<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------ -------
Commission file number 0-21061
LAMINATING TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-2044990
(State or other jurisdiction (IRS employer
of Incorporation) identification number)
1160 Hightower Trail 30350-2910
Atlanta, Georgia (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (770) 518-6010
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of January 31, 1997, the Company had 3,185,000 shares of Common
Stock, par value $.01 per share, outstanding
<PAGE> 2
Laminating Technologies, Inc.
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information
Page No.
--------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1996 3
(Unaudited)
Consolidated Statements of Operations for the Three and 4
Nine Months Ended December 31, 1996 and 1995 (Unaudited)
Consolidated Statements of Cash Flows for the Nine Months 5
Ended December 31, 1996 and 1995 (Unaudited)
Consolidated Statements of Changes in Stockholders' Equity / 6
Capital Deficiency (Unaudited)
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Part II - Other Information 12
</TABLE>
2
<PAGE> 3
Laminating Technologies, Inc. and Subsidiary
(a development stage company)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1996
(Unaudited) (Audited)
----------------- --------------
<S> <C> <C>
A S S E T S
CURRENT ASSETS
Cash and cash equivalents $ 5,380,700 $ 1,347
Accounts receivable (net of allowance for doubtful 15,309 9,321
accounts of $20,000)
Inventory 54,020 -
Other current assets 8,856 3,000
----------------- --------------
Total current assets 5,458,885 13,668
Fixed assets, net 103,716 6,169
Other assets 1,170 692
----------------- --------------
T O T A L A S S E T S $ 5,563,771 $ 20,529
================= ==============
L I A B I L I T I E S
CURRENT LIABILITIES
Notes payable-current $ - $ 1,047,842
Notes payable-stockholders - 350,000
Due to stockholders - 31,036
Accounts payable 132,106 315,156
Payroll taxes payable 2,127 89,779
Accrued expenses 92,301 182,798
Accrued interest - 86,782
----------------- --------------
Total current liabilities 226,534 2,103,393
Notes payable, less current maturities - 5,000
Due to related parties - 428,346
----------------- --------------
Total liabilities 226,534 2,536,739
----------------- --------------
S T O C K H O L D E R S' E Q U I T Y / C A P I T A L D E F I C I E N C Y
Series A convertible preferred stock, par value $.01
5,000,000 shares authorized, 0 and 250,000 shares
issued and outstanding, respectively - 2,500
Common stock, par value $.01, 20,000,000, shares
authorized, 3,185,000 and 679,764 shares issued
and outstanding, respectively 31,850 6,797
Additional paid in capital 11,712,000 1,850,466
Deficit accumulated during the development stage (6,406,613) (4,375,973)
----------------- --------------
Total stockholders' equity/capital deficiency 5,337,237 (2,516,210)
----------------- --------------
T O T A L L I A B I L I T I E S A N D S T O C K H O L D E R S'
E Q U I T Y / C A P I T A L D E F I C I E N C Y $ 5,563,771 $ 20,529
================= ==============
</TABLE>
3
<PAGE> 4
Laminating Technologies, Inc and Subsidiary
(a development stage company)
Consolidated Statements of Operations
(Unaudited)
Three Months and Nine Months Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1996 1995 1996 1995
---------------------- --------------------
<S> <C> <C> <C> <C>
Net sales $ 15,031 $ - $ 15,031 $ 108,441
Cost of sales 10,096 101,188 10,096 224,215
---------- ---------- ----------- ----------
Gross profit (loss) 4,935 (101,188) 4,935 (115,774)
Selling, general and administrative expenses 246,361 167,050 1,064,599 631,076
---------- ---------- ----------- ----------
Operating (loss) (241,426) (268,238) (1,059,664) (746,850)
Interest expense 8,515 28,244 123,888 63,233
Charge incurred related to Bridge Debt 519,382 944,350
Interest income (53,328) - (53,328) -
Cancellation of debt (4,469) (78,738) (49,742) (78,738)
Loss on abandonment of fixed assets - 46,740 5,808 49,277
---------- ---------- ----------- ----------
Net (loss) (711,526) (264,484) (2,030,640) (780,622)
Cumulative dividend on preferred stock - 12,500 25,000 37,500
---------- ---------- ----------- ----------
