Rule 424(b)(3)
Registration Statement
No. 333-21879
SUPPLEMENT NO. 1
DATED JANUARY 24, 1998
TO THE PROSPECTUS
DATED JUNE 2, 1997
OF
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
This Supplement No. 1 (the "Supplement") to the Prospectus
(the "Prospectus") of Electronic Retailing Systems International,
Inc., a Delaware corporation ("ERS" or the "Company"), relates to
the offering from time to time by certain holders of 147,312
warrants (the "Warrants") to purchase an aggregate of 2,538,258
shares of common stock, $.01 par value (the "Common Stock"), of the
Company, and to the shares of Common Stock issuable upon exercise
of the Warrants (the "Warrant Shares"), and may also be used by the
Company in connection with the issuance from time to time of the
Warrant Shares. The following information supplements, and should
be read in conjunction with, the Prospectus, and the documents
incorporated by reference therein. Capitalized terms used herein
and not defined in this Supplement are used as defined in the
Prospectus.
The purpose of this Supplement is to update the Prospectus and
to provide certain information regarding the possible combination
of ERS and Telepanel Systems, Inc., a company incorporated under
the Canada Business Corporations Act ("Telepanel").
PROPOSED COMBINATION WITH TELEPANEL
General. On October 29, 1997, ERS and Telepanel executed a
Combination Agreement dated such date (the "Combination
Agreement"), which provides for the combination of ERS and
Telepanel pursuant to a plan of arrangement under Canadian law (the
"Arrangement"). The obligations of ERS and Telepanel to consummate
the Arrangement are subject to the satisfaction or waiver, where
permissible, of certain conditions set forth in the Combination
Agreement, including obtaining approval of the stockholders of ERS
and of Telepanel, the approval (without material condition or
costs) of the plan of arrangement contemplated by the Combination
Agreement by the Ontario Court of Justice (General Division) (the
"Court"), the receipt of certain consents from the holders of debt
of ERS and Telepanel and the receipt of certain accountants'
letters relating to the qualification of the transaction (the
"Transaction") for pooling-of-interests accounting treatment.
Under the terms of the Transaction, Telepanel will be
recapitalized and each common share, without par value
(collectively, the "Telepanel Common Shares"), of Telepanel will be
exchanged for .5566 of an exchangeable share (a newly created class
of shares) of Telepanel (collectively, the "Exchangeable Shares").
Each Exchangeable Share will entitle the holder thereof to dividend<PAGE>
<PAGE>
and other rights economically equivalent to those of one share of
Common Stock and, through a voting trust, to vote at meetings of
stockholders of ERS. The Exchangeable Shares will be exchangeable,
at the option of the holder, for Common Stock, on a share-for-share
basis. As a result of the Transaction, ERS will become the sole
beneficial owner of the outstanding Telepanel Common Shares.
Based on an exchange ratio (the "Exchange Ratio") of .5566
Exchangeable Shares for each Telepanel Common Share, ERS will
ultimately be required to issue up to approximately 10,045,780
shares of Common Stock in exchange for all Exchangeable Shares
issuable upon exchange of the currently outstanding Telepanel
Common Shares. In addition, under the Combination Agreement, each
option exercisable with respect to Telepanel Common Shares will, at
the election of the holder, either be adjusted so as to constitute
an option to purchase a number of Exchangeable Shares for each
Telepanel Common Share subject to option determined by application
of the Exchange Ratio, or be exchanged for an option to purchase
the number of shares of ERS Common Stock determined in the same
manner. Accordingly, ERS will be required to issue up to
approximately 2,705,550 shares of Common Stock in respect of
Exchangeable Shares so exchanged, and in respect of Exchangeable
Shares issuable pursuant to outstanding options so adjusted, and
pursuant to outstanding warrants and convertible securities of
Telepanel, and exchanged for shares permitted to be issued by
Telepanel prior to consummation of the Transaction. In the event
that, prior to the effective date (the "Effective Date") of the
Arrangement, Telepanel consummates specified additional financings
through the issuance of convertible securities, the Exchange Ratio
will be adjusted so as not to be less than .5166 Exchangeable
Shares for each Telepanel Common Share.
