<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
Commission File number 1-12230
ADVANCED DEPOSITION TECHNOLOGIES, INC.
(Exact name of Small Business Issuer as Specified in its Charter)
Delaware 04-2865714
(State of Organization) (I.R.S. Employer
Identification Number)
580 Myles Standish Industrial Park, Taunton, Massachusetts 02780
(Address of Principal Executive Offices, Zip Code)
(508) 823-0707
(Issuer's Telephone Number, Including Area Code)
Indicate by check mark wether the issuers (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
As of November 12, 1997, there were 3,965,945 shares of Common Stock, $0.01
par value, of the issuer outstanding.
<PAGE>
ADVANCED DEPOSITION TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
<S> <C>
Item 1. Financial Statements
Condensed and Consolidated Balance Sheets (unaudited): 1
September 30, 1997 and December 31, 1996
Condensed and Consolidated Statements of Operations 2
(unaudited): for the Three Months and Nine Months
ended September 30, 1997 and September 30, 1996
Condensed and Consolidated Statements of Cash Flows 3
(unaudited): for the Nine Months ended September 30, 1997
and September 30, 1996
Notes to Condensed and Consolidated Financial 4-5
Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE>
ADVANCED DEPOSITION TECHNOLOGIES, INC.
CONDENSED AND CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share amounts)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 724 $ 1,170
Investment in marketable securities 1,257 1.240
Accounts receivable, net of reserve for doubtful accounts of $136
at September 30, 1997 and December 31, 1996 2,073 1,453
Inventories 1,818 1,667
Prepaid expenses and other current assets 101 123
------------ -----------
Total current assets 5,973 5,653
PROPERTY AND EQUIPMENT, net 5,199 5,189
OTHER ASSETS, net 1,652 1,740
------------ -----------
$ 12,824 $ 12,582
============ ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES
Revolving line of credit $ 571 $ 180
Current maturities of long-term debt 526 526
Accounts payable 795 802
Accrued liabilities 139 113
------------ -----------
Total current liabilities 2,031 1,621
------------ -----------
LONG-TERM OBLIGATIONS, net of current maturities 1,457 1,854
------------ -----------
STOCKHOLDERS' EQUITY;
Preferred stock, $0.01 par value
1,000,000 shares authorized, none issued -- --
Common stock, $0.01 par value,
10,000,000 shares authorized, 4,263,555 shares issued,
3,968,019 and 3,919,300 shares outstanding at
September 30, 1997 and December 31, 1996, respectively 43 42
Common stock purchase warrants 1,672 1,691
Additional paid-in capital 9,472 9,289
Retained deficit (755) (788)
------------ -----------
10,432 10,234
Less treasury stock, 297,610 and 310,610 shares at
September 30, 1997 and December 31, 1996, respectively (1,096) (1,127)
------------ -----------
Total stockholders' equity 9,336 9,107
------------ -----------
$ 12,824 $ 12,582
============ ===========
</TABLE>
The Condensed and Consolidated Balance Sheet at December 31, 1996, has been
derived from the audited financial statements of the Company at that date.
See Notes to Condensed and Consolidated Financial Statements
1
<PAGE>
ADVANCED DEPOSITION TECHNOLOGIES, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C>
REVENUES:
Product sales $ 1,899 $ 1,728 $ 8,171 $ 6,126
Royalties, license fees and other 0 800 400 1,350
----------- ----------- ----------- -----------
1,899 2,528 8,571 7,476
COST OF REVENUES 1,793 1,664 6,702 5,433
----------- ----------- ----------- -----------
Gross Profit 106 864 1,869 2,043
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 367 357 1,194 943
PATENTS AND LICENSES AMORTIZATION EXPENSE 37 11 109 23
RESEARCH AND DEVELOPMENT EXPENSES 109 78 357 201
----------- ----------- ---------- ------------
Operating profit (loss) (407) 418 209 876
INTEREST EXPENSE, NET OF
INTEREST INCOME 45 65 118 180
OTHER EXPENSE 32 -- 58 --
----------- ----------- ----------- -----------
Net income (loss) $ (484) $ 353 $ 33 $ 696
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE $ (0.12) $ 0.09 $ 0.01 $ 0.20
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,923,161 3,948,933 4,104,693 3,508,188
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed and Consolidated Financial Statements
2
<PAGE>
ADVANCED DEPOSITION TECHNOLOGIES, INC.