Net (loss) attributable to common stockholders $ (711,526) $ (276,984) $(2,055,640) $ (818,122)
========== ========== =========== ==========
Net (loss) per share of common stock ($0.29) $ (1.51)
========== ===========
Weighted average number of common shares outstanding 2,440,543 1,362,145
========== ===========
Supplementary pro forma:
Net (loss) per share of common stock $ (0.34) $ (1.00)
========== ==========
Weighted average number of common shares outstanding 820,000 820,000
========== ==========
</TABLE>
See notes to accompanying consolidated financial statements
4
<PAGE> 5
Laminating Technologies, Inc. and Subsidiary
(a development stage company)
(Unaudited)
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION> April 19, 1993
(Commencement of
Nine Months Ended Operations) Through
December 31, December 31,
1996 1995 1996
------------------------ -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (Loss) (2,030,640) (780,622) (6,150,661)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Provision for doubtful accounts - 5,000 21,100
Depreciation and amortization 289,058 24,953 437,203
Compensation recorded for fair value of
common shares issued in excess of
price paid by employee 12,707 273,763
Compensation recorded for stock options
issued by stockholders to an officer 386,000 386,000
Services contributed by stockholder 30,000
Noncash finance charge 665,000 684,551
Loss on disposal of fixed assets 5,808 49,277 128,183
Changes in current assets and liabilities (539,870) 296,977 850,749
---------- -------- -------------------
Net cash (used) in operating activities (1,211,937) (404,415) (3,339,112)
---------- -------- -------------------
Cash flows from investing activities:
Acquisitions of fixed assets (112,545) (346,850)
---------- -------- -------------------
Cash flows from financing activities:
Proceeds of notes payable 1,500,000 178,000 2,557,750
(Repayment) of notes payable (2,356,507) (52,118) (2,587,798)
Proceeds of notes payable--stockholders 350,000 458,700
(Repayment) of notes payable--stockholders (2,000) (3,685) (20,700)
Advances from stockholders 11,485
Deferred financing and offering costs (279,466) (279,466)
(Repayment) of capital leases payable (2,035) (41,367)
Proceeds from sale of common stock 7,994,308 8,606,808
Proceeds from sale of preferred stock 500,000
(Retirement) of preferred stock (2,500) (2,500)
Payment of dividends on preferred stock (150,000) (150,000)
Proceeds from stock subscription receivable 1,250
Cash contributed by stockholder 12,500
---------- -------- -------------------
Net cash provided by financing activities 6,703,835 470,162 9,066,662
---------- -------- -------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,379,353 65,747 5,380,700
Cash and cash equivalents-beginning of period 1,347 1,836
---------- -------- -------------------
CASH AND CASH EQUIVALENTS-END OF PERIOD 5,380,700 67,583 5,380,700
========== ======== ===================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest 507,423 34,989 673,773
Noncash transactions:
Common stock subscribed 1,250
Common stock issued for developed technology 406,875
Common stock issued as settlement of note
payable to stockholder 90,000 135,000
Due to stockholder for shares purchased for treasury 19,551
Cancellation of debt obligation in exchange for fixed assets 54,279
Settlement of related party debt by capital contribution 307,457
Conversion of debt to equity 978,572 978,572
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
Laminating Technologies, Inc. and Subsidiary
(a development stage company)
(Unaudited)
Consolidated Statement of Changes in Stockholders' Equity/Capital Deficiency
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock
Par Value $ .01 Par Value $ .01
------------------- -------------------
Shares Amount Shares Amount
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Balance at March 31, 1996 250,000 $ 2,500 679,764 $ 6,797
Warrants issued in connection with Bridge Notes
Conversion of debt to common stock 361,061 3,611
Common stock issued as consideration for compensation 4,689 47
Stock options issued by stockholders to an officer as compensation
Sale of 1,955,000 shares of common stock (net of offering costs) 1,955,000 19,550
Payment of cumulative dividends on Series A Preferred Stock
