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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] Transition report under section 13 or 15(d) of the Exchange Act.
COMMISSION FILE NUMBER 1-12230
ADVANCED DEPOSITION TECHNOLOGIES, INC.
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2865714
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
580 Myles Standish Industrial Park, Taunton, Massachusetts 02780
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(508) 823-0707
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(ISSUER'S TELEPHONE NUMBER)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
As of May 8, 2000, there were 4,818,648 shares of Common Stock, $0.01
par value, of the issuer outstanding.
Transitional Small Business Disclosure Format (check one)
YES NO X
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<PAGE>
ADVANCED DEPOSITION TECHNOLOGIES, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
Item 1. Financial Statements
Condensed and Consolidated Balance Sheets (unaudited): 1
March 31, 2000 and December 31, 1999
Condensed and Consolidated Statements of Operations 2
(unaudited): for the Three Months ended March 31, 2000
and March 31, 1999
Condensed and Consolidated Statements of Cash Flows 3
(unaudited): for the Three Months ended March 31, 2000
and March 31, 1999
Notes to Condensed and Consolidated Financial 4-7
Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II. OTHER INFORMATION
Item 3. Default Upon Senior Securities 12
Item 6. Exhibits and Reports filed on Form 8-K 12
Signatures 13
<PAGE>
ADVANCED DEPOSITION TECHNOLOGIES, INC.
CONDENSED AND CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE><CAPTION>
ASSETS
(In thousands, except share amounts)
March 31, December 31,
2000 1999
CURRENT ASSETS ======== ========
<S> <C> <C>
Cash and cash equivalents $ 397 $ 309
Investment in marketable securities 1 17
Accounts receivable, net of reserve for doubtful accounts of $166,000 and
$184,000 at March 31, 2000 and December 31, 1999, respectively 7,265 6,521
Inventories 4,674 4,567
Prepaid expenses and other current assets 450 392
-------- --------
Total current assets 12,787 11,806
-------- --------
PROPERTY AND EQUIPMENT, net of accumulated depreciation 8,267 8,383
OTHER ASSETS, net of accumulated amortization 4,725 4,942
-------- --------
Total assets $ 25,779 $ 25,131
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Due to financing institutions $ 4,464 $ 4,309
Accounts payable 5,381 4,746
Accrued expenses 561 697
Current maturities of long-term obligations 2,240 1,335
-------- --------
Total current liabilities 12,646 11,087
-------- --------
LONG-TERM OBLIGATIONS
Revolving line of credit 1,906 1,820
Long-term obligations, net of current maturities 3,674 4,700
-------- --------
Total liabilities 18,226 17,607
-------- --------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 509 488
-------- --------
STOCKHOLDERS' EQUITY;
Preferred stock, $0.01 par value
1,000,000 shares authorized, none issued -- --
Common stock, $0.01 par value,
Authorized 10,000,000 shares, issued 4,894,758 and
4,818,648 shares outstanding at March 31, 2000 and December 31, 1999 49 49
Common stock purchase warrants -- --
Additional paid-in capital 11,902 11,902
Accumulated deficit (4,378) (4,486)
Accumulated other comprehensive (loss) (385) (285)
-------- --------
7,188 7,180
Less treasury stock, 76,110 shares at cost at March 31, 2000
and December 31, 1999 (144) (144)
-------- --------
Total stockholders' equity 7,044 7,036
-------- --------
Total liabilities and stockholders' equity $ 25,779 $ 25,131
======== ========
</TABLE>
The Condensed and Consolidated Balance Sheet at December 31, 1999, 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
March 31,
2000 1999
=========== ===========
<S> <C> <C>
REVENUES:
Product sales $ 7,027 $ 6,138
Royalties, license fees and other 18 106
----------- -----------
7,045 6,244
COST OF REVENUES 5,712 4,864
----------- -----------
Gross Profit 1,333 1,380
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 789 917
RESEARCH AND DEVELOPMENT EXPENSES 63 75
AMORTIZATION EXPENSE 76 54
----------- -----------
Operating income 405 334
INTEREST EXPENSE, NET OF
INTEREST INCOME (238) (222)
OTHER (EXPENSE) (3) (63)
