FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED JANUARY 25, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission file number: 0-14922
ABC DISPENSING TECHNOLOGIES, INC.
(Name changed from 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: (330) 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
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 February 19, 1997 was 17,109,160.
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<PAGE>
<TABLE>
<CAPTION>
Index
ABC Dispensing Technologies, Inc. and Subsidiaries
Part I Financial Information Page No.
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - January 25, 1997 and April 27, 1996 3
Consolidated statements of operations - Nine months and three months ended
January 25, 1997 and January 27, 1996 4
Consolidated statements of cash flows - Nine months ended January 25, 1997
and January 27, 1996 5
Consolidated statement of stockholders' equity - Nine months ended January 25, 1997 6
Notes to consolidated financial statements - January 25, 1997 7-11
Item II. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-13
Part II Other Information
- ----------------------------------------------------------------------------------------------------------------
Item 1. (Not Applicable)
Item 2. (Not Applicable)
Item 3. (Not Applicable)
Item 4. (Not Applicable)
Item 5. Other Information 14
Item 6. (A) Exhibits and Reports 15
Signature 16
</TABLE>
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<PAGE>
ITEM I.
ABC DISPENSING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited Audited
ASSETS January 25, 1997 April 27, 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,040,000 $ 488,000
Trade receivables:
Accounts receivable, less allowance for doubtful accounts
of $158,000 as of January 25 and $136,000 as of April 27 216,000 666,000
Notes receivable (short-term) 33,000 28,000
Inventories (Note 3) 1,055,000 1,703,000
------------ ------------
Total current assets 2,344,000 2,885,000
Property, Plant, and Equipment (Note 10) 1,528,000 1,494,000
Less accumulated depreciation (838,000) (791,000)
------------ ------------
690,000 703,000
Capitalized R&D Labor 340,000 0
Less accumulated amortization (19,000) 0
------------ ------------
321,000 0
Other assets:
Notes receivable (long-term) 78,000 70,000
Intangible assets, less accumulated amortization of $534,000
as of January 25 and $480,000 as of April 27 120,000 169,000
Patents pending and deferred charges 130,000 193,000
------------ ------------
Total other assets 328,000 432,000
Total Assets $ 3,683,000 $ 4,020,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 401,000 $ 876,000
Line of credit 0 292,000
Note payable to related party (Note 4) (92,000) 500,000
Current portion of long-term debt (Note 4) 31,000 25,000
Accrued liabilities:
Legal fees and settlement costs 43,000 148,000
Employee compensation and benefits 294,000 218,000
Warranty reserve 119,000 197,000
Other 171,000 353,000
Deferred income 4,000 33,000
------------ ------------
Total current liabilities 971,000 2,642,000
Long-term debt (Note 4) 279,000 294,000
Stockholders' equity:
Common Stock, $.01 par value; authorized
50,000,000 shares; 17,109,160 shares issued
and outstanding (16,984,160 at April 27, 1996) 171,000 170,000
Preferred stock (Note 6) 2,836,000 0
Additional paid-in-capital 19,010,000 18,942,000
Retained earnings (deficiency) (19,532,000) (17,882,000)
------------ ------------
2,485,000 1,230,000
Less notes receivable - stockholders (52,000) (146,000)
------------ ------------
Total Stockholders' Equity 2,433,000 1,084,000
------------ ------------
Total Liabilities and Stockholders' Equity $ 3,683,000 $ 4,020,000
============ ============
See accompanying notes
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<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Nine months and three months ended January 25, 1997 and January 27, 1996
Unaudited
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
Jan. 25, 1997 Jan. 27, 1996 Jan. 25, 1997 Jan. 27, 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Products and services $ 2,565,000 $ 3,980,000 $ 427,000 $ 425,000
Royalties 0 256,000 0 0
------------ ------------ ------------ ------------
Total revenues 2,565,000 4,236,000 427,000 425,000
Cost and expenses:
Products and services 2,076,000 3,683,000 313,000 527,000
General and administrative 1,281,000 921,000 268,000 344,000
Selling and marketing 470,000 367,000 165,000 112,000
Research and development 344,000 517,000 (47,000) 154,000
------------ ------------ ------------ ------------
Total cost and expenses 4,171,000 5,488,000 699,000 1,137,000
Loss from operations (1,606,000) (1,252,000) (272,000) (712,000)
Other income:
Securities and contract litigation
fees and settlement cost 0 328,000 0 328,000
Investment income 14,000 21,000 5,000 3,000
Interest income/(expense) (74,000) (88,000) (12,000) 0
Other income/(expense) 16,000 72,000 13,000 (30,000)
------------ ------------ ------------ ------------
Total other income/(expense) (44,000) 333,000 6,000 301,000
Net loss (Note 5) ($ 1,650,000) ($ 919,000) ($ 266,000) ($ 411,000)
------------ ------------ ------------ ------------
Weighted average number of
shares outstanding 17,540,662 16,320,562 18,538,604 16,672,361
------------ ------------ ------------ ------------
Net loss per share ($ 0.09) ($ 0.06) ($ 0.01) ($ 0.02)
============ ============ ============ ============
</TABLE>
See accompanying notes.
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ABC DISPENSING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
January 25, 1997 January 27, 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($1,650,000) ($ 919,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 124,000 73,000
Changes in operating assets and liabilities:
Inventories 648,000 (107,000)
Receivables 437,000 2,000
Patents pending and deferred charges 22,000 (55,000)
Deferred income (29,000) 0
Accrued liabilities 289,000 (1,278,000)
Accounts payable (475,000) (57,000)
----------- -----------
Total adjustments 438,000 (1,422,000)
----------- -----------
Net cash used in operating activities (1,212,000) (2,341,000)
Cash flows from investing activities:
Additions to property, plant and equipment 2,000 (65,000)
Additions to selling rights 0 (175,000)
Additions to patents (4,000) 1,000
Additions to capitalized R & D labor (340,000) 0
----------- -----------
Net cash used in investing activities (342,000) (239,000)
Cash flows from financing activities:
Proceeds from issuance of preferred stock 2,836,000 0
Proceeds from severance settlement 89,000 0
Proceeds (costs) of private placements 68,000 593,000
Proceeds from collection of stockholders receivable 5,000 8,000
Proceeds from issuance of notes payable 0 1,007,000
Stock contribution to class action settlement fund 0 467,000
Proceeds from stock issued for exercise of warrants 0 428,000
Proceeds from stock issued for exercise of stock options 0 72,000
Repayment of line of credit (292,000) 0
Repayment of notes payable and loan costs (600,000) (654,000)
----------- -----------
Net cash provided by financing activities 2,270,000 1,921,000
----------- -----------
Net increase (decrease) in cash and cash equivalents 716,000 (659,000)
Cash and cash equivalents at beginning of year 488,000 1,309,000
----------- -----------
Cash and cash equivalents at end of period $ 1,040,000 $ 650,000
=========== ===========
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
ABC DISPENSING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Nine months ended January 25, 1997
Unaudited
Number of Common Stock Additional Retained Notes
Shares of $.01 Par Preferred Paid-in Earnings Receivable-
Common Stock Value Stock Capital (Deficiency) Stockholders
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 27, 1996 16,984,160 $170,000 $0 $18,942,000 $(17,882,000) $(146,000)
Collection of notes receivable-
stockholders' 5,000
Severance settlement 89,000
Issue of stock to Mezzanine
Financial Fund, L.P. (Note 4) 125,000 1,000 141,000
Issue of stock to Davis, Scott
Preferred Stock private
placement (Note 6) 2,836,000
Private placement costs (73,000)
Net loss for the nine months
ended January 25, 1997 (1,650,000)
-- -- -- -- -- --
---------- -------- ------------ ----------- ------------ ---------
Balance at January 25, 1997 17,109,160 $171,000 $ 2,836,000 $19,010,000 $(19,532,000) $ (52,000)
========== ======== ============ =========== ============ =========
</TABLE>
See accompanying notes.
