SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended Commission File Number
May 30, 1997 1-10648
BPI Packaging Technologies, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware 04-2997486
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
455 Somerset Avenue, Dighton, Massachusetts 02764
(Address of Principal Executive Offices) (Zip Code)
(508) 824-8636
(Registrant's Telephone Number, Including Area Code)
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 and Exchange Act of 1934
during the preceeding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of May 30, 1997, there were issued and outstanding 14,084,368 shares of
Common Stock and 339,846 shares of Series A Preferred Stock.
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited)
Balance Sheets - May 30, 1997 and February 28, 1997......... 1-2
Statements of Operations - Three Months Ended
May 30, 1997 and May 24, 1996............................ 3
Statements of Cash Flows - Three Months Ended
May 30, 1997 and May 24, 1996............................ 4
Notes to Financial Statements - May 30, 1997................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................... 13
Item 2. Changes in Securities....................................... 13
Item 3. Default Upon Senior Securities.............................. 13
Item 4. Submission of Matters to a Note of Security Holders......... 13
Item 5. Other Information........................................... 13
Item 6. Exhibits and Reports on Form 8-K............................ 13
SIGNATURES................................................................ 14
i
<PAGE>
Part I. Financial Information
Item I. Financial Statements
BPI Packaging Technologies, Inc.
Consolidated Balance Sheets
Assets
May 30, February 28,
1997 1997
-------------- -----------
(unaudited)
Current assets
Cash $ 20,209 $ 58,134
Accounts receivable, net 2,763,006 2,093,760
Inventories 2,581,698 4,534,453
Prepaid expenses and other assets 1,305,103 1,387,824
----------- -----------
Total current assets 6,670,016 8,074,171
----------- -----------
Property and equipment, net 19,185,504 19,803,337
----------- -----------
Deposits - leases and equipment purchases 149,955 128,461
Loans to officers 510,648 479,797
Other assets 717,986 761,465
----------- -----------
1,378,589 1,369,723
----------- -----------
$27,234,109 $29,247,231
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
BPI Packaging Technologies, Inc.
Consolidated Balance Sheets
Liabilities and Stockholders' Equity
May 30, February 28,
1997 1997
------------- -------------
(unaudited)
<S> <C> <C>
Current liabilities
Revolving line of credit $ 3,576,379 $ 3,733,477
Capital lease obligations due within one year 2,132,496 2,109,718
Accounts payable 7,723,281 7,090,283
Other accrued expenses 888,215 959,837
------------ ------------
Total current liabilities 14,320,371 13,893,315
------------ ------------
Capital lease obligations-long-term portion 3,167,870 3,809,241
------------ ------------
Stockholders' Equity
Series B convertible preferred stock, $.01 par value 1,466,954 1,466,954
Series A convertible preferred stock, $.01 par value 1,184,384 1,213,584
Common stock, $.01 par value; shares authorized -
30,000,000; shares issued and outstanding - 14,084,368 at
May 30, 1997 and 14,074,428 at February 28, 1997 140,844 140,745
Capital in excess of par value 38,168,003 38,134,612
Accumulated deficit (31,214,317) (29,411,220)
------------ ------------
9,745,868 11,544,675
------------ ------------
Commitments and contingencies $ 27,234,109 $ 29,247,231
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
2
<PAGE>
BPI Packaging Technologies, Inc.
Consolidated Statements of Operations
----Three Months Ended----
May 30, May 24,
1997 1996
------------ -----------
(unaudited)
Net sales $ 7,012,144 $ 6,514,734
Cost of goods sold 6,905,395 5,568,054
----------- -----------
Gross profit 106,749 946,680
----------- -----------
Operating expenses
Selling, general and administrative 1,622,506 1,633,555
----------- -----------
1,622,506 1,633,555
----------- -----------
Loss from operations (1,515,757) (686,875)
Other income (expense):
Interest expense (299,530) (288,479)
Interest income 12,190 2,384
----------- -----------
(287,340) (286,095)
----------- -----------
Net loss $(1,803,097) $ (972,970)
=========== ===========
Earnings per common share:
Loss per share $ (0.13) $ (0.08)
Weighted average common shares outstanding 14,077,937 12,192,942
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
BPI Packaging Technologies, Inc.
