SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported):
December 5, 1996
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INTERNATIONAL DISPENSING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-21489 13-3856324
(State or other jurisdiction of (Commission file number) (I.R.S. employer
incorporation) identification no.)
342 Madison Avenue, Suite 1034, New York, NY 10173
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 682-2244
<PAGE>
Item 5. Other Events.
In connection with the application of International Dispensing
Corporation, a Delaware corporation (the "Company"), to have certain of its
securities listed on the Philadelphia Stock Exchange, the Company's independent
public accountants have reissued their report dated June 28, 1996 to reflect the
completion of the Company's initial public offering and the removal of the going
concern qualification from such report.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit 99.1 Report of Independent Public Accountants and Financial Statements
of the Company.
- 2 -
<PAGE>
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 hereunto duly authorized.
INTERNATIONAL DISPENSING CORPORATION
Date: December 11, 1996 By: /s/ Jon Silverman
---------------------
Jon Silverman
Chairman, Chief Executive Officer and
President
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<PAGE>
INDEX
Exhibit No. Description
99.1 Report of Independent Public Accountants and Financial Statements
of the Company.
- 4 -
EXHIBIT 99.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To International Dispensing Corporation:
We have audited the accompanying balance sheet of International Dispensing
Corporation (a Delaware corporation in the development stage) as of December 31,
1995, and the related statements of operations, stockholders' equity and cash
flows for the period from October 10, 1995 (date of inception) through December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Dispensing
Corporation as of December 31, 1995, and the results of its operations and its
cash flows for the period from October 10, 1995 (date of inception) through
December 31, 1995 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
June 28, 1996
(except as to Note 13
which is as of
December 5, 1996)
New York, New York
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
Balance Sheets
December 31, June 30,
1995 1996
----------- -----------
(unaudited)
Assets
Current assets:
Cash and cash equivalent $ 5,168 $ 488,379
-------- ---------
Total current assets: 5,168 488,379
Fixed assets:
Leasehold improvements 4,475 5,872
Office equipment 4,350 7,079
Accumulated depreciation and amortization (882) (1,322)
-------- ---------
Net fixed assets 7,943 11,629
Other assets 14,677 63,927
Deferred issuance costs -- 21,763
-------- ---------
Total assets: $ 27,788 $ 585,698
======== =========
Liabilities and Stockholders' Equity
Current Liabilities:
Accrued expenses $ 45,806 $ 97,509
Due to affiliate 3,649,739 2,883,893
Convertible promissory notes 150,000 100,000
Promissory Notes -- 300,000
Bridge loans payable, current portion -- 1,050,000
---------- ----------
Total current liabilities: 3,845,545 4,431,402
Bridge loans payable 175,000 --
---------- ----------
Total liabilities: 4,020,545 4,431,402
Commitments and contingencies (Note 11)
Stockholders' Equity (Deficiency):
Preferred Stock, $.001 par value;
2,000,000 shares authorized;
no shares issued or outstanding -- --
Common Stock $.001 par value; 20,000,000
shares authorized: 5,887,500 and
6,325,000 issued and outstanding as
of December 31, 1995 and
June 30, 1996, respectively 5,888 6,325
Additional paid-in capital 251,150 1,125,713
Deficit accumulated during
the development stage (4,249,795) (4,977,742)
----------- -----------
Total stockholders' equity (deficiency) (3,992,757) (3,845,704)
----------- -----------
Total liabilities and stockholders'
equity (deficiency) $ 27,788 $ 585,698
=========== ===========
The accompanying notes are an integral part of these balance sheets
1
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
For the Period For the Period
from Inception from Inception
(October 10, 1995) (October 10, 1995)
through Six Months through
December 31, Ended June 30,
1995 June 30, 1996 1996
------------ ------------- ----
(unaudited) (unaudited)
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
Costs and expenses:
General and administrative 244,768 451,491 696,259
Depreciation and amortization 882 441 1,323
--------------- ------------- -------------
Total costs and expenses 245,650 451,932 697,582
Loss from operations 245,650 451,932 697,582
Interest expense 4,145 26,015 30,160