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine months ended September 30,
----------------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used in operating activities $ (161) $(1,360)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (382) (190)
Increase in investment in marketable securities (17) --
Increase in other assets (47) (60)
------------ -----------
Net cash used in investing activities (446) (250)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayment) under revolving line of credit 391 (1,389)
Net borrowings (repayment) of long term obligations (397) 1,443
Proceeds from redemption of common stock purchase warrants 184 4,775
Purchase of warrants (18) --
Purchase of treasury stock -- (1,000)
Exercise of stock options 1 11
------------ -----------
Net cash provided by financing activities 161 3,840
------------ -----------
NET INCREASE (DECREASE) IN CASH (446) 2,230
CASH AND CASH EQUIVALENTS, beginning of period 1,170 598
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 724 $ 2,828
============ ===========
</TABLE>
See Notes to Condensed and Consolidated Financial Statements
3
<PAGE>
ADVANCED DEPOSITION TECHNOLOGIES, INC.
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1997
1.) General
The accompanying unaudited condensed and consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial reporting and with the instructions to Form
10-QSB and Item 310 (b) of Regulation SB. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. Reference should be made to the
financial statements and related notes included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996, which was filed with the
Securities and Exchange Commission on April 15, 1997.
In the opinion of the management of the Company, the accompanying
financial statements reflect all adjustments that were of a normal recurring
nature necessary for a fair presentation of the Company's results of operations
and changes in financial position for the three and nine month periods ended
September 30, 1997 and September 30, 1996. Operating results for the three and
nine month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997.
2.) Significant Accounting Policies
The accompanying condensed and consolidated financial statements
reflect the application of certain significant accounting policies, including
those described below.
a. Principals of consolidation
The accompanying condensed and consolidated financial statements
include the Company and its wholly owned subsidiary. All significant
intercompany balances and transactions have been eliminated in consolidation.
b. Revenue recognition
The Company recognizes revenues on its product sales upon shipment and
royalties and license fees as earned.
c. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---------- -----------
<S> <C> <C>
Raw materials $ 1,031 $ 1,283
Work in process and finished goods 1,116 751
---------- -----------
2,147 2,034
Less: Reserves for obsolescence 329 367
---------- -----------
Total $ 1,818 $ 1,667
========== ===========
</TABLE>
4
<PAGE>
d. Net Income (Loss) per Common Share
Net income (loss) per common share has been determined by dividing net
income (loss) by the weighted average common shares outstanding during the
period. Common stock equivalents have been calculated in accordance with the
treasury stock method and are included for all periods where their effect is
dilutive.
3.) Cash and Cash Equivalents
The Company considers all investments purchased with original
maturities of less than three months to be cash equivalents. Cash and cash
equivalents consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Cash $ 301 $ 218
Cash equivalents 424 952
------------- ------------
Total
$ 724 $ 1,170
============= ============
</TABLE>
4.) Investment in Marketable Securities
The Company adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Investments" (SFAS
No 115), effective January 1, 1994. As of September 30, 1997 and December 31,
1996, investments in marketable securities that were classified as
available-for-sale and were recorded at fair value (which approximated cost)
consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
United States Government obligations $ 1,146 $ 1,143
Common stock 111 -
Corporate obligations - 97
------------- ------------
Total $ 1,257 $ 1,240
============= ============
</TABLE>
5.) Exercise of Common Stock Purchase Warrants
The Company's Redeemable Common Stock Purchase Warrants (the "IPO
Warrants") expired on March 8, 1997. Approximately 78,000 IPO Warrants were
exercised during the first quarter of 1997, resulting in net proceeds to the
Company of approximately $184,000.