Consolidated Statements of Cash Flows
---- Three Months Ended ----
May 30, May 24,
1997 1996
------------ --------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,803,097) $ (972,970)
----------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 692,956 823,380
Increase in accounts receivable - trade (669,248) (753,349)
Decrease (increase) in inventories 1,952,755 (386,684)
Decrease (increase) in prepaid expenses and other current assets 82,722 (3,397)
Increase in accounts payable 632,999 906,347
Decrease in other accrued expenses (71,622) (121,543)
----------- -----------
Total adjustments 2,620,562 464,754
----------- -----------
Net cash provided by (used in) operating activities 817,465 (508,216)
----------- -----------
Cash flows from investing activities:
Additions to property and equipment (64,139) (374,937)
Cost of patents -- (15,685)
(Increase) decrease in deposits, net (21,494) 58,267
(Increase) decrease in advance to officers (30,851) 84,798
Decrease (increase) in other assets, net 36,785 (53,228)
----------- -----------
Net cash used in investing activities (79,699) (300,785)
----------- -----------
Cash flows from financing activities:
Net payments under note payable - bank -- (339,118)
Net payments on revolving line of credit (157,098) --
Principal payments on capital lease obligations (618,593) (460,767)
Net proceeds from sales of stock and exercise of warrants -- 3,283,173
----------- -----------
Net cash (used in) provided by financing activities (775,691) 2,483,288
----------- -----------
Net (decrease) increase in cash (37,925) 1,674,287
Cash at beginning of period 58,134 109,093
----------- -----------
Cash at end of period $ 20,209 $ 1,783,380
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
BPI Packaging Technologies, Inc.
Notes to Consolidated Financial Statements
Note 1: Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
consolidated financial statements.
In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) considered necessary for a fair statement of the
interim financial data have been included. Results from operations for the three
month period ended May 30, 1997 are not necessarily indicative of the results
that may be expected for the fiscal year ending February 28, 1998.
For further information, refer to the consolidated financial statements
and the footnotes included in the annual report on Form 10-K for BPI Packaging
Technologies, Inc. (the "Company") for the year ended February 28, 1997.
Note 2: Going Concern and Management's Plan
As shown in the accompanying consolidated financial statements, the
Company has suffered recurring net operating losses, and has working capital and
operating cash flow deficiencies. Further, as discussed in Note 6, the Company's
revolving line of credit facility is renewable annually. While convenant
violations have been waived as of May 30, 1997, no assurances can be given that
the lender will renew the line on November 25, 1997. Furthermore, significant
trade credit balances are past due at the balance sheet date, including amounts
due to certain lessors for building and equipment leases.
The Company's ability to continue as a going concern is dependent on
its ability to successfully implement its business and financial plans as
discussed below. However, there can be no assurances the Company will be able to
successfully complete these plans. The financial statements do not include any
additional adjustments related to the recoverability and the classification of
recorded assets and liabilities, other than those recorded for the year ended
February 28, 1997, that might be necessary should the Company be unable to
continue as a going concern.
The Company is currently implementing its plan to exit the production
of its traditional plastic grocery carryout bag product line during Fiscal 1998.
The Company is shifting its production to principally proprietary bag and
plastic film product lines which have higher profit margins. In order to
implement its exit plan, the Company is negotiating to sell a private placement
of $2.0-$5.0 million of debt and/or equity financing to increase general working
capital. If the Company is unsuccessful in completing its private placement in
the minimum amount of $2.0 million, the Company will have to negotiate
extensions with certain creditors. If such extensions are not granted on terms
acceptable to the Company, the Company may have no alternative but to file for
protection under the Bankruptcy Code in order to execute its business plan. It
is management's opinion that if its working capital is increased in the minimum
amount of $2.0 million, that the Company will be able to successfully execute
its business plan and reach profitability.
5
<PAGE>
Note 3. Earnings Per Share
Earnings per share is calculated based upon the weighted average common
shares outstanding during the period including dilutive employee stock options,
underwriter warrants, Class A and B warrants, using the treasury stock method as
applicable, and Series A and B Preferred Stock. Common stock equivalents are not
reflected in the calculation in periods in which they would have an
anti-dilutive effect.
