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
November 28, 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 November 28, 1997, there were issued and outstanding 17,981,270 shares of
Common Stock.
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
INDEX
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ -------
Item 1. Financial Statements (Unaudited)
Balance Sheets - November 28, 1997 and February 28, 1997.... 1-2
Statements of Operations - Three Months Ended
November 28, 1997 and November 22, 1996.................. 3
Statements of Operations - Nine Months Ended
November 28, 1997 and November 22, 1996.................. 4
Consolidated Statement of Cash Flows - Nine Months Ended
November 28, 1997 and November 22, 1996.................. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................ 15
Item 2. Changes in Securities........................................ 15
Item 3. Default Upon Senior Securities............................... 15
Item 4. Submission of Matters to a Vote of Security Holders.......... 15
Item 5. Other Information............................................ 15
Item 6. Exhibits and Reports on Form 8-K............................. 15
SIGNATURES................................................................ 16
<PAGE>
Part I. Financial Information
Item I. Financial Statements
<TABLE>
<CAPTION>
BPI Packaging Technologies, Inc.
Consolidated Balance Sheet
Assets
November 28, February 28,
1997 1997
------------ ------------
(unaudited)
<S> <C> <C>
Current assets
Cash $ -- $ 58,134
Accounts receivable, net 1,043,943 2,093,760
Inventories 1,975,417 4,534,453
Prepaid expenses and other assets 1,175,619 1,387,824
------------ ------------
Total current assets 4,194,979 8,074,171
------------ ------------
Property and equipment, net 17,932,528 19,803,337
------------ ------------
Deposits - leases and equipment purchases 166,284 128,461
Loans to officers 568,142 479,797
Other assets 655,695 761,465
------------ ------------
1,390,121 1,369,723
------------ ------------
$ 23,517,628 $ 29,247,231
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
1
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<CAPTION>
BPI Packaging Technologies, Inc.
Consolidated Balance Sheet
Liabilities and Stockholders' Equity
November 28, February 28,
1997 1997
------------ ------------
(unaudited)
<S> <C> <C>
Current liabilities
Cash Overdraft $ 106,477 $ --
Revolving line of credit 1,325,854 3,733,477
Capital lease obligations currently due 4,329,684 2,109,718
Accounts payable 7,102,921 7,090,283
Other accrued expenses 787,401 959,837
------------ ------------
Total current liabilities 13,652,337 13,893,315
------------ ------------
Capital lease obligations-long-term portion -- 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 - 17,981,270 at
November 28, 1997 and 14,074,428 at February 28, 1997 179,813 140,745
Capital in excess of par value 42,026,984 38,134,612
Accumulated deficit (34,992,844) (29,411,220)
------------ ------------
9,865,291 11,544,675
------------ ------------
Commitments and contingencies
$ 23,517,628 $ 29,247,231
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
2
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BPI Packaging Technologies, Inc.
Consolidated Statement of Operations
------Three Months Ended------
November 28, November 22,
1997 1996
------------- -----------
(unaudited)
Net sales $ 2,916,221 $ 8,840,916
Cost of goods sold 3,008,028 7,365,285
----------- -----------
Gross (loss) profit (91,807) 1,475,631
----------- -----------
Operating expenses
Selling, general and administrative 1,524,684 1,870,519
----------- -----------
1,524,684 1,870,519
----------- -----------
Loss from operations (1,616,491) (394,888)
----------- -----------
Other income (expense):
Interest expense (278,786) (258,364)
Interest income 15,790 1,861
----------- -----------
(262,996) (256,503)
----------- -----------
Net loss $(1,879,487) $ (651,391)
=========== ===========
Earnings per common share:
Loss per share $ (0.12) $ (0.05)
Weighted average common shares outstanding 16,066,500 12,475,138
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
BPI Packaging Technologies, Inc.