Preferred stock conversion (250,000) (2,500) 184,486 1,845
Net loss for the nine months ended December 31, 1996
-------- -------- --------- ---------
Balance at December 31, 1996 - $ - 3,185,000 $ 31,850
======== ======== ========= =========
<CAPTION>
Deficit
Accumulated
Additional During the
Paid- in Development
Capital Stage Total
---------- ----------- ------------
<S> <C> <C> <C>
Balance at March 31, 1996 $ 1,850,466 $(4,375,973) $ (2,516,210)
Warrants issued in connection with Bridge Notes 665,000 665,000
Conversion of debt to common stock 974,961 978,572
Common stock issued as consideration for compensation 12,660 12,707
Stock options issued by stockholders to an officer as compensation 386,000 386,000
Sale of 1,955,000 shares of common stock (net of offering costs) 7,972,913 7,992,463
Payment of cumulative dividends on Series A Preferred Stock (150,000) (150,000)
Preferred stock conversion (655)
Net loss for the nine months ended December 31, 1996 (2,030,640) (2,030,640)
----------- ----------- ------------
Balance at December 31, 1996 $11,712,000 $(6,406,613) $ 5,337,237
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE> 7
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying financial statements have been prepared on a consolidated
basis. They include the accounts of the Company and its wholly-owned inactive
subsidiary, Revenue Process Development, Inc. All intercompany transactions
and balances have been eliminated in consolidation.
In the opinion of management, the accompanying, unaudited, consolidated,
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments with the exception of the public offering that was
recorded) necessary to present fairly the financial position of the Company and
its results of operations and cash flows for the interim periods presented.
Such financial statements have been condensed in accordance with the applicable
regulations of the Securities and Exchange Commission and therefore, do not
include all disclosures required by generally accepted accounting principles.
These financial statements should be read in conjunction with the Company's
audited financial statements for the year ended March 31, 1996.
Loss Per Share of Common Stock
Net loss per share is computed using the weighted average number of shares
outstanding during the period. Supplementary pro forma loss per share gives
effect to the conversions of debt to equity and preferred stock into common
stock and excludes 410,000 shares held in escrow. Shares issuable pursuant to
stock options are excluded from the supplementary loss and weighted average
number of common shares outstanding because the effect is antidilutive.
NOTE 2 COMMON STOCK ISSUANCE
On October 14, 1996 the Company completed an initial public offering of
1,700,000 units, each unit consisting of one share of common stock, one Class A
Warrant and one Class B Warrant. On November 4, 1996, the underwriter exercised
its over-allotment option to purchase an additional 255,000 units. The initial
public offering resulted in total net proceeds to the Company of approximately
$8,000,000.
7
<PAGE> 8
A portion of the proceeds of this offering were used to repay (1) the principal
balance of and accrued interest on certain notes (the "Bridge Notes") issued
in connection with a private placement in April and May 1996 in the aggregate
amount of approximately $2,100,000 and (2) the $150,000 cumulative dividends on
the Series A Preferred Stock. The 250,000 shares of Series A Preferred Stock
were converted to 184,486 shares of Common Stock on the closing of the
offering. In the quarter ended December 31, 1996, the Company charged to
earnings approximately $520,000 relating to the repayment of the Bridge Notes.
8
<PAGE> 9
LAMINATING TECHNOLOGIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is a development stage company organized to develop, design, and
market value-added packaging and specialty display products. Since its
inception, the Company's efforts have been principally devoted to research,
development and design of products, marketing activities and raising capital.
The Company has had only limited sales, has generated minimal revenues from
operations and has incurred substantial operating losses from these activities.