--------------- ------------- -------------
Net loss before extraordinary loss $ 249,795 $ 477,947 $ 727,742
Extraordinary loss on retirement
of debt -- 250,000 250,000
--------------- ------------- -------------
Net Loss $ 249,795 $ 727,947 $ 977,742
=============== ============= =============
Net loss per share before
extraordinary item $ (.03) $ (.06)
Extraordinary loss per share $ __ $ (.03)
Net loss per share $ (.03) $ (.09)
Weighted average shares outstanding 7,900,000 7,900,000
</TABLE>
The accompanying notes are an integral part of these statements
2
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficiency)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the Total
Common Stock Paid in Development Stockholders'
Shares Amount Capital Stage Deficit
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, October 10, 1995 -- $ -- $ -- $ -- $ --
Issuance of common
stock pursuant to
License Agreement 2,900,000 2,900 -- -- 2,900
Issuance of common
stock pursuant to
Settlement Agreement 1,950,000 1,950 -- -- 1,950
Issuance of common
stock to management 950,000 950 76,238 -- 77,188
Purchase of License from
affiliate -- -- -- (4,000,000) (4,000,000)
Issuance of common
stock in private
placement 87,500 88 43,662 -- 43,750
Issuance of common stock
rights in private placement -- -- 131,250 -- 131,250
Net loss -- -- -- (249,795) (249,795)
------------------------------------------------------------------------------------------
Balance, December 31, 1995 5,887,500 5,888 251,150 (4,249,795) (3,992,757)
Issuance of common
stock in private
placement 437,500 437 218,313 -- 218,750
Issuance of common stock
rights in private placement -- -- 656,250 -- 656,250
Net loss -- -- -- (727,947) (727,947)
------------------------------------------------------------------------------------------
Balance, June 30, 1996 6,325,000 $6,325 $1,125,713 $ (4,977,742) $ (3,845,704)
(unaudited)
==========================================================================================
</TABLE>
The accompanying notes are an integral part of this statement
3
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Period For the Period
from October 10, from October 10,
1995 (Inception) 1995 (Inception)
through Six Months through
December 31, Ended June 30,
1995 June 30, 1996 1996
--------------- ------------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (249,795) $ (727,947) $ (977,742)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 882 441 1,323
Non-cash compensation 76,238 -- 76,238
Loss on retirement of debt -- 250,000 250,000
Changes in operating assets and
liabilities:
Increase in other assets (8,877) (71,013) (79,890)
Increase/(decrease) in accrued expenses 45,806 51,703 97,509
----------- ----------- -----------
Net cash used in operating activities (135,746) (496,816) (632,562)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of fixed assets (8,825) (4,127) (12,952)
Purchase of license (350,261) (765,846) (1,116,107)
----------- ----------- -----------
Net cash used in investing activities (359,086) (769,973) (1,129,059)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from private placement 350,000 1,750,000 2,100,000
Proceeds from issuance of convertible debt 150,000 -- 150,000
----------- ----------- -----------
Net cash provided from financing activities 500,000 1,750,000 2,250,000
----------- ----------- -----------
Net increase in cash and cash equivalents 5,168 483,211 488,379
Cash and cash equivalents, beginning of
period 0 5,168 0
----------- ----------- -----------
Cash and cash equivalents, end of period $ 5,168 $ 488,379 $ 488,379
=========== =========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest -- -- --
Cash paid for income taxes -- -- --
Non-cash investing and financing activities:
Issuance of common stock $ 5,800 -- $ 5,800
Purchase of license from affiliate $ 4,000,000 -- $ 4,000,000
</TABLE>
The accompanying notes are an integral part of these statements
4
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Information as of and for the period ended June 30, 1996
is unaudited)
1. The Company and Organization
International Dispensing Corporation, formerly known as ReSeal Food
Dispensing Systems, Inc. (the "Company"), was incorporated in the State of
Delaware in October 1995. The Company was formed primarily for the purpose of
commercializing and marketing certain proprietary and patented delivery and
dispensing technologies (the "Reseal Technologies") licensed from ReSeal
International Corporation ("RIC"). The Reseal Technologies are designed to
dispense a flowable product while maintaining the product's sterility, purity
and freshness without employing preservatives.
