UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________to_______________
Commission file number 0-21489
International Dispensing Corporation
(Exact name of small business issuer as specified in its charter)
Delaware 13-3856324
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2500 Westchester Avenue, Suite 304, Purchase, New York 10577
(Address of principal executive offices)
(914) 251-0336
(Issuer's telephone number)
Not applicable
(Former name, former address and former
fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes or common
equity, as of the latest practicable date: 9,566,668 shares of Common Stock as
of May 12, 1998
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
<PAGE>
International Dispensing Corporation
(A Development Stage Company)
Table of Contents
Part I - FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
Balance Sheets at March 31, 1998 (unaudited) 2
and December 31, 1997
Statements of Operations for the Three Months 3
Ended March 31, 1998 and for the Period from Inception
(October 10, 1995) through March 31, 1998
Statements of Cash for the Three Months Ended 4
March 31, 1998 and for the Period from Inception
(October 10, 1995) through March 31, 1998
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
Part II - OTHER INFORMATION 9
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
BALANCE SHEETS
March 31,
December 31, 1998
1997 (unaudited)
ASSETS ------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents ................................................... $ 3,138,204 $2,455,74
Miscellaneous receivable .................................................... -- 60,076
Prepaid expense ............................................................. 46,333 29,333
----------- -----------
Total current assets ............................................... 3,184,537 2,551,158
Fixed Assets:
Leasehold improvements ...................................................... 7,270 7,270
Office equipment ............................................................ 4,350 4,350
Automobile .................................................................. 21,920 21,920
Accumulated depreciation and amortization ................................... (6,559) (8,058)
----------- -----------
Net fixed assets ................................................... 26,981 25,482
Other Assets ......................................................................... 57,786 447,057
----------- -----------
Total assets ....................................................... $ 3,269,304 $ 3,023,697
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable ............................................................ $ 12,255 $ 20,362
Accrued expenses ............................................................ $ 49,766 $ 44,222
----------- -----------
Total current liabilities .......................................... 62,021 64,584
----------- -----------
Total liabilities .................................................. 62,021 65,584
Commitments and contingencies
Stockholders' Equity:
Preferred Stock, $.001 par value; 2,000,000 shares .......................... -- --
authorized; no shares issued or outstanding
Common Stock $.001 par value; 40,000,000 shares ............................. 9,567 9,567
authorized; 9,566,668 issued and outstanding as of
December 31, 1997 and March 31, 1998,
respectively
Additional paid-in capital .................................................. 9,895,286 9,895,286
Deficit accumulated during the development stage ............................ (6,697,570) (6,945,740)
----------- -----------
Total stockholders' equity ......................................... 3,207,283 2,959,113
----------- -----------
Total liabilities and stockholders' equity ......................... $ 3,269,304 $ 3,023,697
=========== ===========
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
from Inception
Three Months Three Months (October 10, 1995)
Ended Ended through
March 31, 1998 March 31, 1997 March 31, 1998
-------------- -------------- --------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Revenues ...................................................... $ 57,456 $ -- $ 57,456
Cost of goods sold ........................................ 37,584 -- 37,584
----------- -----------
Gross margin .............................................. 19,872 -- 19,872
Operating expenses
General and administrative ................................ 301,326 180,096 2,913,576
Depreciation and amortization ............................. 1,500 221 8,060
----------- ----------- -----------
Total expenses ................................................ 302,826 180,316 2,921,636
Loss from operations .......................................... 282,954 180,316 2,901,764
Other (income) expense
Interest expense .......................................... -- -- 66,665
Interest income ........................................... (34,784) (49,206) (272,689)
----------- ----------- -----------
Net loss before extraordinary loss ............................ $ 248,170 $ 131,110 $ 2,695,740
Extraordinary loss on retirement of debt ...................... -- -- 250,000
----------- ----------- -----------
Net loss ...................................................... $ 248,170 $ 131,110 $ 2,945,740
=========== =========== ===========
Basic loss per share .......................................... $ (0.03) $ (0.01)
Basic and diluted weighted average ............................ 9,566,668 9,533,333
shares outstanding
Diluted loss per share ........................................ $ (0.03) $ (0.01)
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
from Inception
Three Months Three Months (October 10, 1995)
Ended Ended through
March 31, 1998 March 31, 1997 March 31, 1998
-------------- -------------- --------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss ............................................................ $ (248,170) $ (131,110) $(2,945,740)
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation and amortization ................................... 1,500 221 8,058
Non-cash compensation ........................................... -- -- 76,238
Loss on retirement of debt ...................................... -- -- 250,000
Changes in operating assets and liabilities; .................... (66,076) -- (66,076)
Increase in miscellaneous receivable
(Increase) decrease in prepaid expenses ......................... 17,000 8,711 (29,333)
Increase in other assets ........................................ 389,272 -- (441,258)