Note 4: Accounts Receivables
Accounts receivable, net consists of the following:
May 30, February 28,
1997 1997
------------- --------------
Accounts receivable $ 2,927,232 $ 2,268,760
Allowance for doubtful accounts (89,226) (100,000)
Allowance for credits (75,000) (75,000)
----------- -----------
$ 2,763,006 $ 2,093,760
=========== ===========
Note 5: Inventories
Inventories, net of valuation reserves, consist of the following:
May 30, February 28,
1997 1997
----------- -----------
Raw materials $ 533,481 $1,020,902
Finished goods 2,048,217 3,513,551
---------- ----------
$2,581,698 $4,534,453
========== ==========
Note 6: Loans
The Company has an $ 8,000,000 revolving line of credit secured by
accounts receivable and inventory and all other assets except for equipment.
Availability of borrowings under the line of credit is determined by calculation
of the borrowing base, as specifically defined in the loan and security
agreement, but generally means 85% of qualifying accounts receivable and 40% of
eligible inventories, less the aggregate amount of all outstanding commercial
and standby letters of credit. The line of credit bears interest at 2.0% above
the variable interest rate qouted by Norwest Bank of Minnesota with a minimum
rate of 8.0% (10.75% at May 30, 1997) and provides for a 1/2 of 1% unused line
fee. The credit line is for 5 years and is subject to renewal annually. At May
30, 1997, the balance under the line of credit is $3,576,379 which is the
maximum available under the lending formula. The line of credit includes certain
financial covenants that the Company must maintain to avoid a default including
current ratio, debt to equity, maintaining a net worth of $ 14 million,
limitation on capital spending, and profitability. At May 30, 1997 the Company
was in default under the financial covenants. The lender waived these conditions
of default at May 30, 1997. One of the conditions to the waiver is that the
interest rate charged on the line be increased to 3% above the variable interest
rate quoted by Norwest Bank of Minnesota.
Capital leases contain certain provisions that give the lessor the
right to accelerate lease payments in the event of default. All of the capital
leases are in default as a result of being past due. If the lessors exercised
their right of acceleration, the long-term capital lease obligations in the
amount of $3,167,870 would become current liabilities.
6
<PAGE>
Note 7: Consolidated Statement of Changes in Stockholders' Equity for the
three months ended May 30, 1997
<TABLE>
<CAPTION>
BPI Packaging Technologies, Inc.
Consolidated Statement of Changes in Stockholders' Equity
For The Three Months Ended May 30, 1997
Series A Series B
Convertible Convertible
Common Stock Preferred Stock Preferred Stock Capital in
--------------------- ----------------- ---------------- Excess of Accumulated
Shares Amount Shares Amount Shares Amount Par Value Deficit Total
------ ------ ------ ------ ------ ------ --------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1997 14,074,428 $140,745 347,146 $1,213,584 146,695 $1,466,954 $38,134,612 ($29,411,220) $11,544,675
Issuance of common
stock based on RC
America's FY97 results 2,640 26 4,264 4,290
Conversion of Series A
convertible preferred
stock to common stock 7,300 73 (7,300) ($29,200) 29,127 0
Net loss for the quarter
ended May 30, 1997 (1,803,097) (1,803,097)
---------- -------- ------- ---------- ------- ---------- ----------- ------------ ----------
Balance at May 30, 1997 14,084,368 $140,844 339,846 $1,184,384 146,695 $1,466,954 $38,168,003 ($31,214,317) $9,745,868
========== ======== ======= ========== ======= ========== =========== ============ ==========
</TABLE>
Note 8: RC America, Inc.
In April 1997, the Company issued 2,640 shares to Ronald Caulfield as
part of the February 26, 1994 agreement providing for the issuance of up to an
additional 100,000 shares of the Company's Common Stock over a five year period
based on RC America, Inc. attaining certain levels of pre-tax earnings. The
Agreement also contains demand and piggy-back registration rights for the
shares.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements or Information
Certain statements contained in this Form 10-Q are not based on
historical facts, but are "foward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, that are based upon a number
of assumptions concerning future conditions that may ultimately prove to be
inaccurate. Actual events and results may materially differ from anticipated
results described in such statements. The Company's ability to achieve the
results anticipated in any forward-looking statements is subject to certain
risks and uncertainties, including, but not limited to, the general economy,
product demand, market acceptance of products, fluctuations in operating
results, competition, continued availability of capital and financing, and other
factors affecting the Company's business beyond the Company's control.
