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, 1999
[ ] 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
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(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 7, 1999
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
Item 1. Financial Statements Page Number
Balance Sheets at March 31, 1999 (unaudited) 3
and December 31, 1998
Statements of Operations for the Three Months 4
Ended March 31, 1999 and 1998 and for the Period from
Inception (October 10, 1995) through March 31, 1999
Statements of Cash Flows for the Three Months Ended 5
March 31, 1999 and 1998 and for the Period from Inception
(October 10, 1995) through March 31, 1999
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Part II - OTHER INFORMATION 11
2
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
BALANCE SHEET
March 31, December 31,
1999 1998
(unaudited)
----------- -----------
Assets
Current Assets:
Cash and cash equivalents ....................... $ 1,040,269 $ 1,270,527
Prepaid expenses ................................. 50,540 43,545
----------- -----------
Total current assets 1,090,809 1,314,072
Fixed Assets:
Office equipment ................................. 7,469 3,480
Automobile ....................................... 21,919 21,919
Accumulated depreciation and amortization ........ (10,114) (8,314)
----------- -----------
Net fixed assets 19,274 17,085
Other Assets ..................................... 30,035 30,033
----------- -----------
Total Assets $ 1,140,118 $ 1,361,190
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable ................................. 42,112 19,791
Accrued expenses ................................. 42,366 72,506
----------- -----------
Total current liabilities ........................ 84,478 92,297
----------- -----------
Total liabilities 84,478 92,297
Commitments & Contingencies
Stockholders' Equity:
Preferred stock, $.001 par value; ................ -- --
2,000,000 shares authorized, no
shares issued or outstanding
Common stock, $.001 par value; ................... 9,567 9,567
40,000,000 shares authorized;
9,566,668 issued and outstanding
as of December 31, 1998 and March 31,
1999 respectively
Additional paid-in capital ....................... 9,895,286 9,895,286
Deficit accumulated during ....................... (8,849,213) (8,635,960)
development stage
----------- -----------
Total stockholders' equity 1,055,640 1,268,893
----------- -----------
Total liabilities and stockholders' equity $ 1,140,118 $ 1,361,190
=========== ===========
The accompanying notes are an integral part of these financial statements
3
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Cumulative
from Inception
Three Months ended October 10, 1995
------------------------------------- through
March 31, 1999 March 31, 1998 March 31, 1999
----------- ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Operating Expenses
General and adminstrative ................................... 275,971 301,326 4,105,211
Depreciation and amortization ............................... 1,800 1,500 18,256
----------- ----------- -----------
Total operating expenses .................................. 277,771 302,826 4,123,467
----------- ----------- -----------
Loss from operations .................................. (277,771) (302,826) (4,123,467)
Other income (expense)
Interest expense ............................................ -- -- (66,665)
Interest income ............................................. 13,871 34,784 384,199
Miscellaneous income ........................................ 50,647 -- 50,647
----------- ----------- -----------
Net loss before extraordinary loss
and discontinued operations .......................... ($ 213,253) ($ 268,042) ($3,755,286)
Extraordinary loss on retirement debt ......................... -- -- (250,000)
Loss from discontinued operation .............................. -- 19,872 (843,927)
----------- ----------- -----------
Net loss ............................................ ($ 213,253) ($ 248,170) ($4,849,213)
=========== =========== ===========
Basic and diluted loss per share .............................. ($ 0.02) ($ 0.03)
Basic and diluted weighted average
shares outstanding ............................................ 9,566,668 9,566,668
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Cumulative
from Inception
Three months Three Months October 10, 1995
ended ended through
March 31, 1999 March 31, 1998 March 31, 1999
(unaudited) (unaudited) (unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ............................................................... $ (213,253) $ (248,170) $(4,849,213)
Adjustment for (income) loss from discontinued operations .............. -- (19,872) 843,927
----------- ----------- -----------
Net loss from continuing operations
(213,253) (268,042) (4,005,286)
Adjustments to reconcile net loss to
net cash used in operating activities-
Depreciation and amortization ........................................ 1,800 1,500 18,254
Compensation from stock grant ........................................ -- -- 25,279