----------- -----------
Income before income taxes and
minority interest 164 49
INCOME TAXES 2 13
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED SUBSIDIARY (54) (1)
----------- -----------
Net income $ 108 $ 37
=========== ===========
BASIC AND FULLY DILUTED NET INCOME (LOSS) PER
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING $ 0.02 $ 0.01
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,818,648 4,249,483
=========== ===========
</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>
Three Months Ended March 31,
2000 1999
===== =====
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 108 $ 37
----- -----
Other cash (used in) operating activities (289) (882)
----- -----
Net cash (used in) operating activities $(181) $(845)
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (136) (234)
Decrease in investment in marketable securities 16 16
(Increase) decrease in other assets (45) 627
----- -----
Net cash provide by (used in) investing activities (165) 409
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under revolving line of credit 86 402
Net borrowings from financial institutions 437 195
Repayment of long term obligations (188) (273)
Purchase of treasury stock -- (16)
Exercise of stock options -- 20
----- -----
Net cash provided by financing activities 335 328
----- -----
Net effect of exchange rates on cash and cash
equivalents 99 (18)
----- -----
NET INCREASE (DECREASE) IN CASH 88 (126)
CASH AND CASH EQUIVALENTS, beginning of period 309 411
----- -----
CASH AND CASH EQUIVALENTS, end of period $ 397 $ 285
===== =====
</TABLE>
See Notes to Condensed and Consolidated Financial Statements
3
<PAGE>
ADVANCED DEPOSITION TECHNOLOGIES, INC.
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2000
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 S-B. 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, 1999, which was filed with the
Securities and Exchange Commission on April 14, 2000.
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 months ended March 31, 2000 and
March 31, 1999. Operating results for the three month period ended March 31,
2000 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000.
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 majority owned and wholly owned subsidiaries. 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):
March 31, December 31,
2000 1999
================= ================
Raw materials $ 2,465 $ 2,338
Work in process 304 287
Finished goods 2,292 2,334
----------------- ----------------
5,061 4,959
Less: Reserves for obsolescence 387 392
----------------- ----------------
Total $ 4,674 $ 4,567
================= ================
4
<PAGE>
d. Net Income (Loss) Per Common Share
The Company follows Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS 128"). The new accounting standard established
standards for computing and presenting earnings per share.
e. Reclassifications
Certain balances in the 1999 financial statements have been
reclassified to conform to the 2000 presentation.
f. Comprehensive income
The Company follows Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"), which requires that all
components of comprehensive and total comprehensive income be reported on one of
the following: a statement of income and comprehensive income, a statement of
comprehensive income or a statement of stockholders equity. Comprehensive income
is comprised of net income and all changes to stockholders' equity except those
due to investment by owners (changes in paid in capital) and distributions to
owners (dividends). For interim reporting purposes, SFAS 130 requires disclosure
of total comprehensive income.
Total comprehensive income (unaudited) is as follows (in thousands):
<TABLE><CAPTION>
Three Months Ended
March 31,
2000 1999
================= ===============
<S> <C> <C>
Net income $ 108 $ 37
Foreign currency translation adjustments (100) (1)
Unrealized losses on investments in marketable securities - (16)
----------------- ---------------
Total comprehensive income $ 8 $ 20
================= ===============
</TABLE>
g. Industry and geographic segments
The Company's operations are classified into two business segments:
food packaging applications and electronic capacitor operations.
