UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ to ______
Commission File Number 0-29048
ACCENT COLOR SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Connecticut 06-1380314
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Connecticut Boulevard, East Hartford, Connecticut 06108
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including areacode:(860) 610-4000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the
past 90 days. Yes /x/ No / /
The number of shares outstanding of the registrant's
common stock as of April 24, 1998 was 12,198,836.
ACCENT COLOR SCIENCES, INC.
FORM 10-Q
For The Quarterly Period Ended March 31, 1998
INDEX
Part I. Financial Information
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<TABLE>
<CAPTION>
ACCENT COLOR SCIENCES, INC.
(a development stage company)
CONDENSED BALANCE SHEETS
March 31, December
31, 1998 1997
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,735,216 $ 4,005,563
Accounts receivable 623,152 439,934
Inventories (Note 3) 5,184,192 4,611,216
Prepaid expenses and other
assets 275,794 323,306
Total current assets 10,818,354 9,380,019
Fixed assets, net 2,682,718 2,974,422
Other assets, net 52,609 52,698
Total assets $13,553,681 $12,407,139
Liabilities and Shareholders' Equity
Current liabilities:
Obligations under capital
leases 63,374 61,360
Accounts payable 1,237,809 859,693
Accrued expenses 830,389 1,041,383
Customer advances and deposits 38,320 85,600
Deferred revenue 2,598,800 2,496,000
Total current liabilities 4,768,692 4,544,036
Obligation under capital leases 74,175 91,937
Other long-term liabilities 551,001 501,644
Total non-current liabilities 625,176 593,581
Shareholders' equity:
Preferred stock, no par value,
500,000 shares authorized,
4,500 and 0 shares issued
and outstanding (Note 4) 3,921,038 -
Common stock, no par value,
25,000,000 shares authorized,
12,027,355 and 11,989,855
shares issued and outstanding 45,159,258 45,114,633
Deficit accumulated during the
development stage (40,920,483) (37,845,111)
Total shareholders' equity 8,159,813 7,269,522
Total liabilities and
shareholders' equity $13,553,681 $12,407,139
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
ACCENT COLOR SCIENCES, INC.
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For the period
from inception
(May 21, 1993)
Three months ended March through
1998 1997 March 31, 1998
<S> <C> <C> <C>
Sales $ 916,733 $ - $2,494,241
Costs and expenses:
Costs of production 1,628,047 934,218 10,297,232
Research and
development 1,478,947 2,128,450 21,072,072
Marketing, general
and administrative 909,342 1,157,769 11,212,135
4,016,336 4,220,437 42,581,439
Other (income) expense:
Interest expense 7,783 69,698 1,004,163
Interest income (32,014) (194,110) (744,181)
(24,231) (124,412) 259,982
Net loss before
extraordinary item (3,075,372) (4,096,025) (40,347,180)
Extraordinary item:
Loss on early
extinguishment of debt,
net of income taxes of
nil - - (573,303)
Net loss $(3,075,372) $(4,096,025) $(40,920,483)
Imputed dividend
on preferred
stock (Note 4) (920,000) - (920,000)
Net loss applicable
to common stock $(3,995,372) $(4,096,025) $(41,840,483)
Net loss (basic &
diluted) per common
share (Note 2) $ (.33) $ (.40)
Weighted average common
shares outstanding
(Note 2) 11,993,188 10,139,775
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
ACCENT COLOR SCIENCES, INC.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the
period from
inception
(May 21, 1993)
Three months ended March 31, through
1998 1997 March 31, 1998
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss before
imputed dividend $ (3,075,372) $ (4,096,025) $(40,920,483)
Adjustments to reconcile
net loss to net cash used in
operating activities:
Depreciation and
amortization 288,321 235,779 2,505,353
Write-off of deferred
offering costs - - 47,264
Expense related to
stock and options granted - - 363,630
Debenture issued for
services - - 50,000
Loss on disposal of
fixed assets 13,453 - 116,982
Conversion of accrued
interest to common stock - - 231,147