Results of Operations
First Quarter of Fiscal Year 1998 Compared to First Quarter
of Fiscal Year 1997
The audited financial statements at February 28, 1997 and dated June
12, 1997 contained a qualified opinion based on the uncertainly surrounding the
Company's ability to continue as a going concern (See Note 2). The Company's
plans to address the situation are explained in Note 2 and in the Management
Discussion and Analysis of Financial Condition and Results of Operations
presented in this report. Based upon the Company's current operating plan and
assuming receipt of at least $2 million in financing in the second fiscal
quarter, management expects that the Company will be profitable in Fiscal 1998.
For the first quarter of Fiscal 1998, ended May 30,1997, the Company
had sales totaling $7,012,144 as compared to net sales of $6,514,734 for the
first quarter of Fiscal 1997, ended May 24, 1996, an increase of 7.6%.
During the first quarter of Fiscal 1998 the Company began implementing
its exit plan from the traditional plastic grocery carryout bag product line as
that product line was unprofitable. However, nothwithstanding the decision to
exit this product line, the Company continued to fulfill purchase orders and
other obligations that were outstanding at the end of Fiscal 1997 and took other
actions to minimize the impact of the exit decision on its customers. The exit
decision resulted in the Company reducing its work force 26% and reducing
salary, wages, fringe benefit costs and other variable costs by an estimated
$6.0 million annually. However, these cost reductions were not implemented until
the end of the first quarter and the benefit of the cost reductions was not
material in the first quarter.
The Company's core bag and film business (traditional plastic grocery
carryout bags and proprietary plastic carryout bags of "T-shirt sack" design and
plastic film products) had sales of $6,360,216 in the first quarter of Fiscal
1998 compared to $6,147,026 in the first quarter of Fiscal 1997, an increase of
3.5%. Sales of the Company's proprietary bag products
8
<PAGE>
(FRESH-SAC(R) T-shirt sack produce bag, HANDI-SACTM and MAXI-SACTM) and film
products were $3,374,757 in the first quarter of Fiscal 1998 compared to sales
of $2,288,469 in the first quarter of Fiscal 1997, an increase of 47.5%.
Management expects that sales of proprietary bag and film products will increase
significantly in Fiscal 1998 and that the 47.5% increase in the first quarter,
in the opinion of management, is indicative of that trend. Sales of traditional
plastic grocery carryout bag products were $2,985,459 in the first quarter of
Fiscal 1998 compared to sales of $3,858,557 in the first quarter of Fiscal 1997,
a decrease of 22.6%, in line with the Company's decision to discontinue this
product line.
Sales from RC America, Inc. were $651,931 in the first quarter of
Fiscal 1998 compared to sales of $367,708 in the first quarter of Fiscal 1997,
an increase of 77.3%. RC America's sales may fluctuate significantly from
quarter to quarter due to the nature of its business and the timing of
transactions.
Cost of goods sold for the first quarter of Fiscal 1998 was $6,905,395
compared to $5,568,054 in the first quarter of Fiscal 1997. Cost of goods sold
as a percentage of sales was 98.5% for the first quarter of Fiscal 1998,
compared to 85% for the first quarter of Fiscal 1997. The increase in cost of
goods sold as a percentage of sales was due to an increase in manufacturing and
material costs relative to the selling prices of the Company's products.
Manufacturing costs included in costs of goods sold increased $1,337,341
principally as a result of lower production and under absorbed labor and
overhead of $925,857 compared to production in excess of inventory reduction and
over absorbed labor and overhead of ($399,911) in the prior year. The increase
in costs of goods sold, as a percentage of sales, also reflected the decline in
margin over raw material costs caused by increased material costs and declining
prices primarily for the traditional plastic grocery carryout bag which margin
was reduced approximately $515,000 for product produced in the first quarter
compared to the margin over raw materials in the first quarter of the previous
year.
Cost of goods sold benefitted from a reduction in depreciation expense
of $138,000. Depreciation expense savings are a direct result of Fiscal 1997
write-downs of fixed assets related to exiting of the traditional plastic
grocery carryout bag product line. Management anticipates that costs will
decrease in subsequent quarters by an estimated $6 million annually as a result
of its plans to exit the traditional plastic grocery carryout bag product line.
In summary, costs were significantly higher in the first quarter primarily
because of the reduced volume of production, increased raw material cost and
declining margin over raw materials for the traditional plastic grocery carryout
bag compared to the first quarter of Fiscal 1997 which together increased cost
of goods approximately $1,852,341 and because the Company maintained full
staffing to service its' customers as it simultaneously began its exit from the
traditional plastic grocery carryout bag product line which further increased
cost of goods.
