<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended April 29, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________.
Commission file number: 0-14922
AMERICAN BUSINESS COMPUTERS CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-2001203
_______________________________ __________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
451 Kennedy Road Akron, Ohio 44305
_______________________________________ _________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 733-2841
Securities registered pursuant to Section 12(b) of the Act: None
____
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, Par Value $.01
____________________________
(Title of class)
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 (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: [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: [ X ]
The aggregate market value of the voting stock held by non-affiliates
as of July 17, 1995 was $34,115,000.
The number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date is: Common Stock
outstanding at July 17, 1995 was 16,037,701 shares.
Documents Incorporated by Reference
The Registrant's Proxy Statement for the 1995 Annual Meeting of Shareholders is
incorporated by reference in Part III.
Total number of pages of this report: 26.
Index to Exhibits located on page 25.
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ITEM 1. BUSINESS
-----------------
CORE COMPETENCE
ABC ("the Company") is a technology firm. Our core competence is our
ability to use existing technology and to create new technology to develop
dispensing systems and mechanisms. Our interpretation of dispensing systems
and the related technology is unrestricted. The Company is not limited to
dispensing liquids; the Company will dispense virtually any substance. The
Company is not limited to pneumatic or electronic technology, the Company will
utilize any technology including mechanical, electro-mechanical, hydraulic, and
sonic.
Pure research is time consuming and expensive. The Company
concentrates on developing solutions for specific known applications. The
Company has a unique approach to creating new, innovative solutions by
combining first principles of physics with state-of-the-art electronics. The
Company designs its own computer controlled systems--both hardware and
software.
The Company has a talented, creative, experienced, and motivated staff.
The Company is a technology firm, not a manufacturer. However, two operational
advantages the Company has over technically oriented firms are: (1) the ability
to produce the systems we design and (2) our ability to offer field technical
support (training, installation, and emergency service). Design advantages
include speed, ease of use, reduced maintenance and reduced environmental
impact. The Company has developed products which have gained commerical
acceptance in both the paint and beverage industries.
DISPENSING MARKET
Dispensing pervades nearly every industry.
Dispensing plays a key role in some of the world's largest industries:
for example, transportation, medical/pharmaceutical, and food service, to name
a few. In addition to a growing, global demand for dispensing systems for
fuel, drugs, and beverages, there is a need for dispensing systems in the
construction industry for concrete additives, the graphics industry for
printing ink, and the paint industry for tints and bases. Everyday each of us
uses water in our homes, without thinking of it as a dispensing system--but it
is. The industrial use of water for cooling, heating, and cleaning also
requires a dispensing system. Dispensing systems are an ubiquitous part of
most individual's and business' daily routines. Dispensing occurs at the
manufacturing, wholesale, retail levels, and residential. The current trend in
corporate downsizing could create additional opportunities for outsourced
research and development.
Dispensing systems are designed to accurately and efficiently control
and measure product movement; i.e., the Company does not narrowly define
dispensing as only moving a product from point A to point B. Further, the
Company sees opportunity to use our unique technology to incorporate production
functions with the dispensing process (e.g., customize at the point-of-sale),
thereby providing our customers additional cost savings and other market
advantages.
The Company also sees opportunities for dispensing systems to
contribute to global environmental improvements. Some of our beverage systems
employ computer controlled mixing techniques which reduce product waste in
calibration procedures. Also, our tint dispensing systems have eliminated the
need for daily product purges. Further, the Company believes dispensing
technology could help reduce packaging and packaging waste.
MISSION STATEMENT & STRATEGY
The Company is dedicated to the development and commercialization of
dispensing technology for a wide range of industries.
Our strategy is to develop dispensing systems and components in
partnership with industry leaders who have significant market shares and
effective marketing organizations. These new dispensing systems are to be
marketed by our business partners. Our joint efforts will maximize our
technological strengths and capitalize on the marketing strengths of our
industry leading partners.
Dispensing technology can be transferred among industries. This means
that the Company does not have to start with a clean slate for the development
of every new product. Every new system and component that is developed makes
the next one less expensive and more readily obtainable.
The Company markets both self contained, complete dispensing systems
and individual dispensing components (valves, nozzles, controls, etc.).
Components can be designed for a specific objective or developed as part of a
complete system and then sold to meet other dispensing needs. The number of
components will automatically grow with the growth in the number of complete
systems being developed. In addition to the development and commercialization
of the dispensing products, the Company offers a complete array of supporting
services, including quality assurance, training, installation, and field
support. These are more than ancillary services to the development process;
they help us to better understand the marketplace, and are an integral part of
the Company's long-term growth plan.
BUSINESS RISKS
As a research and development company, the Company faces certain
inherent risks: (1) new product ideas may not advance beyond the development
stage; (2) new products could be technically successful but fail commercially;
(3) successful new products could develop unplanned warranty expenses or face
recall; and, (4) new products could be replaced by more advanced competitive
products. The Company has taken steps to monitor and mitigate these potential
risks, including the utilization of advanced Quality and Project Management
Systems.
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PRODUCTS
Beverage
--------
The Company is currently selling four beverage dispensing products:
The Company's unique Juice Dispenser attracted a $7 million initial
order on July 17, 1995. The customer name cannot be divulged at this time
pursuant to their request for secrecy for competitive reasons. This new
product substantially reduces waste, spoilage, and dispensing time. This new
product also marks a substantial reduction in turnaround time between the start
of development and the receipt of the initial major order. This
microprocessor-driven system mixes and dispenses juice from concentrates,
ensuring a controlled mixture and an accurate, standard portion. The
technology could have broad commercialization prospects. Juices are typically
only available in cans, cartons or bottles at most restaurants and other food
outlets. This technology is adaptable for fountain juice dispensing to serve
today's health conscious consumers.
The Company is currently field testing its new Cold Coffee Dispenser in
several Starbucks Coffee Company ("Starbucks") locations, in conjunction with
The North American Coffee Partnership (a Starbucks and Pepsi-Cola Company
["Pepsi"] joint venture). The partnership's first product is a new fountain
cold coffee beverage, called MAZAGRAN. The Company has developed a custom
dispensing system for this refreshing, lightly carbonated beverage made with
Starbucks coffee. The microprocessor-driven system mixes and dispenses more
ingredients than conventional dispensers that only mix soda and a syrup.
The Company has applied for a patent on the coffee dispensing technology for
the system; this dispenser also employs some of the Company's previously
patented technology. The North American Coffee Partnership will determine the
length of the test and future rollout of the system.
The Company markets a line of Classic(TM) computerized soft drink
dispensers. The Classic line evolved from the original Omnitron(TM) system.
The advantages of the Classic line are competitive speed and ability to control
the following: brix (ratio), stratification, foam, carbonation, and portion
control. The Classic line is priced above the competitors' dispensing
equipment. Marketing efforts are directed primarily towards theater chains.
The Company demonstrates the advantages of the dispenser and the improved
customer satisfaction by conducting "no charge" tests in operating retail
locations. To date, approval of the Classic line has not been granted by Pepsi
or Coca-Cola Company ("Coke"). The soft drink dispensing equipment market is
highly competitive. There are several well-established competitors that have
the approval and support of Pepsi and/or Coke. Sales of soft drink dispensers
and components were approximately $375,000, or 11 percent of total Company
sales in fiscal 1995.
The Company also markets a line of liquor dispensing systems. The
UltraBar(TM) system is able to quickly pour complex mixed drinks via a
customized touch-sensitive drink selector. Advantages are electronic cash and
inventory accountability, and reduction of the following: theft, breakage,
spillage, overpours, and giveaways. Marketing efforts are limited and are
directed primarily towards nightclubs and bowling centers. Sales of liquor
dispensing systems were approximately $450,000, or 13 percent of total Company
sales in fiscal 1995.
Paint
-----
The Company is currently selling two paint dispensing products:
The automated paint tint dispensing system, Tint-A-Color(TM), was the
Company's first entrant into industrial dispensing. This product was developed
exclusively for The Sherwin-Williams Company ("Sherwin-Williams") and is
marketed exclusively by them. This exclusivity agreement applies to North
America only through May 1996. The first order for Tint-A-Color Systems was
received in February 1993; production commenced in April 1993. This system
accurately dispenses tints to match precise color formulas stored in an
interfaced computer. Features include higher reliability due to the
utilization of pneumatic pumps (versus conventional gear-driven pumps) and
increased yield through the elimination of tint purging. The Tint-A-Color is
approximately the size of a standard office copier, and is geared for high
volume retail and paint contractor outlets. Another order (the fourth), worth
$1.9 million, was received from Sherwin-Williams in April 1995.
The Company developed a second tint dispenser for Sherwin-Williams,
called the "TAC-CB" This unit is smaller and less expensive than the
Tint-A-Color. In February 1995, the Company received its first production
order, worth $1 million, for the new smaller computerized paint tint dispensing
system. Sherwin-Williams has exclusive rights to this new dispenser in North
America through May 1997. Commercialization of the small scale system
represents an important benchmark in the Company's paint dispensing business,
because it addresses the needs of the largest segment of the worldwide retail
paint market. The Company's growth strategy is sharply focused on developing
and bringing to market computerized dispensing products which can gain
substantial market share in the paint industry. This new system had been in
development for about two years under a joint design program between the
Company and Sherwin-Williams. Since the unit was designed expressly for paint
retailers and "do-it-yourself" chains, the technological advantages of this
user-friendly system should lead to higher customer satisfaction at the retail
level. The new unit can be electronically interfaced with bar code scanners
and color matching equipment and has size, cost and maintenance advantages.
The user-friendly, computer controlled system dispenses tints into pint, quart,
gallon and five gallon cans and has the same "no purge" feature as the larger
Tint-A-Color system.
The Company has begun marketing its paint products to potential
customers in Europe, Latin America, and the Far East and expects to introduce
its paint product line into other international markets. Automatic tint
dispensing systems have been available for many years. The Company's products
must compete on price and performance levels with these existing conventional
systems.
Sales of paint dispensing systems were approximately $1,700,000, or 51
percent of total Company sales in fiscal 1995.
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Emerging Products
-----------------
The Company has several new products in development and plans to
introduce them in 1996. The Company is developing these emerging products for
specific industry leaders who have significant market shares and effective
marketing organizations. The Company must limit the availability of
information on these emerging products to protect the Company and the
above-referenced marketing partners from their respective competition.
Services
--------
The Company has more than 20 years of field service experience. In
addition to servicing the Company's dispensing systems, the Field Service
Division is qualified and prepared to install and service all types of
pneumatic, electro-mechanical, and microprocessor controlled products. Through
the Company's marketing efforts, it has been determined that many manufacturers
lack the resources, technical skills, or the desire to install and service
their own equipment. In many situations, these manufacturers have customers in
remote locations with no economical way to service them. The Company is able
to offer economical installation and service arrangements to these
manufacturers by utilizing the Company's existing field service structure.
As a result, these manufacturers achieve an economical solution to their
installation and service problems, thereby potentially increasing their ability
to sell and open up new markets, thus potentially increasing the demand for the
Company's field service force.
Additionally, a technological benefit is gained by offering field
service support. The Company is learning and working with different
technologies that it may otherwise not have been exposed to. This information
will assist the Company's research and development teams in their product
conceptualization and design functions.
The Company is planning to expand its field service force to take
advantage of these opportunities.
SALES BACKLOG
As of April 29, 1995, sales order backlog (unshipped product orders)
was $3.1 million. As of April 30, 1994, order backlog was $1.8 million. The
$7 million Juice Dispenser order was received on July 17, 1995, boosting the
backlog to $9.4 million at that date.
INTERNATIONAL SALES
Virtually all international sales for fiscal 1995 were shipments of
liquor dispensing systems to Canada. International sales for fiscal years
1995, 1994, and 1993 were 3, 2, and 15 percent of total sales, respectively.
HUMAN RESOURCES
As of July 17, 1995, the Company had 49 full-time employees compared to
43 last year. The Company has cash and stock option incentive plan programs
for substantially all full-time employees. The employees are not represented
by a union. Temporary workers are utilized in the production process. A
highly qualified labor pool exists in the immediate geographic area should the
Company need to expand our workforce.
PATENTS AND TRADEMARKS
The Company has consistently sought patent protection for our
proprietary technology and products. To date, 26 patents are outstanding and
an additional 11 are pending. Patent coverage of our dispensing technology is
broad. Research and development expenditures for the fiscal years 1995, 1994,
and 1993 were $606,000, $386,000, and $391,000, respectively.
Trademarks have been issued for the following:
FlavorGuard
Classic 1000
Classic 2000
UltraBar
Classic 100
"Innovative Solutions Through Applied Science"
ABC Dispensing Technologies
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<PAGE> 5
ENTITIES & FISCAL YEAR
"ABC" is comprised of three legal entities: the parent (public
entity)--American Business Computers Corporation (a Florida corporation)
(NASDAQ:ABCC), the operating subsidiary--ABC Dispensing Technologies, Inc. (an
Ohio corporation), and a second subsidiary that holds the patents--ABC Tech
Corp. (an Ohio corporation).
"Fiscal Year 1995" ended April 29, 1995. The Company has adopted a
fiscal year ending on the Saturday closest to April 30. Each quarter consists
of 13 weeks:
<TABLE>
<CAPTION>
FY95 (10-K) FY96 (Current Year)
---------- ------------------
<S> <C> <C>
1st Qtr July 30, 1994 July 29, 1995
2nd Qtr October 29, 1994 October 28, 1995
3rd Qtr January 28, 1995 January 27, 1996
4th Qtr April 29, 1995 April 27, 1996
</TABLE>
ITEM 2. PROPERTIES
------------------
The Company owns a single floor building of approximately 18,400 square
feet of office, laboratory and production space located in Akron, Ohio. The
facility and adjacent land were purchased in June, 1994 by the Company from
Joseph W. Shannon, former Chairman of the Company, for $490,000. Prior to the
purchase, the facility and land were appraised for $535,000. The Company had
previously leased the facility from Mr. Shannon. This acquisition was
partially financed by a bank note; the balance on this note was $288,000 as of
April 29, 1995.