Consolidated Statement of Operations
-------Nine Months Ended-------
November 28, November 22,
1997 1996
------------- ------------
(unaudited)
Net sales $ 14,122,724 $ 24,670,990
Cost of goods sold 14,300,564 21,665,509
------------ ------------
Gross (loss) profit (177,840) 3,005,481
------------ ------------
Operating expenses
Selling, general and administrative 4,652,873 5,553,788
------------ ------------
4,652,873 5,553,788
------------ ------------
Loss from operations (4,830,713) (2,548,307)
------------ ------------
Other income (expense):
Interest expense (793,600) (826,331)
Interest income 42,689 5,212
------------ ------------
(750,911) (821,119)
------------ ------------
Net loss $ (5,581,624) $ (3,369,426)
============ ============
Earnings per common share:
Loss per share $ (0.38) $ (0.27)
Weighted average common shares outstanding 14,766,797 12,298,560
The accompanying notes are an integral
part of these consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
BPI Packaging Technologies, Inc.
Consolidated Statement of Cash Flows
--------- Nine Months Ended --------
November 28, November 22,
1997 1996
------------- -------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,581,624) $(3,369,426)
----------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,081,349 2,506,266
Decrease (increase) in accounts receivable - trade 1,049,815 (1,484,365)
Decrease (increase) in inventories 2,559,036 (260,022)
Decrease (increase) in prepaid expenses and other current assets 212,206 (212,531)
Increase in accounts payable 12,639 1,833,047
(Decrease) increase in other accrued expenses (172,436) 63,449
----------- -----------
Total adjustments 5,742,609 2,445,844
----------- -----------
Net cash provided by (used in) operating activities 160,985 (923,582)
----------- -----------
Cash flows from investing activities:
Additions to property and equipment (186,167) (1,136,196)
Cost of patents -- (86,795)
(Increase) decrease in deposits, net (37,823) 34,722
(Increase) decrease in advance to officers (88,345) (11,226)
Decrease (increase) in other assets, net 85,687 (20,874)
----------- -----------
Net cash used in investing activities (226,648) (1,220,369)
----------- -----------
Cash flows from financing activities:
Net payments under note payable - bank -- (27,992)
Net payments on revolving line of credit (2,407,623) --
Principal payments on capital lease obligations (1,589,275) (1,436,429)
Net proceeds from sales of stock and exercise of warrants 3,897,950 4,384,835
----------- -----------
Net cash (used in) provided by financing activities (98,948) 2,920,414
----------- -----------
Net (decrease) increase in cash (164,611) 776,463
Cash at beginning of period 58,134 109,093
----------- -----------
Cash (Overdraft) at end of period ($ 106,477) $ 885,556
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
<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 nine
month period ended November 28, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997.
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 losses, has recorded a gross loss for the
nine months ended November 28, 1997 and has working capital and operating cash
flow deficiencies. Further, as discussed in Note 6, the Company's revolving
credit facility is renewable annually. No assurances can be given that the
lender will renew the line. Furthermore, significant trade credit balances are
past due at the balance sheet date. As of the filing date, January 26, 1998, all
capital and operating leases are in default.
In addition, the Company has incurred certain violations of the
covenants on its capital lease obligations which have not been waived by the
lessors. As a result, the long-term portion of the capital lease obligations has
been reclassified to current liabilities as of November 28, 1997.
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.
6
<PAGE>
The Company is implementing its plan to exit the production of its
traditional T-shirt bag product lines during Fiscal 1998. The Company is
shifting its production to principally proprietary bag and plastic film product
lines which have higher profit margins. In the second quarter of Fiscal 1998,
the Company received gross proceeds from the sale of Common Stock of $1,690,902.
In the third quarter of Fiscal 1998, the Company received additional gross
proceeds from the sale of common stock of $ 2,207,048. The total gross proceeds
from the sale of Common Stock in the second and third quarters was $ 3,897,950.
In December, 1997, the Company received additional gross proceeds from the sale
of Common Stock of $ 968,136.
Management intends to further increase its liquidity in the third and
fourth quarters of Fiscal 1998 through debt or equity financing with long-term
institutional investors subject to financial market conditions.