Non-cash compensation ................................................ -- -- 76,238
Loss on retirement of debt ........................................... -- -- 250,000
Changes in operating assets and liabilities:
Increase in accounts receivable .................................... -- (66,076) --
(Increase) decrease in prepaid expenses ............................ (6,995) 17,000 (50,540)
Increase in other assets ........................................... (2) (389,272) (24,235)
Increase (decrease) in accrued expenses ............................ (30,140) (5,544) 17,087
Increase in accounts payable ....................................... 22,321 8,107 42,112
----------- ----------- -----------
Net cash used in continuing operating activities: ...................... (226,269) (702,327) (3,651,091)
Net cash provided by (used in) discontinued operations: ................ -- 19,872 (843,927)
Net cash used by operating activities: ................................. (226,269) (682,455) (4,495,018)
Cash flows from operating activities:
Purchase of fixed assets ........................................... (3,989) -- (37,528)
Purchase of license ................................................ -- -- (4,000,000)
----------- ----------- -----------
Net cash used in investing activities (3,989) -- (4,037,528)
Cash flows from financing activities:
Proceeds from private placement .................................... -- -- 2,100,000
Proceeds from issuance of convertible debt ......................... -- -- 150,000
Repayment of promissory note ....................................... -- -- (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 ................... (230,258) (682,455) 1,040,269
Cash and cash equivalents, beginning of period ......................... 1,270,527 3,138,204 --
----------- ----------- -----------
Cash and cash equivalents,end of period ................................ $ 1,040,269 $ 2,455,749 $ 1,040,269
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest ............................................. -- -- $ 66,665
Non-cash investing and financing activities:
Issuance of common stock ........................................... -- -- $ 5,800
Purchase of license from affiliate ................................. -- -- $ 4,000,000
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Information as of and for the period ended March 31,
1999 is unaudited)
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
The balance sheet as of March 31, 1999 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, 1998. 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. GOING CONCERN
The Company's development stage activities have resulted in an accumulated
deficit from inception to March 31, 1999, in excess of $8.8 million (including a
discontinued operation in China of $844,000, see Note 3), and losses are
continuing. Since its inception, the Company has not generated any revenue. The
Company's primary source of funds since inception has been from the sale of its
common stock. Consequently, there is doubt about the Company's ability to
continue as a going concern. Management is attempting to raise additional
capital through a private placement of securities to provide funding to allow it
to continue development of its licensed technology. Notwithstanding, the Company
believes that with the completion of the production injection mold per its
Gravity Feed Valve Assembly, scheduled for the third quarter of 1999, it will
generate sales revenue in the fourth quarter of 1999.
3. DISCONTINUED OPERATIONS
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 was for an initial term of ten years. The Company had opened a
representative office in China to promote the sales of Well Men products and to
establish the name of the Company. The Company incurred cumulative expenses of
approximately $844,000 related to the opening and maintaining of the
representative office in China, merchandise shipped to China, and general and
administrative expenses.
6
<PAGE>
In December 1998, Well Men materially breached its agreement with the
Company by selling Well Men water heaters directly in China. In addition, Well
Men had refused to pay for any of the products provided to it. As a result of
this breach and the Company's inability to obtain payment from Well Men, the
Company discontinued this operation and wrote-off all related receivables
resulting in a loss of $719,000 in 1998. In the first quarter of 1998, the
Company's results of operations have been classified as discontinued operations.
It is the Company's intent to pursue payment of reimbursement of expenses
incurred in the Company's China undertaking from Well Men.
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
7
<PAGE>
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 has been
completed. Initial prototype Valve Assemblies have been produced and subjected
to independent laboratory testing. Such laboratory testing is continuing. In
addition, the Company has supplied specific prototype Systems to customers for
consumer testing. Additional customers will also be supplied with prototype
systems.