The Company leases additional laboratory and warehouse space from
independent third parties on an as needed basis.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
A. SECURITIES LITIGATION
On March 2, 1995 the Company reported it had reached a settlement with
the plaintiffs in a class action lawsuit, filed originally in 1991. The
Federal Court approved the settlement on June 16, 1995. The plaintiffs are
current and former shareholders who purchased shares during the period January
24, 1990 through August 1, 1991. The settlement provides for the payment to
the plaintiff class of a minimum aggregate of $6,500,000 in cash and shares of
the Company's common stock. The cash portion of the settlement will consist of
$1,850,000, of which approximately $1,400,000 has been funded by certain of the
named individual defendants who are current or former officers or directors,
with the Company funding the remaining $450,000 on June 8, 1995. The stock
portion of the settlement will consist of 1,550,000 shares of the Company's
common stock, subject to adjustment if the per-share price falls below $3.00 or
rises above $4.50. The Company will fund 150,000 shares, with the Pepsi-Cola
Company funding 1,000,000 shares and Hussmann Corporation funding 400,000
shares. Pepsi-Cola and Hussmann were co-defendants in the litigation. The
Company will grant common stock purchase warrants having a term of five years
to Pepsi for 500,000 shares and to Hussmann for 200,000 shares, at an exercise
price of $3.50 per share. The warrants are callable after three years if the
price of the Company's common stock is in excess of $10.00 per share.
Refer to Form 10-K for the fiscal year ended April 30, 1994 for more
information on this litigation.
B. CONTRACT LITIGATION
On December 22, 1994, the Company reported it had reached a definitive
settlement agreement with the Pepsi-Cola Company relating to litigation that
had been pending since 1993 in the United States District Court for the
Northern District of Ohio in Akron. The Company sought to recover damages for
substantial breaches of contract by Pepsi with respect to the development,
manufacture, and sales of the Omnitron, Minitron, Midtron, and Advanced
Omnitron soft drink dispensing systems. Pepsi has agreed for a period of five
years to offer its customers using the Company's beverage dispensing equipment
its standard marketing, merchandising or equipment allowances, which will help
the Company build its beverage dispensing sales. Pepsi has agreed to give any
application for approval of the Company's fountain equipment and soft drink
dispensing equipment fair consideration in accordance with its supplier
approval procedures, with Pepsi retaining the right to approve within its sole
discretion. Pepsi is also under no obligation to recommend, encourage, or
promote the sale or use of the Company's products.
Refer to Form 10-K for the fiscal year ended April 30, 1994 for more
information on this litigation.
As of June 30, 1995, Pepsi owned 2,000,000 common shares of the
Company, or 12.5% of the total outstanding stock. Subsequent to Pepsi's
funding of 1,000,000 shares to the Securities Litigation settlement, Pepsi's
ownership will be reduced to approximately 6.2%.
C. LEGAL FEE AND SETTLEMENT COST ACCRUAL
The estimated legal fees and settlement costs have been accrued for
both of the above actions. The accrual as of April 29, 1995 was $1,498,000.
The accrual (legal fees, only) as of April 30, 1994 was $946,000.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
-------------------------------------------------------------------------
MATTERS
-------
A. PRICE RANGE OF COMMON STOCK
---------------------------
Bid and ask prices for the Company's common stock (symbol `ABCC') have
been quoted on the NASDAQ system since March 28, 1985. The table below shows
the range of bid prices of the common stock for the last two years as reported
by NASDAQ.
<TABLE>
<CAPTION>
Common Stock (ABCC):
-------------------------------------------------------------------------------
Year Ended April 29, 1995 Prices: High Bid Low Bid
-------------------------------------------------------------------------------
<S> <C> <C>
01/29/95 - 04/29/95 (Fourth Quarter) $3 - 1/2 $2 - 1/2
10/30/94 - 01/28/95 (Third Quarter) 3 - 3/4 2 - 3/4
07/31/94 - 10/29/94 (Second Quarter) 3 - 1/2 1 - 5/8
05/01/94 - 07/30/94 (First Quarter) 2 - 11/16 1 - 1/8
-------------------------------------------------------------------------------
Year Ended April 30, 1994 Prices: High Bid Low Bid
-------------------------------------------------------------------------------
02/01/94 - 04/30/94 (Fourth Quarter) $2 - 7/16 $1 - 1/8
11/01/93 - 01/31/94 (Third Quarter) 3 - 5/8 2 - 7/16
08/01/93 - 10/31/93 (Second Quarter) 3 - 3/4 2 - 5/16
05/01/93 - 07/31/93 (First Quarter) 3 - 15/16 2 - 3/16
</TABLE>
B. APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
---------------------------------------------
<TABLE>
<CAPTION>
Approximate Number of
Record Holders
Title of Class (as of July 17, 1995)
-------------- -------------------
<S> <C>
Common Stock, $.01 par value 741 (1)
</TABLE>
C. DIVIDENDS
---------
The Company has never paid a dividend and has no current plans to do
so. Future dividend policy will be determined by the Board of Directors based
on the Company's earnings, financial condition, capital requirements, and other
existing conditions.
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ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED APRIL 29, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
---------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES (a) $ 3,359,000 $ 5,010,000 $ 2,329,000 $ 2,971,000 $ 4,830,000
NET LOSS $(2,681,000) $(1,378,000) $(3,359,000) $(3,440,000) $ (149,000)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 15,668,993 14,155,215 13,820,280 13,800,966 13,792,635
NET LOSS PER SHARE $ (0.17) $ (0.10) $ (0.24) $ (0.25) $ (0.01)
TOTAL ASSETS $ 3,719,000 $ 4,190,000 $ 4,102,000 $ 6,886,000 $ 9,261,000
LONG-TERM OBLIGATIONS $ 278,000 $ -0- $ -0- $ -0- $ -0-
STOCKHOLDERS' EQUITY $ 515,000 $ 2,194,000 $ 2,011,000 $ 5,323,000 $ 8,181,000
DIVIDENDS DECLARED
PER SHARE OF COMMON STOCK $ -0- $ -0- $ -0- $ -0- $ -0-
RESEARCH & DEVELOPMENT (a) $ 606,000 $ 386,000 $ 391,000 $ 304,000 $ 275,000
<FN>
(a) Research & Development costs for fiscal years 1991, 1993, 1994, and 1995
include costs subject to reimbursement under various agreements. The amounts
earned under these agreements are included in revenues for the respective years.
</TABLE>
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Effective May 1, 1994, the Company changed the fiscal year end to the
Saturday closest to April 30. All references to fiscal years 1995, 1994, and
1993 are to the twelve months ended April 29, 1995, April 30, 1994, and April
30, 1993, respectively. "FY95," for example, refers to the fiscal year ending
April 29, 1995.
SIGNIFICANT SUBSEQUENT EVENT
On July 17, 1995, the Company received a $7 million initial order for
its new Juice Dispenser. This is the largest single order the Company has ever
received and brings the Company's backlog to a record $9.4 million as of July
17, 1995. The microprocessor-driven system mixes and dispenses juice from
concentrates, ensuring a controlled mixture and an accurate, standard portion.
The Company filed for a patent on the controlling electronics and software.
Shipments of this new product are expected to begin in the December
1995-January 1996 time period. The shipments are expected to spread over a
period of 18 months.
LITIGATION
On December 22, 1994, the Company reported it had reached a definitive
settlement with the Pepsi-Cola Company relating to the breach of contract
litigation.
On March 2, 1995 the Company reported it had reached a settlement with
the plaintiffs in a class action lawsuit, filed originally in 1991. The
Federal Court approved the settlement on June 16, 1995. The plaintiffs are
current and former shareholders who purchased shares during the period January
24, 1990 through August 1, 1991. The settlement provides for the payment to
the plaintiff class of a minimum aggregate of $6,500,000 in cash and shares of
the Company's common stock. The cash portion of the settlement will consist of
$1,850,000, of which approximately $1,400,000 has been funded by certain of the
named individual defendants who are current or former officers or directors,
with the Company funding the remaining $450,000 on June 8, 1995. The stock
portion of the settlement will consist of 1,550,000 shares of the Company's
common stock, subject to adjustment if the per-share price falls below $3.00 or
rises above $4.50. The Company will fund 150,000 shares, with the Pepsi-Cola
Company funding 1,000,000 shares and Hussmann Corporation funding 400,000
shares. Pepsi-Cola and Hussmann were co-defendants in the litigation. The
Company will grant common stock purchase warrants having a term of five years
to Pepsi for 500,000 shares and to Hussmann for 200,000 shares, at an exercise
price of $3.50 per share. The warrants are callable after three years if the
price of the Company's common stock is in excess of $10.00 per share.
The Company accrued an additional $1 million in fiscal year 1995
("FY95") to account for the settlement expenses and remaining legal fees. The
Company is liable for additional settlement expenses (additional shares at fair
market value) should the Company's common stock market price per share fall
below $3.00 during a future defined settlement period (Fall 1995). For example,
a common stock price of $2.75 would require the Company to contribute to the
settlement fund an additional 141,000 shares and incur an additional $275,000
settlement expense.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
The net loss was $2,681,000 for FY95 compared to $1,378,000 for fiscal
year 1994 ("FY94"). Decreased revenues and the $1 million accrual for legal
settlement expenses and fees were responsible for the increased loss.
FY95 total revenues were $3,359,000 compared to FY94 total revenues of
$5,010,000. The decline in revenues was due primarily to reduction in shipments
of Tint-A-Color paint dispensers in FY95. The following is a comparison of
equipment sales (which includes royalty and product development fees):
<TABLE>
<CAPTION>
Equipment sales: FY95 FY94
<S> <C> <C>
Paint dispensers $1,819,000 $3,468,000
ComputerBar dispensers 451,000 410,000
Soft drink dispensers 404,000 447,000
Other 2,000 95,000
---------- ----------
$2,676,000 $4,420,000
</TABLE>
The history of Tint-A-Color orders and shipments is as follows:
<TABLE>
<CAPTION>
Order dates Ship dates Sales Volume
<S> <C> <C>
February 1993 April-October 1993 $1,637,000
June 1993 October 1993-Feb 1994 $1,663,000
March 1994 June-October 1994 $1,659,000
April 1995 (est.) July-October 1995 $1,866,000
</TABLE>
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<PAGE> 9
The Company did receive a $1,866,000 order for additional Tint-A-Color
units in April 1995 and will begin shipping them in July 1995. The order and
ship dates were delayed due to significant changes made to this most recent
version of the Tint-A-Color.
On February 13, 1995, the Company also received a $990,000 initial
order of "TAC-CB" units, the down-sized, lower-cost tint dispenser designed
expressly for paint retailers and chains. The TAC-CB was in joint development
for two years with Sherwin-Williams. The Company began shipping this new unit
in May 1995 (the beginning of fiscal year 1996).
The Company's gross profit on overall equipment sales decreased from
25.3% in FY94 to 21.8% in FY95 due to the $150,000 inventory obsolescence
reserve writeoff taken in the third quarter for slow-moving beverage products.
Without this additional reserve, the gross margin on overall equipment sales
for FY95 is 27.7%.
The Company offers technical field support for its products. Revenues
from this field support group was $686,000 for FY95 compared to $590,000 for
FY94. As previewed on Page 4 of this Form 10-K, the Company expects to
significantly expand this technical group in FY96.
An activity-based costing system was implemented at the beginning of
FY95. Operating costs and expenses are now recorded based on the activity that
drives them (i.e. Products & Services, G&A, Selling and Marketing, Research and
Development). Certain reclassifications have been made to the FY94 (and FY93)
figures to conform with FY95 classifications.
General and administrative expenses increased 5% from FY94 primarily as
a result of increased public entity related costs, such as public relation
expenses.
Selling and marketing expenses increased 8% from FY94 due to the
following additions: (1) In November 1994, Randolph D. Letsch was recruited as
V.P. Paint Sales of ABC Dispensing Technologies, Inc., the Company's operating
subsidiary. Mr. Letsch joined the Company from Sherwin-Williams where he was
Director of Sales, OEM and National Accounts, a position he held since 1986.
The Company's intent was to acquire marketing expertise needed to expand the
commercialization of paint dispensing both domestically and internationally;
(2) In February 1995, the Company promoted David B. Hudson to V.P. Sales -
Domestic Beverage Equipment of ABC Dispensing Technologies, Inc. to enhance the
beverage marketing efforts; (3) In March 1995, the Company recruited Keith P.
Jordan from Pepsi-Cola Company, Houston, to enhance both beverage and new
product marketing efforts.
Research and development expenses increased 57% from FY94 as a result
of increased new product development activity. (1) Numerous dispensing
applications were under development during FY95 and these development projects
have continued into FY96. The Juice Dispenser and TAC-CB were two such
projects. (2) The activity-based costing system provides for any employee
incurring time on new product development to be accounted for as an "R&D
expense" regardless of their basic functional responsibilities. Therefore,
administrative personnel, if assigned a task on a new product development team,
can and have added to R&D expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance decreased $712,000 during FY95, from
$2,021,000 to $1,309,000.
Operating activities required $1,510,000. This requirement was
partially funded by the net proceeds ($979,000) from a private placement of 1
million common shares in August-September 1994. Officers, directors, and
employees purchased 271,000 shares. The Company financed the officer and
employee purchases with 5-year notes. For each share of common stock,
subscribers were also granted a warrant to buy one additional share of common
stock for $2.00. These warrants expire 5 years from their issue date. The
common shares and warrants were registered with the Security and Exchange
Commission in May 1995 and can be traded at this time.