Extraordinary loss on
extinguishment of debt - - 573,303
Changes in assets and
liabilities:
Accounts receivable (183,218) (113,118) (623,152)
Inventories (572,976) (869,896) (5,184,192)
Prepaid expenses and
other assets 47,512 (51,918) (275,794)
Accounts payable and
accrued expenses 167,122 (731,824) 1,890,677
Customer advances and
deposits (47,280) (30,000) 38,320
Deferred revenue 102,800 150,000 2,598,800
Other long-term
liabilities 49,357 85,002 551,001
Net cash used in
operating activities (3,210,281) (5,422,000) (38,037,144)
Cash flows from investing
activities:
Proceeds from sale of fixed
assets - - 5,524
Purchases of fixed assets (9,982) (571,712) (4,432,230)
Cost of patents - (19,553) (54,766)
Net cash used in
investing activities (9,982) (591,265) (4,481,472)
Cash flows from financing
activities:
Payment of capital lease
obligations (15,747) (24,880) (156,846)
Net proceeds from issuance
of debentures - - 4,839,101
Proceeds from issuance of
warrants - - 318,113
Net proceeds from issuance
of common stock - - 38,407,134
Proceeds from exercise of
options & warrants 44,625 - 2,523,172
Net proceeds from issuance
of preferred stock
through offerings
and conversion of debt 3,921,038 - 5,351,672
Increase in long term debt - - 2,223,750
Repayment of debentures - - (6,205,000)
Deferred offering costs - - (47,264)
Net cash provided by
(used in) financing
activities 3,949,916 (24,880) 47,253,832
Net increase
(decrease) in cash and
cash equivalents 729,653 (6,038,145) 4,735,216
Cash and cash
equivalents at
beginning of period 4,005,563 20,288,535 -
Cash and cash
equivalents at end of period $ 4,735,216 $ 14,250,390 $ 4,735,216
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
ACCENT COLOR SCIENCES, INC.
(a development stage company)
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Deficit
Accumulated
During the
Common Stock Preferred Stock Development
Shares Amount Shares Amount Stage Total
<S> <C> <C> <C> <C> <C> <C>
Proceeds from
sale 3,900 $21,800 - $ - $ - $ 21,800
Net loss - - - - (45,398) (45,398)
December 31, 1993 3,900 21,800 - - (45,398) (23,598)
Stock split 1,751,100 - - - - -
Conversion of
debentures - - 74,360 371,804 - 371,804
Proceeds from
sale - - 160,000 643,770 - 643,770
Conversion of
promissory
notes 42,000 50,000 - - - 50,000
Reclassification - (20,500) - - - (20,500)
Shares issued
for services - - 15,000 75,000 - 75,000
Net loss - - - - (1,153,533) (1,153,533)
December 31, 1994 1,797,000 51,300 249,360 1,090,574 (1,198,931) (57,057)
Proceeds from
sale - - 75,000 340,060 - 340,060
Exercise of
warrants 297,840 694,960 - - - 694,960
Options granted
to service
provider - 18,400 - - - 18,400
Warrants issued
with debt - 56,631 - - - 56,631
Net loss - - - - (4,216,955) (4,216,955)
December 31, 1995 2,094,840 821,291 324,360 1,430,634 (5,415,886) (3,163,961)
Warrants issued
with debt - 138,032 - - - 138,032
Proceeds from
sale 2,625,000 9,460,044 - - - 9,460,044
Warrants issued
with debt - 123,450 - - - 123,450
Proceeds from
initial public
offering 3,450,000 24,409,464 - - - 24,409,464
Conversion of
Series III
debentures 607,626 2,116,575 - - - 2,116,575
Conversion of
Preferred
stock 1,362,309 1,430,634 (324,360) (1,430,634) - -
Net loss - - - - (13,738,661) (13,738,661)
December 31,
1996 10,139,775 38,499,490 - - (19,154,547) 19,344,943
Exercise of
options 92,250 465,067 - - - 465,067
Exercise of
warrants 394,091 1,445,000 - - - 1,445,000
Shares issued in
connection with
the Xerox
agreement 50,000 218,750 - - - 218,750
Proceeds from
sale 1,313,739 4,486,326 - - - 4,486,326
Net loss - - - - (18,690,564) (18,690,564)
December 31,
1997 11,989,855 45,114,633 - - (37,845,111) 7,269,522
Proceeds from
sale - - 4,500 3,921,038 - 3,921,038
Exercise of
options 37,500 44,625 - - - 44,625
Net loss before
imputed dividend - - - - (3,075,372) (3,075,372)
March 31, 1998
(unaudited) 12,027,355 $45,159,258 4,500 $ 3,921,038 $(40,920,483) $8,159,813
</TABLE>
The accompanying notes are an integral part of these financial statements.
ACCENT COLOR SCIENCES, INC.
