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, 2000 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 1,
2000 was approximately $2,165,157 for the Common Stock and $183,358
for the Series A Convertible Preferred Stock. As of August 1,
2000, 47,068,621 shares of Common Stock, $0.01 par value per
share, were outstanding and 183,358 shares of Series A Convertible
Preferred Stock, $0.01 par value per share, were outstanding.
BPI PACKAGING TECHNOLOGIES, INC.
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Report of Independent Accountants.................F-1
Consolidated Balance Sheets as of June 30, 2000
and December 31, 1999......................F-2
Consolidated Statement of Operations - Three Month
periods ended June 30, 2000 and June 30,
1999.......................................F-4
Consolidated Statement of Operations - Six Month
periods ended June 30, 2000 and June 30,
1999.......................................F-5
Consolidated Statement of Cash Flows
periods ended June 30, 2000 and June 30,
1999.......................................F-6
Notes to Consolidated Financial Statements........F-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations...............................12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.................................17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..........................17
Item 2. Changes in Securities......................18
Item 3. Default Upon Senior Securities.............18
Item 4. Submission of Matters to a Vote of Security
Holders....................................19
Item 5. Other Information.........................19
Item 6. Exhibits and Reports on Form 8-K..........20
SIGNATURES.........................................21
i
REPORT OF INDEPENDENT ACCOUNTANTS
LIVINGSTON & HAYNES, P.C.
August 7, 2000
To the Board of Directors and Stockholders
of BPI Packaging Technologies, Inc.
We have reviewed the accompanying consolidated balance
sheets of BPI Packaging Technologies, Inc. (the "Company")
and subsidiaries as of June 30, 2000 and the related
consolidated statement of operations, stockholders' equity
and cash flows for the three and six months then ended, in
accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified
Public Accountants, all information included in these
financial statements is the representation of the management
of the Company.
A review consists principally of inquiries of Company
personnel and analytical procedures applied to financial
data. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
financial statements in order for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheets
of the Company and its subsidiaries as of December 31, 1999,
and the related statements of operations, stockholders'
equity and cash flows for the year ended (not presented
herein); and in our report dated March 14, 2000, we expressed
an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1999, is fairly
stated in all material respects in relation to the
consolidated balance sheet from which is has been derived.
The financial statements for the three and six months
ended June 30, 1999 were not audited or reviewed by us and
we express no opinion or assurance on them.
/s/ Livingston & Haynes, P.C.
Livingston & Haynes, P.C.
Wellesley, Massachusetts
F-1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
JUNE 30, DECEMBER 31,
2000 1999
(UNAUDITED)
Current assets
Cash $ 1,724 $ 48,041
Accounts receivable, net 1,343,626 2,515,892
Inventories, net 2,336,252 2,697,056
Prepaid expenses and other
current assets, net 138,102 30,138
---------- ----------
Total current assets 3,819,614 5,291,127
Property and equipment, net 15,535,968 16,515,668
Deposits - leases and equipment
purchases 139,673 133,425
Loans to officers, net 6,668 6,807
Other assets 1,344,176 1,305,858
---------- ----------
1,490,517 1,446,090
---------- ----------
$20,846,099 $23,252,885
=========== ===========
See "Report of Independent Accountants"
The accompanying notes are an integral part
of these consolidated financial statements.
F-2
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 30, DECEMBER 31,
2000 1999
(UNAUDITED)
Current liabilities
Note payable $ 1,948,309 $ 3,299,259
Accounts payable 3,988,104 3,285,453
Accrued expenses 1,275,165 1,943,034
Note payable to related party 4,163,585 1,873,585
---------- ----------
Total current liabilities 11,375,163 10,401,331
Long-term liabilities
Capitalized lease obligations 7,052,000 6,902,000
Subordinated debt 2,920,000 2,720,000
Accounts payable long term 320,903 773,000
---------- ----------
Total long-term liabilities 10,292,903 10,395,000
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 673,932 673,936
Series C redeemable preferred
stock,$0.01 par value 100 100
Common stock, $0.01 par value;
shares authorized - 150,000,000;
shares issued and outstanding
47,068,621 at June 30, 2000 and
28,068,221 at December 31, 1999 470,686 280,682
Subscribed stock 37,480 37,480
Capital in excess of par value 45,971,593 45,589,623
Accumulated deficit (49,442,712) (45,592,221)
---------- ----------
(821,967) 2,456,554
---------- ----------
$20,846,099 $23,252,885
========== ==========
See "Report of Independent Accountants"
The accompanying notes are an integral part
of these consolidated financial statements.
