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 31, 2000
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 March 8, 2000 was 19,159,548 shares.
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<TABLE>
<CAPTION>
Index
ABC Dispensing Technologies, Inc. and Subsidiaries
Part I Financial Information Page No.
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<S> <C> <C> <C>
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - January 31, 2000 and April 24, 1999 3
Condensed consolidated statements of operations - Nine months ended January 31, 2000 and
January 23, 1999 and three months ended January 31, 2000 and January 23, 1999 4
Condensed consolidated statements of cash flows - Nine months ended January 31, 2000 and January 23, 1999 5
Condensed consolidated statement of stockholders' equity - Nine months ended January 31, 2000 6
Notes to condensed consolidated financial statements 7-10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-13
Item 7A. Management's Discussion about Market Risk 13
Part II Other Information
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Item 1. (Not Applicable)
Item 2. (Not Applicable)
Item 3. (Not Applicable)
Item 4. (Not Applicable)
Item 5. (Not Applicable)
Item 6. (A) Exhibits and Reports 14
Signature 15
</TABLE>
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ABC DISPENSING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS January 31, 2000 April 24, 1999
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<S> <C> <C>
Current Assets
Cash and cash equivalents $ 108,000 $ 65,000
Accounts receivable, less allowance for doubtful accounts
of $35,000 as of January 31 and $60,000 as of April 24 92,000 202,000
Inventories (Note 3) 1,512,000 1,497,000
------------ ------------
Total current assets 1,712,000 1,764,000
Property, plant, and equipment 698,000 745,000
Other assets:
Intangible assets, less accumulated amortization of
$489,000 as of January 31 and $640,000 as of April 24 27,000 22,000
Patents pending and deferred charges 87,000 91,000
------------ ------------
114,000 113,000
------------ ------------
Total Assets $ 2,524,000 $ 2,622,000
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current Liabilities
Current portion of long-term debt $ 5,000 $ 25,000
Short-term notes payable (Note 4) 1,975,000 725,000
Accounts payable 484,000 885,000
Accrued liabilities:
Accrued interest 176,000 67,000
Employee compensation and benefits 145,000 134,000
Warranty reserve 64,000 157,000
Other 252,000 171,000
Deferred income 188,000 364,000
------------ ------------
Total current liabilities 3,289,000 2,528,000
Long-term debt 235,000 233,000
Stockholders' equity/(deficit) (Note 6):
Preferred Stock - Series A, 9% cumulative;
authorized 840 shares, 399 issued
and outstanding
Series B, 9% cumulative authorized 160 shares
24 shares issued and outstanding
Series C, 9% cumulative authorized 200 shares
37 shares issued and outstanding 5,608,000 5,608,000
Common Stock, $.01 par value; authorized 50,000,000
shares; 19,159,548 as of January 31 and 17,936,483 as of April 24
shares issued respectively 191,000 179,000
Additional paid-in capital 19,972,000 19,768,000
Accumulated deficit (26,771,000) (25,674,000)
------------ ------------
(964,000) (119,000)
Less notes receivable - stockholders (--) (20,000)
------------ ------------
Total Stockholders' Equity/(Deficit) (964,000) (139,000)
------------ ------------
Total Liabilities and Stockholders' Equity/(Deficit) $ 2,524,000 $ 2,622,000
===================================================================================================================================
</TABLE>
See accompanying notes.