In August 1994, the Company acquired the Akron, Ohio headquarters
facility and adjacent land for $490,000 from Joseph W. Shannon, former
Chairman of the Company. The facility and land were appraised for $535,000. The
Company financed 60 percent of this acquisition with a bank note (see Note 4 to
Consolidated Financial Statements). The 40 percent balance was originally
financed by a margin account on a short-term investment; this margin account
was paid in full subsequent to FY95.
The Company ended FY95 with a cash balance of $1,309,000. Subsequent
to FY95 year end, the Company (1) paid approximately $700,000 in legal
settlement expenses and fees, and (2) acquired inventory for the current TAC-CB
and Tint-A-Color production runs. The resulting cash balance as of July 17,
1995 was $215,000.
-9-
<PAGE> 10
Through July 17, the Company has issued $400,000 in 10% senior
subordinated notes due June 1, 1998. Each unit ($25,000) of this note was
granted 12,500 three-year warrants at an exercise price of $2.00. Interest
payments are due semi-annually on June 1 and December 1. The Company also
agreed to use 40% of the net proceeds of the issuance of common stock (other
than via employee/director stock options) to prepay the notes within 60 days of
the receipt of such proceeds. These notes are, therefore, being utilized as a
"bridge" until some or all of the warrants from the August-September 1994
Placement are exercised.
FY96 is a growth year for the Company. The current backlog of orders
(as of July 17, 1995) is $9.4 million, nearly 3 times the total revenues of the
Company for FY95. The Company must complete the development of certain new
products, acquire inventory, build and ship finished products, and collect its
receivables to complete each business cycle. The Company also anticipates the
need for capital expenditures, mostly R&D related, in the range of $300,000 to
$600,000 for FY96.
During this growth period, the Company will seek additional alternative
sources of cash through:
a. Trade credit (suppliers extending terms)
b. Accounts receivable and inventory credit lines
c. Private placements
d. Warrant exercises
e. Employee/director stock option exercises
Available for placement are 600,000 shares of shelf (uncommitted) common
stock which were included in the Form S-2 Registration Statement approved by
the Securities and Exchange Commission in May 1995.
Of the 20 million authorized shares of common stock, 16 million are
issued and outstanding, 2.2 million are committed for warrants, 400,000 are
committed for employee/director stock options, and 150,000 are committed to the
class action settlement fund. Approximately 1.2 million shares remain
uncommitted. The Company will seek approval in its upcoming Proxy Statement
from the shareholders for authorization to issue additional shares of common
stock.
-10-
<PAGE> 11
RESULTS OF OPERATIONS
FISCAL YEAR 1994 COMPARED TO THE FISCAL YEAR 1993
Our strategy provided positive results in FY94. Total revenues were up
115% and the net loss was reduced 144%, to $1,378,000 compared to the prior
year net loss of $3,359,000.
<TABLE>
<CAPTION>
Equipment/Royalty/Product Development sales were: Fiscal Year Fiscal Year
1994 1993
<S> <C> <C>
Tint Dispensers $3,468,000 $ 92,000
ComputerBar Dispensers 410,000 464,000
Soft Drink Dispensers 447,000 1,030,000
Other 95,000 45,000
---------- ----------
Total $4,420,000 $1,631,000
</TABLE>
The gross profit margin on all equipment/royalty/product development
sales was 25.3% compared to the prior year margin of 18.9%.
Service and support revenues were $590,000 for the year versus $698,000
for the prior year. The decline is attributable to the decrease in computerbar
and soft drink dispenser sales; fewer installations were performed during the
year.
PAINT DISPENSING LINE
As of April 30, 1994, the backlog of tint dispenser orders totaled
$1,676,000; the majority of this backlog is scheduled to ship in the first
quarter of fiscal 1995. The paint market is seasonal; future tint dispenser
revenues may fluctuate from highs in the summer months to lows in the winter
months.
SOFT DRINK DISPENSING LINE
Soft drink dispensers are being sold directly to end-users. We do not
have the approval of Pepsi or Cola nor do we anticipate this approval. It will
be difficult for us to gain extensive market penetration. The ongoing
litigation with Pepsi has adversely affected our soft drink revenues. Because
of this situation, we reviewed our alternatives, such as designing and selling
components in lieu of complete systems.
COMPUTERBAR DISPENSING LINE
The computerbar equipment market in the U.S. has declined and
price-based competition has increased. We continue to sell the product direct
to end-users as well as through dealers in the U.S. and Canada. Alternatives
are being reviewed for this product line.
RESEARCH, DEVELOPMENT AND DESIGN
Research, Development and Design expenditures were $583,000 of which
49% ($286,000) was invested in specific new product development.
Research, Development and Design costs will increase as we explore and
develop new applications for our dispensing technology. We have and will
continue to expand our technical staff and resources to meet the increased
demand. Development work is progressing on two new dispensing products. Each
development agreement is contingent upon creating a product acceptable to our
business partner(s). We cannot predict the likelihood of this event, nor can
we predict commercial success of these products.
SELLING AND MARKETING
The Company increased its selling and marketing efforts. A new
brochure was created; ads were placed in specific industry publications.
Expenses in this category decreased temporarily during the Company's transition
from a provider of soft drink and liquor systems to a broad based supplier of
dispensing technology and services. Sales and marketing expenses will be
increasing.
-11-
<PAGE> 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES PAGE NO.
------------------------------------------------------------------------------------------------------
<S> <C>
REPORT OF INDEPENDENT AUDITORS 13
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of April 29, 1995 and April 30, 1994 14
Consolidated Statement of Operations for the Years ended April 29, 1995,
and April 30, 1994, and April 30, 1993 15
Consolidated Statement of Cash Flows for the Years ended April 29, 1995,
and April 30, 1994, and April 30, 1993 16
Consolidated Statement of Stockholders' Equity for the Years ended
April 29, 1995, and April 30, 1994, and April 30, 1993 17
Notes to Consolidated Financial Statements 18-21
SUPPLEMENTARY DATA:
Consent of Independent Auditors 22
Schedule II-Valuation and Qualifying Accounts 23
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
-12-
<PAGE> 13
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
American Business Computers Corporation
We have audited the accompanying consolidated balance sheets of
American Business Computers Corporation as of April 29, 1995 and April 30,
1994, and the related consolidated statements of operations, cash flows and
stockholders' equity for each of the three years in the periods ended April 29,
1995. Our audits also included the financial statement schedule listed in the
index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of American Business Computers Corporation at April 29, 1995 and April 30,
1994, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended April 29, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Akron, Ohio
July 11, 1995
-13-
<PAGE> 14
AMERICAN BUSINESS COMPUTERS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS April 29, 1995 April 30, 1994
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,309,000 $ 2,021,000
Trade receivables:
Accounts receivable, less allowance for doubtful accounts
of $78,000 in 1995 and $128,000 in 1994 285,000 391,000
Notes receivable 22,000 88,000
Inventories (Note 3) 1,219,000 1,348,000
------------ ------------
Total current assets 2,835,000 3,848,000
Property, Plant, and Equipment (Note 8) 1,428,000 1,024,000
Less accumulated depreciation and amortization (725,000) (923,000)
------------ ------------
703,000 101,000
Other assets:
Notes receivable 59,000 107,000
Patents, less accumulated amortization of $438,000 in 1995
and $464,000 in 1994 37,000 79,000
Patents pending and deferred charges 85,000 55,000
------------ ------------
181,000 241,000
------------ ------------
TOTAL ASSETS $ 3,719,000 $ 4,190,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 454,000 $ 305,000
Notes payable 190,000 -
Current portion of long-term debt (Note 4) 10,000 -
Accrued liabilities:
Legal fees and settlement costs (Note 10) 1,635,000 1,065,000
Employee compensation and benefits (Note 9) 232,000 182,000
Warranty reserve 183,000 163,000
Other 202,000 229,000
Deferred income 20,000 52,000
------------ ------------
Total current liabilities 2,926,000 1,996,000
Long-term debt (Note 4) 278,000 -
Stockholders' equity (Note 6):
Common Stock, $.01 par value; authorized
20,000,000 shares; 15,996,116 shares issued
and outstanding (14,981,039 in 1994) 160,000 150,000
Additional paid-in capital 17,070,000 15,921,000
Retained earnings (deficiency) (16,558,000) (13,877,000)
------------ ------------
672,000 2,194,000
Less notes receivable - stockholders (157,000) -
------------ ------------
Total Stockholders' Equity 515,000 2,194,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,719,000 $ 4,190,000
============ ============
</TABLE>
See accompanying notes.
-14-
<PAGE> 15
AMERICAN BUSINESS COMPUTERS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended April 29, April 30, April 30,
----------------------------------------------------------------------------------------
1995 1994 1993
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Products and services $ 3,208,000 $ 4,710,000 $ 2,312,000
Royalties 151,000 300,000 17,000
------------ ----------- ------------
3,359,000 5,010,000 2,329,000
Cost and expenses:
Products and services 3,053,000 4,583,000 2,798,000
General and administrative 1,049,000 999,000 967,000
Selling and marketing 406,000 375,000 620,000
Research and development 606,000 386,000 391,000
------------ ----------- ------------
5,114,000 6,343,000 4,776,000
------------ ----------- ------------
Loss from operations (1,755,000) (1,333,000) (2,447,000)
Other income (expense)
Securities and contract litigation
fees and settlement costs (Note 10) (1,000,000) (50,000) (1,084,000)
Investment income (loss) 77,000 (20,000) 113,000
Other income and expense, net (3,000) 25,000 59,000
------------ ----------- ------------
(926,000) (45,000) (912,000)
------------- ----------- -----------
Net loss $ (2,681,000) $(1,378,000) $ (3,359,000)
============ =========== ============
Weighted average number of shares
outstanding 15,668,993 14,155,215 13,820,280
============ =========== ============
Net loss per share $ (0.17) $ (0.10) $ (0.24)
============ =========== ============
</TABLE>
See accompanying notes.
-15-
<PAGE> 16
AMERICAN BUSINESS COMPUTERS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended April 29, April 30, April 30,
------------------------------------------------------------------------------------
1995 1994 1993
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
------------------------------------
Net loss $(2,681,000) $(1,378,000) $(3,359,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 99,000 139,000 228,000
Patent write offs 17,000 - -
(Gain)/loss on disposal of assets 6,000 88,000 (91,000)
Value of common stock to be issued to
settle litigation 450,000 - -
Changes in operating assets and liabilities:
Receivables 220,000 (82,000) 486,000
Inventories 129,000 681,000 533,000
Patents pending and deferred charges (30,000) 83,000 26,000
Accounts payable 149,000 (57,000) 33,000
Accrued liabilities 163,000 (48,000) 482,000
Deferred income (32,000) 10,000 13,000
---------- --------- ---------
Total adjustments 1,171,000 814,000 1,710,000
---------- --------- ---------
Net cash used in operating activities (1,510,000) (564,000) (1,649,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
------------------------------------
Additions to property, plant, and equipment (671,000) (41,000) (53,000)
Additions to patents (11,000) (23,000) (59,000)
Proceeds from sale of equipment - - 185,000
---------- ---------- ----------
Net cash provided by/(used in) investing activities (682,000) (64,000) 73,000
CASH FLOWS FROM FINANCING ACTIVITIES:
------------------------------------
Proceeds from private placements 979,000 1,463,000 -
Proceeds from issuance of notes payable 490,000 - -
Repayment of notes payable and loan costs (12,000) - -
Proceeds from stock issued for exercise of 23,000 98,000 47,000
stock options -- -- --
---------- ---------- ----------
Net cash provided by financing activities 1,480,000 1,561,000 47,000
---------- ---------- ----------
Net (decrease)/increase in cash and cash equivalents (712,000) 933,000 (1,529,000)
Cash and cash equivalents at beginning of year 2,021,000 1,088,000 2,617,000
---------- ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,309,000 $2,021,000 $ 1,088,000
========== ========== ===========
</TABLE>
See accompanying notes.
-16-
<PAGE> 17
AMERICAN BUSINESS COMPUTERS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended April 29, 1995, April 30, 1994, and April 30, 1993
<TABLE>
<CAPTION>
Number of Common Stock Additional Retained Notes
Shares of $.01 Par Paid-in Earnings Receivable-
Common Stock Value Capital (Deficiency) Stockholders
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at April 30, 1992 13,809,665 $138,000 $14,325,000 $ (9,140,000) -
Exercise of stock options (Note 5) 32,000 - 47,000 - -
Net loss for the year ended
April 30, 1993 - - - (3,359,000) -
---------- -------- ----------- ------------ --------
Balance at April 30, 1993 13,841,665 $138,000 $14,372,000 $(12,499,000) -
Private placements 1,077,343 11,000 1,452,000 - -
Exercise of stock options (Note 5) 62,031 1,000 97,000 - -
Net loss for the year ended
April 30, 1994 - - - (1,378,000) -
---------- -------- ----------- ------------ --------
Balance at April 30, 1994 14,981,039 $150,000 $15,921,000 $(13,877,000) -
Private placements 1,000,000 10,000 1,126,000 - (164,000)
Exercise of stock options (Note 5) 15,077 - 23,000 - -
Collection of notes receivable-
stockholders - - - - 7,000
Net loss for the year ended
April 29, 1995 - - - (2,681,000) -
---------- -------- ----------- ------------ --------
Balance at April 29, 1995 15,996,116 $160,000 $17,070,000 $(16,558,000) $(157,000)
========== ======== =========== ============ =========
</TABLE>
See accompanying notes.
-17-
<PAGE> 18
AMERICAN BUSINESS COMPUTERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION
----------------------------
The Company is a technology firm. The Company's core competence is the
ability to use existing technology and create new technology to develop
dispensing systems and mechanisms.
2. SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------
Year End - Effective May 1, 1994, the Company changed the fiscal year end to
the Saturday closest to April 30, which results in a fifty-two or fifty-three
week year. Fiscal 1995 consisted of fifty-two weeks. Fiscal 1994 and 1993
were calendar years.
Consolidation - The consolidated financial statements include the accounts of
the Company and its subsidiaries, ABC Dispensing Technologies, Inc. and ABC
TechCorp. Significant intercompany transactions and balances have been
eliminated in consolidation.
Cash equivalents - The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Concentration of credit - In the normal course of business, the Company enters
into transactions to meet the financing needs of customers. The Company
performs ongoing credit evaluations of customers' financial condition and
generally requires collateral from customers who finance purchases beyond
thirty days. The Company's exposure to credit risk associated with
nonperformance on these transactions is limited to amounts reflected in the
Company's consolidated financial statements, less the value, if any, of the
secured equipment.
Inventories - Inventories are valued at the lower of cost or market, using the
first-in, first-out (FIFO) method.
Property, Plant, and Equipment - These assets are recorded at cost.
Depreciation is provided primarily by use of the straight-line method over the
estimated useful lives of the assets.
Patents - Patents are recorded at cost. Amortization is provided under the
straight-line method over a period of five years or less. Patents pending are
recorded as a prepaid expense.
Revenue Recognition - Revenue on equipment sales is recognized when the product
is shipped and title transfers, including equipment that requires subsequent
installation. Revenue for development services and for service and support is
recognized when the service is performed unless there is a service contract.
Revenue from service contracts is recognized ratably over the contract term,
generally one year. Royalty income is recognized in accordance with the terms
of the royalty agreement, which generally provides that royalties are based on
units shipped.
Major Customer - Revenues from The Sherwin-Williams Company were 59 and 70
percent of the Company's total revenues, for the years ended April 29, 1995 and
April 30, 1994, respectively.
Provision for Warranty Claims - Estimated warranty costs are provided at the
time of sale of the warranted products.
Reclassifications - An activity-based cost system was implemented at the
beginning of fiscal year 1995. Operating costs and expenses are now recorded
based on the activity that drives them (i.e., Products & Services, General &
Administrative, Selling and Marketing, and Research and Development). Certain
reclassifications have been made to the prior year amounts to conform with
current year classifications.
Net loss per share - Net loss per share is computed on the basis of weighted
average number of shares outstanding for the period. Common stock equivalents
are not material, and therefore, are not included in the computation of primary
earnings per share.
3. INVENTORIES
-------------------
<TABLE>
<S> <C> <C>
Composition of inventories: April 29, 1995 April 30, 1994
Raw materials $ 527,000 $ 698,000
Work-in-process 207,000 150,000
Finished goods 485,000 500,000
---------- ----------
$1,219,000 $1,348,000
========== ==========
</TABLE>
The above amounts are net of obsolescence reserves of $943,000 in 1995 and
$816,000 in 1994.
-18-
<PAGE> 19
AMERICAN BUSINESS COMPUTERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. FINANCING ARRANGEMENTS
------------------------------
Long-term debt consists of the following at April 29, 1995:
<TABLE>
<S> <C>
Note payable to bank $288,000
Less amounts due within one year (10,000)
--------
Total long-term debt $278,000
========
</TABLE>
The note payable to bank was entered into during fiscal 1995 to
partially finance the purchase of the headquarters facility which was
previously leased from the former chairman (see Note 7). The note payable has
an adjustable interest rate ( 9.25% at April 29, 1995) which may not increase
or decrease by more than 2% once every three years. The maximum increase or
decrease is 6% over the life of the loan. Principal and interest payments of
$3,026 are payable monthly with the balance of $143,000 due October 1, 2005.
The note payable is secured by the headquarters facility. The facility has a
net book value of $485,000.
Maturities of long-term debt for the five years subsequent to April 29,
1995 are as follows: 1996-$10,000; 1997-$11,000; 1998-$12,000; 1999-$13,000 and
2000-$15,000.
The Company also has a note payable on a cash equivalent margin account
of $190,000 at April 29, 1995 which bears interest at a variable interest rate
(7.5% weighted average rate in 1995). The note was repaid in full by the
Company in June 1995.
During 1995, the Company incurred interest expense of $28,000, which
approximates interest paid.
5. INCOME TAXES
--------------------
Effective May 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method in accordance
with the provisions of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes." The change had no impact on the accompanying
financial statements. Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of Company
assets and liabilities.
The components of the Company's deferred income tax assets are as
follows:
<TABLE>
<CAPTION>
April 29, 1995 April 30, 1994
<S> <C> <C>
Net operating loss carryforwards $ 4,709,000 $ 4,117,000
Inventory 447,000 407,000
Other 363,000 344,000
----------- ----------
Total deferred tax assets 5,519,000 4,868,000
Valuation allowance for deferred taxes (5,519,000) (4,868,000)
----------- -----------
Net deferred taxes $ -0- $ -0-
=========== ===========
</TABLE>
At April 29, 1995 and April 30, 1994, the Company had Federal net
operating loss carryforwards for tax reporting purposes of approximately
$12,208,000 and $10,172,000, respectively which expire in the years 1996 to
2010. It is uncertain if benefits relating to these deferred tax assets are
realizable and accordingly, a valuation allowance equal to the amount of such
deferred tax assets has been recorded.
-19-
<PAGE> 20
6. COMMON STOCK
--------------------
Stock Option Plans
On February 16, 1990, the Board of Directors adopted the American
Business Computers Corporation 1990 Non-qualified Stock Option Plan (the "1990
Plan") for directors, officers and employees of the Company, its subsidiaries
and affiliates. The 1990 Plan was approved by the affirmative vote of the
Company's stockholders at the Annual Meeting on August 24, 1990 authorizing
500,000 shares. All granted options expire five years after grant date;
all options were granted at the fair market value at the date of the grant.
<TABLE>
<CAPTION>
Stock option transactions
under the 1990 Plan:
Officers' and Employees' Shares Under Option Directors' Shares Under Option
For Year Ended For Year Ended For Year Ended For Year Ended
April 29, 1995 April 30, 1994 April 29, 1995 April 30, 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Outstanding, Beginning of Year 104,018 153,049 75,000 -0-
Granted 119,500 10,000 120,000 75,000
Exercised (15,077) (59,031) -- --
Canceled (16,500) -- -- --
------- ------- ------- ------
Outstanding, End of Year 191,941 104,018 195,000 75,000
======= ======= ======= ======
Exercise price per share $1.63 to $3.44 $1.50 to $1.63 $1.25 to $3.25 $3.25
</TABLE>
Warrants
On May 27, 1994, the Company granted Herbert M. Pearlman, director,
warrants to purchase 250,000 restricted shares of common stock. 150,000
warrants are exercisable at $1.25 per share and 100,000 warrants are
exercisable at $3.25 per share; the warrants expire on May 27, 1999.
In August 1994, the Company completed a private offering of 1 million
shares of common stock at a price of $1.25 per share in a transaction exempt
from registration under the Securities Act of 1933. Officers, directors and
employees purchased 271,000 shares of this private placement. For each share
of common stock purchased in this private placement, subscribers were also
granted a warrant to buy one additional share of common stock for $2.00;
705,000 warrants expire on August 17, 1999 and 295,000 warrants expire on
September 13, 1999. The warrants are callable by the Company, with certain
restrictions. The call price is $.10 per warrant. The shares and warrants have
been registered in accordance with the provisions of the Securities Act of
1933.
On November 28, 1994, the Company granted Randolph D. Letsch, V.P. -
Paint Sales of ABC Dispensing Technologies, Inc., warrants to purchase 25,000
restricted shares of common stock at $3.38 per share; the warrants expire on
November 28, 1999.
On May 2, 1995, the Company granted David B. Hudson, V.P. - Domestic
Beverage Sales, and Keith P. Jordan, National Account Manager (both of ABC
Dispensing Technologies, Inc.), warrants to purchase 20,000 and 10,000
restricted shares of common stock, respectively, at $3.38 per share; the
warrants expire May 2, 2000.
7. RELATED PARTY TRANSACTIONS
----------------------------------
The Company purchased the headquarters facility from Mr. Joseph W.
Shannon, former Chairman of the Company, on June 24, 1994 for $490,000. Prior
to the purchase, the facility was appraised for $535,000. The Company had
previously leased the facility from Mr. Shannon; lease payments were $5,367 per
month through November 1993 and $6,440 per month through the purchase date.
8. OPERATING LEASES
------------------------
For the fiscal years 1995, 1994, and 1993, aggregate rental expense for
all operating leases, except those with terms of a month or less, was $13,000,
$82,000, and $76,000, respectively.
9. RETIREMENT BENEFITS
---------------------------
The Company sponsors a 401(k) plan which covers substantially all
full-time employees. Eligible employees may contribute up to 15% of their
compensation to this plan. The Company has agreed to match participants'
contributions at the rate of 25 cents on the dollar up to a maximum of 3% of
the participants' compensation. The cost of the Company's matching
contribution for the fiscal years 1995, 1994, and 1993 amounted to $9,000,
$9,000, and $8,000, respectively. The Company has the discretion to make a
profit-sharing contribution, but no such contribution has been made by the
Company.
-20-
<PAGE> 21
10. CONTINGENCIES
---------------------
A. SECURITIES LITIGATION
On March 2, 1995 the Company reported it had reached a settlement with
the plaintiffs in a class action lawsuit, filed originally in 1991. The
Federal Court approved the settlement on June 16, 1995. The plaintiffs are
current and former shareholders who purchased shares during the period January
24, 1990 through August 1, 1991. The settlement provides for the payment to
the plaintiff class of a minimum aggregate of $6,500,000 in cash and shares of
the Company's common stock. The cash portion of the settlement will consist of
$1,850,000, of which approximately $1,400,000 has been funded by certain of the
named individual defendants who are current or former officers or directors,
with the Company funding the remaining $450,000 on June 8, 1995. The stock
portion of the settlement will consist of 1,550,000 shares of the Company's
common stock, subject to adjustment if the per-share price falls below $3.00 or
rises above $4.50. The Company will fund 150,000 shares, with the Pepsi-Cola
Company funding 1,000,000 shares and Hussmann Corporation funding 400,000
shares. Pepsi-Cola and Hussmann were co-defendants in the litigation. The
Company will grant common stock purchase warrants having a term of five years
to Pepsi for 500,000 shares and to Hussmann for 200,000 shares, at an exercise
price of $3.50 per share. The warrants are callable after three years if the
price of the Company's common stock is in excess of $10.00 per share.
Refer to Form 10-K for the fiscal year ended April 30, 1994 for more
information on this litigation.
B. CONTRACT LITIGATION
On December 22, 1994, the Company reported it had reached a definitive
settlement agreement with the Pepsi-Cola Company relating to litigation that
had been pending since 1993 in the United States District Court for the
Northern District of Ohio in Akron. The Company sought to recover damages for
substantial breaches of contract by Pepsi with respect to the development,
manufacture, and sales of the Omnitron, Minitron, Midtron, and Advanced
Omnitron soft drink dispensing systems. Pepsi has agreed for a period of five
years to offer its customers using the Company's beverage dispensing equipment
its standard marketing, merchandising or equipment allowances, which will help
the Company build its beverage dispensing sales. Pepsi has agreed to give any
application for approval of the Company's fountain equipment and soft drink
dispensing equipment fair consideration in accordance with its supplier
approval procedures, with Pepsi retaining the right to approve within its sole
discretion. Pepsi is also under no obligation to recommend, encourage, or
promote the sale or use of the Company's products.
Refer to Form 10-K for the fiscal year ended April 30, 1994 for more
information on this litigation.
As of June 30, 1995, Pepsi owned 2,000,000 common shares of the
Company, or 12.5% of the total outstanding stock. Subsequent to Pepsi's
funding of 1,000,000 shares to the Securities Litigation settlement, Pepsi's
ownership will be reduced to approximately 6.2%.
C. LEGAL FEE AND SETTLEMENT COST ACCRUAL
The estimated legal fees and settlement costs have been accrued for
both of the above actions. The accrual as of April 29, 1995 was $1,498,000.
The accrual (legal fees, only) as of April 30, 1994 was $946,000.
11. SUBSEQUENT EVENT
------------------------
On June 13, 1995, the Company initiated a private offering to sell 20
units of $25,000 10% Senior Subordinate Notes due June 1, 1998 and three year
redeemable warrants to purchase 12,500 shares of the Company's common stock at
$2 per share. The transaction was exempt from registration under the
Securities Act of 1933. The offering will extend to the earlier of July 31,
1995 or until all 20 units are sold. At the Company's option, 5 additional
units can be offered and the offering period can be extended to September 30,
1995. As of July 11, 1995, 16 units have been issued under the offering,
providing the Company with $360,000 in proceeds, net of the original issue
discount.
-21-
<PAGE> 22
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements on Form S-8 No. 33-39875; Amendment No. 2 to Form S-2 No. 33-89596
and Amendment No. 2 to Form S-3 No. 33-89398 of American Business Computers
Corporation and in the related Prospectuses of our report dated July 11, 1995,
with respect to the consolidated financial statements and schedule of American
Business Computers Corporation included in this annual report (Form 10-K) for
the year ended April 29, 1995.
