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 June 30, 2000
|_| 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 Identification No.)
Incorporation or organization)
1111 Benfield Blvd., Suite 230, Millersville, Maryland 21108
(Address of principal executive offices)
(410) 729-0125
(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: 9,666,668 shares of Common Stock as
of August 5, 2000
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 June 30, 2000 (unaudited) 3
and December 31, 1999
Statements of Operations for the Six and Three Months 4
Ended June 30, 2000 and 1999 and for the Period from
Inception (October 10, 1995) through June 30, 2000
Statements of Cash Flows for the Six Months Ended 5
June 30, 2000 and 1999 and for the Period from
Inception (October 10, 1995) through June 30, 2000
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 8
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
BALANCE SHEET
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
(unaudited) (unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 338,859 $ 416,322
Accounts receivable 3,300
Prepaid expenses 45,182 14,739
------------ ------------
Total current assets 387,341 431,061
------------ ------------
Fixed Assets
Office equipment 466,997 461,646
Accumulated depreciation and amortization (4,947) (4,947)
------------ ------------
Net fixed assets 462,050 456,699
Other Assets 26,648 26,647
------------ ------------
Total assets $ 876,039 $ 914,407
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 86,059 $ 175,801
Accrued expenses 70,584 51,821
------------ ------------
Total current liabilities 156,643 227,622
------------ ------------
Total liabilities 156,643 227,622
------------ ------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.001 par value; 2,000,000 1,120,000
2,000,000 shares authorized,1,000 and 560
shares issued or outstanding, as of June 30,
2000 and December 31, 1999, respectively
Common stock, $.001 par value;
40,000,000 shares authorized; 9,667 9,567
9,666,668 issued and outstanding as of June 30, 2000
and 9,566,668 as of December 31, 1999
Additional paid-in capital 9,895,286 9,895,286
Deficit accumulated during (11,185,457) (10,338,068)
development stage
------------ ------------
Total stockholders' equity 719,396 686,785
------------ ------------
Total liabilities and stockholders' equity $ 876,039 $ 914,407
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
International Dispensing Corporation
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
Six Months Three Months from Inception
ended ended October 10, 1995
---------------------------- ---------------------------- through
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues -- -- -- -- $ 6,980
----------- ----------- ----------- ----------- -----------
Operating Expenses
General and adminstrative 860,317 691,842 407,288 415,871 6,429,720
Depreciation and amortization 3,600 1,800 24,047
----------- ----------- ----------- ----------- -----------
Total operating expenses 860,317 695,442 407,288 417,671 6,453,767
----------- ----------- ----------- ----------- -----------
Loss from operations (860,317) (695,442) (407,288) (417,671) (6,446,787)
Other income (expense)
Interest expense -- -- -- -- (66,665)
Interest income 12,929 22,391 6,624 8,520 418,922
Miscellaneous income 50,825
----------- ----------- ----------- ----------- -----------
Net loss before extraordinary loss
and discontinued operations (847,388) (622,226) (400,664) (409,151) (6,094,530)
Extraordinary loss on retirement of debt -- -- -- -- (250,000)
Loss from discontinued operations -- -- -- -- (843,927)
----------- ----------- ----------- ----------- -----------
Net loss $ (847,388) $ (622,226) $ (400,664) $ (409,151) $(7,188,457)
=========== =========== =========== =========== ===========
Basic and diluted loss per share $ (0.09) $ (0.06) $ (0.04) $ (0.04)
Basic and diluted weighted average
shares outstanding 9,666,668 9,566,668 9,666,668 9,566,668
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
from Inception
Six months Six months October 10, 1995
ended ended through
June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (847,388) $ (622,226) $(7,103,780)
Adjustment for( income) loss from discontinued operations -- -- 843,927
------------ ----------- -----------
Net loss from continuing operations (847,388) (622,226) (6,259,853)
Adjustments to reconcile net loss to
net cash used in operating activities-
Depreciation and amortization 3,600 24,045
Compensation from stock grant -- -- 25,279
Non-cash compensation -- -- 87,199
Loss on retirement of debt -- -- 250,000
Changes in operating assets and liabilities: -- --
Increase in accounts receivable (3,300) (5,675) (50,225)
(Increase) decrease in prepaid expenses (30,443) (2,564) (79,933)
Increase in other assets (1) (24,002) (20,848)
Increase (decrease) in accrued expenses 18,762 (66,505) 45,304
Increase in accounts payable (89,742) 19,222 86,059
------------ ----------- -----------
Net cash used in continuing operating activities: (952,112) (698,150) (5,892,973)