The Exchangeable Shares. The Exchangeable Shares will be
exchangeable, at any time at the option of the holder, on a one-
for-one basis for shares of Common Stock. Pursuant to a voting,
support and exchange trust agreement (the "Trust Agreement") to be
entered into on the Effective Date by ERS and Telepanel, a trustee
(the "Trustee"), as holder of one share (the "Voting Share") of a
class of newly-created special voting stock, $.01 par value, of ERS
will be entitled to a number of votes on all matters on which
holders of Common Stock are entitled to vote equal to the number of
Exchangeable Shares outstanding from time to time that are not held
by ERS or subsidiaries of ERS. By furnishing instructions to the
Trustee, such holders of Exchangeable Shares will be able to
exercise the same voting rights with respect to ERS as they would
have after exchange of their Exchangeable Shares for Common Stock.
Holders of Exchangeable Shares will also be entitled to receive
dividends economically equivalent to any dividends paid on the
Common Stock. The Trust Agreement will restrict ERS from paying
dividends on the Common Stock unless equivalent dividends are paid
on the Exchangeable Shares. Holders of Exchangeable Shares will
also be entitled to participate in any liquidation of ERS on the
same basis as holders of Common Stock.
<PAGE>
The Exchangeable Shares will, in effect, have no separate
economic rights against or in Telepanel and will have no separate
voting rights in Telepanel (other than certain limited class rights
required under the Canada Business Corporation Act and the right to
vote on any change in the fundamental terms of the shares
themselves or the related terms in the Trust Agreement). In these
cases, the voting rights are subject to automatic redemption upon
the occurrence of the Automatic Redemption Date hereinafter
identified.
Exchange of Exchangeable Shares for Common Stock. Holders of
the Exchangeable Shares will be entitled at any time following the
effective time (the "Effective Time") of the Arrangement, upon
delivery of a certificate representing Exchangeable Shares and a
duly executed retraction request, to require Telepanel to redeem
such Exchangeable Shares in exchange for an equivalent number of
shares of Common Stock. However, Telepanel must deliver all such
requests for redemption to ERS, whereupon ERS instead of Telepanel
has the right to purchase the Exchangeable Shares that are the
subject of the request for redemption in exchange for an equivalent
number of shares of Common Stock. If this right is not exercised,
Telepanel is required to effect the requested redemption.
Mandatory Exchange of Exchangeable Shares for Common Stock.
On December 31, 2002, subject to acceleration in certain
circumstances (the "Automatic Redemption Date"), the Exchangeable
Shares are subject to automatic redemption by Telepanel in exchange
for an equivalent number of shares of Common Stock. ERS has the
overriding right, but not the obligation, to acquire the
outstanding Exchangeable Shares in exchange for an equivalent
number of shares of Common Stock on the last business day prior to
the Automatic Redemption Date. In exercising such overriding right,
ERS will not be required to purchase Exchangeable Shares from
itself. If ERS exercises the overriding right, Telepanel's
obligation to redeem the Exchangeable Shares on the Automatic
Redemption Date will terminate.
Termination. The Combination Agreement may be terminated prior
to the Effective Date, whether before or after approval of the
stockholders of ERS or Telepanel, in circumstances specified in the
Combination Agreement, including (i) mutual agreement, (ii)
breaches of representations, warranties or covenants by the other
party which have a material adverse effect, (iii) failure of the
stockholders of ERS or Telepanel to approve the Transaction, (iv)
failure of the conditions precedent to closing to be satisfied by
May 31, 1998 other than as a result of a breach by the terminating
party, and (v) issuance of a final and nonappealable permanent
injunction or other order preventing consummation of the
Arrangement. Under certain circumstances, Telepanel may be required
to cause the payment to ERS, or ERS may be required to cause the
payment to Telepanel, of a termination fee equal to five percent of
the value of Telepanel, depending on the circumstances of the
termination. <PAGE>
<PAGE>
Management Following Consummation of the Arrangement. The
Combination Agreement provides, in part, that the Board of
Directors of ERS will be expanded, at the Effective Time, to
consist of nine members, five of whom are currently directors of
ERS, three of whom are currently directors of Telepanel and the
remaining one of whom has been designated by both ERS and
Telepanel. ERS has agreed that, during the period from the
Effective Time until its second anniversary, ERS shall nominate and
recommend such persons for re-election to the Board of Directors of
ERS upon expiration of their terms. At the Effective Time, the
principal executive authority of ERS will be exercised by a
Corporate Executive Committee comprised of the Chairman of the
Board and two Vice Chairmen of the Board of ERS, who will consist
of Norton Garfinkle, currently Chairman of the Board of ERS, Bruce
F. Failing, Jr., currently Vice Chairman of the Board and Chief
Executive Officer of ERS, and Christopher Skillen, currently
President and Chief Executive Officer of Telepanel. Until the
second anniversary of the Effective Time, the consent of two-thirds
of the ERS Board of Directors will be required in order to appoint
a principal executive officer of ERS or to authorize any
fundamental change in the business of ERS and its subsidiaries,
taken as a whole.