Selling, general and administrative expenses for the first quarter of
Fiscal 1998 was $1,622,506 compared to $1,633,555 in the first quarter of Fiscal
1997. The decrease is primarily related to savings in connection with the
Company's exiting the traditional plastic grocery carryout bag product line.
Interest expense for the first quarter of Fiscal 1998 was $299,530
compared to $288,479 for the first quarter of Fiscal 1997. The increase reflects
greater borrowing activity for debt related to equipment acquisitions and
working capital requirements.
9
<PAGE>
The Company incurred a net loss of $1,803,097 for the first quarter of
Fiscal 1998 compared to a net loss of $972,970 for the first quarter of Fiscal
1997. The net loss was due primarily to increased cost of goods sold caused in
significant part by the decision to exit the traditional plastic grocery
carryout bag product line coupled with decreases in the volume of production.
The net loss of $1,803,097 included a non-cash charge for depreciation and
amortization of $692,956.
Based upon the Company's current operating plan and assuming receipt of
at least $2 million in financing in the second fiscal quarter, management
expects that the Company will be profitable in Fiscal 1998.
Operating profits (loss) for the various business segments are as
follows:
Fiscal 1998 Fiscal 1997
----------- -----------
Proprietary, traditional and film products ($1,053,971) (166,417)
RC America, Inc. 23,226 (21,402)
BPI Packaging, Inc. 0 0
Market Media, Inc. (142,647) (141,742)
Unallocated corporate overhead (342,365) (357,314)
----------- -----------
Operating (loss) profit (1,515,757) (686,875)
Interest expense, net (287,340) (286,095)
----------- -----------
Net (loss) income ($1,803,097) ($ 972,970)
=========== ===========
Liquidity and Capital Resources
Loans
The Company has an $8,000,000 revolving line of credit secured by
accounts receivable and inventory. Borrowings under the line of credit are
subject to 85% of qualifying accounts receivable and 40% of qualifying
inventories, less the aggregate amount utilized under all commercial and standby
letters of credit and bank acceptances. The line of credit bears interest at
2.0% above the variable interest rate quoted by Norwest Bank of Minnesota with a
minimum rate of 8% (10.75% at May 30, 1997), and provides for a 1/2 of 1% unused
line fee. The credit line is for 5 years and is subject to renewal annually
(November). At May 30, 1997, the balance under the line of credit was $3,576,379
which was the maximum available under the lending formula. The line of credit
includes certain fnancial covenants that the Company must maintain to avoid a
default, including current ratio, debt to equity ratio, maintaining a net worth
of $14 million, limitation on capital spending, and profitability. At May 30,
1997 the Company was in default under the financial covenants. The lender waived
these conditions of default at May 30, 1997. One of the conditions to the waiver
is that the interest rate charged on the line be increased to 3% above the
variable interest rate quoted by Norwest Bank of Minnesota.
10
<PAGE>
Equipment and Lease Financing
From March 1994 through May 1997, the Company acquired through purchase
or lease approximately $19.7 million in additional equipment to increase
manufacturing capacity and efficiency and to expand the Company's product line.
The equipment was financed from the sale of equity securities and from equipment
lease financing and bank loans.
The Company currently has outstanding commitments to purchase an
additional $275,000 in machinery and equipment. The Company expects to purchase
and install this equipment during the fiscal year ending February 28, 1998.
Management intends to finance the purchase of the new equipment primarily
through equipment lease financing. No assurance can be given that the Company
will be able to obtain new equipment financing through banks or equipment
lessors.
Capital leases contain provisions that give the lessor the right to
accelerate lease payments in the event of default. All the capital leases are in
default as a result of being past due. If the lessors exercised their right of
acceleration, the long-term capital lease obligations in the amount of
$3,167,870, would become current liabilities. Management believes that any lease
defaults can be corrected upon the completion of the financing.