Note 3: Earnings Per Share
Earnings per share are 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 Receivable
Accounts receivable, net consists of the following:
November 28, February 28,
1997 1997
------------- -----------
Accounts receivable $ 1,217,637 $ 2,268,760
Allowance for doubtful accounts (100,000) (100,000)
Allowance for credits (75,000) (75,000)
----------- -----------
$ 1,043,943 $ 2,093,760
=========== ===========
Note 5: Inventories
Inventories consist of the following:
November 28, February 28,
1997 1997
----------- -----------
Raw materials $ 294,700 $1,020,902
Finished goods 1,680,717 3,513,551
---------- ----------
$1,975,417 $4,534,453
========== ==========
7
<PAGE>
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 80% of qualifying accounts receivable and 35% of
eligible inventories, less the aggregate amount of all outstanding commercial
and standby letters of credit. The line of credit bears interest at 3.0% above
the variable interest rate quoted by Norwest Bank of Minnesota with a minimum
rate of 8.0% (13.5% at November 28, 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
November 28, 1997, the balance under the line of credit is $1,325,854 which is
the maximum available. 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 November 28, 1997 none of the financial
covenants were met.
Note 7: Consolidated Statement of Changes in Stockholders' Equity for the
nine months ended November 28, 1997
<TABLE>
<CAPTION>
BPI Packaging Technologies, Inc.
Consolidated Statement of Changes in Stockholders' Equity
For The Nine Months Ended November 28, 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
Sale of common stock pursuant to
Regulation S and Regulation D
private placement offerings 3,896,902 38,969 3,858,981 3,897,950
Net loss for the nine months
ended November 28, 1997 (5,581,624) (5,581,624)
========== ======== ======= ========== ======= ========= =========== ============ ==========
Balance at November 28, 1997 17,981,270 $179,813 339,846 $1,184,384 146,695 $1,466,95 $42,026,984 ($34,992,844) $9,865,291
========== ======== ======= ========== ======= ========= =========== ============ ==========
</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.
8
<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 "forward-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
Third Quarter of Fiscal Year 1998 Compared to Third Quarter of Fiscal
Year 1997
The Company has made the decision to change its' fiscal year from year
ending February to December 31. To avoid the possibility of any confusion in
this discussion, the fiscal year beginning January 1, 1998 will be referred as
the Calendar 1998.
For the third quarter of Fiscal 1998, ended November 28, 1997, the
Company had sales totaling $2,916,221 as compared to sales of $8,840,916 for the
third quarter of Fiscal 1997, ended November 22, 1996, a decrease of 67% in line
with the Company's decision to discontinue the traditional plastic carryout bags
and MAXI-SAC(TM) product lines.
Management expects that sales of proprietary film products will
increase significantly in Calendar 1998 and that sales of proprietary film
products will begin in the first quarter of Calendar 1998.
Sales from RC America, Inc. were $25,811 in the third quarter of Fiscal
1998 compared to sales of $79,800 in the third quarter of Fiscal 1997, a
decrease of 67.7%. RC America's sales may fluctuate significantly from quarter
to quarter due to the nature of its business and the timing of transactions. RC
America's management is developing a business plan that will involve the
9
<PAGE>
independent capitalization of RC America and could involve a rights offering to
the Company's shareholders.
RC America's growth is being materially and negatively impacted by the
present operating constraints, which require RC America to sell any inventory
before it is purchased. In order to increase sales, RC America should be
independently capitalized and the Company has made the decision not to further
increase its investment in this market segment. RC America's management is
exploring both private and public financing and the Company has indicated that
it will consider remaining as a minority investor in any newly capitalized
independent RC America.
Cost of goods sold for the third quarter of Fiscal 1998 was $3,008,028
compared to $7,365,285 in the third quarter of Fiscal 1997. Cost of goods sold
as a percentage of sales was 103% for the third quarter of Fiscal 1998, compared
to 83% for the third quarter of Fiscal 1997. Manufacturing costs of goods sold
increased as a percentage because the Company has maintained staffing at levels
greater than needed for current production in anticipation of the increase in
film product sales expected in the first quarter of Calendar 1998.