F-3
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
-------THREE MONTHS ENDED-----
JUNE 30, JUNE 30,
2000 1999
(UNAUDITED) (UNAUDITED)
Net sales $ 3,760,476 $ 4,130,980
Cost of goods sold 3,655,572 3,339,069
---------- ----------
Gross profit (loss) 104,904 791,911
Operating expenses:
Selling, general and
administrative 973,628 898,456
---------- ----------
Loss from operations (868,724) (106,545)
Other (expense) income:
Interest / other expense (542,709) (560,333)
Interest / other income - 26,971
---------- ----------
Net loss before extraordinary
income (1,411,433) (639,907)
Extraordinary income - gain on
debt restructuring - 185,945
Net loss after extraordinary
income $(1,411,433) $ (453,962)
========== =========
Loss per share before
extraordinary income:
Basic and diluted net loss per
share $(0.03) $(0.03)
Shares used in computing basic
and diluted net earnings (loss)
per share 46,760,529 21,497,613
Loss per share after extraordinary
income:
Basic and diluted net loss per
share $(0.03) $(0.02)
Shares used in computing basic and
diluted net earnings (loss)
per share 46,760,529 21,497,613
See "Report of Independent Accountants"
The accompanying notes are an integral part
of these consolidated financial statements.
F-4
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
-------SIX MONTHS ENDED-------
JUNE 30, JUNE 30,
2000 1999
(UNAUDITED) (UNAUDITED)
Net sales $ 8,486,432 $ 7,471,964
Cost of goods sold 9,248,814 5,995,233
---------- ----------
Gross profit (loss) (762,382) 1,476,731
Operating expenses:
Selling, general and
administrative 2,002,211 1,783,482
---------- ----------
Loss from operations (2,764,593) (306,751)
Other (expense) income:
Interest / other expense (1,085,898) (832,105)
Interest / other income - 42,983
---------- ---------
Net loss before extraordinary
income (3,850,491) (1,095,873)
Extraordinary income - gain on
debt restructuring - 1,917,707
---------- ----------
Net income/(loss) after
extraordinary income $(3,850,491) $ 821,834
========== ==========
Loss per share before
extraordinary income:
Basic and diluted net loss per
share $(0.10) $(0.05)
Shares used in computing basic and
diluted net earnings (loss)
per share 37,744,045 21,496,623
Earnings (loss) per share after
extraordinary income:
Basic and diluted net earnings
(loss) per share $(0.10) $0.04
Shares used in computing basic and
diluted net earnings (loss)
per share 37,744,045 21,496,623
See "Report of Independent Accountants"
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
--Six Months Ended --
JUNE 30, JUNE 30,
2000 1999
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net profit (loss) $ (3,850,491) $ 821,834
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,460,892 1,369,953
(Increase) decrease in accounts
receivable - trade 1,172,266 (469,116)
(Increase) decrease in inventories 360,804 (955,448)
Increase in prepaid expenses and
other current assets (107,874) (32,707)
Increase (decrease) in accounts
payable 250,554 (1,259,874)
Decrease in other accrued
expenses (598,420) (152,445)
---------- ----------
Total adjustments 2,538,222 (1,499,637)
Net cash (used in) provided by ---------- ----------
operating activities (1,312,269) (677,803)
Cash flows from investing activities:
Additions to property and equipment (424,192) (542,535)
(Increase) decrease in deposits
related to equipment refinancing (6,248) 75,940
Additions (payments) to property and
- equipment debt refinancing 150,000 (1,678,973)
(Increase) decrease in advance to
officers 139 (358)
---------- ---------
Net cash (used in) provided by
investing activities (280,301) (2,145,926)
Cash flows from financing activities:
Net increase (payments) under note
payable - bank (1,350,950) 875,852
Refinancing costs (95,318) (1,105,908)
Refinance of capital and operating
leases - (5,443,763)
Refinancing of debt gain on reduction
of accounts payable - (1,917,607)
Increase in Note Payable to related
party 2,220,551 -
Refinanced capital lease obligation - 7,018,665
Subordinated debt addition 200,000 3,200,000
Subscribed stock - 300,000
Net proceeds from sales of stock and
exercise of warrants 571,970 100
---------- ---------
Net cash (used in) provided
by financing activities 1,546,253 2,927,339
Net increase (decrease) in cash (46,317) 103,610
Cash at beginning of period 48,041 73,116
---------- ---------
Cash at end of period $ 1,724 $ 176,726
========== =========
See "Report of Independent Accountants"
The accompanying notes are an integral part
of these consolidated financial statements.
F-6
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,
2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
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 December 31, 1999.
NOTE 2: FINANCIAL RESTRUCTURING
On January 27, 1999, the Company entered into a Securities
Purchase Agreement (the "Agreement") with DGJ, L.L.C, a Delaware
limited liability company ("DGJ") (the "January 1999 Financing"),
under which the Company issued and sold to DGJ:
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, 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.