Increase (decrease) in accrued expenses ......................... (2,563) (70,157) 64,584
----------- ----------- -----------
Net cash used in operating activities ............................... (682,455) (192,233) (3,083,527)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of fixed assets ........................................ -- -- (33,539)
Purchase of license ............................................. -- -- (4,000,000)
----------- ----------- -----------
Net cash used in investing activities ............................... -- -- (4,033,539)
Cash flows from financing activities:
Proceeds from private placement ................................. -- -- 2,100,000
Proceeds from issuance of convertible debt ...................... -- -- 150,000
Repayment of promissory notes ................................... -- -- (300,000)
Repayment of bridge loans ....................................... -- -- (1,050,000)
Repayment of convertible debt ................................... -- -- (100,000)
Proceeds from initial public offering ........................... -- -- 8,772,815
----------- ----------- -----------
Net cash provided from financing activities ......................... -- -- 9,572,815
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents, ............... (682,455) (192,233) 2,455,749
Cash and cash equivalents, beginning of period ...................... 3,138,204 4,268,963 --
----------- ----------- -----------
Cash and cash equivalents, end of period ............................ $ 2,455,749 $ 4,076,630 $ 2,455,749
=========== =========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest .......................................... -- -- 66,665
Cash paid for taxes ............................................. -- -- --
Non-cash investing and financing activities:
Issuance of common stock ........................................ -- -- $ 5,800
Purchase of license from affiliate .............................. -- -- $ 4,000,000
</TABLE>
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Information as of and for the period ended March 31,
1998 is unaudited)
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
The balance sheet as of March 31, 1998 and statements of operations and
statements of cash flows for the three months then ended have been prepared by
International Dispensing Corporation (the "Company") without audit. The results
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997. Results of operations for the three month period is not
necessarily indicative of the operating results for the full year. Interim
statements are prepared on a basis consistent with year end statements.
In the opinion of management, the unaudited interim financial
statements furnished herein include all adjustments necessary for a fair
presentation of the results of operations of the Company.
All such adjustments are of a normal recurring nature.
2. BUSINESS DEVELOPMENTS
On December 23, 1997, the Company entered into an agreement with Well
Men Industrial Company Limited, a Hong Kong registered corporation ("Well Men"),
pursuant to which Well Men granted to the Company an exclusive right to market
and sell in China certain Well Men products. Well Men also assigned to the
Company for the purpose of commercializing such Well Men products, all of Well
Men's patents and patent applications relating to such Well Men products. The
agreement is for an initial term of ten years. The Company has opened a
representative office in China to promote the sales of these products and to
establish the name of the Company. Operations commenced in March, 1998.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Company was incorporated in Delaware in October 1995 under the name
ReSeal Food Dispensing Systems, Inc. and changed its name to International
Dispensing Corporation on September 12, 1996. The Company was formed primarily
for the purpose of commercializing and marketing certain proprietary and
patented delivery and dispensing technologies (the "Technologies") licensed from
ReSeal International Corporation ("RIC"), which Technologies consist of barrier
oriented, closed delivery and dispensing systems (the "Systems") composed of:
(i) self-adjusting reservoir bodies, (ii) patented, barrier capable,
unidirectional flow valves (the "Valve Assemblies"), and (iii) as required,
mechanisms to activate and facilitate the product delivery and flow functions.
When utilized in dispensing flowable food and beverage products like milk,
juice, wine, etc., the Systems are designed to maintain the sterility, purity
and freshness of such products throughout its use life, with the possibility of
eliminating or reducing the need for adding preservatives to the product to keep
it fresh and/or refrigeration throughout its use life. The self-adjusting
reservoir body of a System is designed to shrink in proportion to the amount of
the product being dispensed through the Valve Assembly. The Valve Assemblies are
designed to dispense a product without letting either air or contaminants flow
back into the internal reservoir in which the remaining product is held. The
Company believes that by maintaining the purity of the product that remains in
the container, the Systems will provide higher levels of freshness for
significantly longer periods of time and, if preservatives are eliminated, the
level of purity, of a wide array of packaged flowable products.
The Company is primarily focusing its marketing activities on the
application of the licensed technologies in the Field of Use (as defined below)
as set forth in that certain Amended and Restated License Agreement, between the
Company and RIC, which encompasses the food and beverage industries as broadly
defined. "Field Of Use" means the use of the Technology to make, use, lease,
sell or distribute (a) any food or beverage dispensers or containers that embody
the Technology or the manufacture, use, lease, sale or distribution of which
uses the Technology (collectively the "Product") intended for use in an
industrial or commercial place of business in the preparation of food or
beverage at such place of business, (b) any food or beverage Product intended
for use in an industrial or commercial place of business by a customer
purchasing food or beverage at such place of business for consumption on or off
the premises of such place of business, or (c) any food or beverage Product
intended to be sold to or by food or beverage wholesale price discounters,
retailers and similar establishments that sell food or beverage to consumers.