Stock Exchange Listings. The Combination Agreement
contemplates the listing of the Exchangeable Shares on the Toronto
Stock Exchange, subject to the satisfaction of customary
requirements. There is no current intention to list the
Exchangeable Shares on any other stock exchange in Canada, the
United States or any other jurisdiction. The Common Stock is traded
on the over-the-counter market, with price quotations reported on
The Nasdaq Stock Market, and on the Alternative Investment Market
of the London Stock Exchange. There is no current intention to list
the Common Stock on any other stock exchange in Canada, the United
States or any other jurisdiction.
ERS Charter Amendments. In connection with the approval of
the Combination Agreement and the transactions contemplated by the
Combination Agreement, stockholders of ERS will be asked to approve
amendments to the certificate of incorporation of ERS that will
become effective at the Effective Time, and will increase the
number of authorized shares of Common Stock from 35,000,000 shares
to 50,000,000 shares, and will create the Voting Share, to be
issued to the Trustee, who will have a number of votes equal to the
number of Exchangeable Shares which will be cast as instructed by
the holders of Exchangeable Shares, respectively, pursuant to the
Trust Agreement.
<PAGE>
<PAGE>
THIRD QUARTER 1997 RESULTS
The following table contains selected statement of operations
data for the nine-month periods ended September 30, 1996 and 1997,
respectively, and selected balance sheet data at December 31, 1996
and September 30, 1997, respectively. The following information
should be read in conjunction with the Company's Consolidated
Financial Statements contained in the Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1996 1997
-------- --------
<S> <C> <C>
(Amounts in thousands,
except per share data)
Consolidated Statement of
Operations Data:
Revenues................................ $ 4,270 $ 1,557
Cost of goods sold...................... 4,673 2,506
--------- ---------
Gross profit (loss)..................... (403) (949)
--------- ---------
Operating Expenses:
Selling, general and administrative.... 5,112 8,843
Research and development............... 786 1,736
Depreciation and amortization.......... 123 191
--------- ---------
Total operating expenses............ 6,021 10,770
--------- ---------
Loss from operations................ (6,424) (11,719)
--------- ---------
Other income (expenses):
Interest income......................... 179 3,771
Interest expense..................... (283) (10,149)
Total other income (expenses)....... (104) (6,378)
--------- ---------
Net loss.............................. $ (6,528) $ (18,097)
========= =========
Earnings (loss) per share:
Weighted average common shares
outstanding(1)........................ 14,528 21,081
========= =========
Net loss per common share............... $ (0.47) $ (0.86)
========= =========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTIONS>
December 31, September 30,
1996 1997
------------- -------------
<S> <C> <C>
(Amounts in thousands)
Consolidated Balance Sheet Data:
Net working capital..................... $ 8,764 $ 94,649
Total assets............................ 12,260 104,249
Long-term debt.......................... 4,989 109,445
Common stock purchase warrants......... -- 5,100
Stockholders' equity (deficit)......... 5,723 (11,758)
- ----------------
(1) Does not reflect common share equivalents that are anti-dilutive.
</TABLE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations: Nine Months Ended September 30, 1997
Compared to Nine Months Ended September 30, 1996
Revenues. Revenues for the nine months ended September 30,
1997 were $1,557,000 compared to $4,270,000 in the corresponding
period of 1996. ERS believes that the decrease in revenues in 1997
compared to 1996 reflects the decreased demand for ERS' previous
generation product attendant to plans to introduce a new generation
product designed to provide advantages in ease of installation,
ease of use and lower cost of ownership.
In the nine month period ended September 30, 1997, revenues
were concentrated among four significant customers within the
supermarket industry comprising 86% of total revenues. For the nine
month period ended September 30, 1996, revenues were concentrated
among two significant customers comprising 75% of total revenues.
For the nine month periods ended September 30, 1997 and 1996
software license fees were $122,000 and $243,000, respectively, or
8% and 6% of total revenues. For the first nine months of 1997,
maintenance revenues increased to $653,000 from $595,000 in the
first nine months of 1996, notwithstanding a reduced customer base
of the previous generation product in the third quarter of 1997.