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Interim Condensed Financial Statements
In the opinion of the Company, the accompanying
unaudited condensed financial statements contain all
adjustments, consisting only of normal recurring adjustments,
necessary to present fairly its financial position
as of March 31, 1998 and the results of
operations and cash flows for the three months
ended March 31, 1998 and 1997 and the period from
inception (May 21, 1993) through March 31, 1998.
The December 31, 1997 balance sheet has been
derived from the Company's audited financial
statements at that date. These interim
condensed financial statements should be read in
conjunction with Management's Discussion and
Analysis and financial statements included in the
Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of the
results to be expected for the full year.
2. Summary of Significant Accounting Policies
Significant accounting policies followed in the
preparation of these financial statements are as
follows:
Use of Estimates
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Revenue is generally recognized upon product
shipment and customer acceptance. The Company has
established warranty policies that, under specific
conditions, enable customers to return products.
The Company establishes liabilities for
estimated returns and allowances at the time
of revenue recognition. Until such time that the Company
has adequate information to estimate future
returns, revenue resulting from Truecolor Systems
is deferred until the end of the warranty period.
Net Loss Per Common Share
In the fourth quarter of 1997, the Company adopted
Statement of Financial Accounting Standards No. 128,
"Earnings per Share," for all periods presented.
Basic earnings per share computations are determined
based on the weighted average number of shares
outstanding during the period. The effect of the
exercise and conversion of all securities,
including stock options and warrants would be
antidilutive and thus is not included in the
diluted earnings per share calculation.
3.Inventories
Inventories consist of the following:
March 31, December 31,
1998 1997
Raw materials and components $1,958,679 $1,590,386
Work-in-process 318,762 403,585
Finished goods 2,906,751 2,617,245
$5,184,192 $4,611,216
4. Shareholders' Equity
On January 13, 1998 the Company completed a
private equity financing providing net proceeds to
the Company of $3.9 million. In connection with the
financing, the Company issued 4,500 shares of Series
B Convertible Preferred Stock at a price of $1,000
per share and warrants to purchase the Company's
common stock. The warrants issued are exercisable
into 300,000 shares of common stock with an exercise
price of $2.75 andan expiration date of January 9, 2003.
Additionally, warrants exercisable into 115,385
shares of common stock with an exercise price of
$2.50 and an expiration date of January 9, 2003
were issued to the placement agent for services
provided. In connection with the sale of the units,
the Company agreed to register the common stock
issuable upon the conversion of the Series B
Convertible Preferred Stock and the execution of the
warrants.
The Series B Convertible Preferred Stock ("Series B
Stock"), no par value per share, is convertible into
such number of shares of common stock as is
determined by dividing the stated value ($1,000)
of each share of Series B Stock (as such value
is increased by an annual premium of 6%) by the
then current conversion price of the Series B
Stock (which is determined, generally, by
reference to 85% of the average of the closing
market price of the common stock during the five
consecutive trading days immediately preceding the
date of determination) subject to certain
restrictions and adjustments. The Series B Stock
has voting rights as defined in the Company's
Certificate of Incorporation, bears no dividends
and ranks prior to the Company's Common Stock and
Series A Preferred Stock. In the event of any
voluntary or involuntary liquidation of the Company,
the Series B holders shall be entitled to a
liquidation preference equal to the stated value of
the stock plus the accrued premium through the
date of final distribution. Upon occurrence of
specific events, as defined in the agreement, the
holder may redeem the Series B Stock for cash or
shares at the option of the Company. The Company
also has optional redemption rights.
The Company has reserved 6,300,000 shares of common
stock for issuance pursuant to the conversion of the
Series B Stock. This number of shares represents
an estimate based on 200% of the number of
common shares that would have been issuable upon
conversion with an exercise price of $1.875 per share
(4,800,000) and 1,500,000 shares issuable under the
terms of the Certificate of Designation in the event
of certain failures by the Company to comply with
various provisions thereof. The actual number of
shares issuable upon conversion could be materially
less or more than such estimated number depending
on factors that cannot be predicted by the
Company. The number of shares issuable upon
conversion is dependent on (a) the market price of
the common stock at the time of the conversion, (b)
the Company's ability to maintain its NASDAQ
listing and (c) the Company's ability to obtain
shareholder approval for the issuance of common stock
upon the conversion of Series B Stock and the
related warrants. In addition, 415,385 shares of common stock,
subject to adjustments in accordance with the terms of each
warrant, were reserved for issuance pursuant to the exercise
of the warrants described above.