ERNST & YOUNG LLP
Akron, Ohio
August 9, 1995
-22-
<PAGE> 23
AMERICAN BUSINESS COMPUTERS CORPORATION (CONSOLIDATED)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
---------------------------------------------------------------------------------------------------------------
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended April 29, 1995
-------------------------
Allowance for doubtful accounts $128,000 $ 1,000 $ 51,000(a) $ 78,000
-------- -------- -------- --------
Allowance for inventory obsolescence $816,000 $150,000 $ 23,000(b) $943,000
-------- -------- -------- --------
Year ended April 30, 1994
-------------------------
Allowance for doubtful accounts $157,000 $118,000 $147,000(a) $128,000
-------- -------- -------- --------
Allowance for inventory obsolescence $712,000 $265,000 $161,000(b) $816,000
-------- -------- -------- --------
Year ended April 30, 1993
-------------------------
Allowance for doubtful accounts $175,000 $100,000 $118,000(a) $157,000
-------- -------- -------- --------
Allowance for inventory obsolescence $270,000 $469,000 $ 27,000(b) $712,000
-------- -------- -------- --------
<FN>
(a) Uncollectible accounts written off, net of recoveries.
(b) Inventory written off and disposed.
</TABLE>
-23-
<PAGE> 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
Information regarding the Directors and Executive Officers of the
Company is incorporated herein by reference from the Company's definitive Proxy
Statement of the Annual Meeting of Stockholders to be held October 1995.
Certain information concerning the Executive Officers is also included below:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Herbert M. Pearlman Chairman of the Board of Directors
Robert A. Cutting President and Director
Gary T. Salhany Treasurer
William Lerner Secretary
</TABLE>
Mr. Herbert M. Pearlman has been Chairman of the Board of Directors of
the Company since September 1994, replacing Mr. Joseph W. Shannon, who was
Chairman from February 1986 to September 1994.
Mr. Robert A. Cutting has been President of the Company since April
1990 and has been President of the Company's wholly-owned subsidiary, ABC
Dispensing Technologies, Inc., since September 1986.
Mr. Gary T. Salhany, CPA, MBA, has been Treasurer of the Company since
August 1986.
Mr. William Lerner has been Secretary of the Company since September
1994.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
Incorporated herein by reference from the Company's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held October 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------
Incorporated herein by reference from the Company's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held October 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
Incorporated herein by reference from the Company's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held October 1995.
-24-
<PAGE> 25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
------------------------------------------------------------------------
(a) The financial statements listed on the index set forth in Item 8 of
this Annual Report on Form 10-K are filed as part of this Annual Report.
(b) The following exhibits are incorporated by reference herein or annexed
to this Annual Report:
4.1 Form of Senior Subordinate Promissory Note due June 1, 1998 issued in
connection with a private placement of the Registrants Securities (the
"1995 Private Placement").
4.2 Form of Common Stock Purchase Warrant issued in connection with the
1995 Private Placement.
10.1 Development and Manufacture Agreement dated July 27, 1992 between the
Company and The Sherwin-Williams Company relating to the Tint-A-Color
System.*
10.2 L.C.R.U. Tint System Development and Manufacture Agreement dated
September 14, 1993 between the Company and The Sherwin-Williams Company
relating to a lower priced, less automated version of the Tint-A-Color
System.*
10.3 Form of Warrant Agreement to be delivered by the Company to each of
PepsiCo, Inc., and Hussmann Corporation in connection with the
settlement of the Securities Litigation.
11.1 Statement regarding computation of per share earnings (see Item 8 of
this Annual Report in Form 10-K).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
24. Power of Attorney (see signature page).
27. Financial Data Schedule (for S.E.C. electronic filing only)
99.1 Stipulation of Settlement entered as of March 13, 1995 in connection
with the Securities Litigation.
* A portion of this exhibit has been omitted pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934,
as amended.
(c) Current reports on Form 8-K during the quarter ended April 29, 1995.
None.
-25-
<PAGE> 26
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
AMERICAN BUSINESS COMPUTERS CORPORATION
By: _______________________________ By: ________________________________
Robert A. Cutting Gary T. Salhany
President Treasurer
Principal Executive Officer Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
_______________________ Chairman of the Board of Directors August 4, 1995
Herbert M. Pearlman
______________________ President & Director August 4, 1995
Robert A. Cutting
_______________________ Director August 4, 1995
Herbert L. Luxenburg
_______________________ Director August 4, 1995
C. Rand Michaels
</TABLE>
-26-
<PAGE> 27
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
AMERICAN BUSINESS COMPUTERS CORPORATION
By: /s/ ROBERT A. CUTTING By: /s/ GARY T. SALHANY
-------------------------- -----------------------------
Robert A. Cutting Gary T. Salhany
President Treasurer
Principal Executive Officer Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
_____________________ Chairman of the Board of Directors August 4, 1995
Herbert M. Pearlman
/s/ ROBERT A. CUTTING
______________________ President & Director August 4, 1995
Robert A. Cutting
_______________________ Director August 4, 1995
Herbert L. Luxenburg
_______________________ Director August 4, 1995
C. Rand Michaels
</TABLE>
-26-
<PAGE> 28
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
AMERICAN BUSINESS COMPUTERS CORPORATION
By: _______________________________ By: ________________________________
Robert A. Cutting Gary T. Salhany
President Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ HERBERT M. PEARLMAN
_______________________ Chairman of the Board of Directors August 9, 1995
Herbert M. Pearlman
______________________ President & Director August , 1995
Robert A. Cutting
_______________________ Director August , 1995
Herbert L. Luxenburg
_______________________ Director August , 1995
C. Rand Michaels
</TABLE>
-26-
<PAGE> 29
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
AMERICAN BUSINESS COMPUTERS CORPORATION
By: _______________________________ By: ________________________________
Robert A. Cutting Gary T. Salhany
President Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
_______________________ Chairman of the Board of Directors August , 1995
Herbert M. Pearlman
______________________ President & Director August , 1995
Robert A. Cutting
_______________________ Director August , 1995
Herbert L. Luxenburg
/s/ C. RAND MICHAELS
_______________________ Director August 9, 1995
C. Rand Michaels
</TABLE>
-26-
<PAGE> 30
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
AMERICAN BUSINESS COMPUTERS CORPORATION
By: _______________________________ By: ________________________________
Robert A. Cutting Gary T. Salhany
President Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
_______________________ Chairman of the Board of Directors August , 1995
Herbert M. Pearlman
______________________ President & Director August , 1995
Robert A. Cutting
/s/ HERBERT L. LUXENBURG
________________________ Director August , 1995
Herbert L. Luxenburg
_______________________ Director August 9, 1995
C. Rand Michaels
</TABLE>
-26-
<PAGE> 1
EXHIBIT 4. 1
THIS NOTE AND THE COMMON STOCK AS INTEREST HEREIN HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR UNDER
ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH NOTE WHICH OTHER COUNSEL
IS REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH NOTE AND/OR COMMON
STOCK MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE
STATE SECURITIES LAWS.
AMERICAN BUSINESS COMPUTERS CORPORATION
10% Senior Subordinated Note
Due January 1, 1998
ORIGINAL ISSUE DISCOUNT INFORMATION
Original Issue
Discount Amount: $_________________________
Issue Date:
Yield to Maturity:_________________________
Short Accrual Period Yield
Calculation Method:_______________________
Original Issue Discount
Allocable to Short
Accrual Period:___________________________
$ _____________ No.N-_______
June___, 1995
American Business Computers Corporation, a Florida
corporation (the "Company") for value received, hereby promises to
pay to________________________________, with an address located
at _______________________________, or his registered assigns
(the "Payee" or "Holder"), the principal amount of _________________
($ _________) and accrued interest thereon in accordance with the terms
and provisions hereof.
This Note was issued by the Company in a private placement as described
in a Confidential Private Placement Term Sheet dated June 13, 1995. The series
of Notes issued in connection with said private placement are referred to
hereafter as the "Notes".
1. PAYMENT OF PRINCIPAL AND INTEREST: METHOD OF PAYMENT
1.1 Method of Payment. Payment of the principal of and accrued
interest on this Note shall be made in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. The Company will pay or cause to be paid
all sums becoming due hereon for principal and interest by check (or stock
certificate as provided in Section
<PAGE> 2
1.3 below) sent to the Holder's above address or to such other address as
Holder may designate for such purpose from time to time by written notice to
the Company, without any requirement for the presentation of this Note or
making any notation thereon except that the Holder hereof agrees that payment
of the final amount due shall be made only upon surrender of this Note to the
Company for cancellation. Prior to any sale or other disposition of this
instrument, the Holder hereof agrees to endorse hereon the amount of principal
paid hereon and the last date to which interest has been paid hereon and to
notify the Company of the name and address of the transferee.
1.2 Payment of Principal. The entire outstanding principal balance of
this Note shall be paid on June 1, 1998 (the "Maturity Date").
1.3. Payment of Interest. Interest (computed on the basis of a 360-day
year of twelve 30-day months) on the unpaid portion of the principal amount
from time to time outstanding hereunder shall be paid by the Company to the
Payee at the "Stated Interest Rate" set forth below. Said interest to be paid
semi-annually each June 1 and December 1 (commencing December 1, 1995) and
on the Maturity Date. For purposes of this Note, the Stated Interest Rate shall
be 10% per annum; provided, however, that if the holder hereof elects (by
completing and delivering the attached form of payment in kind election to the
Company) on or prior to the tenth day before the subject interest payment date,
the holder shall receive his interest payment to be made on such interest
payment date in shares of Common Stock of the Company at an effective rate of
interest of 12% per annum based on the then current market price of the Common
Stock. For purposes of this Section 1 the "current market price" shall mean the
average of the daily closing prices for 20 consecutive business days prior to
such interest payment date. The closing price for each day shall be the last
sale price regular way, or, in case no such report of sale takes place on such
day, the average of the last reported bid and asked prices regular way in
either case on a principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to listing
on such exchange, the average of the highest reported bid and lowest reported
ask price as reported by NASDAQ, or similar organization if NASDAQ is no longer
reporting such information, or if not so available, the fair market price as
determined by the Board of Directors.
2. SUBORDINATION PROVISIONS.
2.1 Principal and Interest. The Company, for itself, and its
successors and assigns, covenants and agrees, and the Payee and each successive
Holder by acceptance of this Note, likewise covenants and agrees that the
payment of the principal of and interest on this Note is subordinated in right
of payment to the payment of all existing and future "Senior Debt" (as
hereinafter defined) of the Company. The terms "Senior Debt" shall mean the
principal of, premium, if any, and interest on all indebtedness of the Company
to any bank or other financial institution which indebtedness constitutes the
primary working capital credit facility for the Company whether such
indebtedness is heretofore or hereafter created, incurred or entered into and
any deferrals, renewals, modifications or extensions of any such indebtedness.
"Indebtedness" for all purposes herein means and includes without duplication,
as of any date as of which the amount thereof is to be determined (whether or
not secured by lien, pledge or deposit), (i) all direct obligations to repay
money borrowed (including without limitation, all notes payable and drafts
accepted representing extensions of credit, and all obligations upon which
interest charges are customarily paid); and (ii) all guarantees of indebtedness
of any other person.
2.2 Default. No payment or repayment, directly or indirectly, on
account of the principal of or interest on the Notes shall be made (in cash or
property or securities, or by set-off or otherwise), and no holder of the Notes
shall be entitled to demand or receive any such payment or prepayment if, at
the time of such payment or prepayment or immediately after giving effect
thereto, there
-2-
<PAGE> 3
shall have occurred any event of default under such Senior Debt or under any
agreement pursuant to which any such Senior Debt has been or will be issued
which default has not been waived or cured as of the date on which such payment
or prepayment is due.
2.3 Liquidation. Dissolution, etc. In the event of any insolvency or
bankruptcy proceeding, and any receivership, total liquidation, reorganization
or other similar proceedings in connection therewith, relative to the Company,
or to its property, or in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of the Company, whether or not
involving insolvency or bankruptcy, then the holders of Senior Debt shall be
entitled to receive payment in full of all principal (and premium, if any) and
interest on all such Senior Debt before the holders of the Notes shall be
entitled to receive any payment on account of principal or interest of the
Notes, and to that end (but subject to the power of a court of competent
jurisdiction to make other equitable provisions reflecting the rights conferred
by these provisions upon such Senior Debt and the holders thereof with respect
to the Notes and the holders thereof by a lawful plan or reorganization under
applicable bankruptcy law) the holders of Senior Debt (until payment in full of
all principal, premium (if any) and interest on all such Senior Debt, including
interest thereon accruing before or in respect of periods subsequent to the
commencement of any such proceedings) shall be entitled to receive for
application in payment thereof any payment or distribution of any kind or
character, whether in cash or property or securities, or by set-off or
otherwise, which may be payable or deliverable in any such proceedings in
respect of the Notes (including any such payment or distribution which may be
payable or deliverable by reason of the provisions of any indebtedness of the
Company which is subordinate and junior in right to the Notes), except
securities issued in such proceedings which are subordinated and junior in
right of payment to the payment of Senior Debt.
2.4 Subrogation. Subject to the payment in full of Senior Debt,
holders of the Notes shall be subrogated to the rights of the holders of such
Senior Debt to receive payment or distributions of assets of the Company
applicable to such Senior Debt until the Notes shall be paid in full, and no
payment or distributions to the holders of such Senior Debt by or on behalf of
the Company from the proceeds that would otherwise be payable to the holders of
the Notes by or on behalf of the holders of the Notes shall, as between the
Company and the holders of the Notes, be deemed to be a payment by the Company
to or on account of the Notes.
2.5 Amendment. These provisions with respect to subordination cannot
be amended, modified or waived without the prior written consent of the holder
or holders of all Senior Debt at the time outstanding; and the subordination
effected hereby shall not be affected by any amendment or modification of, or
addition or supplement to, any such Senior Debt or any instrument or agreement
relating thereto, without the prior written consent of the holder or holders of
all such Senior Debt at the time outstanding. No present or future holder of
Senior Debt shall be prejudiced in his right to enforce subordination of the
Notes by any act or failure to act on the part of the Company.