The Company is subject to a number of risks including the Company's lack of
prior operating history. The Company is also subject to the availability of
sufficient financing to meet its future cash requirements and the uncertainty of
future product development and regulatory approval and market acceptance of
existing and proposed products. In the event of bankruptcy of RIC, the status of
the continuing obligations of the various parties to and under the License
Agreement (Note 3) is unclear since a court in a bankruptcy proceeding may not
enforce such continuing obligations. Additionally, other risk factors such as
loss of key personnel, lack of manufacturing capabilities, difficulty in
establishing new intellectual property rights and preserving and enforcing
existing intellectual property rights as well as product obsolescence due to the
development of competing technologies could impact the future results of the
Company.
The Board of Directors of the Company has authorized the Company to file a
registration statement with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended, and to sell Units consisting of two
shares of common stock and two redeemable class A warrants of the Company ("IPO
Units"). Each warrant entities the holder to purchase one share of common stock
at a proposed price of $7.00 per share.
2. Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks, as well as highly
liquid investments with original maturities of less than three months.
Fixed Assets
Furniture and equipment are recorded at cost and are depreciated on a
straight line basis over their estimated useful lives, generally five years.
Leasehold improvements are recorded at cost and amortized over the term of the
lease or life of the asset, whichever is shorter.
Patents
Costs to develop patents are expensed when incurred.
Income Taxes
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under this method,
deferred income taxes are determined based on differences between the tax bases
of assets and liabilities and their financial reporting amounts at each year end
and are measured based on enacted tax rates and laws that will be in effect when
the differences are expected to
5
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Information as of and for the period ended June 30, 1996 is unaudited)
(Continued)
reverse. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
Net Loss Per Share
Net loss per common share calculations are based on the weighted average
number of shares of common stock outstanding. Pursuant to the Securities and
Exchange Commission ("SEC") Staff Accounting Bulletin No. 83, stock and stock
rights issued during the twelve months preceding the initial filing of this
offering at prices below the expected initial public offering price have been
included in the Company's loss per share computations for all periods presented
even though they are antidilutive.
Supplementary net loss per share was computed as if all the outstanding
bridge notes (Note 4) and convertible promissory notes (Note 6) had been paid at
the date of issuance, and assuming that 288,127 shares of common stock were
issued to pay such notes and $3,489 and $35,000 of interest expense was
eliminated for the periods ended December 31, 1995 and June 30, 1996,
respectively, as a result of such payments. Such supplementary net loss per
share for the period ended December 31, 1995 was $.03 and for the six months
ended June 30, 1996 was $.08.
Use of Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they may
ultimately differ from actual results.
Interim Financial Information
The unaudited financial statements for the period ended June 30, 1996
include, in the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for the fair presentation of such
financial statements.
3. License Agreement
In October 1995, the Company entered into a License Agreement (the
"Agreement") with RIC, which was amended on June 17, 1996, pursuant to which the
Company obtained the right to commercialize and market the Reseal Technologies
to third parties for its implementation in the food and beverage industries. The
Reseal Technologies are licensed by RIC from its parent, Reseal International
Limited Partnership ("RILP"). The Agreement is royalty free and allows the
Company to grant sublicenses to third parties. Pursuant to the Agreement, the
Company issued 2,900,000 shares of its common stock to RIC and is committed to
make a payment to RIC of $750,000 on the earlier of April 10, 1996 or the
completion of a private placement (Note 4) and another payment of $3,250,000 on
the earlier of December 31, 1996 or the completion of the proposed initial
public offering. The cash paid and payable to RIC and the common stock issued
for this acquisition was charged directly to stockholders' equity and therefore
not reflected as an asset on the Company's Balance Sheet. The Company has
reflected such obligation as a current liability. The Agreement terminates at
the end of the Reseal Technologies useful economic life.