In connection with the January 1999 Financing, DGJ required
certain members of the Company's then management, C. Jill
Beresford, James F. Koehlinger, Hanspeter Schulz, Richard H. Nurse
and Ivan J. Hughes, to invest $300,000, in the aggregate, in the
Company's warrants. As of June 30, 2000, 6,563,000 of the 7,500,000
issued warrant shares were converted into Common Stock.
As part of the January 1999 Financing, the Company entered
into a factoring agreement with Franklin Capital Corporation
("Franklin"), an entity affiliated with Gary Edidin, one of the
Company's Directors and a member of DGJ, whereby the Company, with
full recourse, assigned and sold to Franklin its entire interests
in all of its present and future accounts and similar rights and
instruments arising from its sales of goods, then existing or
created thereafter.
-7-
The Company also refinanced its equipment, capital and
operating leases in January 1999 when it entered into an equipment
lease with DGJ. The new lease carries no debt reduction obligation
and is treated as long-term debt. The combined monthly payments
under the retired leases were reduced from approximately $305,000
per month to $102,000 per month under the new equipment lease with
DGJ. The term of the lease is ten years and its monthly payment of
$102,000 represents interest only.
The Company is in default on the equipment lease with DGJ as
it failed to make lease payments of $102,000 per month for the
months of September 1999 through July 2000, or $1,122,000 in total.
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 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 July 31, 2000, 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.
Also in January 1999, the Company entered into agreements with
most of its unsecured creditors that provided for a discounted
payment in February 1999 or permitted the Company to pay the entire
balance without interest over a three-year period.
On August 19, 1999, the Company entered into a series of
transactions with LaSalle Business Credit, Inc. ("LaSalle") and DGJ
to refinance the indebtedness incurred as part of the January 1999
Financing. The Company's loan agreement with LaSalle provides the
Company with a $4,000,000 revolving line of credit. This credit
facility is secured by a first priority security interest in its
accounts receivable, inventory and certain other assets. DGJ is the
lessor of substantially all the equipment that the Company uses,
under a capital lease, and holds a first priority security interest
in its equipment. LaSalle received a second priority security
interest in the Company's equipment. Certain of the proceeds of
this credit facility were used to retire existing indebtedness the
Company owed to Franklin, including the factoring agreement and
revolving note described above, while the remaining proceeds were
used to retire some of the Company's other indebtedness and for
working capital purposes. This credit facility bears interest at a
fluctuating rate equal to 1.5% per annum above the prime rate of
LaSalle in effect from time to time and matures in three years. As
of June 30, 2000, the balance outstanding under this agreement is
$1,948,309. The loan is in default as of June 30, 2000, as the
Company failed to meet certain loan covenants. LaSalle and the
Company have signed a loan forbearance agreement as of July 2000.
In addition, the Company and DGJ amended and restated the Note
since the Company was unable to fulfill the financial obligations
under the terms of the loan and lease documents with DGJ. To cure
the defaults, the Company restated the Note to include, in addition
to the original principal and interest accrued thereunder at 6%,
all amounts outstanding under: (i) an equipment loan made by DGJ to
the Company as of March 1, 1999 in the original principal amount of
$218,665; (ii) a series of advances made to the Company by Franklin
during the second quarter of 1999 (which totaled approximately
$900,000, and were reduced to approximately $660,000 after
application of proceeds of the credit facility), rights to
repayment of which were subsequently assigned by Franklin to the
Company; (iii) delinquent payments under the DGJ lease of
approximately $570,000; and (iv) interest on the foregoing. The
resulting balance of $4,773,585 was restated as the principal
amount of a new amended promissory note. The amended promissory
note is in the original principal amount of $4,773,585 and is
payable as follows: $3,200,000 of principal is due and payable on
February 1, 2004, or earlier by acceleration, as described in the
Agreement, or otherwise, and $1,573,585 is due and payable pursuant
to the terms of an intercreditor agreement between DGJ and LaSalle.
The amended promissory note bears interest at a rate of 10% per
annum, and is secured by all Company assets, subordinated to
LaSalle except as to equipment.
-8-
The Company failed to make interest payments to DGJ totaling
approximately $480,000 during the period of September 1999 through
July 2000. As this has caused an event of default, as defined in
the amended promissory note, DGJ is entitled to various rights and
remedies under the amended promissory note and the Agreement
including, but not limited to, the right to declare all or any part
of the unpaid principal amount of the amended promissory note
outstanding to be due and payable. As of July 31, 2000, DGJ has
indicated a willingness to defer exercising its rights and remedies
upon default pending discussion with the Company regarding how the
amended promissory note default is to be cured.
During the period of September 1, 1999 through June 30, 2000,
DGJ made additional advances to the Company totaling $1,752,000.
These loans bear interest at the rate of 10% per annum with
interest payable monthly and the principal is due and payable on
the same date as the maturity date of the amended promissory note
discussed above.
