<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER
JUNE 30, 1999 1-10648
BPI PACKAGING TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2997486
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
455 SOMERSET AVENUE, NORTH DIGHTON, MASSACHUSETTS 02764
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(508) 824-8636
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF CLASS
COMMON STOCK, $0.01 PAR VALUE
SERIES A CONVERTIBLE PREFERRED STOCK, $0.01 PAR VALUE
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. Yes X No .
--- ---
The aggregate market value of the voting stock held by
non-affiliates of the Registrant, based upon the average of the bid and ask
prices of the Common Stock and Series A Convertible Preferred Stock as
reported by the OTC Bulletin Board on August 3, 1999 was approximately
$4,945,120 for the Common Stock and $188,458 for the Series A Convertible
Preferred Stock. As of August 3, 1999, 21,500,521 shares of Common Stock,
$0.01 par value per share, were outstanding and 188,458 shares of Series A
Convertible Preferred Stock, $0.01 par value per share, were outstanding.
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998........................................................ 1
Consolidated Statement of Operations - Three Month
periods ended June 30, 1999 and June 30, 1998................................ 3
Consolidated Statement of Operations - Six Month
periods ended June 30, 1999 and June 30, 1998................................ 4
Consolidated Statement of Cash Flows - Six Month
periods ended June 30, 1999 and June 30, 1998................................ 5
Notes to Consolidated Financial Statements ....................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................................... 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk........................ 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................................. 20
Item 2. Changes in Securities............................................................. 20
Item 3. Default Upon Senior Securities.................................................... 20
Item 4. Submission of Matters to a Vote of Security Holders............................... 21
Item 5. Other Information................................................................. 21
Item 6. Exhibits and Reports on Form 8-K.................................................. 21
SIGNATURES................................................................................. 22
</TABLE>
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------------------- -----------------------
(UNAUDITED)
Current assets
<S> <C> <C>
Cash $ 176,726 $ 73,116
Accounts receivable, net 1,351,505 882,389
Inventories 1,672,861 717,413
Prepaid expenses and other current assets, net 84,127 51,420
--------------------- -----------------------
Total current assets 3,285,219 1,724,338
--------------------- -----------------------
Property and equipment, net 16,173,069 15,290,305
--------------------- -----------------------
Deposits - leases and equipment purchases 73,911 149,851
Loans to officers, net 6,430 6,072
Other assets 1,656,098 581,399
--------------------- -----------------------
1,736,439 737,322
--------------------- -----------------------
$ 21,194,727 $ 17,751,965
--------------------- -----------------------
--------------------- -----------------------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
1
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current liabilities
Note payable $ 1,690,163 $ 814,311
Trade notes payable -- 584,433
Capital lease obligations due within one year -- 3,800,286
Accounts payable 2,886,573 6,597,223
Accrued expenses 880,417 2,676,239
------------ ------------
Total current liabilities 5,457,153 14,472,492
------------ ------------
Long-term liabilities
Capitalized lease obligations 7,018,665 --
Subordinated debt 2,720,000 --
Accounts payable long term 1,117,602 --
------------ ------------
Total long-term liabilities 10,856,267 --
Stockholders' Equity
Series B convertible preferred stock, $0.01 par value 1,466,954 1,466,954
Series A convertible preferred stock, $0.01 par value 673,983 674,032
Series C redeemable preferred stock, $0.01 par value 100 --
Common stock, $0.01 par value; shares authorized - 60,000,000; shares
issued and outstanding - 21,500,521 and
21,495,621 at June 30, 1999 and December 31, 1998, respectively 215,005 214,956
Subscribed stock 300,000 --
Capital in excess of par value 45,392,733 44,912,833
Accumulated deficit (43,167,468) (43,989,302)
------------ ------------
4,881,307 3,279,473
------------ ------------
$ 21,194,727 $ 17,751,965
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
2
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
-----THREE MONTHS ENDED-----
JUNE 30, JUNE 30,
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Net sales $ 4,130,980 $ 2,406,967
Cost of goods sold 3,697,856 2,561,729
------------ ------------
Gross profit (loss) 433,124 (154,762)
Operating expenses:
Selling, general and administrative 539,669 1,280,759
------------ ------------
(Loss) income from operations (106,545) (1,435,521)
Other (expense) income:
Interest / other expense (560,333) (131,217)
Interest / other income 26,971 18,598
------------ ------------
Net income/(loss) before extraordinary income (639,907) (1,548,140)
Extraordinary income - gain on debt restructuring 185,945 --
------------ ------------
Net income/(loss) after extraordinary income ($ 453,962) ($ 1,548,140)
------------ ------------
------------ ------------
Earnings (loss) per share before extraordinary income:
Basic and diluted net earnings (loss) per share ($ 0.03) ($ 0.07)
Shares used in computing basic and diluted net
earnings (loss) per share 21,497,613 20,987,122
Earnings (loss) per share after extraordinary income:
Basic and diluted net earnings (loss) per share ($ 0.02) ($ 0.07)
Shares used in computing basic and diluted net
earnings (loss) per share 21,497,613 20,987,122
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
------SIX MONTHS ENDED------
JUNE 30, JUNE 30,
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Net sales $ 7,471,964 $ 4,639,864
Cost of goods sold 6,354,020 4,794,768
------------ ------------
Gross profit (loss) 1,117,944 (154,904)
Operating expenses:
Selling, general and administrative 1,424,695 2,375,830
------------ ------------
(Loss) income from operations (306,751) (2,530,734)
Other (expense) income:
Interest / other expense (832,105) (276,152)
Interest / other income 42,983 35,953
------------ ------------
Net income/(loss) before extraordinary income (1,095,873) (2,770,933)
Extraordinary income - gain on debt restructuring 1,917,707 --
------------ ------------