Selling, general and administrative expenses for the third quarter of
Fiscal 1998 was $1,524,684 compared to $1,870,519 in the third quarter of Fiscal
1997.
Net Interest expense for the third quarter of Fiscal 1998 was $262,996
compared to $256,503 for the third quarter of Fiscal 1997.
The Company incurred a net loss of $1,879,487 for the third quarter of
Fiscal 1998 compared to a net loss of $651,391 for the third quarter of Fiscal
1997. The net loss was due primarily to increased cost of goods sold caused by
low volume and production levels too low for efficient operation. The
anticipated increase in proprietary film business in the first quarter of
Calendar 1998, will result in efficient levels of operation.. The net loss of
$1,879,487 included a non-cash charge for depreciation and amortization of
$652,762 compared to $852,961 in the previous year.
Operating profits (loss) for the various business segments are as
follows:
10
<PAGE>
Third Quarter
Fiscal 1998 Fiscal 1997
----------- -----------
Proprietary bag and film products ($1,229,377) $ 335,159
RC America, Inc. (85,200) (42,806)
Market Media, Inc. (131,552) (187,344)
Unallocated corporate overhead (170,362) (499,897)
----------- -----------
Operating (loss) profit (1,616,491) (394,888)
Interest expense, net (262,996) (256,503)
----------- -----------
Net (loss) income ($1,879,487) ($ 651,391)
=========== ===========
First Nine Months of Fiscal Year 1998 Compared to First Nine Months of
Fiscal Year 1997
For the first nine months of Fiscal 1998, ended November 28, 1997, the
Company had sales totaling $13,162,643 as compared to sales of $28,607,359 for
the first nine months ended November 22, 1996, a decrease of 54%, in line with
the Company's decision to discontinue the traditional plastic grocery carryout
bag and MAXI-SAC(TM) product lines.
RC America, Inc., sales for the first nine months of Fiscal 1998 were
$934,270 compared to $1,802,623 in the first nine months of Fiscal 1997. RC
America, Inc's., sales may fluctuate significantly from quarter to quarter due
to the nature of its' business.
Cost of goods sold for the first nine months of Fiscal 1998 was
$14,300,564 compared to $21,665,509 in the previous year. Cost of goods sold as
a percentage of sales was 101% for the first nine months of Fiscal 1998,
compared to 88% for the first nine months of Fiscal 1997. Manufacturing costs of
goods sold increased as a percentage because the Company has maintained staffing
at levels greater than needed for current production in anticipation of the
increase in film product sales expected in the first quarter of Calendar 1998.
Selling, general and administrative expense for the first nine months
of Fiscal 1998 was $4,652,873, or 32.9% of sales, compared to $5,553,788, or
22.5% of sales for the first nine months of Fiscal 1997. The decrease is
primarily related to decreased shipments (freight and related expenses are
included in SG&A), and decreases in sales and administration expense related to
the decision to exit the traditional plastic grocery carryout bag business.
11
<PAGE>
Net Interest expense for the first nine months of Fiscal 1998 was
$750,911 compared to $821,119 for the first nine months of the previous year.
A net loss of $5,581,624 for the first nine months of Fiscal 1998
compared to a net loss of $3,369,426 for the first nine months of Fiscal 1997.
The increase in net loss was caused primarily by the decrease in gross profits
resulting from low levels of operation. (The non-cash expense of depreciation
was $2,081,349 in the first nine months of Fiscal 1998 compared to $2,506,266 in
the first nine months of Fiscal 1997).
Management expects that the Company will have improved operating
results beginning with the anticipated increase in proprietary film product
sales in the first quarter of Calendar 1998.