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<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION
ABC Dispensing Technologies, Inc. (name changed from American Business Computers
Corporation) designs proprietary dispensing systems which dispense and blend
liquids, powders and other ingredients in a uniform fashion with a high degree
of accuracy. The Company provides training, installation and product service and
also custom designs and manufactures its own proprietary dispensing equipment to
meet the needs of its customers which are located primarily in the United
States. To date, the Company has developed and is marketing dispensing systems
for the beverage, paint, chemical coatings, cement additives, and
animal-husbandry industries.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended January 25, 1997 are
not necessarily indicative of the results that may be expected for the year
ended April 26, 1997. For further information, refer to the Form 10-K for the
year ended April 27, 1996.
YEAR END - The Company `s fiscal year-end is the Saturday closest to April 30,
which results in a fifty-two or fifty-three week year. Both fiscal 1997 and
fiscal 1996 consist of fifty-two weeks ending on April 26 and April 27,
respectively. References to the years 1997 and 1996 refer to fiscal years ended
April 26, 1997 and April 27, 1996, respectively.
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.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH EQUIVALENTS - The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
FINANCIAL INSTRUMENTS - The carrying value of the Company's cash, accounts
receivable, accounts payable and notes payable are a reasonable estimate of
their fair value due to the short-term nature of these instruments. The
Company's long-term debt has variable interest rates and carrying value
approximates fair value at January 25, 1997.
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 - Property, plant and equipment are carried at
cost. Depreciation is provided primarily by use of the straight-line method over
the estimated useful lives of the assets, which are five years for machinery and
equipment and thirty years for buildings.
INTANGIBLE ASSETS - Intangible assets consist of patents and purchased selling
rights which are recorded at cost. Amortization is provided using the
straight-line method over a period of five years or less.
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 65 and 78
percent of the Company's total revenues, for the nine months ended January 25,
1997 and January 27, 1996, respectively.
PROVISION FOR WARRANTY CLAIMS - Estimated warranty costs are provided at the
time of sale of the warranted products.
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ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION - The Company grants stock options for a fixed number
of shares to employees generally with an exercise price equal to the fair value
of the shares at the date of grant. The Company accounts for stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees, " and, accordingly, recognizes no
compensation expense for the stock option grants.
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 material, and therefore, are included in the computation of primary shares
outstanding.
RECLASSIFICATIONS - Certain reclassifications have been made to prior year
amounts to conform with current year classifications.
3. INVENTORIES
At January 25, 1997 and April 27, 1996, inventories consisted of the following:
January 25, 1997 April 27, 1996
Raw Materials $ 633,000 $ 729,000
Work-in-process 125,000 488,000
Finished goods 297,000 486,000
---------- ----------
$1,055,000 $1,703,000
========== ==========
The above amounts are net of obsolescence reserves of 840,000 as of January 25,
1997 and $985,000 as of April 27, 1996.
4. FINANCING ARRANGEMENTS
NOTES PAYABLE
In June 1994, the Company purchased its headquarters facility in Akron, Ohio for
$490,000. A note payable was entered into during fiscal 1995 to partially
finance this purchase which was previously leased from the former chairman.
The note payable has an adjustable interest rate (9.25% at January
25, 1997 and April 27, 1996) 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. At January 25, 1997, the facility had a net book value of
$451,000.
At January 25, 1997 and April 27, 1996, notes payable consisted of the
following:
January 25, 1997 April 27, 1996
Note payable to bank (Headquarters
facility purchase) $270,000 $278,000
Other (equipment purchases) 40,000 41,000
-------- ---------
310,000 319,000
Less amounts due within one year (31,000) (25,000)
-------- ---------
Total long-term debt $279,000 $294,000
======== ========
Interest paid by the Company approximates interest expense for the quarters
ended January 25, 1997 and April 27, 1996.
Maturities of notes payable for the five years subsequent to April 27, 1996 are
as follows: 1997--$25,000; 1998--$30,000; 1999--$24,000; 2000--$15,000 and
2001--$16,000.
-8-
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ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. FINANCING ARRANGEMENTS (CONTINUED)
MEZZANINE NOTE
On January 17, 1996, the Company obtained a $500,000 working capital
asset-secured loan from the Mezzanine Financial Fund, L.P. ("Mezzanine").
Interest was accrued on outstanding principal at the rate of 18% per annum. The
terms of the loan agreement required a $100,000 repayment of principal on each
of the first and second anniversaries of the closing of the loan. The balance of
$300,000 was due on January 17, 1999.
On September 23, 1996, the Company paid-off the loan to the Mezzanine in the
amount of $500,000. Additionally, Mezzanine received 63,000 shares of the
Company's common stock for enhancement fees and prepayment fees.
Herbert M. Pearlman, former Chairman of the Board of Directors of the Company,
is a director, officer and principal stockholder of the general partner of
Mezzanine. Mr. Pearlman is Chairman, chief executive officer and a principal
stockholder of Helm Resources, Inc., a publicly traded company which holds an
approximately 14% equity stake in Mezzanine.
LINE OF CREDIT
On December 18, 1995, the Company established a $750,000 discretionary line of
credit secured by accounts receivable and other assets of the Company. At
January 25, 1997, no amount was outstanding and $750,000 of the line of credit
is available. The line of credit bears an interest rate of prime plus four
points (12.25% at January 25, 1997, which equals the weighted-average interest
rate for the period).
On January 27, 1997, the Company renewed its line of credit agreement with
generally the same terms as the original agreement. The maximum line of credit
available under the renewal is $450,000, and it expires on June 30, 1997.
5. INCOME TAXES
The components of the Company's deferred income taxes at April 27, 1996 and
April 29, 1995 are as follows:
1996 1995
----------- -----------
Net operating loss carryforwards $ 5,450,000 $ 4,709,000
Inventories 495,000 447,000
Other 255,000 363,000
----------- -----------
Total deferred tax asset 6,200,000 5,519,000
Valuation allowance for deferred taxes (6,200,000) (5,519,000)
----------- -----------
Net deferred taxes $ -0- $ -0-
=========== ===========
At April 27, 1996 and April 29, 1995, the Company had Federal net operating loss
carryforwards for tax reporting purposes of approximately $14,200,000 which
expires in the years 1997 to 2011. 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.