The terms of conversion of the Series B Stock issued
in January 1998 afforded the holders a conversion
price lower than the market price of the common
stock at the time of issuance. The difference between
the conversion price and market price was treated as
an imputed (non-cash) dividend for purposes of calculating
net loss per common share, although no assets of the Company
will be expended. The imputed dividend is
approximately $920,000 and has the effect of
increasing the net loss per common share by $.08
per share for the three months ended March 31,
1998. The imputed dividend will be given no other
accounting treatment in the 1998 financial
statements of the Company and beyond.
Depending on the number of shares of Series B
Stock converted into common shares and the
timing of such conversions, the transactions may
result in further Section 382 annual limitations of
net operating loss carryforwards.
5. Subsequent Events
By action of the Board of Directors on April 14,
1998, the Company re-priced all options outstanding
under its 1995 Stock Incentive Plan which had a
current exercise price exceeding $3.125 to an
exercise price of $3.125 per share, the fair market
value as of that date. The weighted average
exercise price of all options outstanding was
reduced from $3.85 per share at December 31, 1997
to $2.93 per share after the re-pricing.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Quarter Ended March 31, 1998 compared to Quarter
Ended March 31, 1997.
Total Net Sales. Total net sales were $917,000 for
the quarter ended March 31, 1998 compared to none for
the quarter ended March 31, 1997. System sales
constituted 53.8% of total net sales for the quarter
ended March 31, 1998 while sales of consumables and
spare parts constituted 46.2%.
Systems. System sales were $493,000 for the quarter
ended March 31, 1998 compared to none for the quarter
ended March 31, 1997. Sales for the first quarter of
1998 consisted of revenue recognized on one pre-production
system and four production systems that were shipped in 1997.
During the first quarter of 1998, the Company
introduced to the market a new enhanced version of
its product, the wide-head Truecolor System. A total
of five enhanced systems were shipped in the first
quarter, which encompassed one pre-production wide-
head system and four production wide-head systems.
These shipments were recorded as deferred revenue in
accordance with the revenue recognition policy of the
Company. As of March 31, 1998, the Company's printer
backlog consisted of 33 systems totaling $3,322,000 for the
next 12 months. The backlog includes 21 new systems and
12 upgrades to the wide-head level totaling $2,494,000 and
$828,000, respectively.
Consumables and Spare Parts Sales. Consumables and
spare parts sales were $424,000 for the quarter ended
March 31, 1998 compared to none for the quarter ended
March 31, 1997. Such sales are directly attributed
to our OEM customers filling their sales channels for
the introduction of the new enhanced wide-head
Truecolor system.
Costs of Production. Costs of production increased
74.3% from $934,000 for the quarter ended March 31,
1997 to $1,628,000 for the quarter ended March 31,
1998. This increase was primarily attributed to cost
of goods sold related to the sale of printers,
consumables and spare parts during the first quarter
of 1998.
Research and Development Expenses. Research
and development expenses decreased 30.5% from $2,128,000
for the quarter ended March 31, 1997 to $1,479,000 for the
quarter ended March 31, 1998 as the Company started
directing its efforts toward production and marketing
and sales with a less significant emphasis on
research and development. The decrease in research
and development expenses was primarily attributable
to three major factors: (i) a reduction in payroll
related costs as a result of the Company's
realignment of its resources in January 1998, (ii)
the Company's completion in the quarter ending
December 31, 1997 of the payments to Spectra, Inc.
("Spectra") to maintain exclusivity rights and (iii)
a decrease in materials and prototype supplies
procured for research and development.
Marketing, General and Administrative Expenses. Marketing,
general and administrative expenses decreased 21.5%
from $1,158,000 for the quarter ended March 31, 1997
to $909,000 for the quarter ended March 31, 1998.
This decrease was primarily due to a reduction in
payroll related costs as a result of the Company's
realignment of its resources in January 1998 and a
reduction of other general and administrative
expenses. Marketing costs, however, increased by approximately
$45,000 to support the increased sales and marketing
efforts planned for 1998.
Interest Expense and Other (Income) Expense.
Interest expense decreased 88.6% from $70,000 for
the quarter ended March 31, 1997 to $8,000 for the
quarter ended March 31, 1998. This decrease was
primarily attributed to the elimination of interest
expense as a result of the settlement and final
payment of outstanding debt with Xerox Corporation in
the second half of 1997. Interest income decreased
83.5% from $194,000 for the quarter ended March 31,
1997 to $32,000 for the quarter ended March 31, 1998.
