raw materials and production supplies during the first quarter of 2012 as it consolidated its East Coast production facilities. Gross profit percentage increased to 40.9% for the three months ended March 31, 2013, from 30.1% for the three months ended March 31, 2012. Additionally, the Company had one major customer whose sales during 2012 and 2011 constituted approximately 24% and 23% of total sales, respectively. Demand for services from this customer can fluctuate quarter to quarter, which can have a corresponding impact on raw materials, work-in-progress and to a lesser extent gross profit.
With respect to Merisel’s affirmative claims against Weinstock, Splash and Domenick Propati, the Court’s March 20, 2013 decision and order dismissed all claims against Splash and Propati, but did not specifically address the remaining claims against defendant Weinstock. Merisel filed a notice of appeal of the order. Additionally, the Company awaits clarification from the Court as to its position regarding the remaining claims against defendant Weinstock.
On April 25, 2013, the Court issued a decision and order granting the plaintiff summary judgment with respect to his first cause of action. The decision did not reference the defendants’ factual and legal arguments that would potentially preclude summary judgment in favor of the plaintiff. Accordingly, the defendants filed a letter with the Court requesting that it clarify its decision. The defendants will also file a timely notice of appeal of the order on the grounds that the court overlooked significant evidence and otherwise committed reversible error in granting summary judgment. The court’s decision and order was silent on the issue of damages.
There have been no material changes to our risk factors during the three months ended March 31, 2013 as compared to those reported in our 2012 Form 10-K.
On April 12, 2013, Saints disclosed on Amendment No. 6 to its Statement of Beneficial Ownership on Schedule 13D that it was considering terminating Merisel’s status as a public company. On April 22, Saints disclosed on Amendment No. 7 to its Statement of Beneficial Ownership on Schedule 13D that it had delivered a conversion notice with respect to $1.75 million in principal amount of Notes, bringing its holdings of Common Stock to 22,500,000 shares held of record, representing approximately 90.1% of the outstanding shares of Common Stock. Saints still holds Notes convertible into an additional 25,000,000 shares.
On April 15, 2013, the Board of Directors established a special committee consisting of Eric Salzman and Bradley Hoecker (the “Special Committee”), each of whom is an independent and disinterested director. The Special Committee was appointed to help ensure a fair process and determine a fair price as consideration offered minority stockholders in the event that Saints should decide to terminate Merisel’s status as a public company. In furtherance of this purpose, the Special Committee has retained a financial adviser and independent legal counsel in connection with its evaluation, and expects that the financial adviser will prepare and deliver to the Special Committee and Board of Directors a valuation analysis setting forth a fair price, or a range of prices that might be considered a fair price, for the Company in connection with a possible short-form merger. There can be no assurance that Saints will undertake a short-form merger. Neither the Board of Directors nor minority stockholders need to take any action in connection with a short-form merger. Minority stockholders would be advised of their rights under Delaware law in accordance with applicable rules and regulations.