As of September 30, 1997, the ERS ShelfNet System was
installed in 52 U.S. retail stores, including those owned by such
leading supermarket chains as The Stop & Shop Supermarket Company,
H.E. Butt Grocery Co., Big Y Foods, Inc., Shaw's Supermarkets Inc.,
The Great Atlantic & Pacific Tea Company, Inc., and K Mart
Corporation, and one supermarket owned by the Overwaitea Food Group<PAGE>
<PAGE>
in Canada. Installations at September 30, 1997 reflect a reduced
customer base compared to the prior quarter, resulting principally
from the deinstallation of ERS' previous generation product from
stores operated by The Vons Companies, Inc., following the
acquisition of Vons earlier in the year.
ERS anticipates that past patterns in revenues may not be
indicative of future results of operations as ERS introduces its
SayGo Plan, under which ERS will recognize revenues as monthly
usage and other fees are billed to customers.
Cost of goods sold. Cost of goods sold consists of the cost
of hardware components of the ERS ShelfNet System, system
installation costs, depreciation of tools and dies owned by ERS and
utilized in the manufacturing of hardware components, amortization
of capitalized product development costs, warranty and maintenance
costs, freight and inventory obsolescence.
In connection with introduction of the SayGo Plan, ERS will
depreciate the cost of hardware components of its system over the
shorter of their estimated useful lives or five years.
Cost of goods sold decreased to $2,506,000 for the first nine
months of 1997, from $4,673,000 in the first nine months of 1996.
Warranty and maintenance expenses included in cost of goods sold
decreased to $615,000 in the first nine months of 1997 from
$718,000 in the first nine months of 1996, which included
reductions in warranty costs. The gross loss (cost of goods sold in
excess of revenues) in the first nine months of 1997 increased to
61% of total revenues from 9% in the 1996 corresponding period,
reflecting reduced installation volumes.
The increase in gross loss is primarily the result of ERS'
transition to a new generation of wireless products. During this
transition, ERS experienced high initial material costs and
installation inefficiencies. Additionally, because of a reduction
in product sales in the nine month period ended September 30, 1997,
depreciation of manufacturing equipment and amortization of product
development costs comprised a significant share of the cost of
sales.
ERS anticipates that system enhancements to be implemented in
1997 and 1998 will decrease future warranty and maintenance
expenses per installation and, in the future, that the cost of
goods sold will decrease as a percentage of revenues as a result of
higher manufacturing volumes of its components and as the
installation process is improved.
Selling, General and Administrative. Selling, general and
administrative costs consist of costs associated with selling and
administrative staff, overhead, market research and development,
and customer service personnel. For the first nine months of 1997
selling, general and administrative costs increased to $8,843,000<PAGE>
<PAGE>
from $5,112,000 in the comparable 1996 period. These increases
reflect efforts to expand ERS' organization in anticipation of
sales growth. In addition, results for the nine month period
include the effect of a special non-cash charge of $510,000 for the
issuance of common stock purchase warrants.
Research and Development. For the nine months ended September
30, 1997 research and development expenses were $1,736,000 compared
to $786,000 for the corresponding period of the previous year. Such
increases reflect expanded hardware engineering activities.
Additionally, for the nine month period ended September 30, 1997
ERS capitalized $272,000 of product development software costs. In
the comparable 1996 period $513,000 of such costs were capitalized.
These product development costs are amortized over the shorter of
the estimated useful life of the related software product or
process or three years.
Interest Income. For the nine months ended September 30, 1997
interest income increased to $3,771,000 from $179,000 in the
corresponding period of the prior year, due to increased cash and
cash equivalents available for investment, including the proceeds
of the Private Placement.
Interest Expense. For the first nine months of 1997 interest
expense increased to $10,149,000 from $283,000 in the first nine
months of 1996. Interest expense in 1997 and 1996 included interest
on amounts borrowed from the CDA and additionally, in 1997,
non-cash interest on the Notes. With the consummation of the
Private Placement in January 1997, ERS commenced recording interest
on an amount equal to the gross proceeds from the Private Placement
plus prior recorded and unpaid interest at the annual rate of
13.25%. Additional expense is being recorded as a result of the
amortization of the discount recorded on the Notes (for value
attributed to the Warrants) and the amortization of costs of
issuance.