5
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
General
- -------
Advanced Deposition Technologies, Inc. (the "Company" or "A. D. TECH"), is
a technology leader in developing and manufacturing high-resolution, patterned,
vacuum-metallized coatings for a variety of energy management applications for
use in industrial, commercial and consumer products. Included among these are
product offerings for electronic capacitors, microwave and standard food
packaging, security holograms, retroreflective films, barrier packaging,
electronic article surveillance (EAS), and electric static discharge (ESD). The
Company's revenue to date has been primarily from sales to the capacitor and
microwave packaging markets.
Recent Developments
- -------------------
The Company continues to receive favorable feedback from its customers'
tests of High Energy Density ("HED") capacitor materials. These patent pending
films are designed to increase the capacitance per unit volume and unit weight
by up to 75% over conventional materials, resulting in improved performance at a
lower net cost. The world-wide market for capacitors is in excess of $2 billion;
potential applications for HED films exceed 50% of this market. During the third
quarter, the Company received product approvals from one of its customers for
certain HED materials and expects to ship a production order by year-end.
In conjunction with the Company's international marketing plan for this and
other new materials, the Company hired Mr. Robert Boughrum as Vice President:
Capacitor Sales and Marketing. Mr. Boughrum brings to the Company more than
twenty-six years of industry experience with such market leaders as AVX, Vishay,
Aerovox and Shizuki Corporation.
The Company believes that meaningful revenues form HED materials will
develop over the next 6 to 12 months. In anticipation of demand, the Company has
committed to a purchase of capital equipment scheduled to be delivered during
the second half of 1998. The new equipment will increase capacity by more than
100% and is designed for producing either standard film products or HED
materials.
In November, the Company announced that it had signed Letters of Intent to
acquire a majority interest in Alexander Boxall S.A. ("ABSA"), located in Madrid
Spain. ABSA is an AC capacitor manufacturer and one of the Company's largest
customers. For the year ended December 1997, ABSA is expected to generate
revenues of approximately $16,000,000 on a profitable basis. The purchase
components will include cash, a subordinated convertible note, and approximately
10% of the Company's common stock. One of the current principals will remain a
minority owner of ABSA and will be nominated for a seat on the Company's Board
of Directors. The Company believes that this acquisition will be accretive to
earnings per share. In addition, The Company believes that other strategic
benefits will result from the acquisition including; stronger cash flow, an
enhanced international presence, increased purchasing power, manufacturing
economies of scale and an enhanced product development cycle leading to faster
new product introductions. The closing of the transaction is subject to the
negotiation and execution of definitive agreements, satisfactory completion of
financial and other due diligence, and the receipt of any necessary consents and
approvals.
Results of Operations
- ---------------------
Three months ended September 30, 1997 compared to Three months ended September
30, 1996
6
<PAGE>
Revenues. Revenues decreased to $1,899,000 for the three months ended
September 30, 1997, from $2,528,000 for the three months ended September 30,
1996, a decrease of 25%. Revenue during the three months ended September 30,
1996, included $800,000 related to the assignment of certain of the Company's
patents to Fort James Corporation, ("Fort James"), formerly known as James River
Corporation. Product sales increased 10% during the three months ended September
30, 1997 compared to the three months ended September 30, 1996, due to higher
sales volume of microwave food packaging products, including the BROWN &
CRISP(R) product, partially offset by lower sales volume of capacitor products
and lower unit prices for metallized film.
Cost of Revenues. Cost of revenues totaled $1,793,000 (94.4% of product
sales) for the three months ended September 30, 1997, compared to $1,664,000
(96.3% of product sales) for the three months ended September 30, 1996. The
increase in cost of revenues was a result of additional sales into the microwave
food packaging market, including the BROWN & CRISP(R) bags, partially offset by
the decrease in sales to the capacitor market. The decrease in cost of revenues
as a percentage of product sales was the result of increased shipments of
higher-margin retail microwave products and lower manufacturing expenses,
partially offset by lower selling prices for metalized film.