The Series C Preferred Stock is redeemable in the Company's
discretion if the amended promissory note to DGJ has been retired
in its entirety. The shares of the Series C Preferred Stock are
not convertible into shares of Common Stock and have no preferences
upon liquidation, dissolution, winding up or insolvency. The
holders of the Series C Preferred Stock have no voting right;
provided, however, upon an event of default, as defined in the
Agreement, holders of the Series C Preferred Stock will be entitled
to vote with holders of Common Stock as a single class in each
matter submitted to a vote of the Company's stockholders, with each
share of the Series C Preferred Stock having 30 votes.
At the Company's annual meeting of stockholders on August 24,
1999, its stockholders approved the increase in its authorized
number of shares of Common Stock from 60,000,000 to 150,000,000
shares. The Company utilized some of these newly authorized shares
to complete a rights offering of 15,000,000 shares of its Common
Stock in March 2000 resulting in the Company receiving $571,970 of
gross proceeds for working capital and other corporate-related
purposes.
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, 2000 and 1999, 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.
-9-
NOTE 4: ACCOUNTS RECEIVABLE-TRADE
Accounts receivable-trade consists of the following:
June 30, December 31,
2000 1999
Accounts receivable-trade $ 1,424,078 $ 2,646,344
Allowance for doubtful accounts (55,452) (55,452)
Allowance for credits (25,000) (75,000)
---------- ----------
$ 1,343,626 $ 2,515,892
NOTE 5: INVENTORIES
Inventories consist of the following:
June 30, December 31,
2000 1999
Raw materials $ 516,965 $ 1,133,963
Finished goods 1,819,287 1,563,093
---------- ----------
$ 2,336,252 $ 2,697,056
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.
-10-
NOTE 7: NOTE PAYABLE
On August 19, 1999, the Company entered into a credit line
agreement with a bank that provides the Company with $4,000,000 of
financing secured by the Company's accounts receivables, inventory
and other certain assets. The loan facility bears interest at a
rate of 1.5% above the bank's prime rate. At December 31, 1999 and
June 30, 2000, the balances outstanding under this agreement were
$3,299,259 and $1,948,309, respectively. The loan is in default as
of June 30, 2000 as the Company failed to meet certain financial
covenants. LaSalle and the Company have signed a loan
forbearance agreement as of July 2000 (Note 2).
NOTE 8: NOTE PAYABLE - RELATED PARTY
On January 27, 1999 the Company issued a promissory note in
the aggregate principal amount of $3,200,000 to DGJ (Note 2). The
Note matures on February 1, 2004, had an interest rate of 6% per
annum payable monthly in arrears and is secured by all assets of
the Company. As part of the new financing agreement obtained with
a bank on August 19, 1999, the Company entered into an amended loan
agreement with DGJ (the "Amended Note"), which restates the Note and
includes $1,573,585, representing subsequent advances made to the
Company, an equipment loan made in March 1999 and past due interest
on obligations of the Company to DGJ. The Amended Note bears interest
at 10% per annum. The addition to the Note is payable on demand.
An intercreditor agreement with the bank providing credit line
financing as of August 19, 1999, provides certain terms that must
be met by the Company before DGJ can collect on its obligations. The
Company failed to make interest payments to DGJ of $436,364 as of
June 30, 2000 and $43,636 in July 2000 or $480,000 in total on its
obligation. As this has caused an Event of Default, as defined in
the Amended Note, DGJ is entitled to various rights and remedies
under the Amended Note and the Agreement, including, but not limited
to, the right to declare all or any part of the unpaid principal
amount of the Amended Note outstanding to be due and payable. As of
July 31, 2000, DGJ has indicated a willingness to defer exercising
its rights and remedies upon default pending discussion with the
Company regarding how the Amended Note default is to be cured. DGJ
made additional advances to the Company totaling $1,752,000 covering
the period of September 1, 1999 through June 30, 2000.