Income Taxes. ERS has incurred net losses since inception
which have generated net operating loss carryforwards of
approximately $52 million for federal and state income tax
purposes, which are available to offset future taxable income and
expire through the year 2012 for federal income tax purposes. In
consideration of ERS' accumulated losses through September 30, 1997
and the uncertainty of its ability to utilize any future tax
benefits resulting from these losses, the impact of this potential
tax benefit has been eliminated in ERS' unaudited condensed
consolidated financial statements.
<PAGE>
<PAGE>
Liquidity and Capital Resources
As of September 30, 1997, ERS had net working capital of
$94,649,000, reflecting cash and cash equivalents of $91,537,000,
compared to net working capital of $8,764,000, reflecting cash and
cash equivalents of $8,198,000 at December 31, 1996. The increase
in net working capital and in cash and cash equivalents during 1997
resulted primarily from $95 million in net proceeds raised in the
Private Placement.
Net cash used in operations was $9,306,000 for the nine months
ended September 30, 1997, compared to net cash of $6,327,000 used
for operating activities for the nine months ended September 30,
1996. In the first nine months of 1997, the net loss of $18,097,000
included $9,871,000 of non-cash interest expense not used by
operations. The net cash used in operations in the first nine
months of 1996 was composed primarily of the net loss of
$6,528,000.
Cash used in investing activities totaled $2,053,000 for the
nine months ended September 30, 1997, compared to $758,000 of cash
used for investing activities for the nine months ended September
30, 1996. Investing activities included capital expenditures of
$1,780,000 and $245,000 for the nine months ended September 30,
1997 and 1996, respectively. ERS also capitalized $272,000 and
$513,000 in product development costs in the respective 1997 and
1996 periods.
In addition to selling the ERS ShelfNet System to customers at
a price generally in excess of $100,000 per store, under ERS'
proposed SayGo Plan ERS will offer the system on a fee-based
arrangement whereby ERS retains ownership of the system. As a
result, ERS will have substantial cash requirements for
manufacturing and carrying costs attendant to introduction of the
SayGo Plan, which will not initially be covered by revenues
calculated on the basis of usage fees paid by customers.
Accordingly, ERS will require substantial funds in order to support
the introduction of the SayGo Plan.
To date, ERS has not generated positive cash flow from
operations, and has historically funded its operations primarily
through loans from its stockholders, the sale of interests in an
affiliated partnership, the initial public offering of the Common
Stock consummated in 1993, its arrangements with the CDA, the sale
of Series A Preferred Stock, $1.00 par value, to ERS' principal
stockholders and members of its Board of Directors and their
affiliates, an offshore public offering and contemporaneous private
placement of Common Stock in July 1996 and the Private Placement.
<PAGE>
<PAGE>
Cash from financing activities provided $94,698,000 in first
nine months of 1997, as a result of the Private Placement, compared
to $13,526,000 in the first nine months of 1996. In addition, ERS
borrowed the remaining $1,650,000 under its facility with the CDA
during the 1996 period, and also completed an offshore public
offering and contemporaneous private placement of Common Stock in
exchange for aggregate proceeds of approximately $12 million.
The aggregate of $5,000,000 principal amount of indebtedness
to the CDA is repayable in August 1999 and is convertible to shares
of Common Stock, at $3.00 plus the average market price of the
Common Stock during the twelve months prior to conversion. In
connection therewith, the CDA acquired five-year warrants to
purchase 699,724 shares (as adjusted) of Common Stock, exercisable
at an adjusted price calculated as $2.58 plus the average market
price of the ERS Common Stock during the twelve months prior to
exercise. Under its arrangements with the CDA, ERS will be
obligated to comply with certain covenants (some of which remain in
effect until August 2004), whether or not the indebtedness to the
CDA has been repaid in full, or be subject to certain penalties
including immediate repayment of the indebtedness to the CDA in
full. In the event of specified changes in control of ERS coupled
with prepayment of its note, ERS has rights to repurchase such
warrants and shares at the fair market value thereof (calculated
pursuant to such arrangements), and thereby, subject to the
foregoing, extinguish such covenants. In all events (and
notwithstanding any such repurchase), if ERS relocates outside of
Connecticut before August 2004, all advances made by the CDA are
subject to acceleration, together with a penalty of $250,000.