6. PRIVATE PLACEMENT
The shareholders of the Company have approved an amendment to the Company's
Certificate of Incorporation to authorize 5,000,000 shares of Preferred Stock.
The Company offered shares of 9% Convertible Cumulative Redeemable Preferred
Stock, Series A ("Series A Preferred Stock") in exchange for the surrender of
the Company's outstanding $25,000, 9% Convertible Subordinated Redeemable Notes
due August 1, 1999 ("Notes").
As of February 28, 1997, the Company issued 261 shares of Series A Preferred
Stock, in exchange for notes or $12,500 cash per share, generating gross
proceeds to the Company of $3,265,000.
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ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. COMMON STOCK
STOCK OPTION PLANS
The Company has non-qualified stock option plans which provides for the issuance
of up to 1,250,000 shares of common stock for non-employee directors, officers
and other key employees. All granted options are exercisable after six months
from the grant date provided the employee has at least one year of service.
Grant options expire five years after grant date. All options were granted at
fair market value at the date of the grant. Options that expire in May 1997 will
be granted a one year extension.
Stock option transactions and prices are summarized as follows:
<TABLE>
<CAPTION>
Officers' & Officers' & Director's Shares Directors' Shares
Employees Employees Under Option Under Option
For Nine Months Ended For Nine Months Ended For Nine Months Ended For Nine Months Ended
January 25, 1997 January 27, 1996 January 25, 1997 January 27, 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Outstanding, April 27, 1996 194,314 191,941 130,000 195,000
Granted 429,128 112,750 160,000 -
Exercised - ( 14,367) - ( 40,000)
Canceled - ( 96,010) - ( 25,000)
--------- -------- ------- --------
Outstanding October 26, 1996 623,442 194,314 290,000 130,000
========= ======== ======= ========
Exercise price per share $1.13 to $3.44 $1.50 to $3.44 $1.25 to $3.25 $1.25 to $3.25
Warrant shares under and prices for the years ended January 25, 1997 and January
27, 1996 are summarized as follows:
January 25, 1997 January 27, 1996
---------------- ----------------
<S> <C> <C>
Outstanding at beginning of period 2,447,410 1,275,000
Granted 329,000 255,000
Exercised - (100,000)
Canceled - -
================ ================
Outstanding at end of period 2,776,410 1,430,000
================ ================
Exercise price per share $1.25 to $3.50 $1.25 to $3.38
</TABLE>
8. RELATED PARTY TRANSACTIONS
The Company and Mr. Herbert M. Pearlman mutually terminated an arrangement
effective October 1, 1996 that paid an allocation to Helm Resources for the
costs of Mr. Pearlman for office space and direct expenses totaling
approximately $21,000 per year for services rendered by Mr. Pearlman to the
Company. Mr. Pearlman, former Chairman of the Company, is the chief executive
officer and a principal stockholder of Helm Resources Inc. (see footnote 4).
9. OPERATING LEASES
For the nine months ended January 25, 1997 and January 27, 1996, aggregate
rental expense was $33,000, and $29,000, respectively.
-10-
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ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following as of January 25, 1997
and April 27, 1996:
January 25, 1997 April 27, 1996
Land $ 57,000 $ 57,000
Building and building improvements 573,000 572,000
Machinery and equipment 898,000 865,000
--------- ----------
1,528,000 1,494,000
Less accumulated depreciation (838,000) (791,000)
--------- ---------
$690,000 $703,000
======== ========
11. RETIREMENT BENEFITS
The Company sponsors a 401(k) plan which covers substantially all full-time
employees. Eligible employees may contribute up to 12% 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 4% of the participants'
compensation. The cost of the Company's matching contribution for the nine
months ended January 25, 1997 and January 27,1996 amounted to $11,000 and
$9,000, respectively. The Company has the discretion to make a profit-sharing
contribution, but no such contribution has been made by the Company.
-11-
<PAGE>
ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
With new top management in the form of a President and CFO, the Company
recognizes the need to change its overall corporate strategy to become
profitable as soon as possible. In the past, the Company focused most of its
efforts on research and development with less emphasis on marketing and sales.
The Company has shifted its emphasis, and as a result of its new focus, the
Company developed an intense marketing and sales strategy for its four main
product lines: paint dispensing equipment, liquor control systems, juice
dispensers, and soft-drink dispensers.
Product sales for the nine months ended January 25, 1997 and January 27, 1996
are shown below:
Product sales: January 25, 1997 January 27, 1996
Paint/Industrial dispensers 1,509,000 3,019,000
Beverage dispensers 509,000 489,000
--------- ---------
2,018,000 3,508,000
Service and development sales:
Paint/Industrial 205,000 296,000
Beverage 293,000 345,000
Other 49,000 87,000
--------- ---------
547,000 728,000
Total revenues 2,565,000 4,236,000
========= =========
RESULTS OF OPERATIONS
Revenues for the nine months ended January 25, 1997 decreased by
$1,671,000, or 39%, to $2,565,000, as compared to the same nine month period FYE
96. This decrease in revenues is primarily the result of a decrease in the sale
of paint dispensers of approximately $1.5 million, or 50%, due to the completion
of Sherwin-Williams' order for tint-a-color dispensing units. Service revenues
also decreased $181,000, or 25%, due to fewer service calls to Sherwin-Williams.
Gross margin percent increased from 13% FYE 96 to 19% for the nine months
ended January 25, 1997. This increase reflects a decrease in production costs
associated with the completion of the tint-a-color dispenser order from
Sherwin-Williams, and to a price increase which was enacted in the third
quarter.
General and administrative expenses increased for the nine months ended
January 25, 1997 by $360,000, or 39% to $1,281,000, as compared to the same nine
month period FYE 96. This increase is primarily due to the recording of
severance expense of $221,000 for former President and CEO, Robert A. Cutting,
and former CFO, Gary T. Salhany. In addition, overall payroll and related
benefits have increased over the same period last year due to an increased
emphasis on supporting the Company's sales staff.
Selling and marketing expenses increased for the nine months ended January
25, 1997 by $103,000, or 28%, to $470,000, as compared to the corresponding
period FYE 96. As stated above, the Company expanded its sales and marketing
efforts. This increase is attributable to an increase in trade shows,
promotional literature and a mass mailing program. The Company did not
participate in any of these activities during FYE 96.
-12-
<PAGE>
RESULTS OF OPERATIONS (continued)
Research and development expenses decreased for the nine months ended
January 25, 1997 by $173,000, or 33%, to $344,000, as compared to the same nine
month period FYE 96. The decrease is due to the capitalization of $340,000 of
research and development labor costs. These labor costs are being amortized over
36 months. In addition, there was an increase in research and development costs
related to the universal tint dispenser and the institutional juice dispenser.