This decrease in interest income was attributed to a
greater amount of cash available for investment in
the first quarter of 1997 as compared to the
first quarter of 1998, primarily due to the
Company's initial public offering in December 1996.
Liquidity and Capital Resources
The Company's need for funding has increased from
period to period as it has continued its
research and development activities for the
enhancement of Truecolor Systems, increased its
capital expenditures on equipment and commenced
production of Truecolor Systems. To date, the
Company has financed its operations through
customer payments, borrowings and sale of equity
securities.
Through March 31, 1998, the Company had received
$5.7 million from the delivery of 48 Truecolor
Systems to customers, net proceeds of $7.8
million from borrowings and the sale of debt
securities, net proceeds of $2.5 million from the
exercise of warrants and stock options and net
proceeds of $43.4 million from the sale of equity
securities. Of the net equity proceeds, $24.4
million was raised in the Company's initial public
offering in December 1996 and the balance of $19.0
million was raised through the private placement of
equity securities.
As of March 31, 1998, the Company's primary source
of liquidity was cash and cash equivalents totaling
$4.7 million.
Operating activities consumed $3.2 million in cash
during the first quarter of 1998 compared to $5.4
million in the first quarter of 1997. This
decrease was primarily attributed to a decrease in
the net loss of the Company and less cash utilized in
the procurement of inventory and payment of
outstanding liabilities.
Capital expenditures decreased 98.3% from $591,000
for the quarter ended March 31, 1997 to $10,000 for
the quarter ended March 31, 1998. This decrease was
primarily attributed to leasehold improvements made
to occupy the second floor of the facility currently
leased by the Company and purchases of manufacturing
and test equipment to support the Company's
development and manufacturing efforts, which were all
incurred during the first quarter of 1997.
On January 13, 1998, the Company completed a private
equity financing providing net proceeds to the
Company of $3.9 million. Pursuant to the financing,
the Company issued 4,500 shares of Series B
Convertible Preferred Stock at a price of $1,000 per
share and warrants to purchase the Company's common
stock. The warrants issued are exercisable into
300,000 shares of common stock with an exercise price
of $2.75 and an expiration date of January 9, 2008.
Additionally, warrants exercisable into 115,385
shares of common stock with an exercise price of
$2.50 and an expiration date of January 9, 2003 were
issued to the placement agent for services provided.
In January 1998, the Company completed a
realignment of its staffing in an effort to further
optimize its resources to meet the challenges and
demands of the marketplace. This realignment and
other reductions decreased the Company's staffing
from 140 full-time, part-time and contract
employees as of December 31, 1997 to 96 full-
time, part-time and contract employees as of March
31, 1998.
Based on the current operating plan of the Company,
the primary requirements for cash through the
remainder of 1998 will be to fund operating
losses, increased marketing and sales efforts,
commercial production of the enhanced Truecolor
System and the further development and
enhancement of the Company's products. The
Company's currently planned research and
development activities are focused on developing
wider ink jet printheads for greater color coverage
per page and higher resolution ink jet printing.
Under the current operating plan, the Company
believes that its existing cash resources and the
funds raised through the private placement
completed in January 1998 will be sufficient for
the financing of its operations and capital
expenditures through at least the second quarter of
1998. The Company is continuing to review various
financing strategies, both debt and equity, that
would allow it to continue to fund operations and
planned capital expenditures through the remainder
of 1998. In the event the Company is
unsuccessful in achieving its anticipated increased
sales volume or the Company fails to obtain
additional financing, the Company would expect to
reduce costs and expenses through reduction in its
planned expansion, including a reduction in 1998
planned inventory increases, capital expenditures
and other costs, sufficient to fund cash
requirements through the end of 1998. The
Company is a development stage company and it is
expected that quarterly net losses will continue
through at least the fourth quarter of 1998.