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.
In 1998 the Company received two orders for Well Men products in China. The
first order was for 2,750 water heaters and 11,000 pitchers, which were
delivered to China in April pursuant to a Sale/Purchase Contract between the
Company and Guangdon Rixin Industrial Development Corporation, a Chinese
Government authorized Importer/Exporter ("Rixin"). The Company incurred a cost
of $217,250 for these goods and recorded revenues of $332,750 for the sale to
Rixin. The second order was for 5,000 water heaters placed in August for
delivery to China by December 31, 1998. The $275,000 cost of these units and the
related sales revenue of $375,000 was reflected as an account payable and an
account receivable, respectively. In December of 1998, Rixin canceled the second
order. Rixin has yet to make payment on the first order.
In December of 1998, Well Men materially breached its agreement with the
Company by selling Well Men water heaters directly in China. As a result of this
breach, the Company has discontinued its operations in China, and has taken a
charge in the fourth quarter of 1998 of $718,926 representing costs and expenses
incurred by the Company in its China venture, and has fully reversed the
$332,750 due from Rixin in the fourth quarter 1998 as well.
8
<PAGE>
The Company intends to pursue payment of the $332,750 receivable from Rixin
as well as reimbursement from Well Men of expenses incurred by the Company in
its China venture.
RESULT OF OPERATIONS
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
- -------------------------------------------------------------------------------
Revenue - The Company has not generated any revenue since its inception.
Operating Expenses - For the three months ended March 31, 1999, the Company
had operating expenses of $277,771, which included $78,419 in research and
development related expenses, versus operating expenses of $302,826 for the
three month period ended March 31, 1998. This decrease of $25,055, or 8.3% over
the comparable period last year is due primarily to a reduction in travel
expenses and a reduction in payroll cost as the result of the termination of
employment of one employee.
Net Loss - For the three months ended March 31, 1999, the Company had a net
loss of $213,253 versus a net loss of $248,170 for the three months ended March
31, 1998. This decrease in net loss of $34,917, or 14.1% over the comparable
period last year, is due primarily to the reduction in operating expenses.
The Company has reported a net loss from operations of $ 4,849,213 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,
1999. The Company's ability to continue as a going concern is dependent upon its
ability to obtain additional financing and to produce and market its products.
As of March 31, 1999, the Company had liquid assets of $1,040,269.
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.
9
<PAGE>
As of March 31, 1999, the Company had working capital of $1,006,331. During
the first quarter of Fiscal 1999, the Company was spending at a rate of
approximately $92,500 per month. The Company expects that such rate will
increase to approximately $130,000 per month commencing in the third quarter of
Fiscal 1999. Such increase will be primarily due to the Company's leasing of a
production mold for the production of the Valve Assemblies. Therefore, the
Company expects that it will require additional capital to finance its
operations after the third quarter of Fiscal 1999.
The Company is seeking a minimum of $1.5 million in financing. If the
Company is not able to obtain additional funds on terms and conditions
satisfactory to the Company, the Company will have to scale back its research
and development activities.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
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.
11
<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 13, 1999 /s/ Gary Allanson
-------------------------------------
Gary Allanson
Chief Executive Officer & President
(Principal Executive Officer)
Date: May 13, 1999 /s/ Jeffrey D. Lewenthal
-------------------------------------
Jeffrey D. Lewenthal
Chief Financial Officer and Treasurer
(Principal Accounting and Financial
Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE MARCH 31, 1999 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-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,040,269
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,090,809
<PP&E> 29,388
<DEPRECIATION> 10,114
<TOTAL-ASSETS> 1,140,118
<CURRENT-LIABILITIES> 84,478
<BONDS> 0
0
0
<COMMON> 9,567
<OTHER-SE> 1,046,073
<TOTAL-LIABILITY-AND-EQUITY> 1,140,118
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 277,771
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (213,253)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (213,253)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