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ABC DISPENSING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Nine months and three months ended January 31, 2000 and January 23, 1999)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
January 31, 2000 January 23, 1999 January 31, 2000 January 23, 1999
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<S> <C> <C> <C> <C>
Revenues:
Equipment sales $ 349,000 $ 720,000 $ 118,000 $ 84,000
Service revenues 1,090,000 598,000 400,000 201,000
----------- ----------- ----------- -----------
Total revenues 1,439,000 1,318,000 518,000 285,000
Cost and expenses:
Cost of equipment sold 204,000 546,000 43,000 44,000
Service expenses 736,000 811,000 287,000 221,000
General and administrative 968,000 1,250,000 286,000 476,000
Selling and marketing 215,000 289,000 69,000 74,000
Research and development 45,000 128,000 12,000 24,000
----------- ----------- ----------- -----------
Total cost and expenses 2,168,000 3,024,000 697,000 839,000
Loss from operations (729,000) (1,706,000) (179,000) (554,000)
Other income and expense:
Interest expense (129,000) (160,000) (54,000) (48,000)
Equity in loss of joint venture -- (42,000) -- (4,000)
Other income (4,000) 166,000 (--) 118,000
----------- ----------- ----------- -----------
Total other income/(expense) (133,000) (36,000) (54,000) 66,000
Net loss $ (862,000) $(1,742,000) $ (233,000) $ (488,000)
=========== =========== =========== ===========
Net loss per share -
Basic and Diluted $ (0.06) $ (0.12) $ (0.01) $ (0.03)
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
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ABC DISPENSING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
January 31, 2000 January 23, 1999
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<S> <C> <C>
Net cash used in operating activities $(1,285,000) $ (938,000)
- -------------------------------------
Cash flows used in investing activities
- ---------------------------------------
Purchases of property, plant and equipment (8,000) (9,000)
Investment in joint venture -- (188,000)
----------- -----------
(8,000) (197,000)
Cash flows from financing activities:
- -------------------------------------
Proceeds from private placements of Preferred Stock -- 732,000
Proceeds from (repayments of) line of credit -- (201,000)
Repayment of notes payable and loan costs -- (33,000)
Proceeds from issuance of notes payable 1,250,000 260,000
Proceeds from collection of stockholders receivable 20,000 24,000
Other 66,000 2,000
----------- -----------
Net cash provided by financing activities 1,336,000 784,000
----------- -----------
Net decrease in cash and cash equivalents 43,000 (351,000)
Cash and cash equivalents at beginning of year 65,000 351,000
----------- -----------
Cash and cash equivalents at end of period $ 108,000 $ 0
=========== ===========
</TABLE>
See accompanying notes.
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ABC DISPENSING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Nine months ended January 31, 2000)
(unaudited)
<TABLE>
<CAPTION>
Common
Number of Stock Additional Retained Notes
Shares of $.01 Par Preferred Paid-in Earnings Receivable
Common Stock Value Stock Capital (Deficiency) Stockholders
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 24, 1999 17,936,483 $179,000 $5,608,000 $19,768,000 $(25,674,000) $(20,000)
Preferred Stock Dividend
Warrants Outstanding -
Original Issue Discount 1,235,565 12,000 223,000 (235,000)
Collection on notes receivable-
stockholders (12,500) (19,000) 19,000
Return of collateral on
notes receivable 1,000
Net loss (862,000)
----------------------------------------------------------------------------------------------
Balance at January 31, 2000 19,159,548 $191,000 $5,608,000 $19,972,000 $(26,771,000) $(-0-)
====================================================================================================================================
</TABLE>
See accompanying notes.
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ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(information as of January 31, 2000)
(unaudited)
The accompanying, unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
applicable to interim financial statements. Accordingly, they do not include all
of the information and notes required for complete financial statements. In the
opinion of management, all adjustments and reclassifications considered
necessary for a fair and comparable presentation have been included and are of a
normal recurring nature. Operating results for the nine months ended January 31,
2000, are not necessarily indicative of the results that may be expected for the
year ending April 30, 2000. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-K filed with the Securities and Exchange Commission for the
fiscal year ended April 24, 1999.
1. Significant accounting policies
The Company has changed the fiscal year end to April 30, 2000 to more closely
align closing periods with its major customers and vendors. This change has
increased the number of days included in the financials from 274 calendar days
to 280 calendar days. An estimate of the impact of this six day change on a
performance basis yields sales of $12,000, gross margin of $2,000 and allocated
selling, general and administrative expenses of $18,000 resulting in a net loss
of $16,000.