Most of the Company's sales to date did not involve significant orders and the
Company believes that these customers were primarily evaluating the commercial
potential of the Company's products. The Company also incurred significant
costs associated with such sales in part because a large percentage of finished
product was distributed free of charge as samples. The Company's sales efforts
have also been adversely affected by periods with no operations, a lack of
continuity of management and inadequate capital.
RESULTS OF OPERATIONS
Three Months Ended December 31, 1995 and 1996. Net sales increased from
approximately $0 to $15,000 during the three months ended December 31, 1995
("1995 Three Months") and December 31, 1996 ("1996 Three Months"),
respectively. The Company initiated sales, some of which were samples for
customer evaluation, shortly after completion of its public offering of stock
in October, 1996. Gross profit (loss), which includes the costs of items
manufactured as well as the cost of samples, was approximately $(100,000) in
the 1995 Three Months as compared to $5,000 in the 1996 Three Months. Gross
loss in 1995 was primarily attributable to the amount of product given away as
samples. The gross profit margin in the 1996 Three Months includes
preproduction costs and therefore is not indicative of future margins.
Selling, general and administrative expenses increased 47% from $167,000 in the
1995 Three Months to $246,000 in the 1996 Three Months. The increase is
primarily attributable to increased business activity subsequent to the
Company's public stock offering in October, 1996.
In the 1996 Three Months the Company charged to earnings approximately $520,000
relating to the repayment of the Bridge Notes.
Interest expense decreased from approximately $28,000 for the 1995 Three Months
to approximately $9,000 for the 1996 Three Months as all debt was repaid with
proceeds from the Company's public stock offering in October, 1996.
9
<PAGE> 10
Interest income increased from zero in the 1995 Three Months to approximately
$53,000 in the 1996 Three Months as cash proceeds from the Company's public
stock offering in October, 1996 have been invested in short term cash
investments to the extent not needed for current operations.
Net loss increased 107% from approximately $343,000 in the 1995 Three Months to
$712,000 in the 1996 Three Months, as a result of the foregoing factors.
Nine Months Ended December 31, 1995 and 1996. Net sales decreased from
approximately $107,000 in the nine months ended December 31, 1995 ("1995 Nine
Months") to $15,000 in the nine months ended December 31, 1996 ("1996 Nine
Months"). Gross profit (loss), which includes the costs of items manufactured
as well as the cost of samples, was approximately $(116,000) in the 1995 Nine
Months as compared to $5,000 in the 1996 Nine Months. The gross profit margin
in the 1996 Nine Months includes preproduction costs and therefore is not
indicative of future margins. The gross loss in 1995 was primarily
attributable to the amount of product given away as samples.
Selling, general and administrative expenses increased by 69% from
approximately $631,000 in the 1995 Nine Months to approximately $1,065,000 in
the 1996 Nine Months. The increase is primarily attributable to (1)
approximately $386,000 relating to the fair market value of stock options
granted by two principal stockholders of the Company to the Company's Chairman,
President and Chief Executive Officer and (2) increased business activity prior
and subsequent to the Company's public stock offering in October, 1996.
In the 1996 Nine Months the Company charged to earnings approximately $944,000
relating to the repayment of the Bridge Notes.
Interest expense increased by approximately 96% from approximately $63,000 for
the 1995 Nine Months to approximately $124,000 for the 1996 Nine Months. The
increase is primarily due to an increase in interest bearing debt outstanding
during the 1996 Nine Months, which was retired in October, 1996 with the use of
part of the proceeds from the October, 1996 sale of stock.
Interest income increased from zero in the 1995 Nine Months to approximately
$53,000 in the 1996 Nine Months as cash proceeds from the Company's public
stock offering in October, 1996 have been invested in short term cash
investments to the extent not needed for current operations.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the public stock offering, the Company funded its activities through
loans from principal stockholders and private placements of equity and debt
securities. On October 15, 1996, the Company sold 1,700,000 units at $5 per
unit in a public offering (See Notes to Consolidated Financial Statements).