Net income/(loss) after extraordinary income $ 821,834 ($ 2,770,933)
------------ ------------
------------ ------------
Earnings (loss) per share before extraordinary income:
Basic and diluted net earnings (loss) per share ($ 0.05) ($ 0.14)
Shares used in computing basic and diluted net
earnings (loss) per share 21,496,623 20,012,639
Earnings (loss) per share after extraordinary income:
Basic and diluted net earnings (loss) per share $ 0.04 ($ 0.14)
Shares used in computing basic and diluted net
earnings (loss) per share 21,496,623 20,012,639
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
----SIX MONTHS ENDED -----
JUNE 30, JUNE 30,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) $ 821,834 ($2,770,933)
----------- -----------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,369,953 1,269,439
(Increase) in accounts receivable - trade (469,116) (185,695)
(Increase) decrease in inventories (955,448) 344,067
(Increase) decrease in prepaid expenses and other current assets (32,707) 5,552
Increase (decrease) in accounts payable (1,259,874) 558,114
Increase (decrease) in other accrued expenses (152,445) 82,930
----------- -----------
Total adjustments (1,499,637) 2,074,407
----------- -----------
Net cash (used in) provided by operating activities (677,803) (696,526)
----------- -----------
Cash flows from investing activities:
Additions to property and equipment (542,535) (1,530)
Deposits related to equipment refinancing 75,940 (318)
Additions to property and equipment debt refinancing (1,678,973) --
(Increase) in advance to officers (358) --
Decrease in other assets, net -- 78,420
----------- -----------
Net cash (used in) provided by investing activities (2,145,926) 76,572
----------- -----------
Cash flows from financing activities:
Net increase (payments) under note payable - bank 875,852 (780,945)
Refinancing costs (1,105,908) --
Principal payments on capital lease obligations -- (75,000)
Refinance of capital and operating leases (5,443,763) --
Refinancing of debt, gain on reduction of accounts payable (1,917,607) --
Refinanced capital lease obligation 7,018,665 --
Subordinated debt addition 3,200,000 --
Subscribed stock 300,000 --
Net proceeds from sales of stock and exercise of warrants 100 1,403,151
----------- -----------
Net cash (used in) provided by financing activities 2,927,339 547,206
----------- -----------
Net increase in cash 103,610 (72,748)
Cash at beginning of period 73,116 125,220
----------- -----------
Cash at end of period $ 176,726 $ 52,472
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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.
Revenue is recognized upon the shipment of products and the passage of
title to customers.
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 six
month period ended June 30, 1999 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999.
For further information, refer to the consolidated financial statements
and the footnotes included in the Amendment No. 4 to the Annual Report on Form
10-K/A for BPI Packaging Technologies, Inc. (the "Company") for the year ended
December 31, 1998 and the Current Report on Form 8-K filed on February 11, 1999
related to the financial restructuring of the Company.
NOTE 2: FINANCIAL RESTRUCTURING
On January 27, 1999, the Company entered into a Securities Purchase
Agreement (the "Securities Purchase Agreement") with DGJ, L.L.C. ("DGJ") (the
"January 1999 Financing"), whereby the Company agreed to issue and sell to DGJ,
and DGJ agreed to purchase from the Company the following:
1. a Promissory Note in the aggregate principal amount of
$3,200,000 (the "Note");
2. a Common Stock Purchase Warrant for the purchase of up to
80,000,000 shares of the Company's common stock, $0.01 par
value per share (the "Common Stock"), at an exercise price of
$0.04 per share, exercisable until January 27, 2009; and
3. 1,629,930 shares of Series C Preferred Stock of the Company
for $100.
The Note matures on February 1, 2004 or earlier if the Company enters
into a merger agreement, completes a public offering in excess of $10,000,000,
defaults on the payment of interest or sells 50% or more of its shares in the
Company to a stockholder not previously an investor in the Company. The Note has
an interest rate of 6% per annum payable monthly in arrears and is secured by
all assets of the Company. The Note is subordinated to the equipment
6
<PAGE>
lease and, in certain respects, the factoring agreement, described below. On
June 30, 1999, the Company was in default on the Note as it failed to make
four monthly interest payments of $16,000 per month for the months of March
to June 1999, or a total of $64,000. In addition, the Company has not made
its July and August 1999 interest payments. As this has caused an Event of
Default, as defined in the Note, DGJ, the holder of the Note, is entitled to
various rights and remedies under the Note and the Securities Purchase
Agreement, including, but not limited to, the right to declare all or any
part of the unpaid principal amount of the Note outstanding to be due and
payable. As of August 13, 1999, DGJ has indicated a willingness to defer
exercising its rights and remedies upon default pending discussion with the
Company regarding how the Note default is to be cured.
In conjunction with the January 1999 Financing, DGJ required certain
members of the Company's management, C. Jill Beresford, James F. Koehlinger,
Richard H. Nurse, Hanspeter Schulz and Ivan J. Hughes, to invest, in the
aggregate, $300,000 in the Company's warrants. The Common Stock represented by
the warrants cannot be issued until approval for an increase in the Company's
authorized shares of Common Stock is obtained at the next annual meeting of
stockholders.
The shares of the Series C Preferred Stock were purchased by DGJ for an
aggregate purchase price of $100. Some of the rights and restrictions of Series
C Preferred Stock include the following: (i) the holders of Series C Preferred
Stock have no voting rights; provided, however, upon an Event of Default, as
defined in the Securities Purchase Agreement, holders of the Series C Preferred
Stock will be entitled to vote with the holders of the Common Stock as a single
class on each matter submitted to a vote to the Company's stockholders, with
each share of the Series C Preferred Stock having 30 votes; (ii) if the Note has
been retired in its entirety, the Company, at its option, may elect to redeem
all or a portion of the outstanding Series C Preferred Stock, at an aggregated
redemption price of $100 plus accrued interest at a rate of 6% per annum
commencing on January 27, 1999; and (iii) the shares of the Series C Preferred
Stock are not convertible into shares of Common Stock.