2. Going concern uncertainty
The Company has reported a net loss for each year of operation since its
inception except for 1989, and as of January 31, 2000, has an accumulated
deficit of $26,736,000. The Company had negative cash flow from operating
activities of $1,453,000, $1,594,000, and $2,684,000 for the years ended April
24, 1999, April 25, 1998, and April 26, 1997, respectively. Management expects
that the Company will continue to incur losses and use cash in operations in the
near future.
Management recognizes the Company must generate additional funds to ensure
continuation of operations. The Company has been able to raise $6,573,000 in
capital from private investors over the past four years through private
placements of both preferred and common stock. The Company is continuing in it
efforts to raise capital through private placements of 9% Convertible Cumulative
Preferred Stock. Proceeds from private placements will be used to reduce
accounts payable and provide additional working capital. No assurances, however,
can be given that the Company will be successful in raising additional capital.
Further, there can be no assurance, assuming the Company does successfully raise
additional capital, that the Company will achieve profitable operations or
positive cash flow. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. No adjustments to the amounts or
classification of assets and liabilities which could result from the outcome of
this uncertainty are reflected in the consolidated financial statements.
The Company intends to satisfy its short-term (i.e., the next 12-month period)
capital requirements using the proceeds of offerings of its equity securities
and notes payable. The Company is currently attempting to raise additional
capital through an offering of its Convertible Preferred Stock. Longer term
capital needs are anticipated to be satisfied by additional proceeds of
offerings of the Company's equity and/or debt securities, improvements in
operational cash flow, warrant exercise proceeds, and traditional credit
facilities. There can be no assurance that at any time a sufficient market for
the Company's equity offerings or debt financings will be available upon
commercially reasonable terms, if at all.
3. Inventories
At January 31, 2000 and April 24, 1999, inventories consisted of the following:
January 31, 2000 April 24, 1999
---------------- --------------
Raw Materials $ 852,000 $ 907,000
Work-in-process 275,000 275,000
Finished goods 385,000 315,000
--------- ----------
$1,512,000 $1,497,000
========== ==========
The above amounts are net of obsolescence reserves of $488,000, and $474,000 at
January 31 and April 24, respectively.
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ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(information as of January 31, 2000)
(unaudited)
4. Financing arrangements
In October of 1998, the Company began to issue notes payable secured by the
patent technology owned by the Company. The notes accrue interest at an annual
rate of 10%. The Company was able to generate $520,000 during the quarter ended
January 31, 2000 with this instrument and $1,975,000 since October of 1998.
5. Net loss per share
The following table sets forth the computation of net loss per share -- basic
and diluted:
<TABLE>
<CAPTION>
9 Months Ended 3 Months Ended
January 31, January 23, January 31, January 23,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Numerator:
Net Loss $ (862,000) $ (1,742,000) $ (233,000) $ (488,000)
Preferred Stock Dividends (252,000) (338,000) (--) (117,000)
------------ ------------ ------------ ------------
Numerator for net loss per share - loss attributable
to common shareholders $ (1,114,000) $ (2,080,000) $ (233,000) $ (605,000)
Denominator:
Denominator for basic and diluted earnings
per share - weighted-average shares 19,159,548 17,651,934 19,159,548 17,712,370
------------ ------------ ------------ ------------
Net loss per share -- basic and diluted $ (0.06) $ (0.12) $ (0.01) $ ( 0.03)
============ ============ ============ ============
</TABLE>
The effect of potentially dilutive securities have not been included in the
above computations since such securities would have been anti-dilutive for the
periods presented. These potentially dilutive securities consisted of options
and warrants to purchase 4,105,585 and 3,364,719 shares of Common Stock as of
January 31, 2000 and January 23, 1999, respectively.
-8-
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ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of January 31, 2000)
(unaudited)
6. Preferred stock
In September 1996 the shareholders of the Company approved an amendment to the
Company's Certificate of Incorporation to authorize up to 5,000,000 shares of
Preferred stock. To date, the Company has authorized 840 shares as Series A
Preferred Stock, 160 shares of Series B Preferred Stock and 200 shares of Series
C 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 January 31, 2000, through private placements, the Company issued 399
shares of Series A Preferred Stock in exchange for notes or $12,500 cash per
share, generating gross proceeds of $4,988,000 to the Company.
