This excerpt taken from the EGLS 10-Q filed Oct 12, 2005.
In October 2005, one of the Companys customers filed a voluntary petition for business reorganization under Chapter 11 of the U.S. Bankruptcy Code. At the time of the bankruptcy filing, accounts receivable from this customer approximated $0.2 million. Until the matter is considered by the bankruptcy judge, it is uncertain what effect the bankruptcy petition will have on the ultimate collectibility of this account.
During the quarter ended September 30, 2005, the Company received payments from this customer aggregating approximately $0.4 million for shipped products. Since the payments were made within 90 days of the bankruptcy filing, it is possible that the trustee or debtor in possession in the bankruptcy may seek to avoid the payment as a preference. In the event such a claim was brought, the Company would fight such claim vigorously, and the Company believes they would ultimately prevail. However, given the uncertainties inherent in litigation and bankruptcy proceedings, there can be no assurance that the ultimate outcome would be in the Companys favor.
As the Company cannot yet assess the probability of losses resulting from the filing of this bankruptcy petition or measure the ultimate effect on the Companys financial position, the September 3, 2005 financial statements have not been adjusted for any possible losses.
This excerpt taken from the EGLS 10-K filed Mar 14, 2005.
Note 20. Subsequent Events
On January 5, 2005, the Company closed the sale of its San Jose campus to Integrated Device Technology for $29.0 million. The net proceeds of the sale were approximately equal to the net book value of the assets held for sale, since those assets were written down to their fair value in December 2004. The fair value of base rent and common area charges for the term of the lease agreement of $0.5 million was recorded as a prepaid expense upon closing and will be amortized over the term of the lease. Electroglas has indemnified IDT for two years with respect to representations and warranties made by Electroglas related to this sale. The limit of Electroglas liability for breach of the representations and warranties is $3.5 million. A $0.5 million reserve was recorded upon closing for the net present value of the Companys guarantee obligations under the indemnification provisions. No gain or loss was recorded on this sale.
On February 7, 2005, the Company entered into an agreement with 5729 Fontanoso Way, LLC to lease facilities for its corporate headquarters commencing May 1, 2005 for 60 months. The Company has an option to extend this lease agreement for an additional five year period. Future minimum lease payments under this agreement are nil, $0.1 million, $0.9 million, $1.0 million, and $1.0 million for 2005, 2006, 2007, 2008, and 2009, respectively.