This increase is due to increased labor hours resulting from intense efforts by
the Company to finalize the design and operation of these two product lines so
that they can be distributed to the marketplace.
Securities and contract litigation expenses were not recognized for the
nine months ended January 25, 1997. However, for the same period last year, a
favorable true-up of $328,000 was recorded. This true-up represented an
over-accrual of legal fees associated with the class action settlement suit. The
suit was settled on January 16, 1996 when all related fees and damages were
paid.
NET INCOME
For the nine months ended January 25, 1997, the Company reported a net
loss of $1,650,000 and loss per share of $0.09 as compared to a net loss
$919,000 and a loss per share of $0.06 for FYE 96. This increase in net loss is
attributable to a decrease in sales.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance increased from $488,000 on April 27, 1996 to
$1,040,000 on January 25, 1997. Operating activities required cash of
$1,212,000, however the Company was able to provide $2,106,000 through financing
activities. This excess will be used to fund day-to-day operations.
For short-term cash, the Company utilizes an accounts receivable-based
credit line. As of January 25, 1997, the Company had no outstanding balance on
this credit line. The interest rate is the prime lending rate plus four percent,
or 12.25% as of January 25, 1997 (See Note 4).
In September 1996, the Company effected a private placement of 9%
Convertible Senior Subordinated Redeemable Notes. All the note holders have
agreed to surrender the notes in exchange for 9% Convertible Cumulative
Redeemable Preferred Stock, Series A (see Note 6). As of February 28, 1997,
$3,265,000 has been received. The Company has used the proceeds to pay related
selling commissions and expenses, and in addition, to fully satisfy and
terminate the $500,000 credit facility provided by Mezzanine and to provide
working capital for the Company.
The current ratio as of January 25 was 2.41:1.00, compared to the current
ratio of April 27, which was 1.09:1.00.
The quick ratio as of January 25 (cash and current receivables, divided by
total current liabilities) was 1.33:1.00 as of January 25, compared to 0.45:1.00
as of April 27.
Inventories were reduced to $1.05 million at January 25, from $1.7 million
at April 27, due to the shipment of Tint-A-Color dispensers to The
Sherwin-Williams Company.
The Company anticipates that its liquidity and capital resources are
sufficient to meet its short-term needs. However, the Company will require
additional capital to continue its long-term operations and research &
development activities. No assurances can be given that the Company will be
successful in raising additional capital. Further, there can be no assurance,
assuming the Company successfully raises additional funds, that the Company will
achieve profitable operations or positive cash flow.
-13-
<PAGE>
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION
- --------------------------
MULTI-MILLION DOLLAR ORDER FROM HOME DEPOT
On February 12, 1997, the Company announced that it received an initial
multi-million dollar order for its new, self-calibrating, universal paint-tint
dispensing system, representing its first order from The Home Depot, Inc., North
America's largest home improvement retailer. The multi-million dollar order is
for 300 units of ABC's new automatic tinting system, tradenamed "Royal Match."
Delivery is scheduled to commence early this Spring. This is the initial phase
of an anticipated rollout to The Home Depot's entire 500-plus store network in
34 states and three Canadian provinces, with one to three units of the tinting
system expected to be installed per store.
RESIGNATION OF DIRECTORS
On February 6, 1997, the Company announced that Mr. Herbert M. Pearlman
resigned as Chairman of the Company's Board of Directors and as a director due
to other business commitments and personal considerations. Mr. John E.
Stieglitz, director of the Company, also resigned as a director. As a result of
these resignations, there are currently three directors of the Company, two of
whom are non-affiliated directors.
SIGNIFICANT ORDER AND PROPOSED JOINT-VENTURE AGREEMENT
On July 17, 1995, the Company received a $7 million initial order from Wm.
H. Leahy Associates, a privately owned national foodservice marketing company
based in Chicago, for its new Institutional Juice Dispenser. The
microprocessor-driven system mixes and dispenses from juice concentrates,
ensuring a controlled mixture and an accurate, standard portion. The Company
filed for a patent on the controlling electronics and software. This new Juice
Dispenser is currently undergoing field tests.
On October 22, 1996, the Company announced a preliminary agreement to form
a joint venture with Wm. H. Leahy Associates to process and sell the
institutional juice dispenser. The proposed joint-venture combines ABC's
proprietary dispensing technologies and equipment with a specially formulated
fresh-fruit concentrate developed by Wm. H. Leahy Associates for sale to the
institutional food marketplace. The proposed agreement, which is still in
negotiations, calls for the two companies to share ongoing revenues and profits
on a basis to be determined after completion of field testing, which is expected
to be in the Spring of 1997.
To date, no sales have been recorded under the initial order or as a
result of the joint-venture.
-14-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS
- -----------------------------
(a) EXHIBITS
3(i).1 Amendment to the Certificate of Incorporation dated January 31, 1997
3(i).2 Amendment to the Certificate of Incorporation dated January 31, 1997
11. Statement of Earnings per Share (See Financial Statements)
27. Financial Data Schedule (for S.E.C. electronic filing only)
-15-
<PAGE>
SIGNATURE
Pursuant to requirements 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.
ABC Dispensing Technologies, Inc.
----------------------------------
(Registrant)
Date: March 11, 1997 /s/ Charles M. Stimac, Jr.
------------------------------ ----------------------------------
Charles M. Stimac, Jr.
President/CEO
-16-
AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
ABC DISPENSING TECHNOLOGIES, INC.
To the Department of State
State of Florida
Pursuant to the provisions of Section 607.1006 of the Florida
Business Corporation Act, the corporation hereinafter named (the "Corporation")
does hereby adopt the following Articles of Amendment:
1. The name of the Corporation is ABC Dispensing Technologies,
Inc.
2. Article III of the Articles of Incorporation of the
Corporation is hereby amended and restated so as henceforth to read as follows:
The total number of shares of stock that the
Company shall have authority to issue is
fifty-five million (55,000,000), consisting of
fifty million (50,000,000) shares of common stock
(the "Common Stock") of the par value of one cent
($.01) each and five million (5,000,000) shares of
preferred stock (the "Preferred Stock") of the par
value of one cent ($.01) each.