6
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Information as of and for the period ended June 30,
1996 is unaudited)
(Continued)
4. Private Placement
The Company has been involved in a private placement ("Bridge Financing").
The Bridge Financing consists of promissory notes, common shares, and rights
("Bridge Options") to acquire Units identical in form to the IPO Units upon
consummation of the IPO. The promissory notes bear interest at 8% per annum and
are due on the earlier of consummation of a public offering or January 1, 1997.
As of December 31, 1995, the Company had received gross proceeds of $350,000 in
connection with the Bridge Financing, which consisted of $175,000 of promissory
notes, 87,500 shares of common stock and rights to obtain 131,250 Units. As of
June 30, 1996, the Company had received additional gross proceeds of $1,750,000,
which consisted of $875,000 of promissory notes, 437,500 shares of common stock
and rights to obtain 656,250 Units. Upon completion of the Bridge Financing, the
Company had received an aggregate of $2,100,000 in consideration for $1,050,000
in promissory notes, 525,000 common shares and rights to obtain 787,500 Units.
The Company has amended the Bridge Financing agreements so that the 787,500
Units underlying the Bridge Options are outstanding prior to the completion of
the IPO, and all of such Units will be registered in the proposed registration.
5. Settlement Agreement
In October 1995, in connection with a settlement of actions and claims
against certain affiliates of RIC, the licensor of the Technology, the Company
agreed to issue (i) 2,900,000 shares of common stock to RIC, as partial
compensation under the License Agreement, (ii) an aggregate of 1,500,000 shares
of common stock (the "Investor Shares") to certain investors in RILP, and (iii)
an aggregate of 450,000 shares of common stock to certain individuals for
services rendered equal to the par value of such shares. Of the 1,500,000 shares
issued, 552,000 were issued to individuals who are now members of the board of
directors and of the 450,000 shares issued, 161,000 were issued to current
members of management and the board of directors.
Pursuant to such settlement, the holders of the Investor Shares may require
the Company to file a Registration Statement under the Securities Act with
respect to 25% of such shares of common stock, commencing one year from the
effective date of the Company's proposed IPO, subject to certain conditions and
limitation. Further, if the Company proposes to register any shares of common
stock under the Securities Act, other than pursuant to an initial public
offering or the previous sentence, then the holders of the Investor Shares are
entitled to include an additional 25% of their shares of common stock in such
registration.
6. Convertible Promissory Notes
During 1995, two convertible promissory notes were issued for $100,000 and
$50,000 (the "Convertible Notes") and are due on April 15, 1996 and December 20,
1996, respectively. These notes bear interest at 8% and each is convertible at
any time prior to the maturity date of the notes into 1,200,000 common shares,
subject to adjustments. The $100,000 note (the "Portenoy Note") converts at a
price of $.084 per common share, subject to adjustments, and the $50,000 note
(the "ATG Note") converts at a price of $.042 per common share, subject to
adjustments.
On April 15, 1996, the Portenoy Note came due. On June 28, 1996, in
accordance with an agreement with the Company, the holder of the ATG Note, which
comes due on December 20, 1996 and contained the right to convert into 1.2
million shares of Common Stock, agreed to transfer such note to the Company for
cancellation in return for the Company agreeing to pay it $300,000. The amounts
owed by the Company to the holders of the Convertible Notes shall be paid out of
the proceeds of the proposed IPO. The Company has
7
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Information as of and for the period ended June 30, 1996 is unaudited)
(Continued)
recorded an extraordinary loss on retirement of debt of $250,000 in its June 30,
1996 unaudited financial statements.