2.6 Benefit of Senior Debt. The foregoing subordination provisions
shall be for the benefit of the holders of the Senior Debt and may be enforced
directly by such holders against the holders of the Notes. Upon any payment or
distribution of assets of the Company referred to above, the holders of the
Notes shall be entitled to rely upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, delivered to the holders of the Notes, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Debt and other indebtedness of the Company, the amount
thereof or payable thereon, and the amount or amounts paid or distributed
thereon and all other facts pertaining thereto or hereto.
-3-
<PAGE> 4
2.7 Obligation to Pay Principal and Interest Absolute. The foregoing
provisions as to subordination are solely for the purpose of defining the
relative rights of the holders of such Senior Debt, on the one hand, and the
holders of the Notes on the other hand. Nothing contained herein is intended to
or shall impair as between the Company, its creditors, other than the holders
of Senior Debt, and the holders of the Notes, the obligation of the Company,
which shall be absolute and unconditional, to pay the holders of the Notes the
principal and interest on the Notes as and when the same shall become due and
payable in accordance with the terms hereof or affect the relative rights of
the holders of Notes and the creditors of the Company other than holders of
Senior Debt, nor shall anything herein prevent the Holder hereof from
exercising all remedies otherwise permitted by applicable law upon default
hereunder subject to the rights of holders of Senior Debt, if any, in respect
of cash, properties or securities of the Company received upon the exercise of
any such remedy. The Holder of this Note by acceptance hereof acknowledges and
agrees that the subordination provisions of this Section 2 are, and/or are
intended to be, an inducement and a consideration to each holder of any Senior
Debt, whether such Senior Debt was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, or to continue to hold,
such Senior Debt and each holder of Senior Debt shall be deemed conclusively to
have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Debt. Nothing contained herein or
elsewhere in this Note shall prevent the Company from making payment of the
principal of or interest on the Notes at any time except under the conditions
described above or during the pendency of any dissolution, winding up,
liquidation or reorganization of the Company.
2.8 Further Instruments. The Holder of this Note covenants and agrees
to execute such further instruments and waivers as may be necessary in the
opinion of a lender or creditor, or reasonably requested by the Company, to
facilitate the issuance or the continued holding of Senior Debt.
3. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon the
occurrence and continuation uncured of any of the following events:
3.1 This Note.
(a) a default in the payment of any principal on this Note, when and as
the same shall become due and payable, either by the terms hereof or upon
prepayment or otherwise, and such default shall continue uncured for ten (10)
days after the day fixed for the making of such principal payment; or
(b) a default in the payment of any interest payments on this Note, and
such default shall continue uncured for thirty (30) days after the date fixed
for the making of such interest payment; or
(c) a material default in the performance, or material breach, of any
covenant of the Company in this Note (other than a covenant or a default which
is elsewhere herein specifically dealt with as an Event of Default), and
continuance of such default or breach uncured for a period of ninety (90) days
after the notice has been given to the Company of such default.
3.2 Bankruptcy. The entry of a decree or order by a court having
jurisdiction adjudging the Company as bankrupt or insolvent, or approving a
petition seeking reorganization, arrangement, adjustment or composition of or
in respect of the Company, under federal bankruptcy law, as now or hereafter
constituted, or any applicable federal or state bankruptcy, insolvency or other
similar law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any substantial part
of its assets, and the continuance of any such decree or order unstayed and in
effect
4-
<PAGE> 5
for a period of ninety (90) days; or the commencement by the Company of a
voluntary case under federal bankruptcy law, as now or hereafter constituted,
or any other applicable Federal or state bankruptcy, insolvency, or other
similar law, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under federal bankruptcy law or any
other applicable Federal or state bankruptcy, insolvency, or other similar law,
or the consent by it to the filing of such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator or similar official of
the Company or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due.
3.3 Limitation on Claims in Bankruptcy or on Acceleration Upon an
Event of Default. Should an acceleration of the maturity of this Note be
declared as a result of the occurrence and continuation of an Event of Default,
absent bankruptcy, the claim of the Holder would be for the unpaid principal
amount and accrued interest of the Note. The amount that the Holder would be
able to recover from the Company under a bankruptcy or an Event of Default,
may, however, be limited by applicable law to the issued price of this Note
plus that portion of any original issue discount which has been amortized.
4. REMEDIES UPON DEFAULT.
4.1 Acceleration. Upon each occurrence of an Event of Default and at
any time during the continuation thereof (unless the principal of the Note
shall already have become and be due and payable), the Holder, by notice in
writing given to the Company, may declare the principal of and accrued interest
on this Note then outstanding to be due and payable immediately, provided that
the holders of at least a majority of the then aggregate principal amount of
the Notes consent to the acceleration, and upon any such declaration the Notes
shall become and be due and payable immediately, anything herein to the
contrary notwithstanding.
4.2 Proceedings and Actions. During the continuation of any one or
more Events of Default and subject to the limitations contained herein,
including without limitation, Section 4.1, the Holder may institute such
actions or proceedings in law or equity as it shall deem expedient for the
protection of its rights and may prosecute and enforce its claims, against all
assets of the Company and shall be entitled to receive therefrom payment on
such claims up to an amount not exceeding the principal amount of this Note
then outstanding plus accrued interest to the date of payment plus reasonable
expenses of collection including, without limitation, attorney's fees and
expenses.
5. PREPAYMENT.
5.1 Optional. In addition to the scheduled repayment of the principal
amount of the Notes, the Notes may be prepaid at the option of the Company on a
pro-rata basis, in whole or in part, from time to time at any time.
5.2. Mandatory. The Company shall apply 40% of the net proceeds the
sale by it of any of its Common Stock other than Common Stock issued upon the
exercise of employee, director or consultant stock options, to the pro-rata
prepayment of the Notes within sixty (60) days of the receipt of such proceeds.
5.3 Notice of Prepayment. The Company shall give the Holder not less
than thirty days, (30) notice of each optional or mandatory prepayment of the
Notes. On and after the prepayment date, interest shall cease to accrue on the
Notes or such portion thereof called for prepayment unless the Company defaults
in such prepayment.
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<PAGE> 6
6. NOTE TO BE SENIOR TO NON SENIOR INDEBTEDNESS FOR BORROWED
MONEY.
The Company covenants with the Holder of this Note that it shall not
incur indebtedness for borrowed money (exclusive of trade debt and indebtedness
incurred in the ordinary course of business) unless such indebtedness is
expressly subordinate to the repayment of this Note under subordination
provisions similar to those contained in Section 2 hereof.
7. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
The Holder of this Note, each transferee hereof and any Holder and
transferee of any shares of Common Stock paid as interest on this Note (the
"Shares"), by his acceptance thereof, agrees that (i) no public distribution of
Notes or Shares will be made in violation of the Act, and (ii) during such
period as the delivery of a prospectus with respect to the Shares may be
required by the Act, no public distribution of the Shares will be made in a
manner or on terms different from those set forth in, or without delivery of, a
prospectus then meeting the requirements of Section 10 of the Act and in
compliance with applicable state securities laws. The Holder of this Note and
each transferee hereof further agrees that if any distribution of any Shares is
proposed to be made by them otherwise than by delivery of a prospectus meeting
the requirements of Section 10 of the Act, such action shall be taken only
after submission to the Company of an opinion of counsel, reasonably
satisfactory in form and substance to the Company's counsel to the effect that
the proposed distribution will not be in violation of the Act or of applicable
state law. Furthermore, it shall be a condition to the transfer of this Note
that any transferee thereof deliver to the Company his written agreement to
accept and be bound by all of the terms and conditions contained in this Note.
Neither this Note nor the Shares may be sold or otherwise disposed or
except as follows:
(1) To a person who, in the opinion of counsel for the Holder
reasonably acceptable to the Company, is a person to whom this Note or Shares
may legally be transferred without registration and without the delivery of a
current prospectus under the Act with respect thereto and then only against
receipt of an agreement of such person to comply with the provisions of this
Section with respect to any resale or other disposition of such securities
which agreement shall be satisfactory in form and substance to the Company and
it counsel; provided that the foregoing shall not apply to any such Note,
Shares or other security as to which such Holder shall have received an opinion
letter from counsel to the Company as to the exemption thereof from the
registration under the Act pursuant to Rule 144(k) under the Act: or
(2) To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering thereof
for such sale or disposition.
Each certificate for Shares issued as a payment of interest on this
Note shall bear a legend relating to the non-registered status of such Shares
under the Act, unless at the time of conversion of this Note such Shares are
subject to a currently effective registration statement under the Act and the
Holder is not otherwise an "affiliate," or could potentially be deemed an
"affiliate," of the Company as such term is defined in the Act.
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<PAGE> 7
8. REGISTRATION OF SHARES
The Company will, within six months of the closing of the date of this
Note, use its best efforts to (i) prepare and file under the Act a registration
statement relating to such Shares (the term "registration statement" as used
herein being deemed to include any form which may be used to register a
distribution of securities to the public for cash); (ii) prepare and file with
the appropriate state blue sky authorities the necessary documents to register
or qualify such Shares, provided that the Company shall only be required to
register or qualify such Shares in the states where the Units have been
registered or qualified; and (iii) use its best efforts to cause such
registration statement to become effective and to keep such registration
statement and state blue sky filings current and effective for three (3) years;
provided, however, the Company will have no such obligation to keep effective a
registration statement with regard to such Shares after the Notes have been
fully paid if it agrees to purchase such Shares at the then current market
price of such Shares.
All expenses in connection with preparing and filing any registration
statement (and any registration or qualification under the blue sky laws of the
states in which the offering will be made under such registration statement)
shall be borne in full by the Company, except that the underwriting commissions
and expenses attributable to such Shares so registered and the fees and
disbursements of counsel, if any, to the holders of such Shares shall be borne
by such holders. The Company may include other securities in any such
registration statement.
As a precondition to such registration and qualification of Shares then
outstanding each holder of Shares then outstanding will provide the Company
with sufficient information for permit and regulation and qualifications and
will indemnify the Company, and each person who controls the Company within the
meaning of Section 15 of the Act, from and against any and all losses, claims,
damages, expenses and liabilities caused by any untrue statement of a material
fact contained in any registration statement or contained in a prospectus
furnished under the Act or statement contained in a prospectus furnished under
the Act or caused by any omission to state of a material fact therein necessary
to make the statements therein not misleading, insofar as such losses, claims,
damages, expenses and liabilities are caused by such untrue statement or
omission based upon information furnished in writing to the Company by any such
holder expressly for use in any registration statement or prospectus. In
addition, each holder will execute and deliver all such documents and
undertakings as the Company may deem necessary or desirable for purposes of
compliance with applicable federal and state securities laws. The Company's
obligations as set forth above with respect to each holder are contingent on
such holder's satisfaction of his or its obligations set forth above.
9. MISCELLANEOUS.
9.1 No Recourse. No recourse whatsoever, either directly or through
the Company or any trustee, receiver or assignee, shall be had in any event or
in any manner against any past, present or future stockholder, director or
officer of the Company for the payment of the redemption price, principal of or
interest on this Note or for any claim based thereon or otherwise in respect
this Note; this Note being a corporate obligation only.
9.2 Notices. All communications provided hereunder shall be in
writing and, if to the Company, delivered or mailed by registered or certified
mail addressed to American Business Computer Corporation, 451 Kennedy Road,
Akron Ohio 44305 Attention: Treasurer, or, if to the Holder at the address
shown for the Holder in the registration books maintained by the Company.
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<PAGE> 8
9.3 Lost, Stolen or Mutilated Notes. In case this Note shall be
mutilated, lost, stolen or destroyed, the Company may, in its discretion, issue
and deliver in exchange an substitution for and upon cancellation, of the
mutilated Notes, or in lieu of and substitution for the Note, lost, stolen, or
destroyed, a new Note of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence satisfactory to the Company of such
loss, theft or destruction and an indemnity, if requested, also satisfactory
to it.
9.4. Stamp Tax. The Company will pay any documentary stamp taxes
attributable to the initial issuance of the Shares; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any
certificates for the Shares in a name other than that of the Holder in respect
of which such Shares is issued, and in such case the Company shall not be
required to issue or deliver any certificate for the Common Stock until the
person requesting the same has paid to the Company the amount of such tax or
has established to the Company's satisfaction that such tax has been paid.
9.5. Shares Validity Issued. The Company agrees that all Shares shall
be, at the time of delivery of certificates for such Shares, validly issued and
outstanding, fully paid and non-assessable and that the issuance of such Shares
will not give rise to preemptive rights in favor of existing stockholders.
9.6 Registration of Transfer. The Company shall maintain books for
the transfer and registration of Notes. The Company may treat the person in
whose name this Note is registered as the owner and Holder of the Note for the
purpose of receiving principal of and interest on this Note and for all other
purposes whatsoever and the Company shall not be affected by any notice to the
contrary. Upon the transfer of any Note in accordance with the provisions of
Section 7 hereof, the Company shall issue and register the Note in the names of
the new holders. The Notes shall be signed manually by the Chairman, Chief
Executive Officer, President or any Vice President and the Secretary or
Assistant Secretary of the Company.
9.7 Governing Law. This Note shall be construed in accordance with
and governed by the laws of the State of Ohio, without giving effect to
conflict of laws principles.
IN WITNESS WHEREOF, American Business Computers Corporation has caused
this Note to be signed in its corporate name by its Chairman of the Board and
to be dated the day and year first above written.
AMERICAN BUSINESS COMPUTERS CORPORATION
By: ___________________________________
Name: _________________________________
Title: ________________________________
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<PAGE> 1
EXHIBIT 4. 2
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AND NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY BE SOLD, TRANSFERRED, PLEDGED.
HYPOTHECATED OR OTHERWISE DISPOSED OF IN WHOLE OR IN PART IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT EXISTS WITH RESPECT TO THE PROPOSED SALE,
TRANSFER, PLEDGE HYPOTHECATION OF OTHER DISPOSITION.