Within such categories, the applications of the licensed technologies can be
divided into a number of potential markets, including but not limited to the
following: (i) beverages, which include milk/cream, coffee, tea (hot and cold),
hot chocolate, juices, sweeteners, baby formula, baby food (in puree form),
wines and water; (ii) foods, which include soups, liquid eggs, liquid butter,
sauces, yogurt, melted cheese (nachos), baby foods and hot toppings in liquid
form; and (iii) condiments, which include ketchup, barbecue sauce, mayonnaise,
salad dressing, oils and mustard.
The prototype tooling for production of prototype Valve Assemblies will
be completed in the second quarter of 1998. Upon production of initial prototype
Valve Assemblies, also anticipated to be completed in the second quarter, such
Valve Assemblies will be subjected to independent laboratory
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(continued)
testing. In addition, the Company will supply specific prototype Systems to
customers for consumer testing.
On November 10, 1997, the Company entered into a Joint Systems
Development Agreement with Packaging Systems, L.L.C., the parent company of
Rapak, Inc. The resulting products of this strategic alliance will be Bag-in-Box
with unique Valve/Pump Technology food and beverage delivery systems that will
be marketed to the food and beverage industries throughout the United States.
On December 23, 1997, the Company entered into an agreement with Well
Men Industrial Company Limited, a Hong Kong registered corporation ("Well Men"),
pursuant to which Well Men granted to the Company an exclusive right to market
and sell in China certain Well Men products. Well Men also assigned to the
Company for the purpose of commercializing such Well Men products, all of Well
Men's patents and patent applications relating to such Well Men products. The
agreement is for an initial term of ten years. The Company has opened a
representative office in China to promote the sales of these products and to
establish the name of the Company. Operations commenced in March, 1998.
Result of Operations
In March, 1998, the Company had revenues of $57,456, all of which were
derived from the sale of Well Men products in China. Such revenues were the
first generated by the Company since its inception. The Company anticipates
steadily increasing revenues from the sale of Well Men Products during the next
12 months.
In addition, the Company has engaged in on-going marketing discussions
with a number of potential strategic alliance partners, licensees and end users
of the Technologies. In this regard, discussions have been conducted with major
companies in Canada, Europe, Australia and the United States to explore
opportunities in the product categories.
The Company incurred General and Administrative expenses of $301,326 in
the quarter ended March 31, 1998 versus General and Administrative expenses of
$180,316 for the quarter ended March 31, 1997. This increase of $121,010 over
the comparable period last year is due primarily to the Company's accelerated
investment in research and development of its core technology, and its start-up
costs associated with the Well Men Agreement.
The Company has reported a net loss from operations of $ 2,945,740
since inception.
Financial Condition
As reflected in the financial statements, the Company has experienced
continuing net losses and negative cash flows from operations through March 31,
1998. The Company's continuing existence
<PAGE>
is dependent on its ability to attain profitable operations. As of March 31,
1998, the Company had liquid assets of $2,455,749.
In a private placement concluded in February 1996, the Company obtained
aggregate capital of $2,250,000 through the issuance by the Company of
convertible notes, options and the sale of Common Stock.
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 Common Stock for $7.00 during
the four year period commencing October 3, 1997. The warrants are redeemable by
the Company at $.05 per warrant any time after October 3, 1997 if certain
conditions are met. The net proceeds, which the Company received from the
offering, amounted to approximately $8.8 million.
The Company believes that it has adequate funds available to conduct
and continue its business and does not foresee needing to raise additional funds
in the next 12 months.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) No reports on Forms 8-K have been filed for
the quarter for which this report is being
filed.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTERNATIONAL DISPENSING
CORPORATION
Date: May 8, 1998 /s/ Jon D. Silverman
---------------------
Jon D. Silverman
Chairman of the Board, Chief Executive
Officer & President
(Principal Executive Officer)
Date: May 8, 1998 /s/ Jeffrey D. Lewenthal
-------------------------
Jeffrey D. Lewenthal
Chief Financial Officer and Treasurer
(Principal Accounting and Financial
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE MARCH 31, 1998 QUARTERLY REPORT
FILED ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,455,749
<SECURITIES> 0
<RECEIVABLES> 66,076
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,551,158
<PP&E> 33,540
<DEPRECIATION> (6,559)
<TOTAL-ASSETS> 3,023,697
<CURRENT-LIABILITIES> 65,584
<BONDS> 0
0
0
<COMMON> 9,567
<OTHER-SE> 3,014,130
<TOTAL-LIABILITY-AND-EQUITY> 3,023,697
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 340,410
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (248,170)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (248,170)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