The Preferred Stock may be divided into one
or more classes. The designation, relative rights,
preferences and limitations of the shares of each
class of Preferred Stock are as follows:
The shares of Preferred Stock may be issued
from time to time in one or more series of any
number of shares; provided that the aggregate
number of shares issued and not canceled of any
and all such series shall not exceed the total
number of shares of Preferred Stock hereinafter
authorized, and with distinctive serial
designations, all as shall hereafter be stated and
expressed in the resolution or resolutions
provided for the issue of such shares of Preferred
Stock from time to time adopted by the Board of
Directors pursuant to the authority so to do which
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is hereby vested in the Board of Directors. Each
series of shares of Preferred Stock (a) may have
such voting powers, full or limited, or may be
without voting powers; (b) may be subject to
redemption at such time or times and at such
prices; (c) may be entitled to receive dividends
(which may be cumulative or non-cumulative) at
such rate or rates, on such conditions and at such
times, and payable in preference to, or in such
relation to, the dividends payable on any other
class or classes or series of stock; (d) may have
such rights upon the dissolution of, or upon any
distribution of the assets of, the Company; (e)
may be made convertible into or exchangeable for,
shares of any other class or classes of any other
series of the same or any other class or classes
of shares the Company at such price or prices or
at such rates or exchange and with such
adjustments; (f) may be entitled to the benefit of
a sinking fund to be applied to the purchase or
redemption of shares of such series in such amount
or amounts; (g) may be entitled to the benefit of
conditions and restrictions upon the creation of
indebtedness of the Company or any subsidiary,
upon the issue of any additional shares (including
additional shares of such series or of any other
series) and upon the payment of dividends or the
making of other distributions on, and the
purchase, redemption or other acquisition by the
Company or any subsidiary of, any outstanding
shares of the Company; and (h) may have such other
relative, participating, optional or other special
rights, qualifications, limitations or
restrictions thereof; all as shall be stated in
said resolution or resolutions providing for the
issue of such shares of Preferred Stock. Shares of
Preferred Stock of any series that have been
redeemed (whether through the operation of a
sinking fund or otherwise) or that if convertible
or exchangeable, have been converted into or
exchanged for shares of any other class or classes
shall have the status of authorized and unissued
shares of Preferred Stock of the same series and
may be reissued as a part of the series of which
they were originally a part or may be reclassified
and reissued as part of a new series of shares of
Preferred Stock to be created by resolution or
resolutions of the Board of Directors or as part
of any other series of shares of Preferred Stock,
all subject to the conditions or restrictions on
issuance set forth in the resolution or
resolutions adopted by the Board of Directors
providing for the issue of any series of shares of
Preferred Stock.
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3. The date of adoption of the aforesaid amendment was December 2,
1996.
4. The number of votes cast for the said amendment by the
shareholders was sufficient for the approval thereof.
5. The effective time and date of these Articles of Amendment shall
be at 5:00 p.m. on December 2, 1996.
ABC DISPENSING TECHNOLOGIES, INC.
/s/ Charles M. Stimac, Jr.
--------------------------------
Charles M. Stimac, Jr.
President and Chief Executive Officer
3
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
ABC DISPENSING TECHNOLOGIES, INC.
TO: THE SECRETARY OF STATE
STATE OF FLORIDA
Pursuant to the provision of Section 607.047 of the Florida General
Corporation Act, the undersigned corporation executes the following
Certificate of Amendment to its Certificate of Incorporation.
1. The name of the corporation is ABC Dispensing Technologies,
Inc. (the "Corporation").
2. The following resolution, establishing and designating a
series of shares and fixing and determining the relative
rights and preferences thereof was duly adopted by the Board
of Directors of the Corporation on or about the 30th day of
January, 1997, pursuant to authority vested in it by the
Certificate of Incorporation:
RESOLVED, pursuant to the authority expressly vested in the
Board of Directors of the Corporation by the Certificate of
Incorporation, the Board of Directors does hereby classify 480
shares of preferred stock of the Corporation as a class
designated 9% Convertible Cumulative Redeemable Preferred
Stock, Series A; and it is further
RESOLVED, that a description of such 9% Convertible Cumulative
Redeemable Preferred Stock, Series A, including the
preferences and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions for redemption, all as set by the Board of
Directors of the Corporation, is set forth in the attached
Certificate of Designation Establishing the 9% Convertible
Cumulative Redeemable Preferred Stock, Series A and Fixing the
Powers, Designations, Preferences and Relative, Participating,
Optional and Other Special Rights, and the Qualifications,
Limitations and Restrictions of the 9% Convertible Cumulative
Redeemable Preferred Stock, Series A.
3. The resolutions were adopted by the Board of Directors by
Unanimous Consent on or about January 30, 1997.
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4. The Certificate of Incorporation of the corporation is amended
so that the designation and number of shares of each class and
series acted upon in the resolution, and the relative rights,
preferences and limitations of each such class and series are
as stated in the resolution.
ABC DISPENSING TECHNOLOGIES, INC.
By: /s/ Charles M. Stimac, Jr.
-----------------------------------
Charles M. Stimac, Jr., President
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ABC DISPENSING TECHNOLOGIES, INC.
Certificate of Designation Establishing the 9% Convertible
Cumulative Redeemable Preferred Stock, Series A and Fixing the
Powers, Designations, Preferences and Relative, Participating,
Optional and Other Special Rights, and the Qualifications,
Limitations and Restrictions of the 9% Convertible Cumulative
Redeemable Preferred Stock, Series A
There is hereby established a new series of the preferred stock
("Preferred Stock") of ABC Dispensing Technologies, Inc., a Florida corporation
("Corporation"), to which the following powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations or restrictions, of the shares of such new series of
preferred stock shall apply:
1. DESIGNATION AND RANK.
The series (this "Series") of shares of Preferred Stock shall be
designated as "9% Convertible Cumulative Redeemable Preferred Stock, Series A"
(the "Series A Preferred Stock"), and each share of Series A Preferred Stock
shall have a liquidation value of $12,500 per share. Shares of Series A
Preferred Stock shall have a liquidation preference of $12,500 per share, plus
an amount per share equal to any dividends declared but unpaid, without
interest.
The Series A Preferred Stock shall rank prior to common stock of all
classes (collectively, "Common Stock") of the Corporation and to all other
classes and series of equity securities of the Corporation now or hereafter
authorized, issued or outstanding (the Common Stock and such other classes and
series of equity securities of the Corporation are collectively referred to
herein as the "Junior Stock"), other than any class or series of equity
securities of the Corporation expressly designated as ranking on a parity with
(the "Parity Stock") or senior to (the "Senior Stock") the Series A Preferred
Stock as to dividend rights and rights upon liquidation, winding up or
dissolution of the Corporation. The Series A Preferred Stock shall be junior to
the creditors of the Corporation. The Series A Preferred Stock shall be subject
to the creation of Senior Stock, Parity Stock and Junior Stock to the extent not
expressly prohibited by the charter of the Corporation.
The number of shares of Series A Preferred Stock may be increased or
decreased from time to time by a vote of not less than a majority of the members
of the Board then in office, provided that no decrease shall reduce the number
of shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of any outstanding options, rights or warrants, if any, to purchase
shares of Series A Preferred Stock, or upon the conversion of any outstanding
securities issued by the Corporation convertible into shares of Series A
Preferred Stock.
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2. DIVIDENDS.