The following table shows sales, operating income (loss) and other
unaudited financial information by industry segment as of and for the three
months ended March 31, 2000 (in thousands):
5
<PAGE>
INDUSTRY SEGMENTS
- -----------------
<TABLE><CAPTION>
Food Capacitor
Packaging Applications Consolidated
===============================================================================
March 31, 2000
<S> <C> <C> <C>
Sales $ 1,384 $ 5,661 $ 7,045
---------------- ------------------ -----------------
Operating income (loss) before corporate
expenses, interest and taxes 85 320 405
---------------- ------------------ -----------------
Corporate expenses (3)
Interest (238)
-----------------
Income before taxes and minority interest $ 164
================ ================== =================
Identifiable assets at March 31, 2000 $ 3,409 $ 18,088 $ 21,497
Corporate assets 4,282
-----------------
Total assets at March 31, 2000 $ 25,779
=================
</TABLE>
Geographic information for the following table shows sales, operating
income (loss) and other financial information by industry segment as of and for
the three months ended March 31, 2000 (in thousands):
GEOGRAPHIC SEGMENTS
<TABLE><CAPTION>
United States Spain Malaysia Consolidated
---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
March 31, 2000
Sales $ 2,625 $ 4,246 $ 175 $ 7,045
---------------- ----------------- ------------------- -----------------
Operating income (loss) before corporate
expenses, interest and taxes $ (50) $ 476 $ (21) 405
---------------- ----------------- ------------------- -----------------
Corporate expenses (3)
Interest (238)
-----------------
Income before taxes and minority interest $ 164
-----------------
Identifiable assets at March 31, 2000 $ 13,334 $ 11,494 $ 951 $ 25,779
================ ================= =================== =================
</TABLE>
3.) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December, 1997, the Company acquired 65% of the common stock of
Alexander Boxall, S.A. of Madrid, Spain ("ABSA"), a manufacturer of electronic
capacitors used for lighting and motor run applications. ABSA was renamed DNA-AD
TECH S.A. ("DNA"). On October 1, 1998, the Company, through DNA, acquired 80% of
the outstanding common stock of Kidamai, SDN of Kuala Lumpur, Malaysia ("DNA
(Asia)"). DNA (Asia) is a capacitor assembler and distributor. In February 1999
the
6
<PAGE>
Company established a joint venture with Trykko Pack of Denmark and currently
owns 82% equity position in a newly formed technology licensing company called
MICROTECH A/S of Denmark.
On March 23, 1999, the Company entered into an agreement to purchase an
additional 16% of the equity of DNA-ADTECH of Madrid, Spain (the "Purchase
Agreement"), bringing the Company's total equity ownership to 81%. The purchase
price was based upon a similar valuation used in December 1997 when the Company
purchased 65% of ABSA. The Company paid for this additional 16% equity position
by issuing 598,198 shares of Common Stock. This transaction was approved by the
Company's stockholders at the Company's annual meeting in August 1999.
In addition, in March 1999, Alexander Boxall and the Company entered
into a Repayment Agreement (the "Repayment Agreement") pursuant to which the
parties agreed that in the event that the Company is unable to pay the amounts
outstanding under the promissory note issued to Pedro Nunez Barranco Guembe in
connection with the previous acquisition of his shares of DNA-ADTECH, on or
before maturity without compromising the Company's plan for growth, On December
20, 1999, Mr. Boxall made payment of $1,099,598 (principal plus interest) to Mr.
Guembe in accordance with the Repayment Agreement. As of December 20, 1999 the
Company was indebted to Mr. Boxall for the amount paid. The debt bears interest
at the thirty day London Interbank Offered Rate, plus 2%, compounded monthly,
based on such rate as of the last day of such month and is due and payable on
March 1, 2001. Mr. Boxall will have the right at any time after January 1, 2001
through March 1, 2001, to convert all or part of the outstanding balance into
shares of Common Stock at a purchase price per share equal to the average sales
price of the Common Stock for the month of December 2000, subject to a $3.50 per
share minimum. If Mr. Boxall does not elect to convert the outstanding balance,
the Company may elect after January 31, 2001 to redeem such amount for shares of
Common Stock at a redemption price equal to the average sales price of the
Common Stock for the twenty business days preceding the date of redemption.
On March 31, 2000, the financial agreement with our principal lender
was amended to record the agreement with Mr. Boxall, pursuant to which Mr.