NOTE 9: CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTH AND THREE MONTH PERIODS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Series A Convertible Series B Convertible
Common Stock Preferred Preferred
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 28,068,221 $280,682 202,658 $673,936 146,695 $1,466,954
Net loss for the six months
ending June 30, 2000
Issuance of 15,000,000 shares of
Common Stock @ $0.04\share 15,000,000 150,000
Issuance of 4,000,000 shares
of Common Stock @ par upon
exercise of warrants 4,000,000 40,000
Conversion of 400 shares of
Series A Convertible Preferred
Stock to Common Stock 400 4 (400) (4)
---------- ------- ------- ------- ------- ---------
Balance at June 30, 2000 47,068,621 $470,686 202,258 $673,932 146,695 $1,466,954
========== ======= ======= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Series C
Preferred Subscribed Stock Capital in Accumulated
Shares Amount Shares Amount Excess/par Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 1,629,930 $100 937,000 $37,480 $45,589,623 $(45,592,221) $2,456,554
Net loss for six months
ending June 30, 2000 (3,850,491) (3,850,491)
Issuance of 15,000,000 shares of
Common Stock @ $0.04\share 421,970 571,970
Issuance of 4,000,000 shares
of Common Stock @ par upon
exercise of warrants (40,000) 0
Conversion of 400 shares of
Series A Convertible Preferred
Stock to Common Stock
--------- --- ------- ------ ---------- ---------- --------
Balance at June 30, 2000 1,629,930 $100 937,000 $37,480 $45,971,593 $(49,442,712) $(821,967)
========= === ======= ====== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Series A Convertible Series B Convertible
Common Stock Preferred Preferred
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 2000 43,068,221 $430,682 202,658 $673,936 146,695 $1,466,954
Net loss for the three months
ending June 30, 2000
Additional issuance costs
of 15m shares issued Q 1
Issuance of 4,000,000 shares
of Common Stock @ par upon
exercise of warrants 4,000,000 40,000
Conversion of 400 shares of
Series A Convertible Preferred
Stock to Common Stock 400 4 (400) (4)
---------- ------- ------- ------- ------- ---------
Balance at June 30,2000 47,068,621 $470,686 202,258 $673,932 146,695 $1,466,954
========== ======= ======= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Series C
Preferred Subscribed Stock Capital in Accumulated
Shares Amount Shares Amount Excess/par Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 2000 1,629,930 $100 937,000 $37,480 $46,022,946 $(48,031,279) $600,819
Net loss for the three months
ending June 30, 2000 (1,411,434) (1,411,434)
Additional issuance costs
of 15m shares issued Q 1 (11,352) (11,352)
Issuance of 4,000,000 shares
of Common Stock @ par upon
exercise of warrants (40,000) 0
Conversion of 400 shares of
Series A Convertible Preferred
Stock to Common Stock 0
--------- --- ------- ------ ---------- ---------- --------
Balance at June 30,2000 1,629,930 $100 937,000 $37,480 $45,971,594 $(49,442,713) $(821,967)
========= === ======= ====== ========== ========== ========
</TABLE>
-11-
NOTE 10: RELATED PARTY TRANSACTIONS
Ivan J. Hughes, the Company's Chairman of the Board and
Acting Chief Executive Officer, is the President of the Plastic's
Division, and a member of the Executive and Compensation
Committees of Duro Bag. For the six months ended June 30, 2000
and the month ended July 31, 2000, Duro Bag issued purchase
orders to the Company for $1,343,465 and $91,571, respectively,
to purchase bags for Duro Bag customers. The Company manufactures
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. There are no assurances that the Company will receive
similar orders from Duro Bag during the remainder of this year.
These orders represented 16% of sales during the six-month period
ended June 30, 2000.
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 December 31, 1999.
Three of the Company's directors, Gary R. Edidin, Allen S.
Gerrard and Theodore L. Koenig, are either related to DGJ or have
been designated by DGJ. The financial restructuring described
in Note 2 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, Theodore L.
Koenig, was a partner with Holleb & Coff, a Chicago-based law
firm, from 1987 through June 1999. Holleb & Coff provided legal
services to the Company from February 1999 through May 2000.
NOTE 11: RECLASSIFICATIONS
Certain items in the income statements for the three and six
months ended June 30, 1999 have been reclassified to conform to
current presentation. These items were expenses that had been
included in cost of goods sold on the income statements for the
three and six months ended June 30, 1999, which have been
reclassified in selling, general and administrative expenses. This
reclassification had no effect on the loss from operations as
previously reported for the three and six months ended June 30,
1999.
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),
` -12-
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 2000 COMPARED TO THE SECOND QUARTER OF 1999
For the second quarter ended June 30, 2000, the Company had
sales of $3,760,476 compared to sales of $4,130,980 for the second
quarter ended June 30, 1999, a decrease of 9%.
Cost of goods sold for the second quarter of 2000 was
$3,655,572, or 97% of sales, compared to $3,339,069, or 81% of
sales, in the second quarter of 1999. The increase in cost of
goods sold, as a percentage of sales, was primarily due to resin
price increases.
Selling, general and administrative expense for the second
quarter of 2000 was $973,628, or 26% of sales, compared to
$898,456, or 22% of sales, in the second quarter of 1999. The
increase in selling, general and administrative expense, as a
percentage of sales, is due primarily to increased freight costs
caused by fuel increase charges.
For the second quarter of 2000, interest expense was $542,709,
compared to $560,333 for the second quarter of 1999. The decrease
in interest expense is due to a decrease in credit line financing.
The net loss before extraordinary income was $1,411,433 in the
second quarter of 2000 compared to a net loss of $639,907 in the
second quarter of 1999. The increase in the loss before
extraordinary income was primarily due to an increase in cost of
goods sold as a percentage of sales.