The Series A Preferred Stock is convertible at the option of the holder, in
whole or in part, at any time after March 1, 1997 (the "Initial Conversion
Date") into Common Stock of the Company at a price per share of Common Stock
equal to (i) $1.00 per share, or (ii) such adjusted price as may from time to
time be adjusted (the "Conversion Price"). If converted into Common Stock, each
Preferred Share will entitle the holder to receive warrants to purchase a number
of shares of Common Stock at a price of $1.25 per share, equal to the number of
shares of Common Stock into which the Preferred Shares were converted. The
warrants will be valid for a period of five years commencing from the date of
issuance.
The Series B Preferred Stock is convertible at the option of the holder into
Common Stock of the Company at a price of $.75 per share and is identical to
Series A Preferred Stock in all other aspects. The Company has authorized 160
shares and sold 24 shares as of April 24, 1999, generating gross proceeds of
$300,000.
The Series C Preferred Stock is a $10,000 denomination, 9% convertible
cumulative redeemable issue with a conversion price of $.25 per share. There are
no warrants attached to this issuance. The Company has authorized 200 shares and
sold 37 shares through April 24, 1999, generating gross proceeds of $370,000.
Series A, B, and C Preferred Shares pay dividends semi-annually each February 1,
and August 1, commencing on February 1, 1997. The Company may elect to pay
dividends in the form of Common Stock of the Company issued at 90% of the then
current market price of the Common Stock. For the purposes of this calculation
the "current market price" shall mean the average of the daily closing prices
for each of the thirty consecutive business days prior to such dividend date.
On October 7, 1997, the Company paid its February 1 and August 1, 1997 Preferred
Stock dividend requirements by issuing common stock. The total number of common
shares issued for the February 1, 1997 dividend was 61,240. The shares were
valued at $1.094 per share. The total number of common shares issued for the
August 1, 1997 dividend was 179,828. The shares were valued at $0.844 per share.
On April 15, 1998, the Company paid its February 1, 1998 Preferred Stock
dividend requirement by issuing common stock. The total number of common shares
issued for the February 1, 1998 dividend was 228,636. The shares were valued at
$0.733 per share.
On October 15, 1998, the Company paid its August 1, 1998 Preferred Stock
dividend requirement by issuing common stock. The total number of common shares
issued for the dividend was 274,985. The shares were common stock. The shares
were valued at $0.75 per share.
On June 11, 1999, the Company paid its February 1, 1999 Preferred Stock dividend
requirement by issuing common stock. The total number of common shares issued
for the dividend was 1,231,565. The shares were valued at $0.191 per share.
The company plans to issue common stock to satisfy the August, 1999 and
February, 2000 preferred stock dividend during the fourth quarter of FY 2000.
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ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(information as of January 31, 2000)
(unaudited)
7. Joint venture agreement
On June 25, 1997, the Company entered into a joint venture agreement with Damon
Industries, a privately-owned national juice manufacturer with headquarters in
Sparks, Nevada, to form the "Virtual Squeeze" joint venture. The purpose of the
joint venture is to provide shelf-stable juice products and state-of-the-art
dispensing technology to health care facilities with high volume juice
consumption. Under the agreement, the Company will manufacture dispensing
equipment and provide technical support to the joint venture, and Damon will
manufacture fruit juice and provide marketing and administrative support for the
joint venture. The joint venture will finance the dispensing equipment through
sale/leaseback arrangements. The dispensing equipment will be placed in a
customer's facility at no charge providing the customer commits to purchasing
all of its juice from the Virtual Squeeze. Resulting profits or losses from the
juice sales will be split equally by the Company and Damon.
On December 31, 1998, the joint venture was terminated with the mutual consent
of both parties. Changes in the strategic direction of the two organizations
made it necessary to liquidate the joint venture assets. The Company has taken
full control of the product line and the joint venture assets.