AMERICAN BUSINESS COMPUTERS CORPORATION
COMMON STOCK PURCHASE WARRANT
CERTIFICATE TO PURCHASE
SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M. NEW YORK, NEW YORK LOCAL TIME ON JUNE 1, 1998
Cert. No. WS-
This Warrant Certificate certifies that _______________________, or registered
assigns, is the registered Holder ("Holder") of ________________Common Stock
Purchase Warrants ("Warrants") to purchase shares of common stock $.01 par
value per share ("Common Stock"), of AMERICAN BUSINESS COMPUTERS CORPORATION, a
Florida corporation (the "Company"). Each Warrant enables the Holder to
purchase from the Company at any time until 5:00 p.m. New York, New York local
time on June 1, 1998 one fully paid and non-assessable share of Common Stock
(individually, a "Share" and collectively the "Shares") upon presentation and
surrender of this Warrant Certificate and upon payment of the purchase price of
$2.00 per Share; provided, that if any time after June 1, 1997 the then current
market price per share of Common Stock (as defined) is less than $2.50, the
exercise price shall be reduced to 80% of such current market price; provided
further, such exercise price shall in no event be less than $1.50 per Share
(the "Exercise Price"). For purposes of computing the exercise price the term
"current market price per Share of Common Stock" shall mean the rolling average
"Market Price" (as defined in Section 11(a) hereof) for a thirty (30) day
period ending within five (5) days of receipt by the Company of a duly
completed Purchase Form with funds sufficient for exercise. Payment shall be
made in lawful money of the United States of America by certified check payable
to the Company. Such payment shall be made at the principal office of the
Company at 451 Kennedy Road, Akron, Ohio 44305. As hereinafter provided, the
Exercise Price and number of Shares purchasable upon the exercise of the
Warrants are subject to modification or adjustment upon the happening of
certain events.
In lieu of paying cash for the Exercise Price the Holder may tender for
cancellation any outstanding principal amount of the Company's 10% Senior
Subordinated Notes due June 1, 1998 ("Notes"). The amount so surrendered for
cancellation shall be credited at its face value against the Exercise Price
with respect to the Warrant being exercised.
<PAGE> 2
The Warrants represented by this Warrant Certificate were issued
together with the Notes in a private placement as described in a certain
Confidential Private Placement Term Sheet dated June 13, 1995 (the "Private
Placement"):
1. Upon surrender to the Company, this Warrant Certificate may be
exchanged for another Warrant Certificate or Warrant Certificates evidencing a
like aggregate number of Warrants. If this Warrant Certificate shall be
exercised in part, the Holder shall be entitled to receive upon surrender
hereof another Warrant Certificate or Warrant Certificates evidencing the
number of Warrants not exercised.
2. No Holder shall be deemed to be the Holder of Common Stock or any
other securities of the Company that may at any time be issuable on the
exercise hereof for any purpose nor shall anything contained herein be
construed to confer upon the Holder any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof or to give or withhold consent
to any corporate action (whether upon any reorganization, issuance of stock,
reclassification or conversion of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings or to
receive dividends or subscription rights or otherwise until a Warrant shall
have been exercised and the Common Stock purchasable upon the exercise thereof
shall have become issuable.
3. Each Holder consents and agrees with the Company and any other
Holder that:
(a) this Warrant Certificate is exercisable by the Holder in person or
by attorney duly authorized in writing at the principal office of the Company
in whole or in part;
(b) anything herein to the contrary notwithstanding, in no event shall
the Company be obligated to issue Warrant Certificates evidencing other than a
whole number of Warrants or issue certificates evidencing other than a whole
number of Shares upon the exercise of this Warrant Certificate; provided,
however, that the Company shall pay with respect to any such fraction of a
share an amount of cash based upon the current market value (or book value, if
there shall be no public market value for shares purchasable upon exercise
hereof); and
(c) the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute true and lawful owner hereof
for all purposes whatsoever.
4. The Company shall maintain books for the transfer and registration
of Warrants. Upon the transfer of any Warrants, the Company shall issue and
register the Warrants in the names of the new Holders. The Warrants shall be
signed manually by the Chairman, Chief Executive Officer, President or any Vice
President and the Secretary (or Assistant Secretary) of the Company. Subject to
Paragraph 10, the Company shall transfer, from time to time, any outstanding
Warrants upon the books to be maintained by the Company for such purpose upon
surrender thereof for transfer properly endorsed or accompanied by appropriate
instruction for transfer. Upon any transfer, a new Warrant Certificate shall be
issued to the transferee and the surrendered Warrants shall be cancelled by the
Company. Warrants may be exchanged at the option of the Holder, when
surrendered at the office of the Company, for another Warrant, or other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Shares. Subject to the terms
of this Warrant Certificate, upon such surrender and payment of the purchase
price, the Company shall issue and deliver with all reasonable dispatch to or
upon the written order of the Holder of such Warrants and in such name or names
as such Holder may designate,
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<PAGE> 3
a certificate or certificates for the number of full Shares so purchased upon
the exercise of such Warrants. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become the Holder of record of such Shares as of the
date of the surrender of such Warrants and payment of the Exercise Price:
provided, however, that if, at the date of surrender and payment, the transfer
books of the Shares shall be closed, the certificates for the Shares shall be
issuable as of the date on which such books shall be opened and until such date
the Company shall be under no duty to deliver any certificate for such Shares;
provided, further, however, that such transfer books, unless otherwise required
by law or by applicable rule of any national securities exchange, shall not be
closed at any one time for a period longer than 20 days. The rights of purchase
represented by the Warrants shall be exercisable, at the election of the
Holders, either in whole or from time to time in part (but in no event with
respect to less than 100 Shares).
5. The Company will pay any documentary stamp taxes attributable to
the initial issuance of the Shares issuable upon the exercise of the Warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificates for Shares in a name other than that of the
Holder in respect of which such Shares are issued, and in such case the Company
shall not be required to issue or deliver any certificate for Shares or any
Warrant until the person requesting the same has paid to the Company the amount
of such tax or has established to the Company's satisfaction that such tax has
been paid.
6. In case the Warrant Certificate shall be mutilated, lost stolen or
destroyed, the Company may, in its discretion, issue and deliver in exchange
and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate, lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing
an equivalent right or interest, but only upon receipt of evidence satisfactory
to the Company of such loss, theft or destruction and an indemnity, if
requested, also satisfactory to it.
7. There have been reserved, and the Company shall at all times keep
reserved, out of the authorized and unissued Common Stock, a number of Shares
sufficient to provide for the exercise of the rights of purchase represented by
this Warrant Certificate. The Company agrees that all Shares issuable upon
exercise of the Warrants shall be, at the time of delivery of the certificates
for such Shares, validly issued and outstanding, fully paid and nonassessable.
8. Subject and pursuant to the provisions of this paragraph, the
purchase price and number of Shares subject to this Warrant Certificate shall
be adjusted form time to time as set forth hereinafter:
(a) In case the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in Common Stock, then the
Exercise Price shall be proportionately decreased as of the close of business
on the date of record of said dividend.
(b) If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the Exercise
Price immediately prior to such subdivision shall be proportionately decreased,
and, if the Company shall at any time combine the outstanding Common Stock by
recapitalization, reclassification or combination thereof, the Exercise Price
immediately prior to such combination shall be proportionately increased. Any
such adjustment to the Exercise Price shall become effective at the close of
business on the record date for such subdivision or combination.
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<PAGE> 4
(c) In case the Company after the date hereof shall distribute to all
of the Holders of outstanding shares of Common Stock any securities or other
assets (other than a cash distribution made as a dividend payable out of
earnings or out of any earned surplus legally available for dividends under the
laws of the State of Florida), the Board of Directors shall be required to make
such equitable adjustment in the Exercise Price, as in effect immediately prior
to the record date for such distribution, as may be necessary to preserve for
the Holder rights substantially proportionate to those enjoyed hereunder by the
Holder immediately prior to the happening of such distribution. Any such
adjustment to the Exercise Price shall become effective at the close of
business on the record date for such distribution.
(d) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that Holders of common stock shall
be entitled to receive stock, securities, cash, or assets with respect to or in
exchange for Common Stock, then as a condition of such reorganization,
reclassification, consolidation, merger or sale, the Company or such successor
or purchasing corporation, as the case may be, shall execute a supplemental
Warrant Certificate providing that each Holder shall have the right thereafter
and until the expiration date to exercise a Warrant for the kind and amount of
stock, securities, cash or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale by a Holder of the number of
shares of Common Stock for the purchase of which such Warrant might have been
exercised immediately prior to such reorganization, reclassification,
consolidation, merger or sale, subject to further adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Paragraph 8.
(e) If at any time after the date of issuance hereof the Company shall
grant or issue any shares of Cornrnon Stock, or grant or issue any rights or
options for the purchase of, or stock or other securities convertible into,
Common Stock (such convertible stock or securities being herein collectively
referred to as "Convertible Securities" other than:
(i) shares issued in a transaction described in subparagraph (f) of
this Paragraph 8; or
(ii) shares issued, subdivided or combined in transactions
described in subparagraphs (a) or (b) of this Paragraph 8;
for a consideration per share which is less than the then current market price
per share of Comrnon Stock, then the Exercise Price in effect immediately
prior to such issuance or sale (the "Applicable Exercise Price") shall, and
thereafter upon each issuance or sale, the Applicable Exercise Price shall,
simultaneously with such issuance or sale, be adjusted, so that such Applicable
Exercise Price shall equal a price determined by multiplying the Applicable
Exercise Price by a fraction, the numerator of which shall be:
(A) the sum of (x) the total number of shares of Common Stock
outstanding immediately prior to such issuance plus (y) the number of shares of
Common Stock which the aggregate consideration received, as determined in
accordance with subparagraph (g) below for the issuance or sale of such
additional Common Stock or Convertible Securities deemed to be an issuance of
Common Stock as provided in subparagraph (h) below, would purchase (including
any consideration received by the Company upon the issuance of any shares of
Common Stock or Convertible Securities since the date the Applicable Exercise
Price became effective not previously included in any computation resulting in
an
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<PAGE> 5
adjustment pursuant to this subparagraph (e)) at the then current market price
per share of Common Stock; and the denominator of which shall be
(B) the total number of shares of Common Stock outstanding (or
deemed to be outstanding as provided in subparagraph (g)) immediately after
the issuance or sale of such additional shares.
For purposes of this Paragraph 8 the current market "current market price per
share" of Common Stock at any date shall be deemed to be the average daily
closing prices for the thirty (30) consecutive business days before such date.
The closing price for each day shall be the last sale price regular way or, in
case no such reported sale takes place on such day the average of the last
reported bid and ask prices regular way, in either case on the principal
national securities exchange, on which the Common Stock is admitted to trading
or listed, or if not listed or admitted to trading on such exchange, the
average of the highest reported bid and lowest reported ask prices as reported
by NASDAQ, or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by the
Board of Directors of the Company. The current market price per share of Common
Stock shall be reduced appropriately to take into account the restricted nature
of any securities issued by the Company and the issuance or sale of larger
blocks of security of its securities.
If, however, the Applicable Exercise Price thus obtained would result in the
issuance of a lesser number of shares upon conversion than would be issued at
the initial Exercise Price specified in the first paragraph hereof, the
Applicable Exercise Price shall be such initial Exercise Price.
(f) Anything in this Paragraph 8 to the contrary notwithstanding, no
adjustment in the Exercise Price shall be made in connection with:
(i) the grant, issuance or exercise of any Convertible
Securities pursuant to the Company's qualified or non-qualified Employee
Stock Option Plans or any other bona fide employee benefit plan or incentive
arrangement, previously adopted, or as may hereafter be adopted, by the
Company's Board of Directors, for the benefit of the Company's employees,
consultants or directors, as any such plans or arrangements may hereafter
be amended from time to time;
(ii) the issuance of any shares of Common Stock pursuant to the
grant or exercise of Convertible Securities outstanding as of the date hereof;
(iii) to shareholders of any corporation or other entity the
stock or assets of which is acquired by, or which merges into the Company
(the "Target Company") in proportion to their stock holdings of the
Target Company immediately prior to such acquisition or merger, upon such
acquisition or merger, provided that the Target Company does not at the time of
such merger beneficially own in excess of fifteen ( 15%) of the issued and
outstanding Capital Stock of the Company ("Affiliate") or, if the Target
Company is an Affiliate, that the Company has obtained a fairness opinion from
a recognized investment banking firm as to the consideration receive by the
Company in connection with such acquisition or merger; or
(iv) in a bona fide public offering pursuant to a firm
commitment underwriting.
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<PAGE> 6
(g) For the purpose of subparagraph (a) above, the following provisions
shall also be applied:
(i) In the case of the issuance or sale of additional shares
of Common Stock for cash, the consideration received by the Company therefor
shall be deemed to be the amount of cash received by the Company for such
shares, before deducting therefrom any commissions, compensations or other
expenses paid or incurred by the Company for any underwriting of, or otherwise
in connection with, the issuance or sale of such shares.
(ii) In the case of the issuance of Convertible Securities,
the consideration received by the Company therefore shall be deemed to be the
amount of cash, if any, received by the Company for the issuance of such
rights or Convertible Securities, plus the minimum amounts of cash and fair
value of other consideration, if any, payable to the Company upon the exercise
of such rights or options or payable to the Company on conversion of such
Convertible Securities.
(iii) In the case of the issuance of shares of Common Stock
or Convertible Securities for a consideration in whole or in part, other
than cash, the consideration other than cash shall be deemed to be the fair
market value thereof as reasonably determined in good faith by the Board of
Directors of the Company (irrespective of accounting treatment thereof);
provided, however, that if such consideration consists of the cancellation of
debt issued by the Company, the consideration shall be deemed to be the amount
the Company received upon issuance of such debt (gross proceeds) plus accrued
interest and, in the case of original issue discount or zero coupon
indebtedness, accredited value to the date of such cancellation, but not
including any premium or discount at which the debt may then be trading or
which might otherwise be appropriate for such class of debt.