No extraordinary income was reported for the second quarter of
2000. 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.
-13-
Net loss after extraordinary income was $1,411,433 for the
second quarter of 2000, compared with a loss of $453,962 in the
second quarter of 1999. The increase in net loss was primarily
caused by an increase in selling, general and administrative
expense.
The Company had basic and diluted net loss before
extraordinary income of $0.03 per share in the second quarter of
2000 compared to a loss before extraordinary income of $0.03 per
share in second quarter of 1999. The Company had basic and diluted
net loss after extraordinary income of $0.03 per share in the
second quarter of 2000 compared to a loss after extraordinary
income of $0.02 per share in second quarter of 1999.
FIRST SIX MONTHS OF 2000 COMPARED TO THE FIRST SIX MONTHS OF 1999
For the first six months ended June 30, 2000, the Company had
sales of $8,486,432 compared to sales of $7,471,964 for the first
six months ended June 30, 1999, an increase of 14%.
Cost of goods sold for the first six months of 2000 was
$9,248,814, or 109% of sales, compared to $5,995,233, or 80% of
sales, in the first six months of 1999. The increase in cost of
goods sold, as a percentage of sales, was primarily due to resin
price increases.
Selling, general and administrative expense for the first
six months of 2000 was $2,002,211, or 24% of sales, compared
to $1,783,482, or 24% of sales, in the first six months of 1999.
For the first six months of 2000, interest expense was
$1,085,898, compared to $832,105 for the first six months of 1999.
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, described below, and increases in
subordinated debt and the note to related party.
The net loss before extraordinary income was $3,850,491 in
the first six months of 2000 compared to a net loss of $1,095,873
in the first six months of 1999. The increase in the loss before
extraordinary income was due to increases in cost of goods sold and
interest expense.
No extraordinary income was reported for the first six months
of 2000. 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.
Net loss after extraordinary income was $3,850,491 for the
first six months of 2000, compared with a net income of $821,834
in the first six months of 1999. The change from net income to net
loss was primarily caused by extraordinary income in 1999 and
increases in cost of goods sold and interest expense.
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 had basic and diluted net loss before
extraordinary income of $0.10 per share in the first six months of
2000 compared to a loss before extraordinary income of $0.05 per
share in the first six months of 1999. The Company has basic and
diluted net loss after extraordinary income of $0.10 per share in
the first six months of 2000 compared to a net income of $0.04 per
share in the first six months of 1999.
-14-
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 2000, it
borrowed additional funds and is currently in default on some of
its borrowings and its equipment lease.
The Company anticipates entering into a contract with a
Fortune 500 company along with film supply agreements with other
companies, as well, in the second half of 2000. These additional
sales, coupled with the expansion of our Handi-Sac (trademark) and
Fresh-Sac (registered trademark) proprietary products, should result
in increased revenues to meet the Company's near term financial
obligations. The Company hasalso retained the consulting firm of
Brent I. Kugman and Associatesto assist in evaluating various
strategic alternatives available to the Company, including its
possible sale or merger.
On January 27, 1999, the Company issued a promissory note in
the aggregate principal amount of $3,200,000 to DGJ. This note
matures on February 1, 2004, had an interest rate of 6% per annum
payable monthly in arrears and is secured by all of the Company's
assets. As part of the new financing agreement obtained with a bank
on August 19, 1999, the Company entered into an amended loan
agreement with DGJ, which restates the original note and includes
$1,573,585, representing subsequent advances made to the Company,
an equipment loan made in March 1999 and past due interest on the
Company's obligations to DGJ. This amended promissory note bears
interest at 10% per annum. The addition to the original note is
payable on demand. An intercreditor agreement with the bank
providing credit line financing as of August 19, 1999, provides
certain terms that the Company must meet before DGJ can collect on
its obligations.
The Company failed to make interest payments to DGJ totaling approximately
$480,000 during the period of September 1999 through July 2000. As this has
caused an event of default, as defined in the amended promissory note, DGJ is
entitled to various rights and remedies under the amended promissory note and
the Agreement, as defined below, including, but not limited to, the right to
declare all or any part of the unpaid principal amount of the amended promissory
note outstanding to be due and payable. As of July 31, 2000, DGJ has indicated
a willingness to defer exercising its rights and remedies upon default pending
discussion with the Company regarding how the amended promissory note default is
to be cured. DGJ made additional advances to the Company totaling $1,752,000
during the period from September 1, 1999 through June 30, 2000.
On August 19, 1999, the Company entered into a credit line
agreement with a bank that provides it with $4,000,000 of financing
secured by its accounts receivable, inventory and other certain
assets. The loan facility bears interest at a rate of 1.5% above
the bank's prime rate. At June 30, 2000, the balance outstanding
under this agreement was $1,948,309. The loan is in default at
June 30, 2000, as the Company failed to meet certain financial
covenants. LaSalle and the Company have signed a forbearance
agreement as of July 2000.