In conjunction with the January 1999 Financing, the Company entered
into agreements with most of its unsecured creditors that provided a discounted
payment in February 1999 or a non-interest bearing agreement to pay the entire
balance over a three-year period. The unsecured creditor agreements, together
with the financing referred to above, allowed the Company to restructure trade
notes payable of $584,000 and accounts payable of $6,597,000, or a total of
$7,181,000, compared to $1,874,000 of current accounts payable and $1,426,000 of
long-term debt, or a total of $3,300,000 after refinancing. Unsecured creditors
of the Company owed approximately $3,009,000 as of January 27, 1999 selected the
discounted payment plan resulting in extraordinary income of $1,917,707 during
the first six months of 1999. This gain of $1,917,707 was recorded as
extraordinary income amounting to $0.08 per share. The tax effect of this gain
reduced the net operating tax loss carry-forward from prior years which has been
fully reserved and, therefore, has no impact on current operations. The balance
of the unsecured creditors selected the three-year payment plan or are currently
negotiating with the Company or did not reach discounted or deferred agreements
with the Company. The Company did not recognize any gain under the three-year
payment arrangement.
7
<PAGE>
The gain on the restructuring of trade notes payable and accounts
payable was accounted for as an extraordinary item in the Company's Consolidated
Statement of Operations for the six month period ended June 30, 1999. The
creditors who selected the long-term debt agreement are being paid their
balances due over a 36-month period in 36 equal installments with no interest.
The Company was involved in a patent infringement suit and reached a settlement
on January 27, 1999 to pay the balance due of $200,000 as part of the
restructuring of the Company's debt described above.
A factoring agreement with a company related to DGJ now provides the
Company with $2,000,000 of financing secured by the Company's accounts
receivable and $1,000,000 secured by its inventory. The term for both the
accounts receivable and inventory financing is six months, subject to
automatic renewal unless the Company gives at least 90 days written notice of
termination. Written notice of termination regarding this factoring agreement
was given by the Company on March 30, 1999. The financing bears interest at
the prime rate plus 5% on the outstanding balance on the inventory loan and
the prime rate plus 2% on all accounts receivable submitted for financing.
The Company may borrow up to 85% of its qualified accounts receivable and 33%
of its qualified inventory. The parties to the factoring agreement have
indicated a willingness to extend the terms of the agreement on a
month-to-month basis until the agreement can be replaced with a revolving
line of credit, which the Company is currently negotiating with another
entity (Note 7).
The Company's equipment, capital and operating leases have been
replaced with a new equipment lease with DGJ. Current obligations of
$3,800,000 and accrued lease obligations of $1,643,000 were retired and
$1,679,000 of equipment previously treated as operating leases was added to
the property and equipment accounts. The new lease carries no debt reduction
obligation and is treated as long-term debt. The Company's combined monthly
payments under the retired leases were reduced from approximately $305,000
per month to $102,000 per month under the new lease agreement with DGJ. The
lease obligation is a ten-year lease with monthly payments of $102,000
representing interest only. The total principal amount of the lease is
$6,800,000 and is due at the end of the lease term. The lease was recorded as
a capital lease during the quarter ended March 31, 1999 and will be treated
as such in future periods. The lease requires the Company to meet certain
financial covenants, including, but not limited to, earnings targets and
debt-to-equity ratios.
On June 30, 1999, the Company was in default on the equipment lease
with DGJ as it failed to make five monthly lease payments of $102,000 per
month for the months of February to June 1999, or $510,000 in total. In
addition, the Company has not made its July and August 1999 lease payments.
As this has caused an Event of Default, as defined in the equipment lease,
DGJ is entitled to various rights and remedies under the equipment lease and
the Securities Purchase Agreement, including, but not limited to, the right
to have any and all remaining sums under the lease become immediately due and
payable and the right to repossess the leased equipment. As of August 13,
1999, DGJ has indicated a willingness to defer exercising its rights and
remedies upon default pending discussion with the Company regarding how the
equipment lease default is to be cured.
8
<PAGE>
The note payable, warrants and Series C Preferred Stock purchased by
DGJ for $3,200,200 were valued using a discounted cash flow analysis, at an
assumed rate of 14%. Net cash proceeds after fees were assigned to the various
components of this transaction based upon the discounted value of the note
payable at 14%. Of the $3,200,200, $480,000 has been recorded as additional
capital in excess of par value related to the warrants. The Series C Preferred
Stock is determined to have no value separate from the warrants because it is
not convertible to Common Stock and its redemption price is the same as its
purchase price, $100 plus accrued interest at 6% per annum beginning on January
27, 1999. Also, the Series C Preferred Stock has no preference in liquidation,
although, it has a voting preference. The fair market value of the Common Stock
on January 27, 1999 was $0.28 per share. The warrants have an exercise price of
$0.04 per share.
Accounts payable long term consists of amounts due to vendors who
selected a 36 month payment plan as part of the Company's financial
restructuring. The payment plan current portion is included in current
liabilities.
NOTE 3: BASIC AND DILUTED NET LOSS PER SHARE
The Company is required to present "basic" and "diluted" earnings per
share. Basic earnings per share is computed by dividing the income available to
common stockholders by the weighted average number of common shares outstanding
for the period. For the purposes of calculating diluted earnings per share, the
denominator includes both the weighted average number of common shares
outstanding and potential dilutive common shares outstanding for the period.
For the periods ended June 30, 1999 and 1998, the Company had recorded
a net loss before extraordinary income. Therefore, basic and diluted earnings
per share are the same due to the anti-dilutive effect of potential common
shares outstanding. Anti-dilutive potential common shares excluded from the
computation include common shares issuable upon the exercise of stock options,
common shares issuable upon the conversion of redeemable convertible preferred
stock or upon the exercise of warrants.