7. Management Shares
In 1995, the Company issued an aggregate of 950,000 shares to management at
par as compensation for services rendered in incorporating the Company. Such
shares were issued at fair market value of the Company's common stock, which was
determined based upon the fair market value of the private placement shares (see
Note 4) and the convertible promissory notes. The statement of operations
reflects approximately $76,000 of compensation expense related to such shares.
8. Related Party Transactions
The Company shares office space with certain affiliated companies,
including RIC and RILP. The Company also pays certain operating expenses,
including compensation of key personnel, on behalf of RIC and RILP. At December
31, 1995 and June 30, 1996, the Company had paid 85,261 and 332,794,
respectively, on behalf of RIC. The Company is entitled to be reimbursed for
these expenses and has offset such against the current liability related to the
License Agreement (Note 3) in the Company's balance sheet.
For both the period ended December 31, 1995 and the three months ended June
30, 1996, the Company paid consulting fees to members of management in the
aggregate amount of $168,000.
9. Income Taxes
As a result of losses incurred during the year, there is no provision for
income taxes in the accompanying financial statements. The Company has
established a full valuation allowance against its net deferred tax assets as
realizability of such assets is predicated upon the Company achieving
profitability.
10. Commitment and Contingencies
The Company leases office space under a noncancellable operating lease,
expiring on November 30, 1997. Rental expense for the period ending December
31,1995 was $8,259. Future minimum lease payments under this lease agreement is
as follows:
Year Ending December 31
- -----------------------
1996 $90,292
1997 84,571
--------
$174,863
11. Settlement of Pending Lawsuit
In May 1996, in connection with the settlement of a lawsuit brought by
Banco Inversion, S.A. and Administratadora General de Patrimonios, S.A.
(collectively, "Banco") against certain affiliates of RIC, RIC entered into an
agreement pursuant to which it agreed, among other things, (i) to transfer an
aggregate of 300,000 of its shares of common stock (the "Settlement Shares") to
Banco, (ii) to pay Banco $50,000 at the
8
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Information as of and for the period ended June 30, 1996 is unaudited)
(Continued)
closing of such settlement and $150,000 out of the licensing fees RIC receives
from the proceeds of this Offering and (iii) to exchange mutual releases with
the parties of such lawsuit.
The number of Settlement Shares, subject to certain anti-dilution
adjustments, may be increased up to 600,000 shares in the event that 30 months
after the effective date of the registration statement the market value of the
300,000 Settlement Shares is less than $2,800,000.
The Company has granted to the holders of such Settlement Shares, the right
to register such shares along with shares registered by the Company in a public
offering, whether on behalf of the Company or other holders of common stock,
subject to customary market factor limitations. Such registration rights
terminate upon the earlier of (i) the date that all Settlement Shares have been
either registered or sold, or (ii) the date that all such shares may be sold
pursuant to Rule 144(k) under the Securities Act.
12. Employment Agreements
It is anticipated that the Company will enter into a three-year employment
agreement with Jon Silverman upon the closing of the proposed initial public
offering. Pursuant to such proposed employment agreement, Mr. Silverman will
receive a monthly salary of $15,000. In addition, the Company will be obligated
to pay the premium on his $1,000,000 life insurance policy, to which his estate
is the beneficiary. This insurance policy is in addition to the $1,000,000
key-man life insurance policy maintained by the Company on the life of Mr.
Silverman. He will also be entitled to customary benefits and perquisites.
13. Subsequent Event
In October 1996, the Company sold, in an initial public offering, 833,334
Units, each Unit consisting of two shares of Common Stock and two redeemable
Class A purchase warrants for $12.00 per Unit. Each warrant entitles the holder
to purchase one share of the Company's stock for $7.00. The warrants are
redeemable by the Company at $.05 per warrant any time after October 3, 1998 if
certain conditions are met. The net proceeds, which the Company received from
the offering, amounted to approximately $8.7 million.
9