The Company's previous equipment, capital and operating leases
were replaced with a new equipment lease with DGJ in January 1999.
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 were 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
-15-
the end of the lease term. The lease was recorded as a capital
lease during the quarter ended March 31, 1999 and is being treated
as such on an on-going basis. The lease requires the Company to
meet certain financial covenants including, but not limited to,
earnings targets and debt-to-equity ratios.
The Company is in default on the equipment lease with DGJ as
it failed to make lease payments of $102,000 per month for the
months of September 1999 through July 2000, or $1,122,000 in total.
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 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 July 31, 2000, 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.
On October 12, 1999 and March 17, 2000 DGJ advanced an
additional $102,000 and $150,000, respectively, for the purchase of
additional equipment, pursuant to a promissory note providing for
a single principal payment on February 1, 2004. The annual interest
rate is 10%, and interest is due monthly. The note is secured and
is subject to the same subordination terms as the amended note, as
reflected in the intercreditor agreement, described above. As of
July 31, 2000, DGJ has indicated a willingness to defer exercising
its rights and remedies upon default pending discussion with the
Company regarding how the amended promissory note default is to be
cured.
SALES OF SECURITIES
In connection with the January 1999 Financing, up to 5,000,000
shares of Common Stock, issuable upon the exercise of warrants
expiring January 27, 2009, were issued to consultants of the
Company, subject to adjustments. The holders of these warrants
exercised such warrants on April 7, 2000 and elected to utilize the
net issue option, resulting in the issuance of 4,000,000 shares.
As of June 30, 2000, 6,563,000 of the 7,500,000 warrant shares
issued to management in connection with the January 1999 Financing
were converted into Common Stock.
On March 17, 2000, the Company completed a rights offering for
15,000,000 shares of its Common Stock to its stockholders of record
as of the close of business on December 2, 1999. Each non-
affiliated stockholder of the Company received one right for each
share of the Company's Common Stock, which it owned. Each of the
rights entitled stockholders to purchase 0.7 shares of Common Stock
at $0.04 per share. The rights offering was oversubscribed and the
Company used the $571,970 of gross proceeds for working capital and
other corporate-related purposes.
No common stock was issued from sales by the Company during
1999. In connection with the January 1999 Financing, 1,629,930
shares of Series C Preferred Stock were issued to DGJ for $100.
Also in connection with the January 1999 Financing, the Company
reserved 30,937,500 shares of authorized but unissued shares of
Common Stock to meet the Company's requirements under the financing
terms of such restructuring.
EQUIPMENT AND LEASE FINANCING
Pursuant to the Securities Purchase Agreement between the
Company and DGJ dated January 27, 1999 (the "Agreement"), 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.
-16-
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 10% per annum and has the same maturity
as the Equipment Lease (Note 2).
LIQUIDITY
The Company's cash flow was enhanced by $1,460,892 from
depreciation and amortization non-cash charges in the first six
months of 2000. Inventory and accounts receivable decreased by a
total of $1,533,070 during the first six months of 2000. The
current asset ratio was 0.34:1 at June 30, 2000 and 0.51:1 at
December 31, 1999. The debt to equity ratio was 8.5:1 at December
31, 1999. At June 30, 2000, total liabilities exceeded total
assets resulting in a deficit equity of $821,967.
IMPACT OF INFLATION
Inflation during the second quarter of 2000 did have an
impact on operating results.
YEAR 2000
The Company implemented a Year 2000 compliance project in June
1998, which addressed the internal risk, requirements and budgets
for becoming Year 2000 compliant. The Company completed an
inventory of its internal operations and addressed Year 2000
compliance from its suppliers and other constituents.
As a result of the Year 2000 compliance project, the Company
has upgraded its financial and accounting system at an investment
of approximately $25,000, and funded the upgrade out of working
capital. The finance and accounting system upgrade was installed
and tested on October 22, 1999. The Company 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 its manufacturing systems
determined the systems to be Year 2000 compliant. The Company does
not contract out its systems maintenance and design and, therefore,
has no third party risk in this regard.
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.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Currently, the Company has no pending significant commercial
legal proceedings with equipment lessors or trade suppliers.
-17-
A notice of potential claim has been sent by a group of
investors to both the Company and its insurance carrier. This
notice alleges that the Company's former management made
misrepresentations concerning registration rights attendant to the
securities purchased by them pursuant to Regulation D, Rule 144A
and Regulation S of the Securities Act of 1933, as amended. On
October 28, 1999, the securities held by this group of investors
were registered with the SEC. The Company believes that any
disposition in connection with this potential claim will not have
a material effect on its operations. Except as noted below, no
further action has been taken by this group of investors as of June
30, 2000.
