Polk Announces Disposition of Eosone and Genesis Interests

Back in January of this year, we reported that loudspeaker manufacturer Polk Audio had purchased an interest in Genesis Technologies, a loudspeaker and digital electronics manufacturer, with an option to buy the company in three years. Last week, however, Polk announced that it has decided to pass the company on to new investors.

Polk stated that they have "reached an agreement in principle with The Providers, Inc. (TPI) of Vail, Colorado and certain of its affiliates to dispose of Polk's registered trademark 'Eosone' along with certain inventories, as well as Polk's entire holdings of common and preferred equity securities of Genesis Technologies, Inc. to TPI in exchange for a barter package of promotional services." Polk further states that "the package of barter goods and services is expected to consist of an assortment of promotional services, printing services, and advertising. At the present time it is not possible to assign a definite monetary value to this package. However, it is possible (but not certain) that the use of these services in future periods will offset or reduce operating expenses that otherwise would have been paid for in cash and charged against income during the periods involved."

According to Polk, their original cost basis in the Genesis securities involved in this transaction was $600,000. Polk reported in its September 1998 Form 10Q that it had recorded a $200,000 impairment charge against the carrying value of the Genesis securities against its reported results for the September 1998 fiscal quarter, leaving therefore a net carrying value for the Genesis Securities on the Company's books of $400,000 as of the end of September 1998.

The Eosone Assets included in this transaction were carried on the Company's books at approximately $25,000. Because the Company expects to use the services in the package during the current fiscal year, and considering the foregoing evaluation difficulties, the Company will record an additional pretax charge of $425,000 against earnings for the December 1998 quarter, or $0.12 per share.