Cash Flow
During the first quarter of Fiscal 1998, the Company generated $692,956
from depreciation and amortization, $1,952,755 from a reduction in inventories,
$82,722 from a reduction of prepaid expenses, and $632,999 from an increase in
accounts payable. Cash was used to finance an increase in accounts receivable -
trade of $669,248, a decrease in accrued expenses of $71,622 and certain other
less significant requirements of $79,699. The Company also used funds to reduce
its borrowings under the revolving line of credit by $157,098, and for principal
payments on capital lease obligations of $618,593. At May 30, 1997,
stockholders' equity was $9,745,868, as compared to $22,084,274 at May 24, 1996.
The Company's current ratio decreased from 0.95:1 at May 24, 1996 to 0.47:1 at
May 30, 1997 due principally to increases in accounts payable. The net book
value of property and equipment decreased from $24,506,626 at May 26, 1996 to
$19,185,504 at May 30, 1997, primarily as a result of write-offs at the end of
Fiscal 1997 related to exiting the traditional plastic grocery carryout bag
product line.
To date, the Company has generated cash flows from income, including
depreciation, financing activities, including sales of equity securities, lines
of credit, term loan facilities, equipment leasing arrangements and loans from
raw material suppliers. The Company is presently negotiating a $2.0 to $5.0
million debt and/or equity financing to increase general working capital and
provide funds for deposits on equipment. While management has commitments for
part of the financing, management has been unable to complete the financing to
date in Fiscal 1998. As a result, certain lease obligations and trade credit
balances are past due.
11
<PAGE>
If the $2.0 to $5.0 million financing is not completed, management
believes that the working capital ratio of 0.47:1 at May 30, 1997 is too low for
efficient operations. The low working capital ratio has resulted in cash flow
discontinuities in the first quarter of Fiscal 1998 which impacted operating
efficiency and increased costs and has resulted in defaults on certain leases
and caused certain trade accounts payable to be past due. Management believes
that any lease defaults can be corrected upon the completion of the proposed
$2.0 to $5.0 million financing.
Management believes that the completion of the $2.0 - $5.0 million
financing together with the current revolving line of credit and anticipated
cash flow should be sufficient to fund the Company's current operations.
Furthermore, these anticipated improvements in the Company's cash flow resources
may enable similar improvements in the current ratio and in working capital.
Management also believes that upon the completion of the financing, fixed asset
or lease financing will be available at competitive rates from banks and leasing
companies to finance a substantial part of the planned $0.5 million to $3.5
million increase in capacity at the Dighton facility during Fiscal 1998. No
assurance can be given that additional financings will be successfully completed
or that such financing will be available or, if available, will be on terms
favorable to the Company.
Loan to Officers
At May 30, 1997 and February 28, 1997, an officer of the Company owed
$510,648 and $479,797 to the Company, respectively. The increase represents
current travel advances that have not yet been offset by expense reports. The
officer has agreed to apply any bonus payments made to him under the Company's
executive bonus plan to reduce the amounts outstanding under the loan.
RC America, Inc.
On April 23, 1997, the Company issued 2,640 shares of Common Stock to
Ronald Caulfield as a part of the February 26, 1994 purchase agreement providing
for the issuance of up to an additional 100,000 shares of the Company's Common
Stock over a five year period based on RC America, Inc. attaining certain levels
of pre-tax earnings. The Agreement also contains demand and piggy-back
registration rights for the shares.
Impact of Inflation
Inflation during the last three fiscal years has not had a significant
effect on the Company's activities.
12
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
On December 4, 1995, Mobil Oil Corporation ("Mobil") filed suit against
the Company in the U.S. District Court for the District of Delaware, Civil
Action No. 95-737. Mobil also named Inteplast Corporation and Integrated Bagging
Systems Corporation as defendants in this matter. Mobil has alleged that the
Company has infringed on Mobil's rights under U.S. Patent No. Re. 34,019 (the
"Patent"), regarding the manufacture of plastic carrying bags known as "T-shirt
bags." Subsequently, the Company filed a counter claim against Mobil for patent
infringement. In December 1996, Mobil and the Company settled this patent
litigation by mutual agreement.
The Company is involved in pending commercial legal proceedings that
the Company does not consider to be material.
Item 2. Changes in Securities. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K. None
13
<PAGE>
SIGNATURES
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.
BPI PACKAGING TECHNOLOGIES, INC.
Date: July 18, 1997 By:/s/ Dennis N. Caulfield
Dennis N. Caulfield, Chairman and
Chief Executive Officer
Date: July 18, 1997 By/s/ Paul J. DeCristofaro
Paul J. DeCristofaro, Chief Financial
Officer
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