On October 4, 1999, Professional Edge Fund, L.P. ("Pro Edge"),
one of the group of investors, described above, filed suit against
the Company in the Court of Common Pleas of Philadelphia County
Trial Division, Action No. 000147. Pro Edge also named as
defendants C. Jill Beresford, our former Vice President of
Marketing, Dennis N. Caulfield, our former Chief Executive Officer
and our former Chairman of the Board of Directors, and Newport
Capital Partners in this matter. Pro Edge has alleged that we have
breached a contract in regards to the registration of shares it
purchased in a private placement of our shares in November 1997 and
that we have been unjustly enriched based on the sale of these
unregistered shares. Pro Edge sought damages in an amount of
approximately $1,013,000 plus interest, costs and expenses of the
lawsuit. On February 28, 2000, the Company was advised that this
action was dismissed without prejudice based upon improper venue.
As of June 16, 2000, Pro Edge re-filed suit against the Company in
the United States District Court for the District of Massachusetts,
Action #CV-10568-RWZ.
On November 26, 1997, the estate of a former temporary worker,
Mr. John Dion, filed a wrongful death suit against the Company in
Bristol County (Massachusetts) Superior Court, Civil Action No. 97-
01688. The lawsuit alleges that the Company's actions caused or
contributed to Mr. Dion's December 7, 1994, fatal forklift accident
at the Company. Both parties continue to conduct discovery
regarding this accident. The Company's general liability insurance
carrier is vigorously defending the Company against these
allegations. The outcome of this lawsuit remains uncertain. The
Company has a total of $3 million in insurance coverage in place.
The Company believes the insurance coverage is sufficient to cover
its exposure.
ITEM 2. CHANGES IN SECURITIES
1. On October 25, 1999, securities acquired by a group of
investors pursuant to Regulation D and Rule 144A of
the Securities Act of 1933, as amended, were
registered with the Securities and Exchange
Commission.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
a) 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, had an interest rate of 6% per
annum payable monthly in arrears and is secured by
all assets of the Company. As part of the new
financing agreement obtained with a bank on August
19, 1999, the Company entered into an amended loan
agreement with DGJ (the "Amended Note"), which
restated the Note and included $1,573,585,
representing subsequent advances made to the Company,
an equipment loan made in March 1999 and past due
interest on obligations of the Company to DGJ. The
Amended Note bears interest at 10% per annum. The
addition to the Note is payable on demand. An
intercreditor agreement with the bank providing
credit line financing as of August 19, 1999, provides
certain terms that must be met by the Company before
DGJ can collect on its obligations. The Company
-18-
failed to make interest payments to DGJ of $436,364
as of June 30, 2000 and $43,636 in July 2000 or
$480,000 in total on its obligation. As this has
caused an Event of Default, as defined in the Amended
Note, DGJ is entitled to various rights and remedies
under the Amended 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 Amended Note outstanding to be due and
payable. As of July 31, 2000, DGJ has indicated a
willingness to defer exercising its rights and
remedies upon default pending discussion with the
Company regarding how the Amended Note default is to
be cured.
b) The Company was in default on the equipment lease
with DGJ as it failed to make lease payments of
$102,000 per month for the months of September 1999
through July 2000, or $1,122,000 in total. 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 July 31, 2000, 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
On June 8, 2000, the Company had its Annual Meeting of
Stockholders in which the following resolutions were
adopted:
1. Gary R. Edidin, Bruce M. Fleisher and Theodore L.
Koenig serve as Class III directors for a term
expiring in 2002.
2. Livingston & Haynes, P.C. to serve as the
independent accountants for the Company for the
year ending
ITEM 5. OTHER INFORMATION
a) On July 19, 2000, the Company reported that it has
retained the consulting firm of Brent I. Kugman and
Associates to assist in evaluating various
strategic alternatives available to the Company,
including its possible sale to a potential
purchaser or merger with a potential partner.
b) Effective July 27, 2000, Mr. Bruce M. Fleisher
resigned from the Board of Directors.
c) On August 3, 2000, the Company appointed Ivan J.
Hughes, the Company's Chairman of the Board of
Directors, to the position of Acting Chief
Executive Officer. In such capacity, Mr. Hughes is
now responsible for the Company's day-to-day
operations. The Company also announced the
resignation of Mr. Peter W. Blackett as Senior Vice
President of Sales, effective August 18, 2000.
-19-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 10.1 - Employment Agreement with Mr. Jay Shapiro, Vice
President of Operations.
b) Exhibit 27 - Financial Data Schedule
c) The Company did not file any reports on Form 8-K
during the three-month period ended June 30, 2000.
-20-
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 14, 2000
By: /s/ Ivan J. Hughes
Acting Chief Executive Officer
By: /s/ James F. Koehlinger
Chief Financial Officer and
Treasurer
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