(a) PAYMENT OF DIVIDENDS. Holders of shares of Series A Preferred Stock
shall be entitled to receive, if, when and as declared by the Board of
Directors, out of funds legally available therefor, cumulative cash (except as
provided below) dividends at an annual rate of 9% of the $12,500 liquidation
preference per share ($562.50 per share bi-annually), and no more. Such
cumulative dividends shall be payable, if declared, bi-annually on August 1 and
February 1, in each year, or if such day is not a business day, on the next
business day (each such date, a "Dividend Payment Date"). If the Corporation
elects, the Corporation may make dividend payments in shares of Common Stock of
the Corporation valued at 90% of the then current market price of the Common
Stock ("Dividend Stock"); provided, however, no fractional shares or scrip
representing any fractional shares shall be issued. Instead of any fractional
shares of Dividend Stock which would otherwise be issuable, upon election of the
Corporation to make dividend payments in the form of Common Stock, the
Corporation shall pay a cash adjustment in respect of such fractional share of
Common Stock in an amount equal to the same fraction of 90% of the then current
market price of a share of Common Stock. For these purposes, the "current market
price" shall mean the average of the daily closing prices for thirty (30)
consecutive business days prior to such dividend 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. The
first Dividend Payment Date shall be February 1, 1997. Each declared dividend
shall be payable to holders of record of the Series A Preferred Stock as they
appear on the stock books of the Corporation at the close of business on such
record dates, not more than forty-five (45) calendar days nor fewer than ten
(10) calendar days preceding the Dividend Payment Date therefor, as determined
by the Board of Directors (each such date, a "Record Date"). Semi-annual
dividend periods (each a "Dividend Period") shall commence on a Dividend Payment
Date and shall end on and include the day immediately preceding the next
Dividend Payment Date; provided, however, that the first Dividend Period (the
"Initial Dividend Period") shall commence, with respect to each holder of Series
A Preferred Stock, on the date the Corporation accepted such holder's
subscription for the Series A Preferred Stock and shall end on and include
January 31, 1997.
The amount of dividends payable on each share of the Series A Preferred
Stock for each full Dividend Period during which such share is outstanding shall
be $562.50. The amount of dividends payable for the Initial Dividend Period and
for any Dividend Period which, as to a share of Series A Preferred Stock
(determined by reference to the issuance date and the redemption or retirement
date thereof), is other than one full Dividend Period shall be computed on the
basis of a 360-day year composed of twelve (12) thirty (30) day months and the
actual number of days elapsed in the Initial Dividend Period or such Dividend
Period.
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Holders of the Series A Preferred Stock shall not be entitled to any
interest, or any sum of money in lieu of interest, in respect of any dividend
payment or payments on the Series A Preferred Stock (whether or not declared by
the Board of Directors) which may be unpaid. Any dividend payment made on any
share of Series A Preferred Stock shall first be credited against the earliest
unpaid accrued dividend with respect to such share of Series A Preferred Stock.
(b) DIVIDENDS CUMULATIVE. The right of holders of Series A Preferred Stock
to receive dividends shall commence to accrue and shall be cumulative from and
including the date of its original issuance (or in the case of shares of Series
A Preferred Stock subscribed for prior to the date hereof, the date the
Corporation accepted such subscription) and shall be cumulative whether or not
they have been paid or declared.
(c) PRIORITY AS TO DIVIDENDS. No full dividends shall be declared or paid
or set apart for payment on any Parity Stock or Junior Stock for any Dividend
Period unless full dividends have been or contemporaneously are declared and
paid (or declared and a sum (or amount of Dividend Stock) sufficient for the
payment thereof set apart for such payment) on the Series A Preferred Stock for
such Dividend Period. When dividends are not paid in full (or declared and a sum
(or amount of Dividend Stock) sufficient for such full payment is not so set
apart) for any Dividend Period on the Series A Preferred Stock and any Parity
Stock, dividends declared on the Series A Preferred Stock and Parity Stock shall
only be declared PRO RATA based upon the respective amounts that would have been
paid on the Series A Preferred Stock and such Parity Stock had dividends been
declared in full.
In addition to the foregoing restriction, the Corporation shall not
declare, pay or set apart funds for any dividends or other distributions (other
than in Common Stock or other Junior Stock) with respect to any Common Stock or
other Junior Stock of the Corporation or repurchase, redeem or otherwise
acquire, or set apart funds for repurchase, redemption or other acquisition of,
any Common Stock or other Junior Stock through a sinking fund or otherwise,
unless and until (i) the Corporation shall have paid in full all accrued
cumulative dividends on the Series A Preferred Stock through the most recent
preceding Dividend Period or funds (or the requisite amount of Dividend Stock)
have been paid over to the dividend disbursing agent of the Corporation for
payment of such dividends, and (ii) the Corporation has declared a dividend on
the Series A Preferred Stock for the current Dividend Period, and sufficient
funds or Dividend Stock have been paid over or delivered to the dividend
disbursing agent for the Corporation for the payment of such dividend for such
current Dividend Period.
No dividend shall be paid or set aside for holders of Series A Preferred
Stock for any Dividend Period unless full dividends have been paid or set aside
for the holders of each class or series of equity securities of the Corporation,
if any, ranking prior to the Series A Preferred Stock as to dividends for such
Dividend Period.
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(d) Any reference to "dividends" or "distributions" in this Section 2
shall not be deemed to include any distribution made in connection with any
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation.
2A. NEGATIVE PLEDGE.
The Corporation will not grant or permit the existence of any liens on any
of the assets of the Corporation except:
(i) Purchase money security interests incurred from time to time in
connection with the acquisition of additional assets (included
capitalized lease obligations);
(ii) Liens granted from time to time by the Corporation to financial
institutions and/or insurance companies to secure working capital
loans to the Corporation;
(iii) Liens for taxes not yet due which are contested in good faith by
appropriate proceedings;
(iv) Carrier's, warehousemen's, mechanic's, materialmen's, repairmen's,
landlord's liens or other like lines arising in the ordinary course
of business; and
(v) Easements, rights of way, restrictions and other similar
encumbrances incurred in the ordinary course of business.
3. REDEMPTION
(a) GENERAL. The shares of Series A Preferred Stock may be redeemed by the
Corporation or its successor or any acquiring or resulting entity with respect
to the Corporation (including by any parent or subsidiary of the Corporation,
any such successor, or any such acquiring or resulting entity), as applicable,
at its option, in whole or in part, at any time or from time to time, upon
notice as provided in subsection (b) of this Section 3, by resolution of the
Board of Directors of the Corporation or its successor or any acquiring or
resulting entity with respect to the Corporation (including by any parent or
subsidiary of the Corporation, any such successor, or any such acquiring or
resulting entity), as applicable, at price equal to $12,750 per share if the
redemption takes place on or before December 31, 1998 or $12,625 per share if
the redemption takes place at any time thereafter, plus, in each case, an amount
in cash equal to all accrued and unpaid dividends to the date fixed for
redemption, without interest.
The aggregate redemption price payable to each holder of record of Series
A Preferred Stock to be redeemed shall be rounded to the nearest cent ($0.01).