Forward-Looking Statements
The foregoing statements and analysis contain forward-
looking statements and information including
information with respect to the Company's plans and
strategy for its business. Such forwardlooking
statements are made pursuant to the "safe harbor"
provisions of Section 21E of the Securities Exchange
Act of 1934, as amended, which were enacted as part
of the Private Securities Litigation Reform Act of
1995. Forward-looking statements
contained in the foregoing analysis include
marketing, revenue and expenditure expectations, and
other strategies and anticipated events. Without
limiting the foregoing, the words "believes",
"anticipates", "plans", "expects" and similar
expressions are intended to identify forward-looking
statements. There are a number of important factors
that could cause actual events or the Company's
actual results to differ materially from those
indicated by such forward-looking statements. These
factors include, without limitation, (i) the ability
of the Company to develop and maintain sales and
distribution agreements with OEM customers; (ii) the
ability of the Company to develop a market for its
product; (iii) the dependence of the Company on
third party marketing, distribution and support,
including the control by the Company's OEM customers
over the timing of the introduction of its products
and the need for the Company to complete and satisfy
extensive testing requirements of its products on a
timely basis; (iv) the dependence of the Company on
third party manufacturers and suppliers; (v) the
ability of the Company to raise sufficient capital on
reasonable terms; (vi) the level of customer acceptance of the
Company's products; and (vii) potential fluctuations
in the Company's quarterly results of operations.
Further information on factors that could cause
actual results to differ from those anticipated is
detailed in the Company's Annual Report on Form 10-K
for 1997 as filed with the Securities and Exchange
Commission. Any forward-looking information
contained herein should be considered in light of
these factors.
Part II. Other Information
Item 1. Legal Proceedings
The Company is not a party to any material legal
proceedings.
Item 2. Changes in Securities and Use of Proceeds
On January 13, 1998 the Company completed a
private equity offering of 4,500 shares of the
Company's Series B Convertible Preferred Stock
(the " Series B Stock") with accompanying
warrants to purchase an aggregate of 300,000
shares of the Company's common stock. The
offering yielded gross proceeds of $4.5 million to
the Company and net proceeds to the Company of $3.9
million after advisors' fees of $472,500 and other
offering expenses of approximately $106,500. The
Series B Stock was sold exclusively to Accredited
Investors and was not registered under the
Securities Act of 1933, as amended, in reliance on
Section 4(2) thereof as interpreted by Rule 506
of Regulation D promulgated thereunder. In
connection with the offering, the Company agreed
to register the common stock issuable upon the
conversion of the Series B Stock and the
exercise of the warrants.
The Series B Stock, no par value per share, is
convertible into such number of shares of common
stock as is determined by dividing the stated
value ($1,000) of each share of Series B Stock (as
such value is increased by an annual premium of 6%)
by the then current conversion price of the Series B
Stock (which is determined, generally, by reference
to 85% of the average of the closing market price
of the common stock during the five consecutive
trading days immediately preceding the date of
determination) subject to certain restrictions and
adjustments.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
By action of the Board of Directors on April 14,
1998, the Registrant granted options to purchase
shares of the Registrant's common stock at an
exercise price of $3.125 per share, the fair market
value as of that date, to Charles E. Buchheit who,
effective May 8, 1998, will become the Registrant's
President and Chief Executive Officer. Coincident
with such grant, the Registrant also re-priced, based
on the fair market value as of April 14, 1998, all
options outstanding under its 1995 Stock Incentive
Plan which had a current exercise price exceeding
$3.125.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial data schedule
(b) Reports filed on Form 8-K
On January 13, 1998, the Company filed a report on
Form 8-K in which it reported the completion of a
private equity financing consisting of 4,500 units
of Series B Convertible Preferred Stock and warrants
to purchase the Company's Common Stock.
Signatures
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ACCENT COLOR SCIENCES, INC.
Date May 1, 1998 By /s/ Norman L. Milliard
Norman L. Milliard
President and Chief
Executive Officer
By /s/ Patrick J. Pedonti
Patrick J. Pedonti
Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,735,216
<SECURITIES> 0
<RECEIVABLES> 623,152
<ALLOWANCES> 0
<INVENTORY> 5,184,192
<CURRENT-ASSETS> 10,818,354
<PP&E> 4,569,071
<DEPRECIATION> 1,886,353
<TOTAL-ASSETS> 13,553,681
<CURRENT-LIABILITIES> 4,768,692
<BONDS> 74,175
0
3,921,038
<COMMON> 45,159,258
<OTHER-SE> (40,920,483)
<TOTAL-LIABILITY-AND-EQUITY> 13,553,681
<SALES> 916,733
<TOTAL-REVENUES> 916,733
<CGS> 1,628,047
<TOTAL-COSTS> 1,628,047
<OTHER-EXPENSES> 1,478,947
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,783
<INCOME-PRETAX> (3,075,372)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,075,372)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,075,372)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