Gross Profit. Gross profit decreased to $106,000 (5.6% of total revenue)
for the three months ended September 30, 1997, compared to $864,000 (34.2% of
total revenue) for the three months ended September 30, 1996. The decrease in
gross profit, both in absolute magnitude and as a percentage of total revenue,
was primarily due to the absence of royalty and licensing revenue and to a
lesser extent to lower unit prices for metalized film, partially offset by
increased shipments of higher-margin retail microwave products and lower
manufacturing expenses.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $367,000 for the three months ended September 30, 1997
(19.3% of product sales) from approximately $357,000 for the three months ended
September 30, 1996 (20.7% of product sales). Higher professional fees,
associated primarily with investor and public relations, was the primary reason
for the increase.
Patents and licenses amortization. Patents and license amortization
increased to $37,000 for the three months ended September 30, 1997 from $11,000
for the three months ended September 30, 1996. The amortization of licenses
acquired from Fort James accounted for the increase.
Research and Development. Research and development expenses increased to
$109,000 for the three months ended September 30, 1997, from approximately
$78,000 for the three months ended September 30, 1996. Research and development
expenditures continue to be directed primarily at new product development and
improving the Company's technical capacity to produce higher resolution
metallized patterns at higher volumes for existing and new applications
Operating Profit (Loss). The Company generated an operating loss of
$407,000 for the three months ended September 30, 1997, compared to an operating
profit of $418,000 for the three months ended September 30, 1996. The decrease
was a primarily the result of the reduction of royalty and license revenues
from $800,000 for the period ended September 30, 1996, to $0 for the period
ended September 30, 1997, additional amortization expense related to licenses
acquired from Fort James and lower unit prices for metalized film.
Net Interest Expense. Net interest expense decreased to approximately
$45,000 for the three month period ended September 30, 1997, from $65,000 for
the three month period ended September 30, 1996. The decrease was primarily the
result of increased interest income as a result of additional funds being
available for investment.
7
<PAGE>
Other Expense. Other expense was $32,000 during the three months ended
September 30, 1997, compared to an insignificant amount for the three months
ended September 30, 1996. Other expense includes the amortization of costs
associated with the new financing arrangement entered into during 1996.
Net Income (Loss). The Company generated a net loss of $484,000 for the
three months ended September 30, 1997, compared to net income of $353,000 for
the three months ended September 30, 1996, as a result of the factors discussed
above.
Nine months ended September 30, 1997 compared to Nine months ended September 30,
1996
Revenues. Revenues increased to $8,571,000 for the nine months ended
September 30, 1997, as compared to $7,476,000 for the nine months ended
September 30, 1996, a 15% increase. The increase was due to higher product
sales to the microwave food packaging market, including sales of the BROWN &
CRISP(R) product, partially offset by lower license and royalty fees, reduced
volume for capacitor and standard packaging products, and lower unit prices for
metalized film. Royalty and license fees decreased by $950,000. In this
category, the Company recognized $400,000 in revenue during the nine months
ended September 30, 1997 from the licensing of the Company's PMP technology.
Cost of Revenues. Cost of revenues totaled $6,702,000 (82.0% of product
sales) for the nine months ended September 30, 1997, compared to $5,433,000
(88.7% of product sales) for the nine months ended September 30, 1996. The
increase in cost of revenues was a result of additional sales into the microwave
food packaging market, including the BROWN & CRISP(R) bags, partially offset by
the decrease in sales to the capacitor and standard food packaging markets. The
decrease in cost of revenues as a percentage of product sales was the result of
a change in product mix towards higher-margin retail microwave products,
partially offset by lower selling prices for metalized film.