If less than all of the outstanding shares of Series A Preferred Stock are
to be redeemed, the Corporation will select those shares to be redeemed pro
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rata, by lot or such other methods as the Board of Directors in its sole
discretion determines to be equitable. If redemption is being affected by the
Corporation, on and after the redemption date, dividends shall cease to accrue
on the shares of Series A Preferred Stock called for redemption, and they shall
be deemed to cease to be outstanding, provided that the redemption price
(including any accrued but unpaid dividends to the date fixed for redemption)
has been duly paid or provided for. If redemption is being effected by an entity
other than the Corporation, on and as of the redemption date, such entity shall
be deemed to own the shares being redeemed for all purposes hereof provided that
the redemption price (including the amount of any declared but unpaid dividends
to the date fixed for redemption) has been duly paid or provided for.
If redemption is being effected by the Corporation, on and as of the
redemption date, dividends shall cease to accrue on the shares of Series A
Preferred Stock called for redemption, and they shall be deemed to cease to be
outstanding, provided that the redemption price (including any declared but
unpaid dividends to the date fixed for redemption) has been duly paid. If
redemption is being effected by an entity other than the Corporation, on and as
of the redemption date such entity shall be deemed to own the shares being
redeemed for all purposes of hereunder, provided that the redemption price
(including the amount of any declared but unpaid dividends to the date fixed for
redemption) has been duly paid or provided for.
(b) NOTICE OF REDEMPTION. Notice of any redemption, setting forth (i) the
date and place fixed for said redemption, (ii) the redemption price and (iii) a
statement that dividends on the shares of Series A Preferred Stock (A) to be
redeemed by the Corporation will cease to accrue on such redemption date, or (B)
to be redeemed by an entity other than the Corporation will thereafter accrue
solely for the benefit of such entity, shall be mailed, postage prepaid, at
least thirty (30) days, but not more than sixty (60) days, prior to said
redemption date to each holder of record of Series A Preferred Stock to be
redeemed at his or her address as the same shall appear on the stock books of
the Corporation. If less than all of the shares of Series A Preferred Stock
owned by such holder are then to be redeemed, such notice shall specify the
number of shares thereof that are to be redeemed and the numbers of the
certificates representing such shares. Notice of any redemption shall be given
by first class mail, postage prepaid. Neither failure to mail such notice, nor
any defect therein or in the mailing thereof, to any particular holder shall
affect the sufficiency of the notice or the validity of the proceedings for
redemption with respect to the other holders. Any notice which was mailed in the
manner herein provided shall be conclusively presumed to have been duly given
whether or not the holder receives such notice.
If such notice of redemption shall have been so mailed, and if, on or
before the redemption date specified in such notice, all funds necessary for
such redemption shall have been set aside by the Corporation (or other entity as
provided in subsection (a) of this Section 3) separate and apart from its other
funds in trust for the account of the holders of shares of Series A Preferred
Stock to be redeemed (so as to be and continue to be available therefor), then,
on and after said redemption date, notwithstanding that any certificate for
shares of Series A Preferred Stock so called for redemption shall not have been
surrendered for cancellation or transfer, the shares of Series A Preferred Stock
(A) so called for redemption by the Corporation shall be deemed to be no longer
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outstanding and all rights with respect to such shares of Series A Preferred
Stock so called for redemption shall forthwith cease and terminate, or (B) so
called for redemption by an entity other than the Corporation shall be deemed
owned for all purposes hereof by such entity, except in each case for the right
of the holders thereof to receive, out of the funds so set aside in trust, the
amount payable on redemption thereof, but without interest, upon surrender (and
endorsement or assignment for transfer, if required by the Corporation or such
other entity) of their certificates.
In the event that holders of shares of Series A Preferred Stock that shall
have been redeemed shall not within two (2) years (or any longer period if
required by law) after the redemption date claim any amount deposited in trust
with a Corporation or trust company for the redemption of such shares, such
Corporation or trust company shall, upon demand and if permitted by applicable
law, pay over to the Corporation (or other entity that redeemed the shares) any
such unclaimed amount so deposited with it, and shall thereupon be relieved of
all responsibility in respect thereof, and thereafter the holders of such shares
shall, subject to applicable escheat laws, look only to the Corporation (or
other entity that redeemed the shares) for payment of the redemption price
thereof, but without interest from the date of redemption.
(c) STATUS OF SHARES REDEEMED. Shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired for value by the Corporation shall,
after such acquisition, have the status of authorized and unissued shares of
Preferred Stock and may be reissued by the Corporation at any time as shares of
any series of Preferred Stock other than as shares of Series A Preferred Stock.
4. LIQUIDATION PREFERENCE.
(a) LIQUIDATING DISTRIBUTIONS. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of shares of Series A Preferred Stock shall be entitled to receive
for each share thereof, out of the assets of the Corporation legally available
for distribution to shareholders under applicable law, or the proceeds thereof,
before any payment or distribution of the assets shall be made to holders of
shares of Common Stock or any other Junior Stock (subject to the rights of the
holders of any class or series of equity securities having preference with
respect to distributions upon liquidation and the Corporation's general
creditors, including its depositors), liquidating distributions in the amount of
$12,500 per share, PLUS an amount per share equal to any dividends accrued but
unpaid, without interest.
If the amounts available for distribution in respect of shares of Series A
Preferred Stock and any outstanding Parity Stock are not sufficient to satisfy
the full liquidation rights of all of the outstanding shares of Series A
Preferred Stock and such Parity Stock, then the holders of such outstanding
shares shall share ratably in any such distribution of assets in proportion to
the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled , the holders of shares of Series A Preferred Stock will not be
entitled to any further participation in any liquidating distribution of assets
by the Corporation. All distributions made in respect of Series A Preferred
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Stock in connection with such a liquidation, dissolution or winding up of the
Corporation shall be made pro rata to the holders entitled thereto.
(b) CONSOLIDATION, MERGER OR CERTAIN OTHER ACTIONS. Neither the
consolidation, merger or other business combination of the Corporation with or
into any other person, nor the sale of all or substantially all of the assets of
the Corporation, shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 4.
5. VOTING RIGHTS.
Holders of shares of Series A Preferred Stock shall have no voting rights.