8. Litigation settlement/contingencies
The Company, from time to time, is subject to routine litigation incidental to
its business. The Company believes that any liability that may finally be
determined, would not have a material adverse effect on its financial
statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Quarter ended January 31, 2000 compared to the Quarter ended January 23, 1999
The net loss for the nine months ended January 31, 2000 was $862,000, a decrease
of $880,000, or 50.5% from the net loss of $1,742,000 for the nine months ended
January 23, 1999.
Revenues Nine Months Ended
January 31, January 23,
2000 1999
Equipment sales $ 349,000 $ 720,000
Service revenues 1,090,000 598,000
----------- ----------
Total $ 1,439,000 $1,318,000
=========== ==========
Equipment sales for the first nine months of FY 2000, (ending January 31, 2000)
decreased $371,000, or 51.5%, over the same period of the prior year. Sales of
paint colorant dispensers decreased $410,000. Sales of the Royal Match(R) paint
colorant dispensers have decreased because the equipment has not yet gained
widespread market acceptance. Sales of beverage equipment increased $39,000, the
Company is not actively marketing its beverage equipment.
Service revenues for the first nine months of FY 2000 increased $492,000, or
82.3% from the same period of the prior year. The increase is due to higher
service contract revenues of $160,000 on Royal Match(R) paint colorant
dispensers and an increase in juice sales of $290,000 from the Virtual
Squeeze(R) business.
Gross margins Nine Months Ended
January 31, January 23,
2000 1999
Equipment 46.1% 43.3%
==== ====
Service 32.6% (18.5)%
==== ====
Total 35.7% 14.7%
==== ====
For the first nine months of FY 2000 gross margin as a percentage of sales on
equipment increased 2.8 points from the same period of the prior year. The
increase resulted from higher prices obtained from sales of the Royal Match(R)
paint dispensers to midsize, independent paint companies offset by higher costs
associated with lower volumes.
For the first nine months of FY 2000 gross margin as a percentage of service
revenues increased 51.1 points over the same period of the prior year. The
increase is attributable to service contract revenues on Royal Match(R) paint
colorant dispensers and the inclusion of Virtual Squeeze(R) juice sales in this
category.
General and administrative
For the first nine months of FY 2000 general and administrative expenses
decreased $282,000, or 22.6%, to $968,000, as compared to the same period of FY
1999. This was due to fewer general and administrative resources being employed.
Selling and marketing expenses
For the first nine months of FY 2000 selling and marketing expense decreased
$74,000, or 25.6%, to $215,000, down from $289,000 for the same period of FY
1999. The decrease is due primarily to reorganization of the management
structure of the sales force.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Research and development
For the first nine months of FY 2000, research and development expenses
decreased $83,000, or 64.8%, to $45,000. The decrease is due to completion of
the mechanical aspects of the Royal Match(R) paint colorant dispenser with new
development efforts being limited to software enhancement.
Interest expense
For the first nine months of fiscal 2000 interest expense decreased $31,000, or
19.4%, to $129,000. The decrease is due to the amortization of the discount on
notes payable being completed in December, 1998.
Equity in loss of joint venture
The Company's equity in the loss of the Virtual Squeeze(R) joint venture for the
first nine months of FY 1999 was $42,000. The losses are attributable to the
start up costs and marketing expenses of the joint venture.
On December 31, 1998, the joint venture was terminated with the mutual consent
of both parties. Changes in the strategic direction of the two organizations
made it necessary to liquidate the joint venture assets. The Company has taken
full control of the product line and the joint venture assets.
Other income
Other income decreased $170,000, or 100%, to ($4,000) for the first nine months
of FY 2000. Other income for FY 1999 was attributable to a distribution of
excess earnings on fund assets by the Ohio Bureau of Worker's Compensation.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance increased to $108,000 as of January 31, 2000 from
$65,000 at April 24, 1999. Operations for the nine months ended January 31, 2000
required cash of $1,285,000 an increase of $347,000, or 37.0%, when compared to
the nine months ended July 23, 1999. The $1,285,000 use of cash was caused by a
net loss of $867,000 and a decrease in accounts payable of $401,000.