NOTE 4: ACCOUNTS RECEIVABLE-NET
Accounts receivable-net consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Accounts receivable-trade $1,481,058 $ 1,066,841
Allowance for doubtful accounts ( 54,553) ( 109,452)
Allowance for credits ( 75,000) ( 75,000)
----------- ------------
$1,351,505 $ 882,389
----------- ------------
----------- ------------
</TABLE>
9
<PAGE>
NOTE 5: INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Raw materials $ 613,262 $ 296,427
Finished goods 1,059,599 420,986
---------- ----------
$1,672,861 $ 717,413
---------- ----------
---------- ----------
</TABLE>
NOTE 6: PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, which includes costs of
assets constructed or purchased, related delivery and installation costs and
interest incurred on significant capital projects during their construction and
installation periods. Property under capital leases is recorded at the lower of
the present value of future minimum rental payments or the fair value of the
property at the beginning of the lease term. Maintenance and repairs that do not
extend the useful life of the asset or improve capacity are charged to expense
when incurred. Machinery and equipment are depreciated using the straight-line
method over a period of eleven years. Leasehold improvements consist of costs
relating to buildings and equipment under lease and are amortized using the
straight-line method over the shorter of the life of the asset or the remaining
life of the lease.
The carrying value of property and equipment is periodically reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying values may not be recoverable.
NOTE 7: NOTE PAYABLE
At December 31, 1998, the Company had a $2,000,000 revolving line of
credit secured by accounts receivable. Borrowings under the line of credit were
subject to 70% of qualifying accounts receivable, less the aggregate amount
utilized under all commercial and standby letters of credit and bank
acceptances. The line of credit bore interest at prime plus 6% (14.5% at
December 31, 1998). In addition, the Company paid 2% interest on all new
invoices submitted for financing. The credit line was for one year and subject
to renewal annually. At December 31, 1998, the balance under the line of credit
was $814,311, which was the maximum available based on the qualifying accounts
receivable. Subsequent to December 31, 1998, the Company repaid this note
payable in full in connection with its financial restructuring (Note 2).
On January 27, 1999, the Company entered into a factoring agreement,
which provides the Company with up to $2,000,000 of financing secured by the
Company's accounts receivables and $1,000,000 secured by its inventory. At June
30, 1999, the balance under this agreement was $1,690,163 (Note 2).
10
<PAGE>
During the second quarter of 1999, the lender under the factoring
agreement, described above, advanced additional funds to the Company in
various increments. These additional funds were used as working capital. The
terms of these additional loans made to the Company are on the same terms as the
original factoring agreement. As of August 12, 1999, the Company
had borrowed a total of $600,000 from this lender.
On July 16, 1999, the Company received a non-binding letter from a
bank stating that it is intending to provide the Company with a $4,000,000
revolving line of credit that would be secured, to some extent, by accounts
receivable, inventory and all other assets of the Company. The proceeds of
this loan are to be used to retire the factoring agreement, described above,
and for working capital purposes.
In February 1999, the Company borrowed approximately $219,000 from DGJ
to purchase additional pieces of equipment. This loan bears interest at a rate
of 18% per annum and matures in September 1999. Beginning on April 1, 1999, the
Company was required to make six successive monthly installment payments of
interest only. As of June 30, 1999, the Company has not made any monthly
interest payments under this note. As of August 13, 1999, DGJ has indicated a
willingness to defer exercising its rights and remedies upon default pending
discussion with the Company regarding how the loan default is to be cured.
NOTE 8: CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX
MONTH PERIOD ENDED JUNE 30, 1999
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
SERIES B CONVERTIBLE SERIES A CONVERTIBLE SERIES C
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
--------------- --------------- --------------- ------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 146,695 $1,466,954 212,258 $674,032 0 $0 21,495,621 $214,956
Subscribed stock
Net income for the three months
ending June 30, 1999
Ascribed value of Series C preferred
stock under refinancing of 1/27/99
Issuance of stock during financial 1,629,930 $100
restructuring
Conversion of Series A Convertible (4,900) ($49) 4,900 $49
Preferred Stock to Common Stock
Balance at June 30, 1999 146,695 $1,466,954 207,358 $673,983 1,629,930 $100 21,500,521 $215,005
</TABLE>
<TABLE>
SUBSCRIBED STOCK CAPITAL IN
---------------- EXCESS OF ACCUMULATED
SHARES AMOUNT PAR VALUE DEFICIT TOTAL
------ ------ --------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 0 $ 0 $44,912,833 ($43,989,302) $3,279,473
Subscribed stock 7,500,000 $300,000 $300,000
Net income for the three months
ending June 30, 1999 $821,834 $821,834
Ascribed value of Series C preferred
stock under refinancing of 1/27/99 $480,000 $480,000
Issuance of stock during financial ($100) $0
restructuring
Conversion of Series A Convertible
Preferred Stock to Common Stock
Balance at June 30, 1999 7,500,000 $300,000 $45,392,733 ($43,167,468) $4,881,307
</TABLE>
11
<PAGE>
NOTE 9: RELATED PARTY TRANSACTIONS
Ivan J. Hughes, a director of the Company, is the President of the
Plastic's Division, and a director and a member of the Executive and
Compensation Committees of Duro Bag Manufacturing Company ("Duro Bag"). In
January, February, March, April, May, June and July, Duro Bag issued purchase
orders for $192,000, $190,335, $209,513, $255,729, $0, $350,019 and $364,435,
respectively, to the Company to purchase bags for Duro Bag customers. Orders
from Duro Bag represented 18% of sales during the first quarter period ended
March 31, 1999, 15% of sales during the second quarter period ended June 30,
1999 and 16% of sales for the six months ended June 30, 1999. The Company
expects similar orders from Duro Bag during the remainder of the year. The
Company manufacturers these products on behalf of Duro Bag for its customers.
The Company sells these products on terms as contracted between Duro Bag and
its customers, which terms are equal, if not better, than the Company could
obtain from its other customers for these products.