Net cash provided by (used in) discontinued operations: -- -- (843,927)
------------ ----------- -----------
Net cash used by operating activities: (952,112) (698,150) (6,736,900)
Cash flows from operating activities:
Purchase of fixed assets (5,351) (27,402) (497,057)
------------ ----------- -----------
Purchase of license -- -- (4,000,000)
------------ ----------- -----------
Net cash used in investing activities (957,463) (27,402) (4,497,057)
Cash flows from financing activities:
Proceeds from issuance of preferred stock 880,000 -- 2,000,000
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 -- -- 8,772,816
------------ ----------- -----------
Net cash provided from financing activities 11,572,816
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents (725,552) 338,859
-----------
Cash and cash equivalents, beginning of period 416,322 1,270,527 --
------------ -----------
Cash and cash equivalents,end of period $ 338,859 $ 544,975 $ 338,859
============ =========== ===========
Supplemental disclosure of cash flow information: --
Cash paid for interest --
Non-cash investing and financing activities: --
Issuance of common stock -- --
Purchase of license from affiliate -- --
</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 June 30, 2000 is unaudited)
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
The balance sheet as of June 30, 2000, statements of operations for the
three and six months then ended and statements of cash flows for the six 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, 1999. Results of
operations for the three and six month periods are 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 financial statements have been presented on the basis that it is a
going concern. The Company's development stage activities have resulted in an
accumulated deficit since inception to June 30, 2000, in excess of $11.1 million
and losses are continuing. Efforts to market its products have yet to result in
the Company generating revenue. The Company's primary source of funds since
inception has been from the sale of its common and preferred stock. Management
plans include the completion of an additional private placement of equity
securities in 2000 to provide funding to allow the Company to continue its
development of its licensed technology. In addition, management has taken
certain steps and made significant management changes in an effort to reduce
operating expenses of the Company. The Company believes that with the completion
of production injection molds for one or more of its products, scheduled for the
third quarter of 2000, it will generate sales revenue in the first quarter of
2001. The Company believes these steps will provide sufficient liquidity for it
to continue as a going concern. Accordingly, the financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities or any
other adjustments that might result should the Company be unable to continue as
a going concern.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction with the
Company's financial statements, beginning on Page 3 and financial information
included elsewhere in this report.
The Company was formed primarily for the purpose of commercializing and
marketing technologies designed to maintain the sterility, purity and freshness
of flowable food and beverage products. The Company is focusing its marketing
activities on the application of licensed technologies in the Field of Use as
set forth in its License Agreement with ReSeal International Corporation
("RIC"). The Field of Use under the License Agreement encompasses the food and
beverage industries as broadly defined. The Company is also independently
developing and marketing other dispensing technology outside the RIC License
Agreement.
The Company is undertaking the formation of strategic alliances or direct
license/supply agreements with major food, beverage and chemical companies as
well as applicable equipment, bag, pouch as well as bag-in-box manufacturers.
6
<PAGE>
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 the bankruptcy of RIC, the
status of the continuing obligations of the various parties to and under the
License Agreement 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.
For further information concerning the business conducted by the Company, see
Item 1. "Description of Business" in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1999.
Results of Operations
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Revenue - The Company has not generated any revenue since its inception.
Operating Expenses - For the six months ended June 30, 2000 the Company had
operating expenses of $860,317, representing an $168,475 increase versus the
same period last year. Operating expenses for the six month period ended June
30, 2000 included $281,039 in Research and Development related expenses,
(including fees paid to three (3) engineering firms and a university for
conducting product development tests) and $241,223 in accounting, legal and new
patent filing expenses.