Boxall loaned the Company $300,000 during April 2000 and the Company agreed to
repay such amount, with interest, thereby increasing the Company's indebtedness
to Mr. Boxall to $1,399,598. This additional debt also bears interest at the
thirty day London Interbank Offered Rate, plus 2%, compounded monthly, based on
such rate as of the last day of such month and is due and payable on March 1,
2001. These additional funds provided by Mr. Boxall are subordinate to the
Company's obligation to the bank pursuant to the subordinated debt agreement
among the bank, Mr. Boxall (the "Subordinated Creditor"), and Advanced
Deposition Technologies, Inc. (the "Borrower").
7
<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-metalized 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.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
REVENUES. Revenues increased to $7,045,000 for the three months ended
March 31, 2000, as compared to $6,244,000 for the three months ended March 31,
1999, an increase of 13%. The increase was primarily due to stronger Capacitor
sales through DNA Spain (up 15%) and the U.S. operation (up 13%). When comparing
the DNA Spain sales increase in pesetas the increase for the quarter, year to
year was 33%, thereby reflecting the strength of the dollar during that period.
The new production equipment installed in Taunton, Massachusetts partially
contributed to the increased sales volume realized in the first quarter.
Contingent upon hiring and training new production staff, we believe this new
machine should be operating at its full capacity by the end of the second
quarter 2000.
COST OF REVENUES. Cost of revenues increased to $5,712,000 (81.3% of
product sales) for the three months ended March 31, 2000, compared to $4,864,000
(79.2% of product sales) for the three months ended March 31, 1999. Cost of
revenues increased due to increased sales and was higher on a percent comparison
due to the strength of the dollar described above. Elimination of several job
positions in February and March of 2000 at the Taunton operation should benefit
future periods.
GROSS PROFIT. Gross profit decreased to $1,333,000 (19.0% of product
sales) for the three months ended March 31, 2000, compared to $1,380,000 (22.5%
of product sales) for the three months ended March 31, 1999. The decrease in
gross profit was due to growing relative strength of the dollar and a reduction
of royalty and license revenue from 1999.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses decreased to $789,000 (11.2% of product sales) for the
three months ended March 31, 2000, compared to $917,000 (14.9% of product sales)
for the three months ended March 31, 1999. Reductions were noted in travel,
legal, investor relation expenses and non-recurring recruiting fees.
RESEARCH AND DEVELOPMENT. Research and development expenses decreased
modestly to $63,000 for the three months ended March 31, 2000, compared to
$75,000 for the three months ended March 31, 1999.
AMORTIZATION. Amortization expenses increased to $76,000 during the
three months ended March 31, 2000, compared to $54,000 for the three months
ended March 31, 1999.
8
<PAGE>
OPERATING INCOME . The Company generated operating income of $405,000
for the three months ended March 31, 2000, compared to operating income of
$334,000 for the three months ended March 31, 1999. Operating income improved
due to stronger sales and reduced spending for Selling and General
Administration. The growing strength of the dollar relative to the pesetas had a
negative impact on the operating income attributed to Spain by approximately
$75,000.
NET INTEREST EXPENSE. Net interest expense increased to $238,000 for
the three months ended March 31, 2000, compared to $222,000 for the three months
ended March 31, 1999. The increase was due to increased borrowing and higher
interest rates.
OTHER EXPENSE. Other expense totaled $3,000 during the three months
ended March 31, 2000, compared to other expense of $63,000 for the three months
ended March 31, 1999.
INCOME TAXES. Income taxes decreased to $2,000 for the three months
ended March 31, 2000, compared to $13,000 for the three months ended March 31,
1999. Income tax expense in 1999 was attributable to DNA Spain operations.
MINORITY INTEREST. Minority interest was $54,000 for the three months
ending March 31, 2000 compared to $1,000 for the three months ending March 31,
1999. Strong profits from DNA-ADTECH for the quarter account for the results in
this category.