In November 1990, the Company established an officer's loan receivable
to Dennis N. Caulfield, its Chairman for $132,197. The note was amended in April
1998 and the interest rate changed to 6% effective from November 1990 and is now
payable on or before January 1, 2001. Interest on the loan, along with advances
for travel not offset by expense records, caused the loan balance to equal
$586,978 as of December 31,1997. Mr. Caulfield did not make any payments against
the loan from the period beginning 1990 through December 31, 1997. According,
the Company reserved the full amount of this loan on that date. Also, no
payments were made in 1998. In addition, the Company paid, on behalf of the
former Chairman, approximately $36,000 of a $200,000 personal income tax levy
imposed by the Massachusetts Department of Revenue on Mr. Caulfield in exchange
for an interest bearing note due on or before June 30, 1998, which has not yet
been repaid. This note was reserved for as of June 30, 1999.
Effective February 26, 1994, Ronald Caulfield exchanged his 49,500
shares of common stock of RC America for 200,000 shares of the Company's Common
Stock, pursuant to the terms of a Stock Exchange Agreement by and between the
Company and Ronald Caulfield (the "Exchange Agreement"). The Exchange Agreement
also provides for the issuance to Ronald Caulfield of up to an additional
100,000 shares of the Company's Common Stock over a five year period based on RC
America attaining certain levels of pre-tax earnings. No shares of Common Stock
were issued in 1998 or for the 10 month period ended December 31, 1997. As a
result of RC America's earnings for the fiscal year ended February 28, 1997 and
February 23, 1996, 2,649 and 2,550 shares, respectively, of the 100,000 shares
of Common Stock were issued to Mr. Ronald Caulfield. The Exchange Agreement
contains demand and piggy-back registration rights for the shares.
Four of the Company's directors, Gary R. Edidin, Allen S. Gerrard,
Theodore L. Koenig and Bruce M. Fleisher, are either related to DGJ or have been
designated by DGJ. The financial restructuring and loan described in Note 2,
Note 7 and all other transactions between the Company and DGJ will be deemed to
be related party transactions due to the relationships of these directors with
DGJ. Also, Mr. Koenig is counsel to the Chicago-based law firm of Holleb & Coff,
which provides legal services to the Company.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS OR INFORMATION
This Form 10-Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements in this Form 10-Q which address
activities, events and developments that the Company expects or anticipates will
or may occur in the future, including such things as future capital expenditures
(including the amount and nature thereof), expansion and other development
trends of industry segments in which the Company is active, business strategy,
expansion and growth of the Company's business and operations and other such
matters are forward-looking statements. Although the Company believes the
expectations expressed in such forward-looking statements are based on
reasonable assumptions within the bounds of its knowledge of its business, a
number of factors could cause actual results to differ materially from those
expressed in any forward-looking statements, whether oral or written, made by or
on behalf of the Company. Many of these factors have previously been identified
in filings of statements made by or on behalf of the Company.
All phases of the Company's operations are subject to influences
outside its control. Any one, or a combination, of these factors could
materially affect the results of the Company's operations. These factors
include: sales, competition, inflation, raw material price increases, rate of
market penetration for products, new product development and market acceptance,
litigation, interest rate fluctuations, availability of equity financing,
availability of capital and operating lease financing, availability of bank or
other financial institution lines of credit and other capital market conditions.
Forward-looking statements made by or on behalf of the Company are based on a
knowledge of its business and the environment in which it operates, but because
of the factors listed above, actual results may differ from those in the
forward-looking statements. Consequently, all of the forward-looking statements
made are qualified by these cautionary statements and there can be no assurance
that the actual results or developments anticipated by the Company will be
realized or, even if substantially realized, that they will have the expected
consequences to or effects on the Company or its business or operations.
RESULTS OF OPERATIONS
SECOND QUARTER OF 1999 COMPARED TO THE SECOND QUARTER OF 1998
For the second quarter ended June 30, 1999, the Company had sales of
$4,130,980 compared to sales of $2,406,967 for the second quarter ended June 30,
1998.
13
<PAGE>
Sales of the Company's proprietary bag products (FRESH-SAC-Registered
Trademark- T-shirt sack produce bag and HANDI-SAC-TM-) and film products
were $2,463,621 in the second quarter of 1999, compared to sales of $2,406,967
in the second quarter of 1998, an increase of 3%. Sales of traditional plastic
carry-out bags were $1,667,359 in the second quarter of 1999, compared to no
sales in the second quarter of 1998. The Company has re-entered the traditional
plastic carry-out bag market and expects continued sales increases in this
segment in future quarters.
In the second quarter of 1999, cost of goods sold was $3,697,856 or 90%
of sales, compared to $2,561,729, or 106% of sales, in the second quarter of
1998. The decrease in cost of goods sold as a percentage of sales is due to a
decrease in fixed costs, increased sales volume and a reduction in variable
costs as a percentage of sales. Cost of goods sold would have been approximately
$75,000 greater in the second quarter of both 1999 and 1998 had the Company not
recorded a write-down of plant and equipment during the fiscal year ended
February 28, 1997.
Selling, general and administrative expense for the second quarter of
1999 was $539,669, or 13% of sales, compared to $1,280,759, or 53% of sales, in
the second quarter of 1998. The decrease in selling, general and administrative
expense, as a percentage of sales, is due to the reduction of fixed expenses,
offset by an increase in variable expenses, which resulted from an increase in
sales volume.
For the second quarter of 1999, interest expense was $560,333, compared
to $131,217 for the second quarter of 1998. The increase in interest expense is
due to the conversion of operating leases to capital leases as a result of the
Company's financial restructuring in January 1999.
The net loss before extraordinary income was $639,907 in the second
quarter of 1999 compared to a net loss of $1,548,140 in the second quarter of
1998. The decrease in the loss before extraordinary income was due to a decrease
in fixed expenses and an increase in sales volume.