(iv) In case of the issuance of addition shares of Common
Stock upon the conversion or exchange of any obligations (other than
Convertible Securities), the amount of the consideration received by the
Company for such obligations or shares or converted or exchanged, before
deducting from such consideration so received by the Company any expenses or
commissions or compensations incurred or paid by the Company for any
underwriting of, or otherwise in connection with, the issuance or sale of such
obligations or shares, plus any consideration received by the Company in
adjustment of interest and dividends. If obligations or shares of the same
class or series of a class as the obligations or shares so converted or
exchanged have been originally issued for different amounts of consideration,
then the amount of consideration received by the Company upon the original
issuance of each of the obligations or shares so converted or exchanged shall
be deemed to be the average amount of the consideration received by the Company
upon the original issuance of all such obligations or shares. The amount of
consideration received by the Company upon the original issuance of the
obligations or shares so converted or exchanged and the amount of the
consideration, if any, other than such obligations or shares received by the
Company upon such conversion or exchange shall be determined in the same manner
as provided in subparagraphs (i) through (iii) above with respect to the
consideration received by the Company in case of the issuance of additional
shares of Common Stock or Convertible Securities.
(h) For purposes of the adjustments provided for in subparagraph (e)
above, if at any time, the Company shall issue any Convertible Securities the
Company shall be deemed to have issued at the same time of the issuance of such
Convertible Securities the maximum number of shares of Common Stock issuable
upon conversion of the total amount of such Convertible Securities.
-6-
<PAGE> 7
(i) On the expiration, cancellation or redemption of any Convertible
Securities, the Exercise Price then in effect hereunder shall forthwith be
readjusted to such Exercise Price as would have been obtained (a) had the
adjustments made upon the issuance or sale or such expired, cancelled or
redeemed Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock therefore actually delivered upon the
exercise or conversion of such Convertible Securities (and the total
consideration received therefor) and (b) had all subsequent adjustments been
made only on the basis of the Exercise Price as readjusted under this
subparagraph (i) for all transactions (which would have affected such adjusted
Exercise Price) made after the issuance or sale of such Convertible Securities.
(j) Anything in this Paragraph 8 to the contrary notwithstanding, no
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 5% in such Exercise Price;
provided, however, that any adjustments which by reason of this subparagraph
(j) are not required to be made shall be carried forward and taken into account
in making subsequent adjustments. All calculations under this Paragraph shall
be made to the nearest cent or to the nearest tenth of a share, as the case may
be.
(k) Upon any adjustment of any Exercise Price, then and in each such
case the Company shall promptly deliver a notice to the registered Holder of
this Warrant, which notice shall state the Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise hereof, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
(l) Upon any adjustment of the Exercise Price pursuant to any
provisions contained in this Paragraph 8, the number of Shares issuable upon
exercise of this Warrant shall be changed to the number of Shares determined by
dividing (i) the aggregate Exercise Price payable for the purchase of all
Shares issuable upon exercise of the Warrant immediately prior to such
adjustment by (ii) the Exercise Price per Share in effect immediately after
such adjustment.
9. In case at any time:
(i) The Company shall pay any dividend payable in stock upon
the Common Stock or make any distribution (other than regular cash dividends)
to the Holders of the Common Stock;
(ii) The Company shall offer for subscription pro-rata to the
Holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) There shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(iv) There shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of such cases, the Company shall give written notice
to the Holder of the date on which (x) the books of the Company shall close or
a record shall be taken for such dividend, distribution, or subscription
rights, or (v) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case may
be. Such notice shall also specify the date as
-7-
<PAGE> 8
of which the Holders of Common Stock of record shall participate in such
dividend, distribution, or subscription rights or shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such notice shall be given at
least 20 days prior to the record date or the date on which the Company's
transfer books are closed in respect thereof. Failure to give such notice, or
any defect therein, shall not affect the legality or validity of any of the
matters set forth in this Paragraph.
10. (a) The Holder of this Warrant Certificate, each transferee hereof
and any Holder and transferees of any Shares, by his or its acceptance thereof,
agrees that (a) no public distribution of Warrants or Shares will be made in
violation of the Securities Act of 1933 as amended (the "Act"), and (b) during
such period as the delivery of a prospectus with respect to Warrants or Shares
may be required by the Act, no public distribution of Warrants or Shares will
be made in a manner or on terms different from those set forth in, or without
delivery of, a prospectus then meeting the requirements of Section 10 of the
Act and in compliance with all applicable state securities laws. The Holder of
this Warrant Certificate and each transferee hereof further agrees that if any
distribution of any of the Warrants or Shares is proposed to be made by them
otherwise than by delivery of a prospectus meeting the requirements of Section
10 of the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed distribution will not be in
violation of the Act or of applicable state law. Furthermore, it shall be a
condition to the transfer of the Warrants that any transferee thereof deliver
to the Company his or its written agreement to accept and be bound by all of
the terms and conditions contained in this Warrant Certificate.
(b) This Warrant or the Shares or any other security issued or issuable
upon exercise of this Warrant may not be sold or otherwise disposed of except
as follows:
(1) To a person who, in the opinion of counsel for the Holder
reasonably acceptable to the Company, is a person to whom this Warrant or
Shares may legally be transferred without registration and without the delivery
of a current prospectus under the Act with respect thereto and then only
against receipt of an agreement of such person to comply with the provisions of
this Section (1) with respect to any resale or other disposition of such
securities which agreement shall be satisfactory in form and substance to the
Company and its counsel; provided that the foregoing shall not only apply to
any such Warrant, Shares or other security as to which such Holder shall have
received an opinion letter from counsel to the Company as to the exemption
thereof from the registration under the Act pursuant to Rule 144(k) under the
Act; or
(2) To any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering thereof
for such sale or disposition.
(c) Each certificate for Shares issued upon exercise of this Warrant
shall bear a legend relating to the non-registered status of such Shares under
the Act, unless at the time of exercise of this Warrant such Shares are subject
to a currently effective registration statement under the Act.
11. (a) The Warrants represented by this Certificate may be redeemed
(as a whole at any time or in part from time to time) on not less than thirty
(30) days' notice, at a redemption price of $.10 per Warrant, provided the
"Market Price" (as hereinafter defined) of the Common Stock receivable upon
exercise of such Warrants on each of the 60 consecutive trading days ending on
the third business day prior
-8-
<PAGE> 9
to the date on which notice of redemption is given, has been at least 200% of
the then effective Exercise Price. The 60 consecutive trading day period ending
on the third business day prior to the date the notice of redemption is given
is hereinafter referred to as the "Measurement Period". Notwithstanding the
foregoing, the Company shall not be entitled to redeem any of the Warrants
represented by this Certificate, unless the issuance of the Shares into which
the Warrants are exercisable has been registered under the Act at all times
during the applicable Measurement Period and shall continue to be so registered
at all times between the date on which the notice of redemption is given and
the "Redemption Date" (as hereinafter defined). For purposes hereof, "Market
Price" shall mean with respect to each trading day the greater of (i) the
closing sales price of the Common Stock as reported by NASDAQ, or for any day
on which there is no closing sales price so reported, then the closing bid
price for such day, and (ii) the closing sales price of the Common Stock
reported on the primary securities exchange on which the Common Stock is
traded, or for any day on which there is no closing sales price so reported,
then the closing bid price for such day.
(b) In the event the Company shall elect to redeem all or any part of
the Warrants, the Company shall fix a date for redemption (the "Redemption
Date"). Notice of redemption shall be mailed by first class mail, postage
prepaid, by the Company not less than 30 days from the date fixed for
redemption to the registered Holder of this Warrant Certificate at its last
address as it shall appear on the Company's Warrant Certificate registry books.
Any notice mailed in the manner herein provided shall be conclusively presumed
to have been duly given whether or not the Holder receives such notice. Any
right to exercise a Warrant being redeemed shall terminate at 5:00 P.M. (New
York time) on the business day immediately preceding the Redemption Date.
(c) From and after the date specified for redemption, the Company
shall, at the place specified in the notice of redemption, upon presentation
and surrender of this Certificate to the Company by or on behalf of the Holder
thereof, deliver or cause to be delivered to or upon the written order of the
Holder a sum in cash equal to the redemption price of each Warrant being
redeemed. From and after the date fixed for redemption and upon the deposit or
setting aside by the Company of a sum sufficient to redeem all the Warrants
called for redemption, such Warrants shall expire and become void and all
rights hereunder with respect thereto, except the right to receive payment of
the redemption price, shall cease.
(d) If less than all of the Common Stock purchase warrants sold in the
Private Placement are called for redemption by the Company, the particular
Common Stock purchase warrants to be redeemed shall be selected at random by
the Company in such manner as the Company in its discretion may deem fair and
appropriate. If there shall be drawn for redemption less than all of the
Warrants represented by this Warrant Certificate, the Company shall execute and
deliver, upon surrender of this Warrant Certificate, without charge to the
Holder, a new Warrant Certificate representing the unredeemed balance of the
Warrants represented by this Warrant Certificate.
12. The Company will, within six months of the date of original
issuance of this Warrant, use its best efforts to (i) prepare and file under
the Act a registration statement relating to the Shares (the term "registration
statement" as used herein being deemed to include any form which may be used to
register a distribution of securities to the public for cash); (ii) prepare and
file with the appropriate state blue sky authorities the necessary documents to
register or qualify the Shares, provided that the Company shall only be
required to register or qualify the Shares in the states where the Units have
been registered or qualified; and (iii) use its best efforts to cause such
registration statement to become effective and to keep such registration
statement and state blue sky filings current and effective for three (3) years;
provided, however, the Company will have no such obligation to keep effective a
registration statement with regard to the
-9-
<PAGE> 10
Shares which is then outstanding if it agrees to purchase the Shares at the
then current market price of the Shares.
All expenses in connection with preparing and filing any registration
statement (and any registration or qualification under the blue sky laws of the
states in which the offering will be made under such registration statement)
shall be borne in full by the Company, except that the underwriting commissions
and expenses attributable to the Shares so registered and the fees and
disbursements of counsel, if any, to the holders of the Shares shall be borne
by such holders. The Company may include other securities in any such
registration statement.
As a precondition to such registration and qualification each holder of
the Shares will provide the Company with sufficient information for permit and
regulation and qualifications and will indemnify the Company, and each person
who controls the Company within the meaning of Section 15 of the Act, from and
against any and all losses, claims, damages, expenses and liabilities caused by
any untrue statement of a material fact contained in any registration statement
or contained in a prospectus furnished under the Act or statement contained in
a prospectus furnished under the Act or caused by any omission to state of a
material fact therein necessary to make the statements therein not misleading,
insofar as such losses, claims, damages, expenses and liabilities are caused by
such untrue statement or omission based upon information furnished in writing
to the Company by any such holder expressly for use in any registration
statement or prospectus. In addition, each holder will execute and deliver all
such documents and undertakings as the Company may deem necessary or desirable
for purposes of compliance with applicable federal and state securities laws.
The Company's obligations as set forth above with respect to each holder are
contingent on such holder's satisfaction of his or its obligations set forth
above.
13. (a) This Warrant shall be governed by and construed in
accordance with the substantive laws of the State of Ohio, without giving
effect to conflict of laws principles.
(b) This Warrant Certificate constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions whether express or implied, oral or
written. Neither this Warrant Certificate nor any portion or provision hereof
may be changed, waived or amended orally or any manner other than by an
agreement in writing signed by the Holder and the Company.
(c) Except as otherwise provided in this Warrant Certificate, all
notices, requests, demands and other communications required or permitted
under this Warrant Certificate or by law shall be in writing and shall be
deemed to have been duly given, made and received only when delivered against
receipt or when deposited in the United States mails, certified or registered
mail, return receipt requested, postage prepaid, addressed as follows:
Company: American Business Computers Corporation
451 Kennedy Road
Akron, Ohio 44305
Attention: Treasurer
Holder: At the address shown for the
Holder in the registration
book maintained by the Company.
-10-
<PAGE> 11
(d) If any provision of this Warrant Certificate is prohibited by or is
unlawful or unenforceable under any applicable law of any jurisdiction, such
provision shall, as to such jurisdiction be in effect to the extent of such
prohibition without invalidating the remaining provisions hereof; provided,
however, that any such prohibition in any jurisdiction shall not invalidate
such provision in any other jurisdiction; and provided, further that where the
provisions of any such applicable law may be waived, that they hereby are
waived by the Company and the Holder to the full extent permitted by law and to
the and that this Warrant instrument shall be deemed to be a valid and binding
agreement in accordance with its terms.
IN WITNESS WHEREOF, American Business Computers Corporation has caused
this Warrant Certificate to be signed by its duly authorized officers as of
the _______ day of __________________, 1995.
AMERICAN BUSINESS COMPUTERS CORPORATION
By: ____________________________________
Name:
Title:
[SEAL]
-11-
<PAGE> 1
EXHIBIT 21.1
------------
Subsidiaries of the Registrant:
(1) ABC Dispensing Technologies, Inc. is the operating subsidiary (an Ohio
corporation).
(2) ABC TechCorp holds certain patents (an Ohio corporation).
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements on Form S-8 No. 33-39875; Amendment No. 2 to Form S-2 No. 33-89596
and Amendment No. 2 to Form S-3 No. 33-89398 of American Business Computers
Corporation and in the related Prospectuses of our report dated July 11, 1995,
with respect to the consolidated financial statements and schedule of American
Business Computers Corporation included in this annual report (Form 10-K) for
the year ended April 29, 1995.
ERNST & YOUNG LLP
Akron, Ohio
August 9, 1995
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