NET INCOME . The Company generated net income of $108,000 during the
three months ended March 31, 2000, as compared to net income of $37,000 for the
three months ended March 31, 1999 as a result of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company had working capital of approximately $141,000 at March 31,
2000, compared to working capital of $719,000 at December 31, 1999. The decrease
in working capital was primarily due to reclassification from long term to short
term obligations of the amounts due Mr. Boxall pursuant to the subordinated debt
agreement.
Cash used in operating activities of $181,000 for the three months
ended March 31, 2000, compared to cash used of $845,000 during the three months
ended March 31, 1999. Cash flow used for operations for the three months ended
March 31, 2000 resulted primarily from non-cash charges to income and increases
in accounts payable, more than offset by increases in inventory, accounts
receivable and decrease in accrued expenses.
The Company used $165,000 in cash for investing activities during the
three-month period ended March 31, 2000, primarily to purchase property and
equipment to add manufacturing capacity and to increase the efficiency of
existing equipment.
The Revolving Credit and Loan Agreement with our principal lender was
modified September 2, 1999 to include a temporary over advance amount of
$500,000 on our Revolving Line of Credit that is payable over 18 months
beginning January 2000 and modification of the repayment start date of the
Machinery & Equipment ("M&E") Loan from October 1999 to April 1, 2000. The Line
of Credit remains at a maximum of $2,000,000. The Company has drawn down
$1,408,677 of the M&E Loan as of March 31, 2000.
9
<PAGE>
In December 1999, the Company amended their Revolving Credit and Loan
Agreement to modify the tangible net worth definition and minimum net income
financial covenants. Tangible Net Worth was amended to include the Subordinated
Debt agreement among the bank, Mr. Boxall (the "Subordinated Creditor"), and
Advanced Deposition Technologies, Inc. (the "Borrower").
On March 31, 2000, the financial agreement with our principal lender was
amended to reduce the M&E Loan borrowing limit from $2,000,000 to $1,500,000, to
record the agreement with Mr. Boxall to provide $300,000 in cash no later than
April 30, 2000, thereby increasing the Company's indebtedness to Mr. Boxall to
$1,399,598. These additional funds provided by Mr. Boxall are subordinated
pursuant to the Subordinated Debt agreement among the bank, Mr. Boxall (the
"Subordinated Creditor"), and Advanced Deposition Technologies, Inc. (the
"Borrower"). This financial amendment also included the waiver for
non-compliance with one of the financial covenants at December 31, 1999. The
bank waived the event of default relating to the covenant of tangible net worth
as of December 31, 1999, and March 31, 2000, respectively.
The Company uses the Line of Credit for working capital. Borrowings under
the Line of Credit bear interest at a rate per annum equal to the bank's prime
lending rate plus 1%. The Credit Agreement provides for a line-of-credit
facility of up to $2,000,000, based on percentages of its eligible accounts
receivable, raw materials and finished goods inventories (the "Line of Credit"),
as well as term loans in the aggregate principal amount of $3,750,000 (the "Term
Loans"). Each of these facilities matures on July 24, 2001. As of March 31, 2000
and December 31, 1999, the Company had an outstanding line of credit balance of
$1,990,000, a portion of which was classified to current for the respective
periods. The Term Loans are to be repaid in 29 monthly payments of $62,500,
commencing January 1999 with a balloon payment of $1,938,000 in July 2001.
Interest is payable monthly at the bank's prime rate plus 1.25%. As of March 31,
2000 the Company has repaid $937,500 of the $3,750,000 Term Loans and will be
meeting with the primary lender during the second quarter of 2000 to discuss the
maturities due in July 2001.
Management believes that the Company's cash and cash equivalents together
with its credit facilities and expected cash flows from operations, will provide
sufficient funds to meet the Company's current and future cash requirements and
allow the Company to continue its marketing and development efforts.
SEASONAL REVENUES
- -----------------
Historically, the Company has experienced lower sales to the electronic
capacitor market during the third quarter, particularly in July and August.
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
- ---------
During 1999 and the first quarter of 2000, there was minimal inflation
for raw materials and unit selling prices.