Extraordinary income of $185,945 in the second quarter of 1999 was the
result of the financial restructuring in January 1999 and the resulting
discounts from settlements with unsecured creditors. No extraordinary income was
reported for the second quarter of 1998.
Net loss after extraordinary income was $453,962 for the second quarter
of 1999, compared with a loss of $1,548,140 in the second quarter of 1998. The
decrease in net loss was caused by a decrease in fixed expenses, an increase in
sales volume and the financial restructuring during the first quarter of 1999.
Net loss after extraordinary income during the second quarter of 1999 would have
been approximately $75,000 higher and the loss for 1998 higher had the Company
not recorded a write-down of plant and equipment during the fiscal year ended
February 28, 1997.
The Company had basic and diluted net loss before extraordinary income
of $0.02 per share in the second quarter of 1999 compared to a loss before
extraordinary income of $0.07 per share in second quarter of 1998.
14
<PAGE>
FIRST SIX MONTHS OF 1999 COMPARED TO THE FIRST SIX MONTHS OF 1998
For the first six months ended June 30, 1999, the Company had sales of
$7,471,964 compared to sales of $4,639,864 for the first six months ended June
30, 1998.
Sales of the Company's proprietary bag products (FRESH-SAC-Registered
Trademark- T-shirt sack produce bag and HANDI-SAC-TM-) and film products were
$4,830,916 in the first six months of 1999, compared to sales of $4,396,137
in the first six months of 1998, an increase of 9%. Sales of traditional
plastic carry-out bags were $2,641,048 in the first six months of 1999,
compared to sales of $243,727 in the first six months of 1998, an increase of
84%. The Company has re-entered the traditional plastic carry-out bag market
and expects continued sales increases in this segment in future quarters.
In the first six months of 1999, cost of goods sold was $6,354,020, or
85% of sales, compared to $4,794,768, or 104% of sales, in the first six months
of 1998. The decrease in cost of goods sold as a percentage of sales is due to a
decrease in fixed costs, increased sales volume and a reduction in variable
costs as a percentage of sales. Cost of goods sold would have been approximately
$150,000 greater in the first six months of both 1999 and 1998 had the Company
not recorded a write-down of plant and equipment during the fiscal year ended
February 28, 1997.
Selling, general and administrative expense for the first six months of
1999 was $1,424,695, or 19% of sales, compared to $2,375,830, or 51% of sales,
in the first six months of 1998. The decrease in selling, general and
administrative expense, as a percentage of sales, is due to the reduction of
fixed expenses, offset by an increase in variable expenses, which resulted from
an increase in sales volume.
For the first six months of 1999, interest expense was $832,105,
compared to $276,152 for the first six months of 1998. The increase in interest
expense is due to the conversion of operating leases to capital leases as a
result of the financial restructuring in January 1999.
The net loss before extraordinary income was $1,095,873 in the first
six months of 1999 compared to a net loss of $2,770,933 in the first six months
of 1998. The decrease in the loss before extraordinary income was due to a
decrease in fixed expenses and an increase in sales volume.
Extraordinary income of $1,917,707 in the first six months of 1999 was
the result of the financial restructuring in January 1999 and the resulting
discounts from settlements with unsecured creditors. No extraordinary income was
reported for the first six months of 1998.
Net income after extraordinary income was $821,834 for the first six
months of 1999, compared with a loss of $2,770,933 in the first six months of
1998. The change from net loss to net income was caused by a decrease in fixed
expenses, an increase in sales volume and the financial restructuring during the
first quarter of 1999. Net income after extraordinary income during the first
six months of 1999 would have been approximately $150,000 lower and the loss for
1998, $150,000 higher had the Company not recorded a write-down of plant and
equipment during the fiscal year ended February 28, 1997.
15
<PAGE>
The Company experienced losses in prior years resulting in operating
loss carryforwards for federal and state income tax purposes. Due to the
Company's past history, no benefit was recognized for net operating loss
carryforwards because of the uncertainty of realization. The Company
estimates that sufficient net loss carryforwards are available to offset
income for the six months ended June 30, 1999.
The Company had basic and diluted net loss before extraordinary
income of $0.05 per share in the first six months of 1999 compared to a loss
before extraordinary income of $0.14 per share in the first six months of 1998
LIQUIDITY AND CAPITAL RESOURCES
Since its initial public offering in October 1990, the Company has
generated funds to finance its activities through both public sales and private
placements of its securities, as well as bank loans, equipment lease financing
and cash from operations.
Currently, the Company does not have readily available sources of
funds for working capital. In the second quarter of 1999 it borrowed
additional funds and is currently in default on some of its credit facilities
and its equipment lease. The Company is in the process of negotiating with
its creditors and an another bank to refinance the Company's credit
facilities.
On January 27, 1999 the Company issued a promissory note in the
aggregate principal amount of $3,200,000 to DGJ, L.L.C. ("DGJ") (the "Note").
The Note matures at the latest on February 1, 2004, has an interest rate of
6% per annum payable monthly in arrears and is secured by all assets of the
Company. On June 30, 1999, the Company was in default on the Note as it
failed to make four monthly interest payments of $16,000 per month for the
months of March to June 1999, or a total of $64,000. In addition, the Company
has not made its July and August 1999 interest payments. As this has caused
an Event of Default, as defined in the Note, DGJ, the holder of the Note, is
entitled to various rights and remedies under the Note and the Securities
Purchase Agreement, including, but not limited to, the right to declare all
or any part of the unpaid principal amount of the Note outstanding to be due
and payable. As of August 13, 1999, DGJ has indicated a willingness to defer
exercising its rights and remedies upon default pending discussion with the
Company regarding how the Note default is to be cured.
