Message From Bob Carver
As reported previously, the Carver Corporation announced that on Wednesday, May 12, 1999 it filed a voluntary petition under Chapter 11, in United States Bankruptcy Court for the Western District of Washington. The case number is 99-05793. The cause of the filing was an accumulation of unpaid debt and resulting legal actions filed by creditors. These actions created the prospect of an inequitable distribution of payment to creditors and prevented the Company from being able to operate as a functioning business entity. In October of 1998, the Company ran out of working capital and laid off the remainder of its workforce. Subsequently, at the invitation of the Board of Directors, Robert W. Carver, the founder of the Company and former CEO, stepped in to take over. The Board of Carver Corporation found it necessary to seek protection under federal bankruptcy laws in order for the Company to move ahead and reestablish itself as a viable entity in the marketplace. The Company intends to reorganize for the long-term success of the Carver brand name, profitability for shareholders and quality audio product for its faithful customers. The following is the latest message from Bob Carver on the status of the company. Message From Bob Carver As you may know, I lost control of the Board of Carver many long years ago ñ 1987 to be exact. I became only a figurehead at the company I founded, and after watching the actions of the Board from up close (more on this later), I decided enough frustration was enough and I left. Since then Iíve watched from afar as a once proud company has gone down. As the years trolled by and the companyís valuation trickled away, I made it clear that I was always available to help. I repeatedly asserted that I could stanch the losses in excess of $3,000,000 per year and put the company on solid footing. I shared my plan, yet the Board wanted nothing to do with me. I was persona non grata. I was the Evil Founder. In the meantime, I founded a new company, Sunfire, salted it with two inventions and a small capital infusion, and off it took. Sunfireís growth has been strong, with sales revenue nearly doubling each year. Ditto for earnings. If all goes well, and thatís a big if, I intend to combine Sunfire and Carver approximately 15 months from now, thus forging a larger and stronger public company. (Sunfire is at this time privately held.) Back to Carver. By the end of 1998, Carver had spent all its money and then some. Carver Corporation reminded me of the 1950ís science fiction movie in which an H-bomb has been dropped on New York. What used to be a beautiful city was shown with only the wind blowing through a dusty and empty town, and only the occasional tumbleweed rolling along deserted streets. No cars, people, or anything. Empty! This was the state of affairs at Carver when the Board of Directors finally called me. Carver Corporation literally had a mere seventeen dollars in the bank. They had managed to develop a negative net worth of over $1,000,000. I visited Carver and found nobody home. The assembly line had been shut down and the workers had gone. Carver hadnít been able to pay salaries. There were empty desks, empty cubicles, blackboards with writing on them, and no one around. It was as if everyone had just left on a moment's notice. My Carver was a thriving, bustling place. This was surreal. I was witnessing the complete and unmanaged collapse of the company, like an imploding star, into an uninhabited black hole. Carver had no money, no employees, no plan, no technology, and no manufacturing. Carver did have roughly $1 million in lawsuits, $1.6 million in unpaid bills, and a practically nonexistent Dealer network. Through a series of disastrous sales and marketing tactics, Carver had angered its Dealers, who had resigned the line in droves. Carver retained a few factory Representatives in name, but these were ineffective and without action. The primary lending bank had informed Carver it would seize all remaining assets unless the outstanding loan balance was immediately paid in full. I was informed the landlord was in the process of acquiring a court order allowing him to padlock the building. I knew Carver didnít have a legal leg to stand on, and the landlord would indeed prevail and shut the doors. The Board asked me to step in and save Carver. I jumped at the chance, and put my years of passion and experience to the task. Those years have taught me that at a minimum, a Board of Directors owes a company a capable and competent leader. In my opinion, Carverís Board failed miserably in this regard by repeatedly appointing leaders with absolutely no audio industry experience. As incredible as it seems, after each CEO would in turn fail at the job, he was then given a seat on the Board of Directors! Ultimately, the Board was almost entirely comprised of former failed Carver CEOs! Decisions at the very top of the ladder were being made by men who had failed to pull the company out of its downward spiral. Unbelievable! All I could do was watch from afar as decisions made in ignorance and arrogance relentlessly hammered your company into the ground. Forgive me, for I digressÖ To begin, I quickly cut a deal with the bank, paid off the debt, and effectively became the secured creditor for everything Carver owned. Every computer. Every table. Every pen and pencil. Indeed, every roller track, power tool, assembly line, jig, fixture, copy machine, all assets including the patents, trade marks, and the very name of the company. We got word that the landlord had received his court order, effective on the first of the coming month ñ just days away. My Sunfire employees and I rented trucks, leased numerous storage sites throughout the area, and cleared space at Sunfire in preparation for a very hurried move. During the course of several arduous days and nights, we loaded everything up and moved it all out. You can believe that Carver again has a responsive leader, and one who truly cares. Iím back. Carver now has a fighting chance. Prior to doing all this, I signed an agreement with the Board of Directors. Inked just prior to the Consumer Electronics Show, this agreement galvanized Sunfireís engineering department. We designed five new products, including two brand new technologies and one clearly in a class by itself through the use of existing Sunfire technology. We worked around the clock ñ from the crack of dawn to late in the morning ñ night after night, day after day, and finished just in time to go to the show. We showcased five new products sporting the Carver Logo. Our goal was to generate excitement for the New Carver Corporation, and to sign up 100 new retail Dealers. It was also our intention to sign up 18 new factory Representatives at the top level of the new revitalized sales network for Carver products. As we all know, trust is something that is earned slowly and is difficult or impossible to regain once lost through an unfaithful act. When a company is placed in what I call ëthe penalty boxí for such a loss of trust, it often remains there indefinitely. At best, itís very difficult to get out of this ëbox.í We fully expected the Dealers would be extremely wary of the Carver brand. Weíre proud of the trust Sunfire Dealers have in us, and we knew that they would at least listen. Carver had lost the trust of its dealers, and in turn lost its way. We had much work to do. We asked Dealers to look at the new products and talk with us. To our great pleasure, the Dealers loved the products. On the basis of the new products and my personal commitment to the Dealers (most of whom Iíve known for many years), their wary attitudes faded significantly. I gave them a solemn pledge, ""Even though Carver used to be bad, it will now be good."" One by one, we managed to sign up 100 Dealers ñ exactly our goal. We also signed up an entire factory Representative network. This new network of Dealers and Representatives is simply waiting for the new designs to be finished, put into production, and distributed. Weíve replaced Carverís dysfunctional infrastructure with the healthy corporate systems in place at Sunfire. We have an exceptional sales force, a world-class engineering department, and above all, new technologies. Sunfire has assumed all the functional and operational elements for the Company. Everett Audio Repair, an independent repair shop in Everett, Washington, has assumed responsibility for warranty service. Things are looking up for Carver. Carver now has Dealers and factory Representatives who are firmly committed. Carver now has new technology, and hope to go with it. Itís been a wild ride for all of us. Weíre packed to the gills with twenty years worth of Carver stuff sitting around everywhere. It's like a submarine ready to put out to sea; one canít even walk through the isles because there are so many stores, provisions and other gear. Carver was once following a death spiral to its doom, and now it isnít. We have a chance. Thatís where we are today. Sincerely, Bob Carver