The Company also prepaid a full-year's rental expenses in the first quarter of
2000. This payment equates to an incremental $26,000 cash outlay in the first
six months of 2000 versus the same period ended June 30, 1999.
In the first quarter of 1999, RIC made a partial payment to the Company of
$50,825 for a portion of its patent annuity expenses. In the first six months of
2000 RIC has not made a contribution to the on-going patent annuity expenses.
Net Loss - For the six months ended June 30, 2000, the Company had a net loss of
$847,388 versus a net loss of $622,226 for the six months ended June 30, 1999.
The $225,162 increase was primarily the result of the additional operating
expenses the Company incurred in marketing three (3) new products in the first
six months of 2000 compared to one product development effort in the first six
months of 1999.
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Revenue - The Company has not generated any revenue since its inception.
Operating Expenses - For the three months ended June 30, 2000 the Company had
operating expenses of $407,288, representing an $8,583 decrease versus the same
period last year. Expenses associated with travel, entertainment and salaries
were down significantly versus the same period last year. Operating expenses in
the first quarter of 2000 included $157,117 in Research and Development related
expense and $88,748 in accounting legal and patent filing expenses.
Net Loss - For the three months ended June 30, 2000, the Company had a net loss
of $400,664 versus a net loss of $409,151 for the three months ended June 30,
1999. This decrease in net loss of $8,487 was the result of savings in salaries,
travel and other operating expenses.
The Company has reported a loss from operations of $6,446,787 since inception.
7
<PAGE>
Financial Condition
As reflected in the financial statements, the Company has experienced continuing
net losses and negative cash flows from operations through June 30, 2000. The
Company's continuing existence is dependent on its ability to achieve and
maintain profitable operations. The Company continues to be in the development
stage and does not anticipate generating any operating revenue until at least
the first quarter of the fiscal year 2001, at which time, it may be in a
position to generate revenue from sales of its products.
As of June 30, 2000, the Company had working capital of approximately $339,000.
The Company anticipates that during the remainder of fiscal year 2000, the
Company will be spending at a rate of approximately $150,000 per month.
Therefore, the Company expects that it will require additional capital to
finance its operations during and the third quarter of fiscal 2000.
The Company is currently studying the alternatives under which the Company may
raise additional funds and is negotiating the terms of an additional equity
investment by certain of its existing stockholders. The Company expects that it
will need an additional $3,000,000 to $4,000,000 for the two-year period
commencing in the third quarter of fiscal 2000. 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 and product
commercialization activities. Ultimately, the Company's ability to continue as a
going concern is dependent upon its ability to sell its equity securities and to
produce and market its products (see Note 2 of Notes to Financial Statements).
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
In or about January 2000, Nologies, Inc. ("Nologies"), a former consultant to
the Company based in Hartford, Connecticut, commenced an arbitration proceeding
against the Company before the American Arbitration Association in Hartford,
Connecticut. Nologies sought an extension of time to exercise certain stock
options granted to it (the exercise period of which the Company believes had
expired), $12,000 allegedly due for unpaid consulting fees and $10,256.79 in
reimbursable expenses, together with interest and the costs of the arbitration.
The Company successfully changed the locale of the proceeding to New York. Prior
to the arbitration hearing, the dispute was settled by the Company paying the
sum of $20,000 and the parties exchanging general releases, including the
release of Nologies' claim for stock options.
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.
At a meeting held June 12, 2000 the Company's Board of Directors unanimously
agreed to extend the employment contract of Gary R. Allanson, the Company's
Chairman of the Board and Chief Executive Officer, for an additional year
(through March 2002) at the same salary.
8
<PAGE>
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.
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: August 10, 2000 By: /s/ Gary Allanson
----------------------------------------
Gary Allanson
Chief Executive Officer & President
(Principal Executive, Accounting and
Financial Officer)
9