10
<PAGE>
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 Company's liquidity; (ii) the effect of seasons on its
revenue; (iii) the Company's future cash requirements; (iv) the Company's
ability to obtain UL approvals; (v) the Company's expected production and
revenues from new machinery; (vi) the effect of a reduced staff on cost of
revenues and; (vii) the expected demand for capacitor, microwave and HED films.
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: uncertainties regarding the performance
advantages of the Company's PMP products and products in development, 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.
11
<PAGE>
PART II - OTHER INFORMATION
Item 3. Default Upon Senior Securities
Modification # 6 of the Revolving Credit and Loan Agreement with our
primary lender included the waiver for non-compliance with one of the
financial covenants at December 31, 1999. The bank waived the event of
default relating the covenant of tangible net worth in the Revolving
Credit and Loan Agreement.
Item 6. Exhibits and Reports filed on Form 8-K
(a) Exhibits
10uu Modification No 4 to Revolving Credit and
Term Loan Agreement dated July 24, 1998
between the Company and National Bank of
Canada.
10vv Modification No 5 to Revolving Credit and
Term Loan Agreement dated September 2, 1999
between the Company and National Bank of
Canada.
10ww Modification No 6 to Revolving Credit and
Term Loan Agreement dated September 2, 1999
between the Company and National Bank of
Canada.
10xx Modification No 7 to Revolving Credit and
Term Loan Agreement dated March 31, 2000
between the Company and National Bank of
Canada.
10yy Subordinated Debt Agreement dated December
27, 1999 among the Company, National Bank of
Canada and Alexander Boxall.
10zz 1999 Incentive Plan dated February 1999
between the Company and Mr. Walters.
10aaa Amended Employment Agreement dated December
31, 1999 between the Company and Mr.
Walters.
(b) Reports on Form 8-K
None.
12
<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Advanced Deposition Technologies, Inc.
--------------------------------------
Registrant
May 11, 2000 /s/ Glenn J. Walters
- ------------------ --------------------------------
Glenn J. Walters
Chief Executive Officer
And Treasurer
(Principal Executive Officer)
May 11, 2000 /s/ Joseph P. Keller
- ------------------ --------------------------------
Joseph P. Keller
Controller
(Principal Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Description
------- -----------
10uu Modification No 4 to Revolving Credit and
Term Loan Agreement dated July 24, 1998
between the Company and National Bank of
Canada.
10vv Modification No 5 to Revolving Credit and
Term Loan Agreement dated September 2, 1999
between the Company and National Bank of
Canada.
10ww Modification No 6 to Revolving Credit and
Term Loan Agreement dated September 2, 1999
between the Company and National Bank of
Canada.
10xx Modification No 7 to Revolving Credit and
Term Loan Agreement dated March 31, 2000
between the Company and National Bank of
Canada.
10yy Subordinated Debt Agreement dated December
27, 1999 among the Company, National Bank of
Canada and Alexander Boxall.
10zz 1999 Incentive Plan dated February 1999
between the Company and Mr. Walters.
10aaa Amended Employment Agreement dated December
31, 1999 between the Company and Mr.
Walters.
27.1 Financial Data Schedule
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 397
<SECURITIES> 1
<RECEIVABLES> 7431
<ALLOWANCES> (166)
<INVENTORY> 4674
<CURRENT-ASSETS> 12787
<PP&E> 15941
<DEPRECIATION> (7674)
<TOTAL-ASSETS> 25779
<CURRENT-LIABILITIES> 12646
<BONDS> 5914
0
0
<COMMON> 49
<OTHER-SE> 6995
<TOTAL-LIABILITY-AND-EQUITY> 25779
<SALES> 7027
<TOTAL-REVENUES> 7045
<CGS> 5712
<TOTAL-COSTS> 5712
<OTHER-EXPENSES> 928
<LOSS-PROVISION> 166
<INTEREST-EXPENSE> 238
<INCOME-PRETAX> 164
<INCOME-TAX> 2
<INCOME-CONTINUING> 108
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