Gross Profit. Gross profit decreased to $1,869,000 (21.8% of total revenue)
for the nine months ended September 30, 1997, compared to $2,043,000 (27.3% of
total revenue) for the nine months ended September 30, 1996. The decrease in
gross profit in absolute terms and as a percentage of total revenue was the
result of the decrease in license and royalty fees and lower unit prices for
metalized film partially offset by increased sales volume of microwave food
packaging materials, including the BROWN & CRISP(R).
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1,194,000 for the nine months ended September 30, 1997
(14.6% of product sales) from approximately $943,000 for the nine months ended
September 30, 1996 (15.4% of product sales). Higher payroll expenses and
professional fees, relating primarily to investor and public relations, were the
primary reasons for the increase.
License and Patent Amortization. License and patent amortization expense
increased to $109,000 for the nine months ended September 30, 1997, from $23,000
for the nine months ended September 30, 1996. The amortization of licenses
acquired from Fort James accounted for the increase.
Research and Development. Research and development expenses increased to
$357,000 for the nine months ended September 30, 1997, from $201,000 for the
nine months ended September 30, 1996. Research and development expenditures
continue to be directed primarily at new product development and improving the
Company's technical capacity to produce higher resolution metallized patterns at
higher volumes for existing and new applications
Operating Profit. The Company generated operating profit of $209,000 for
the nine months ended September 30, 1997, compared to operating profit of
$876,000 for the nine months ended September 30, 1996. The decrease was the
result of the reduction in royalty and license fees, higher selling, general and
8
<PAGE>
administrative expenses, and higher license and patent amortization expenses
partially offset by higher sales of retail microwave packaging products.
Net Interest Expense. Net interest expense decreased to approximately
$118,000 for the nine months ended September 30, 1997, from $180,000 for the
nine months ended September 30, 1996. The decrease was primarily the result of
increased interest income as additional funds were available for investment.
Other Expense. Other expense was $58,000 during the nine months ended
September 30, 1997, compared to an insignificant amount for the nine months
ended September 30, 1996. Other expense includes the amortization of costs
associated with the new financing arrangement entered into during 1996.
Net Income. The Company generated net income of $33,000 for the nine
months ended September 30, 1997, compared to net income of $696,000 for the nine
months ended September 30, 1996, as a result of the factors discussed above.
Liquidity and Capital Resources
- -------------------------------
The Company had working capital of approximately $3,942,000 at September
30, 1997, compared to working capital of $4,032,000 at December 31, 1996. The
decrease in working capital is primarily the result of the purchase of
additional manufacturing equipment and the repayment of long-term debt partially
offset by the exercise of approximately 78,000 Class A Redeemable Common Stock
Purchase Warrants (the "IPO Warrants") in March 1997, from which the Company
realized net proceeds of approximately $184,000.
Cash used in operating activities for the nine months ended September 30,
1997, was approximately $161,000 compared to cash used in operating activities
during the nine months ended September 30, 1996 of $1,360,000. Negative cash
flow from operations was the result of an increase in accounts receivable and
inventories due to a higher sales volume.
In the nine month period ending September 30, 1997, the Company expended
$382,000 in capital investments. The investments during 1997 were primarily for
adding manufacturing capacity and increasing the efficiency of existing
equipment. As of September 30, 1997, the Company has equipment purchase
commitments totaling approximately $1,600,000.
On July 14, 1996, the Company entered into a credit agreement with a bank
that provides for a line of credit facility and a term loan facility (the
"Credit Facilities"). The Credit Facilities enabled the Company to refinance the
revolving line of credit and term debt that it had maintained with a former
lender and to repay all amounts due to a former lessor of equipment to the
Company. The line of credit allows the Company to borrow up to $3,000,000 based
on percentages of its eligible accounts receivable, raw materials and finished
goods inventories and expires on July 8, 1999. Borrowings under the line of
credit bear interest at a rate per annum equal to the bank's prime lending rate
plus 3/4%. The initial principal amount of the term loan was $2,600,000. The
term loan bears interest at a rate per annum equal to the bank's prime lending
rate plus 1% and must be repaid in 35 monthly installments of approximately
$43,000, plus interest, with a balloon payment of approximately $1,083,000 due
in July 1999.