Operating profits (loss) for the various business segments are as
follows:
Nine Months
Fiscal 1998 Fiscal 1997
----------- -----------
Proprietary bag and film products ($3,854,421) ($ 810,433)
RC America, Inc. (4,100) 98,082
Market Media, Inc. (350,157) (500,568)
Unallocated corporate overhead (622,035) (1,335,388)
----------- -----------
Operating (loss) profit (4,830,713) (2,548,307)
Interest expense, net (750,911) (821,119)
----------- -----------
Net (loss) ($5,581,624) ($3,369,426)
=========== ===========
Liquidity and Capital Resources
Loans
The Company has an $8,000,000 revolving line of credit secured by
accounts receivable and
12
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inventory. Borrowings under the line of credit are subject to 80% of qualifying
accounts receivable and 35% 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 5.0% above the variable
interest rate quoted by Norwest Bank of Minnesota with a minimum rate of 8%
(11.5% at November 28, 1997), and provides for a 2 of 1% unused line fee. The
credit line is for 5 years and is subject to renewal annually in November. At
November 28, 1997, the balance under the line of credit was $1,325,854. The line
of credit includes certain financial 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
November 28, 1997 the Company was in default under the financial covenants. The
lender waived these conditions of default at November 28, 1997 by amending the
loan and security agreement.
Sales of Securities
In the second quarter of Fiscal 1998, the Company received net proceeds
from the sale of Common Stock of $1,690,902. In the third quarter of Fiscal 1998
through October 21, 1997, the Company received additional net proceeds from the
sale of Common Stock of $2,207,048. The total net proceeds from the sale of
Common Stock in the second and third quarters was $3,897,950. The Company
received in December net proceeds of $968,136 from the sale of Common Stock
bringing the total net proceeds from the sale of Common Stock from July through
December 31, 1997 to $4,866,084. The Company intends to place additional equity
and/or debt with institutional investors, subject to market conditions, in the
first quarter of Calendar 1998 to further strengthen the balance sheet.
Equipment and Lease Financing
From March 1994 through August 1998, 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 first quarter of Calendar 1998. The
Company intends to purchase an additional $3.0 million in capital equipment in
Calendar 1998, subject to appropriate contracts and the availability of lease
financing.
13
<PAGE>
Capital leases contain provisions that give the lessor the right to
accelerate lease payments in the event of default and the Company has received
several such notices. All capital leases, operating leases and real-estate
leases were in default at the end of the third quarter of Fiscal 1998. All lease
defaults are expected to be cured with the planned proceeds from first quarter
of Calendar 1998 equity and/or debt financing with institutional investors
Cash Flow
During the first nine months of Fiscal 1998, the Company
generated $2,081,349 from depreciation and amortization, $1,049,815 from
reduction in accounts receivable trade; $2,559,036 from reduction in inventory
levels; $12,639 from an increase in accounts payable and $212,206 from reduction
in prepaid taxes and other current assets. The Company also received net
proceeds of $3,885,152 from the sale of Common Stock. $186,167 was used to
purchase equipment and for plant improvements. An additional $1,589,275 was used
to make principal payments on capital lease, operating lease and real-estate
lease obligations and $2,407,623 to reduce the revolving line of credit. At
November 28, 1997, stockholder's equity was $9,865,291 as compared to $8,298,978
at August 23, 1996. The Company's current ratio increased from 0.34 at August
23, 1996 to 0.37 at November 28, 1997.
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.
Management intends to increase its' liquidity through debt or
equity financing in the first quarter of Calendar 1998, subject to market
conditions. 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 anticipated 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 $3.0 million
(subject to appropriate contracts) increase in capacity at the Dighton facility
during Calendar 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.
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 anadditional 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.
14
<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 know 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 except for a suit
in the approximate amount $1.3 million by Lyondell Petrochemical Company, a
former raw material supplier. In this litigation, the Company has filed counter
claims against the supplier for violation of the Anti-Trust Laws.
The Company is also involved in pending commerical litigation
with equipment lessors which have sent the Company notices of acceleration.
While there is no guarantee, the Company expects that these disputes will be
settled by negotiation and bringing the accounts current from the proceeds of
planned first quarter Calendar 1998 financings.
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
15
<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: January 23, 1998 By:/s/ Dennis N. Caulfield
Dennis N. Caulfield, Chairman and
Chief Executive Officer
Date: January 23, 1998 By/s/ Paul J. DeCristofaro
Paul J. DeCristofaro, Chief Financial
Officer
16
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