In January 1997, ERS completed the private sale of 147,312
Units, consisting of $147,312,000 principal amount at maturity of
the Old Notes and Warrants, which were sold to investors at a price
aggregating $100 million ($95 million net proceeds to ERS). The
Notes mature on February 1, 2004, with accrual of cash interest at
the rate of 13.25% per annum commencing February 1, 2000, such
interest payable thereafter on February 1 and August 1 of each year
commencing August 1, 2000. The Notes may be called, at ERS' option,
in whole or in part, at any time after February 1, 2001, and, upon
specified change in control events, each holder has the right to
require ERS to purchase its Notes, at specified prices.
The indenture under which the Notes have been issued places
limitations on operations and sales of assets by ERS or its
subsidiaries, requires maintenance of certain financial ratios in
order for ERS to incur additional indebtedness (subject to
specified exceptions), requires the delivery by ERS' subsidiaries
of guaranties if specified debt is subsequently incurred by such
subsidiaries, and limits ERS' ability to pay cash dividends or make
other distributions to the holders of its capital stock or to
redeem such stock. The Warrants are exercisable through February 1,
2004 with respect to an aggregate of 2,538,258 shares of Common
Stock at a per share price of $5.23.<PAGE>
<PAGE>
On October 29, 1997, ERS and Telepanel executed the
Combination Agreement, which provides for the Arrangement. Under
the terms of the Transaction, Telepanel will be recapitalized and
each Telepanel Common Share will be exchanged for .5566 of an
Exchangeable Share. Each Exchangeable Share will entitle the holder
thereof to dividend and other rights economically equivalent to
those of one share of Common Stock and, through a voting trust, to
vote at meetings of stockholders of ERS. The Exchangeable Shares
will be exchangeable, at the option of the holder, for Common
Stock, on a share-for-share basis. As a result of the Transaction,
ERS will become the sole beneficial owner of the outstanding
Telepanel Common Shares.
Based on the Exchange Ratio of .5566 Exchangeable Shares for
each Telepanel Common Share, ERS will ultimately be required to
issue up to approximately 10,045,780 shares of Common Stock in
exchange for all Exchangeable Shares issuable upon exchange of the
currently outstanding Telepanel Common Shares. In addition, ERS
will be required to issue up to approximately 2,705,550 shares of
Common Stock in respect of further Telepanel Common Shares issuable
pursuant to outstanding options, warrants and convertible
securities of Telepanel and shares permitted to be issued by
Telepanel prior to consummation of the Transaction. In the event
that, prior to the Effective Date, Telepanel consummates certain
additional financings through the issuance of convertible
securities, The Exchange Ratio will be adjusted so as to not be
less than .5166 Exchangeable Shares for each Telepanel Common
Share.
The obligations of ERS and Telepanel to consummate the
Arrangement are subject to the satisfaction or waiver, where
permissible, of certain conditions set forth in the Combination
Agreement, including obtaining approval of the stockholders of ERS
and of Telepanel, the approval (without material condition or
costs) of the plan of arrangement contemplated by the Combination
Agreement by the Court, the receipt of certain consents from the
holders of debt of ERS and Telepanel, and the receipt of certain
accountants' letters relating to the Transaction's qualification
for pooling-of-interests accounting treatment.
ERS will utilize the net proceeds from the Private Placement
in connection with the anticipated expansion of its operations,
including for manufacturing and carrying costs attendant to the
SayGo Plan, and for general corporate purposes, including the
funding of ERS' ongoing engineering and development efforts. ERS
believes that the proceeds of the Private Placement, together with
its other cash and cash equivalents, will be sufficient to meet
ERS' currently anticipated operating and capital expenditure
requirements for the foreseeable future.
<PAGE>
<PAGE>
ERS continues actively to explore, evaluate and have
discussions with respect to collaborative development projects and
related arrangements, and ERS may consider additional transactions,
consistent with the provisions of the Notes. Under the Combination
Agreement, ERS and Telepanel agreed to use their respective best
efforts to enter into an agreement, upon terms commercially
reasonable to each, pursuant to which ERS would represent Telepanel
in connection with the installation of Telepanel electronic
labelling systems in the United States, containing reasonable
provisions to address Telepanel's anticipated working capital needs
until the earlier of closing or termination of the agreement. ERS
has not reached any determination with respect to the size or
nature of any other such transaction or whether any other such
transaction will be undertaken, and there can be no assurance that
any such transaction will be effected.
MISCELLANEOUS
Since August 1997, ERS' headquarters have been located at 488
Main Avenue, Norwalk, Connecticut 06851-2500, where its telephone
number is (203) 849-2500.