The Credit Facilities require the Company to maintain certain financial
ratios and tangible net worth levels, among others. As of September 30, 1997,
the Company was not in compliance with its operating cash flow covenant. The
bank provided the Company with verbal notification that it waives the event of
default through December 31, 1997. The Company is not in default of any other of
the Credit Facility covenants.
9
<PAGE>
The outstanding balances on the line of credit and the term loan were
approximately $571,000 and $1,975,000, respectively.
Management believes that the Company's cash, cash equivalents, and short-
term investments, together with anticipated cash flows from operations, will
provide sufficient funds to meet the Company's current cash requirements and
allow the Company to continue its marketing and product development efforts.
Seasonal Revenues
- -----------------
Historically, the Company has experienced lower sales to the electronic
capacitor market during the third quarter, particularly in July. Based on market
research conducted by the Company, it believes that demand for the Company's
other products, including microwave food packaging, does not experience
similarly timed seasonal variations and could, in the future, offset lower third
quarter sales in the electronic capacitor market.
Inflation
- ---------
Several times during the last two years, suppliers of the film used in the
Company's products experienced problems meeting demand that led to shortages and
price increases. In late 1995, the shortages began to ease and prices stabilized
to decrease. In 1996, supplies of film increased in quantities sufficient to
meet demand and price increases abated. In 1997, there has been no material
changes in supplies of film nor any significant increases in prices of film.
Business Factors
- ----------------
This report may contain certain forward-looking statements that are subject
to certain risks and uncertainties. These statements include statements
regarding (i) the possibility and the expected effect of the ABSA acquisition by
the Company; (ii) the expected effects of the Company's high energy-density
capacitor film; (iii) price increases in the capacitor market; and (iv) the
Company's liquidity. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described in the forward-
looking statements. The Company cautions investors that there can be no
assurance that actual results or business conditions will not differ materially
from those projected or suggested in such forward-looking statements as a result
of various factors, including, but not limited to, the following; the Company's
ability to close the ABSA acquisition on favorable terms, uncertainties
regarding the performance advantages of the Company's high energy-density
capacitor films, market responses to pricing actions, continued competitive
factors and pricing pressures, the timely acceptance of new products, inventory
risk due to shifts in market demand, the development of competing or superior
technologies or products from other manufacturers, many of which have
substantially greater financial, technical and other resources than the Company,
dependence on key personnel, the variation in the Company's operating results,
technological change, the Company's ability to develop and protect proprietary
products and technologies, the availability of additional capital on acceptable
terms, if at all, to fund expansion, and general economic conditions. For
further information, refer to the more specific risks and uncertainties
discussed throughout this report.
10
<PAGE>
PART II - OTHER INFORMATION
Items 1 through 5: Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) See Exhibit Index.
(b) Reports on Form 8-K. On May 27, 1997, the Company filed Form 8-K in
regard to its offer to acquire Foilmark, Inc. ("Foilmark"). In that filing it
was reported that the Company had made an offer to acquire Foilmark for an
undisclosed amount of cash and common stock. On July 16, 1997, the Company filed
Form 8-K in regard to Foilmark's decision not to pursue discussions on the
acquisition offer. In that filing it was reported that the Company accepted
Foilmark's decision not to pursue discussions related to the acquisition offer.
11
<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 of the
undersigned thereunto duly authorized.
Advanced Deposition Technologies, Inc.