On January 27, 1999, the Company entered into a factoring agreement
with a company related to DGJ. The factoring agreement provides the Company
with $2,000,000 of financing secured by the Company's accounts receivable and
$1,000,000 secured by its inventory. The term for both the accounts
receivable and inventory financing is six months, subject to automatic
termination unless the Company gives at least 90 days written notice of
termination. Written notice of termination regarding this factoring agreement
was given by the Company on March 30, 1999. The financing bears interest at
the prime rate plus 5% on the outstanding balance on the inventory loan and
prime rate plus 2% on all accounts receivable submitted for financing. The
parties to the factoring agreement have indicated a willingness to extend the
terms of the agreement on a month-to-month basis until the agreement can be
replaced with a revolving line of credit, which the Company is currently
negotiating with another entity (Note 7).
16
<PAGE>
During the second quarter of 1999, the lender under the factoring
agreement, described above, advanced additional funds to the Company in
various increments. These additional funds were used as working capital. The
terms of these additional loans made to the Company are on the same terms as
the original factoring agreement. As of August 12, 1999, the Company had
borrowed a total of $600,000 from this lender.
On July 16, 1999, the Company received a non-binding letter from a
bank stating that it is intending to provide the Company with a $4,000,000
revolving line of credit that would be secured, to some extent, by accounts
receivable, inventory and all other assets of the Company. The proceeds of
this loan are to be used to retire the factoring agreement, described above,
and for working capital purposes.
The Company's equipment, capital and operating leases are funded by
the new Equipment Lease with DGJ (as hereinafter defined). On June 30, 1999,
the Company was in default on the Equipment Lease with DGJ as it failed to
make five monthly lease payments of $102,000 per month for the months of
February to June 1999, or $510,000 in total. In addition, the Company has not
made its July and August 1999 lease payments. As this has caused an Event of
Default, as defined in the Equipment Lease, DGJ is entitled to various rights
and remedies under the Equipment Lease and the Securities Purchase Agreement,
including, but not limited to, the right to have any and all remaining sums
under the lease immediately become due and payable and the right to repossess
the leased equipment. As of August 13, 1999, DGJ has indicated a willingness
to defer exercising its rights and remedies upon default pending discussion
with the Company regarding how the Equipment Lease default is to be cured.
In February 1999, the Company borrowed approximately $219,000 from DGJ
to purchase additional pieces of equipment. This loan bears interest at a rate
of 18% per annum and matures in September 1999. Beginning on April 1, 1999, the
Company was required to make six successive monthly installment payments of
interest only. As of June 30, 1999, the Company has not made any monthly
interest payments under this note. As of August 13, 1999, DGJ has indicated a
willingness to defer exercising its rights and remedies upon default pending
discussion with the Company regarding how the loan default is to be cured.
SALES OF SECURITIES
The Company received net proceeds from the privately placed sale of
Common Stock and exercise of warrants from January 1, 1998 to June 30, 1998 of
$1,403,151. The proceeds were used for general corporate purposes.
No Common Stock was issued by the Company from April 1, 1999 through
June 30, 1999. In connection with the financial restructuring of the Company
in January 1999, 1,629,930 shares of Series C Preferred Stock were issued to
DGJ for $100. Also, in connection with the January financial restructuring,
the Company reserved 30,937,500 shares of authorized but unissued shares of
Common Stock to meet its requirements under the financing terms of such
restructuring.
17
<PAGE>
EQUIPMENT AND LEASE FINANCING
Pursuant to the Securities Purchase Agreement between the Company and
DGJ dated January 27, 1999, the Company entered into a ten year Equipment Lease
with DGJ (the "Equipment Lease"), whereby the Company agreed to lease certain
equipment for $1,224,000 (interest only at 18%) per year, payable in equal
monthly installments. The Equipment Lease replaced existing equipment leases,
which have been terminated, in which the Company was in default or which were
subject to judgments due to past due payments owed by the Company. The
Company is in default on the Equipment Lease (see "Liquidity and Capital
Reserves").
In February 1999, the Company borrowed approximately $219,000 from DGJ
to purchase additional pieces of equipment. This loan bears interest at a rate
of 18% per annum and matures in September 1999. The Company is in default on
this loan (see "Liquidity and Capital Reserves").
LIQUIDITY
The Company's cash flow was enhanced by $1,369,953 from depreciation
and amortization non-cash charges in the first six months of 1999. Inventory and
accounts receivable increased by a total of $1,424,564 during the first six
months of 1999. The current asset ratio was 0.60:1 at June 30, 1999 and 0.12:1
at December 31, 1998. The debt to equity ratio was 3.34:1 at June 30, 1999 and
4.4:1 at December 31, 1998.
IMPAIRMENT OF LONG-LIVED ASSETS AND PATENT INFRINGEMENT SETTLEMENT
During the fourth quarter of the fiscal year ended February 28, 1997,
the Company made the decision to exit the traditional plastic carry-out bag
business. The application of Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of," caused the Company to recognize a non-cash charge of $5,385,000 to
write down to fair value certain long-lived assets consisting principally of
machinery and equipment, patents and goodwill, together with other related
expenses. The method used to determine fair value was a discounted cash flow
approach. The assets consist of those related to the manufacture of the
traditional plastic carry-out bag business.
18
<PAGE>
Description of impaired assets, patents, goodwill and plant assets
relating to bag making facilities:
<TABLE>
<S> <C>
Patents $1,044,577
Goodwill 620,353
Plant equipment 3,335,070
Reserve for agreement with bag-making
equipment vendor 285,000
Write-off of rubber plates used in
bag-making equipment 100,000
----------
Total $5,385,000
----------
----------
</TABLE>
Fair value of all assets, except plant equipment, was determined to be
zero based upon the Company's decision to exit the traditional plastic carry-out
bag business. Fair value of the plant equipment was determined based upon
projected future cash flows for the remaining useful life, present book value
and residual value of assets at the end of its useful life, with cash flows both
discounted at 14% per year (average cost of secured debt financing).
A patent infringement suit settlement of $512,648, including legal
defense costs, was recorded during the fiscal year ended February 28, 1997.