Each unit consists of one share of common stock, one Class A Warrant
10
<PAGE> 11
and one Class B Warrant. On November 4, 1996 the underwriter exercised its
over-allotment option to purchase an additional 255,000 units at $5 per unit.
The initial public offering resulted in total net proceeds to the Company of
approximately $8,000,000.
The net proceeds were used to: (1) repay the bridge debt of $1,995,000 plus
accrued interest, (2) pay the $150,000 accrued dividends on preferred stock,
(3) repay other existing debt and payables of approximately $320,000 and (4)
provide working capital for operations. The remaining proceeds of the
offering are intended to be used by the Company to implement its business plan,
which includes the development and testing of products utilizing the LTI
Processed method and sales and marketing activities. The Company expects to
continue to incur substantial research, development and marketing costs in the
future. The Company also expects that general and administrative costs
necessary to support manufacturing and the expansion of a marketing and sales
organization will increase in the future. Accordingly, the Company expects to
continue to incur operating losses for the foreseeable future.
In the event of the release of the Escrow Shares, the Company will recognize
during the period in which the earnings thresholds are probable of being met or
such stock price levels achieved, a substantial non-cash charge to earnings (not
deductible for income tax purposes) equal to the fair market value of such
shares on the date of their release, which would have the effect of
significantly increasing the Company's loss or reducing or eliminating earnings,
if any, at such time. There can be no assurance that the Company will attain
the targets which would enable the Escrow Shares to be released from escrow.
At December 31, 1996 the Company had net operating loss carry-forwards for
Federal income tax purposes of approximately $6,100,000. The net operating
loss and credit carry-forwards expire from March, 2008 through March, 2011.
Additionally, the Company's ability to utilize its net operating loss
carry-forwards may be subject to annual limitations pursuant to Section 382 of
the Internal Revenue Code as a result of this Offering.
In February, 1997 the Company arranged to lease its employees from a
professional employer's organization. The purposes of the arrangement are to
reduce clerical tasks normally associated with administration of payroll and to
provide benefits to the employees that the Company is not able to offer at a
feasible cost, and are not expected to have a material effect on the Company's
employment relationships. The Company maintains its employment-at-will policy
with these employees.
- --------------------------------------------------------------------------------
Statements herein that are not descriptions of historical facts are
forward-looking and subject to risk and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of factors,
including those set forth in the Company's Securities and Exchange Commission
filings under "Risk Factors", including risks relating to the early stage of
the Company and its products under development; the uncertainty of market
acceptance; and the Company's dependence on third parties for manufacturing and
marketing activities.
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - The following exhibit is filed with this report:
27.1 Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed in the quarter ended December 31,
1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
February 14, 1997 LAMINATING TECHNOLOGIES, INC.
By: /s/ Michael E. Noonan
-------------------------------------
Michael E. Noonan
Chief Executive Officer and President
By: /s/ Shirley Pigg
-------------------------------------
Shirley Pigg
Controller
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED
STATEMENTS OF LOSS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 5,380,700
<SECURITIES> 0
<RECEIVABLES> 15,309<F1>
<ALLOWANCES> 0
<INVENTORY> 54,020
<CURRENT-ASSETS> 5,458,885
<PP&E> 103,716<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,563,771
<CURRENT-LIABILITIES> 226,534
<BONDS> 0
0
0
<COMMON> 31,850
<OTHER-SE> 5,305,387
<TOTAL-LIABILITY-AND-EQUITY> 5,563,771
<SALES> 15,031
<TOTAL-REVENUES> 15,031
<CGS> 10,096
<TOTAL-COSTS> 10,096
<OTHER-EXPENSES> 1,064,599
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123,888
<INCOME-PRETAX> (2,030,640)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,030,640)
<EPS-PRIMARY> (1.51)
<EPS-DILUTED> 0
<FN>
<F1>NET AMOUNTS
</FN>
</TABLE>