--------------------------------------
Registrant
November 14, 1997 /s/ Glenn J. Walters
- ----------------- -----------------------------------------
Glenn J. Walters
President
November 14, 1997 /s/ Mark R. Thomas
- ----------------- -----------------------------------------
Mark R. Thomas
Chief Financial Officer
12
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
27.1 Financial Data Schedule
99.1 Press Release dated November 3, 1997 re:
A.D. Tech Signs Letter of Intent to Acquire
Majority Interest in $16 Million Electronic
Component Producer
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 724
<SECURITIES> 1,257
<RECEIVABLES> 2,209
<ALLOWANCES> 136
<INVENTORY> 1,818
<CURRENT-ASSETS> 5,973
<PP&E> 8,297
<DEPRECIATION> 3,098
<TOTAL-ASSETS> 12,824
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<PAGE>
[LETTERHEAD OF CTC INC. APPEARS HERE]
A.D. TECH SIGNS LETTERS OF INTENT TO ACQUIRE MAJORITY INTEREST
IN $16 MILLION ELECTRONIC COMPONENT PRODUCER
Acquisition will more than Double Company's Revenues
TAUNTON, MA--November 3, 1997--Advanced Deposition Technologies, Inc.
(ADTECH) (NASDAQ:ADTC) (BSE:DTI) announced today it has signed letters of intent
to acquire a majority equity position in DNA of Madrid, Spain. DNA is a private
manufacturer of AC capacitor components and projects to have $16 to $18 million
in revenues for calendar year 1997 and report a profit. ADTECH purchase price is
comprised of cash, a note and approximately 10 percent of Advanced Deposition
Technologies common stock for the majority stake. ADTECH expects the transaction
to be accretive to its earnings per share. Alex Boxall will continue on as
Managing Director of DNA and will fill a vacant position on the Board of
Directors of ADTECH. Additional terms have not been disclosed. The closing of
the transaction will be subject to the negotiation and execution of definitive
agreements, satisfactory completion of financials and other due diligence and
the receipt of any necessary consent and approvals.
Glenn J. Walters, President and CEO of ADTECH stated, "DNA has been an excellent
customer to us for nearly the past three years, contributing significant sales
to our capacitor business. Looking ahead, DNA will be able to expand to their
already excellent product line of AC capacitor components with the recent
introduction of ADTECH's High Energy Density (HED) films. This should accelerate
their sales as they offer components able to make the most efficient and
technically advanced AC capacitors available in their markets." DNA has offices
in the United Kingdom, Czech Republic, Turkey and Malaysia.
Vice President of Electronic Film Sales, Bob Boughrum, commented, "This
strategic acquisition will provide additional technical support to ADTECH,
enabling us to develop new film technology faster, providing a significant
advantage to our customers in the United States, as well as those overseas."
Future capacity expansion announced earlier this year by ADTECH will support the
anticipated demand for existing and new thin film products both in the United
States and overseas, especially in the Far East.
Walters added, "The acquisition of DNA is typical of the vertical integration
our business plan calls for that will leverage our investments in technological
developments and the new products resulting from those developments as we
increase our critical mass and take advantage of economies of scales. The
addition of DNA has added very talented people to the ADTECH team. I have always
been very impressed with DNA's production facilities and their dedicated staff.
I look forward to working with them and to expanding both of our businesses."
Advanced Deposition Technologies, Inc. is an operating company dedicated to
development and commercialization of applications originating from the Company's
proprietary technology in markets where the Company can secure a technological
leadership position. Currently the Company has product divisions for the
electronics capacitor, microwave food packaging, security holograms and retro
reflective films markets. The Company either owns or licenses more than 35
patents and has approximately 12 patents pending. On a selective basis, A.D.
Tech licenses its proprietary technologies and patents to market leaders who can
accelerate the Company's revenue growth of its unique products and technologies
into large-scale commercialization and markets.
Any forward-looking statements in this release are made pursuant to the "safe
harbor" provisions of the Private Securities Litigation Act of 1995. Investors
are cautioned that actual results may differ substantially from such forward-
looking statements. Forward-looking statements involve risks and uncertainties
including, but not limited to, continued acceptance of the Company's products
and services in the marketplace, competitive factors, new products and
technological changes, dependence upon third-party vendors, a limited number of
customers, political and other uncertainties related to customer purchases, and
other risks detailed in the Company's periodic report filings with the
Securities and Exchange Commission.