IMPACT OF INFLATION
Inflation during the second quarter of 1999 did not have any impact on
operating results nor did it have any impact on the last three fiscal periods.
YEAR 2000
The Company implemented a Year 2000 compliance project in June 1998,
which addresses the internal risk, requirements and budgets for becoming Year
2000 compliant. The Company has completed an inventory of all of its internal
operations and currently is addressing Year 2000 compliance from its suppliers
and other constituents. In 1998, the Company did not have any costs associated
with Year 2000 compliance. During the first six months of 1999, the Company
expended $25,000 on Year 2000 compliance.
As a result of the Year 2000 compliance project, the Company is
upgrading its financial and accounting system at an investment of approximately
$25,000, and is funding the upgrade out of working capital. The finance and
accounting system upgrade is currently in process and is expected to be
installed and tested by August 31, 1999. The Company has tested all of its
manufacturing equipment, including its manufacturing information systems, and
all were determined to be Year 2000 compliant. The Company has not utilized any
independent verification or validation processes since the tests performed on
the Company's manufacturing systems determined the systems to be Year 2000
complaint. The Company does not contract out its systems maintenance and design
and, therefore, has no third party risk in this regard.
19
<PAGE>
As of August 3, 1999, the Company has contacted five significant
customers, which accounted for 50.3% of total sales for the second quarter of
1999 regarding their Year 2000 compliance status. All of these customers have
indicated that they are either already Year 2000 complaint or are on schedule to
be Year 2000 compliant by December 31, 1999. None of these customers currently
order from the Company through electronic systems.
The Company sent questionnaires to all 409 vendors as of May 14, 1999
regarding their Year 2000 compliance status. As of August 3, 1999 the Company
received 170 responses. All major vendors responded that they are currently Year
2000 compliant and the other vendors are either Year 2000 compliant or are on
schedule to be Year 2000 compliant by December 31, 1999.
In the worse-case scenario envisioned by the Company, Year 2000
compliance issues may cause the railroad systems in the United States to become
dysfunctional, which would cause the Company to obtain its resin and other
supplies by other means of transportation. The Company would be unable to
manufacture products and revenues would be impacted 60 days after the rail
system ceases to function. The Company's contingency plan is to implement a
manual system for its accounting and finance functions and accumulate a 30-day
inventory excess of raw materials by December 31, 1999.
The Company has not deferred any of its information technology projects
due to its Year 2000 efforts. Furthermore, there has been no impact from any
deferred projects on the Company's financial condition or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required by the Company at this time.
20
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A notice of potential claim has been sent by a group of investors to
both the Company and its insurance carrier alleging that the Company's former
management made misrepresentations concerning registration rights attendant to
the securities purchased by them pursuant to exemptions available under the
Securities Act of 1933, as amended. The Company believes that any settlement in
connection with this potential claim will not have a material effect on its
operations.
ITEM 2. CHANGES IN SECURITIES None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On January 27, 1999 the Company issued a promissory note in the
aggregate principal amount of $3,200,000 to DGJ (the "Note"). The Note
matures at the latest on February 1, 2004, has an interest rate of 6% per
annum payable monthly in arrears and is secured by all assets of the Company.
On June 30, 1999, the Company was in default on the Note as it failed to make
four monthly interest payments of $16,000 per month for the months of March
to June 1999, or a total of $64,000. In addition, the Company has not made
its July and August 1999 interest payments. As this has caused an Event of
Default, as defined in the Note, DGJ, the holder of the Note, is entitled to
various rights and remedies under the Note and the Securities Purchase
Agreement, including, but not limited to, the right to declare all or any
part of the unpaid principal amount of the Note outstanding to be due and
payable. As of August 13, 1999, DGJ has indicated a willingness to defer
exercising its rights and remedies upon default pending discussion with the
Company regarding how the Note default is to be cured.
The Company's equipment, capital and operating leases are funded by
the Equipment Lease with DGJ. On June 30, 1999, the Company was in default on
the Equipment Lease with DGJ as it failed to make five monthly lease payments
of $102,000 per month for the months of February to June 1999, or $510,000 in
total. In addition, the Company has not made its July and August 1999 lease
payments. As this has caused an Event of Default, as defined in the Equipment
Lease, DGJ is entitled to various rights and remedies under the Equipment
Lease and the Securities Purchase Agreement, including, but not limited to,
the right to have any and all remaining sums under the lease immediately
become due and payable and the right to repossess the leased equipment. As of
August 13, 1999, DGJ has indicated a willingness to defer exercising its
rights and remedies upon default pending discussion with the Company
regarding how the Equipment Lease default is to be cured.
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
b) The Company did not file any reports on Form 8-K during the
three month period ended June 30, 1999.
21
<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: August 16, 1999 By: /s/ Hanspeter Schulz
--------------------
President
Date: August 16, 1999 By: /s/ James F. Koehlinger
-----------------------
Chief Financial Officer and
Treasurer
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 176,726
<SECURITIES> 0
<RECEIVABLES> 1,481,058
<ALLOWANCES> 129,553
<INVENTORY> 1,672,861
<CURRENT-ASSETS> 3,285,219
<PP&E> 30,973,707
<DEPRECIATION> 14,800,638
<TOTAL-ASSETS> 21,194,727
<CURRENT-LIABILITIES> 5,457,153
<BONDS> 0
0
2,141,037
<COMMON> 215,005
<OTHER-SE> 2,525,265
<TOTAL-LIABILITY-AND-EQUITY> 21,194,727
<SALES> 7,471,964
<TOTAL-REVENUES> 7,471,964
<CGS> 6,354,020
<TOTAL-COSTS> 6,354,020
<OTHER-EXPENSES> 1,424,695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 832,105
<INCOME-PRETAX> (1,095,873)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,095,873)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,917,707
<CHANGES> 0
<NET-INCOME> 821,834
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