6. CONVERSION RIGHTS.
The holders of shares of Series A Preferred Stock shall have rights to
convert such shares into shares of Common Stock. The shares of Series A
Preferred Stock are convertible at the option of the holder, in whole or in
part, at any time after March 1, 1997 (the "Initial Conversion Date") and prior
to maturity into Common Stock at the price per share of Common Stock which
equals (i) $1.00 per share as such price may from time to time be adjusted
pursuant to the terms set forth herein (the "Conversion Price"). No fractional
shares or scrip representing any fractional shares shall be issued; instead of
any fractional shares of such Common Stock which would otherwise be issuable
upon such conversion, the Corporation shall pay a cash adjustment in respect of
such fractional share of Common Stock in an amount equal to the same fraction of
the then current market price of a share of Common Stock. Accrued dividends
through the date of conversion will be paid to the holder in cash or, at the
election of the Corporation, in Common Stock valued at 90% of the then current
market price of a share of Common Stock. For these purposes, "current market
price" shall have the meaning ascribed thereto in Section 2(a) hereof. In the
event that the Corporation shall, at any time prior to the exercise of
conversion rights hereunder: (i) declare or pay to the holders of the Common
Stock a dividend payable in any kind of shares of stock of the Corporation; or
(ii) change or divide or otherwise reclassify its Common Stock into the same or
a different number of shares with or without par value, or in shares of any
class or classes; or (iii) transfer its property as an entirety or substantially
as an entirety to any other company; or (iv) make any distribution of its assets
to holders of its Common Stock as a liquidation or partial liquidation dividend
or by way of return of capital; then, upon the subsequent exercise of conversion
rights, the holder thereof shall receive, in addition to or in substitution for
the shares of Common Stock to which it would otherwise be entitled upon such
exercise, such additional shares of stock or scrip of the Corporation, or such
reclassified shares of stock of the Corporation, or such shares of the
securities or property of the Corporation resulting from such transfer, or such
assets of the Corporation, which it would have been entitled to receive had it
exercised such conversion rights prior to the happening of any of the foregoing
events. Additionally, in the event of any of the foregoing events or
transactions, the Conversion Price shall be appropriately adjusted, if
necessary.
7
<PAGE>
Each share of Series A Preferred Stock, if converted into Common Stock as
prescribed above, will also entitle the holder to Warrants to purchase a number
of shares of Common Stock, at a price of $1.25 per share, during a five (5) year
period, commencing on the date of issuance, equal to the number of shares of
Common Stock received by the holder upon such conversion. The Warrants shall be
redeemable by the Corporation, at its sole option, at a redemption price of $.05
per share underlying the Warrants to be redeemed, at any time commencing from
the date of issuance, upon not less than thirty (30) days prior written notice,
if the current market price of the Common Stock equals or exceeds $3.00 per
share for any sixty (60) consecutive trading day period during which the shares
of Common Stock underlying the Warrants to be redeemed are the subject of an
effective and current registration statement under the Securities Act of 1993,
as amended. "Current market price" for purposes of this Section 6 shall have the
meaning ascribed thereto in Section 2(a) hereof; except that any reference
therein to an average price over a period of thirty (30) business days shall
instead refer to an actual price for each of sixty (60) consecutive trading
days. The exercise price of the Warrants shall be adjusted under the same
circumstances and in the same manner as the adjustments described in the
preceding paragraph regarding the Conversion Price.
7. NO SINKING FUND.
No sinking fund shall be established for the retirement or redemption of
shares of Series A Preferred Stock.
8. PREEMPTIVE OR SUBSCRIPTION RIGHTS.
No holder of shares of Series A Preferred Stock shall have any preemptive
or subscription rights in respect of any shares of the Corporation that may be
issued.
9. NO OTHER RIGHTS.
The shares of Series A Preferred Stock shall not have any designations,
preferences or relative, participating, optional or other special rights except
as set forth herein, or as otherwise required by law.
10. COMPLIANCE WITH APPLICABLE LAW.
Declaration by the Board of Directors and payment by the Corporation of
dividends to holders of the Series A Preferred Stock and the repurchase,
redemption or other acquisition by the Corporation (or another entity as
provided in subsections (a) and (b) of Section 3 hereof) of shares of Series A
Preferred Stock shall be subject in all respects to any and all restrictions and
limitations placed on dividends, redemptions or other distributions by the
Corporation (or any such other entity) under (i) laws, regulations and
regulatory conditions or limitations applicable to or regarding the Corporation
(or any such other entity) from time to time and (ii) agreements between the
Corporation and its creditors from time to time in effect.
8
<PAGE>
Signatures
Signed by:
/s/ Charles M. Stimac, Jr.
- ------------------------------------------------- Date: January 29, 1997
Charles M. Stimac, Jr.
Title: President and Chief Executive Officer
9
COMPUTATION OF FULLY DILUTED EARNINGS PER
SHARE UNDER TREASURY STOCK METHOD SET FORTH
IN ACCOUNTING PRINCIPLES BOARD OPINION NO. 15
<TABLE>
<CAPTION>
For Quarter Ended
-------------------------------------------
January 25, 1997 January 27, 1996
---------------- ----------------
<S> <C> <C>
Number of shares on which earnings (loss) per share is based:
Average outstanding during period 16,984,160 16,668,165
Add - Incremental shares under stock option and
stock purchase plans 1,554,444 4,196
Number of shares on which fully diluted
earnings (loss) per share is based 18,538.604 16,672,361
---------- ----------
Net earnings (loss) available to common
shareholders $ (266,000) $ (411,000)
Net earnings (loss) on which fully diluted
earnings per share is based $ (266,000) $ (411,000)
---------- ----------
Fully diluted earnings (loss) per share $ (.01) $ (.02)
========== ==========
Published earnings (loss) per share $ (.02) $ (.02)
========== ==========
</TABLE>
<PAGE>
COMPUTATION OF FULLY DILUTED EARNINGS PER
SHARE UNDER TREASURY STOCK METHOD SET FORTH
IN ACCOUNTING PRINCIPLES BOARD OPINION NO. 15
<TABLE>
<CAPTION>
For Nine Months Ended
-------------------------------------------
January 25, 1997 January 27, 1996
---------------- ----------------
<S> <C> <C>
Number of shares on which earnings per share is based:
Average outstanding during period 16,984,160 15,996,116
Add - Incremental shares under stock option and
stock purchase plans 556,502 324,446
Number of shares on which fully diluted
earnings (loss) per share is based 17,540,662 16,320,562
----- ---- ----------
Net loss available to common shareholders $ (1,650,000) $ (919,000)
Net loss on which fully diluted earnings per
share is based $ (1,650,000) $ (919,000)
------------ -----------
Fully diluted earnings (loss) per share $ (.09) $ (.06)
============ ===========
Published earnings (loss) per share $ (.10) $ (.06)
============ ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000748103
<NAME> ABC DISPENSING TECHNOLOGIES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-26-1997
<PERIOD-START> APR-28-1996
<PERIOD-END> JAN-25-1997
<CASH> 1,040,000
<SECURITIES> 0
<RECEIVABLES> 374,000
<ALLOWANCES> 158,000
<INVENTORY> 1,055,000
<CURRENT-ASSETS> 2,344,000
<PP&E> 1,528,000
<DEPRECIATION> 838,000
<TOTAL-ASSETS> 3,683,000
<CURRENT-LIABILITIES> 971,000
<BONDS> 218,000
0
2,836,000
<COMMON> 171,000
<OTHER-SE> (574,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,683,000
<SALES> 2,018,000
<TOTAL-REVENUES> 2,565,000
<CGS> 1,392,000
<TOTAL-COSTS> 2,076,000
<OTHER-EXPENSES> 2,095,000
<LOSS-PROVISION> 21,000
<INTEREST-EXPENSE> 74,000
<INCOME-PRETAX> (1,650,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,650,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,650,000)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