Consistent with prior years, the Company's primary source of liquidity has been
private placements of debt and equity derivative instruments. During the fiscal
year ended April 24, 1999, the Company generated $983,000 from the issuance of
Preferred Stock.
In August, 1997, to raise additional capital, the Company began issuing
short-term promissory notes through a private placement. The notes are sold in
multiples of $12,500, or fractions thereof, and accrue interest at the rate of
10%, with principal and interest due at maturity. The initial maturity date was
June 30, 1998, however, the Company had the option, which it exercised, to
extend the maturity date to December 31, 1998. The Company extended the maturity
date through negotiations with Holders of the Notes and their representatives
until December 31, 2000. As of January 31, 2000, the Company has issued notes in
the aggregate of $1,975,000. The Company anticipates using proceeds of equity
offerings, additional extensions or other re-financing options to satisfy the
notes.
The Company decided against renewal of the accounts receivables credit line on
December 31, 1998. The fixed costs associated with the credit line became too
high, because of significantly lower equipment sales. All liabilities and
encumbrances associated with the line have been satisfied. The Company plans to
investigate similar financing options when sales reach a level that will
interest lenders.
The Company intends to satisfy its short-term (i.e., the next 12-month period)
capital requirements using the proceeds of offerings of its equity securities
and the issuance of additional notes. The Company is currently attempting to
raise at least $2,000,000 through an offering of its convertible preferred
stock. Longer-term capital needs are anticipated to be satisfied by additional
proceeds of offerings of the Company's equity and/or debt securities,
improvements in operational cash flow, warrant exercise proceeds, and
traditional credit facilities. There can be no assurance that at any time a
sufficient market for the Company's equity offerings or debt financings will be
available upon commercially reasonable terms, if at all.
The Company's long-term capital plan is critically dependent upon the commercial
success of its Products and, to the extent success is not timely achieved, its
ability to implement significant cost reduction programs. Toward this end,
Management has taken steps to increase revenue through sales and marketing
efforts that include the redeployment of research and development resources of
the Company to work closely with the Company's existing and prospective
customers in the paint and beverage industry. If it becomes necessary to
implement significant cost reduction programs, it is likely that such programs
will involve a significant curtailment of marketing and research and development
activities as well as payroll reductions which would likely have an adverse
affect on future operating results. There can be no assurance that the Company
will be successful in generating operating profit and sufficient operational
cash flow through the commercial success of its products or any such cost
reduction programs. If the Company is not successful in this regard, Management
will have to consider alternative uses of its assets including the possible
licensing or outright sale of one or more of its proprietary technologies.
The current liquidity position of the Company and the inability of operations to
generate positive cash flow raises doubt about the Company's ability to continue
as a going concern (see Note 2 to the Financial Statements).
DISCLOSURES ABOUT MARKET RISK
There are no material risk elements associated with foreign currency, interest
rates and commodity prices. The building mortgage is the only variable interest
rate contract and does not present a material risk to the Company.
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PART IV - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are incorporated by reference herein , via 10k
filed on August 2, 1999, or annexed to this quarterly report.
(3.1) Certificate of Incorporation of the Registrant.
(3.2) Bylaws of the Registrant.
(10.1) Employment agreement dated March 1, 1997 by and between the Registrant
and Charles M. Stimac, Jr.
(10.3) Amended 1995 Stock Option Plan.
(11.1) Statement regarding computation of per share earnings (see Financial
Statements at Item 1 of this Quarterly Report on Form 10-Q).
(24.) Power of attorney (included on the signature page hereof).
(27.) Financial Data Schedule (for S.E.C. electronic filing only)
(b) Current reports on Form 8-K during the quarter ended January 31, 2000.
During the third quarter of FY 2000, the Company filed no reports on
Form 8-K.
-14-
<PAGE>
SIGNATURE
Pursuant to the 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.
-----------------------------------
Date: March 14, 2000 /s/ Charles M. Stimac, Jr.
-------------- -----------------------------------
Charles M. Stimac, Jr.
President/CEO
-15-
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