<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended MARCH 31, 1996
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: 33-150-D
EPL TECHNOLOGIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
Colorado 84-0990658
-------- ----------
(State of incorporation) (I.R.S. Employer Identification Number)
200 FOUR FALLS CORPORATE CENTER, SUITE 315
WEST CONSHOHOCKEN, PA 19428
---------------------------
(Address of principal executive offices)
(610) 834-9600
------------------
(Telephone number)
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.
/X/ Yes / / No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
15,111,216 shares of $0.001 par value common stock
outstanding as of April 30, 1996.
<PAGE> 2
EPL TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
PART I - FINANCIAL INFORMATION
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
A. CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1996 AND DECEMBER 31, 1995 1
B. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 2
C. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 3
D. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 6
CONDITION AND RESULTS OF OPERATIONS.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 8
SIGNATURES. 9
</TABLE>
<PAGE> 3
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
- - --------------------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
(Unaudited) *
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 583,216 $ 1,522,075
Accounts receivable, net 1,315,213 1,333,353
Due from related parties 77,896 74,777
Inventories 650,584 561,255
Prepaid expenses and other current assets 300,438 442,814
------------ ------------
TOTAL CURRENT ASSETS 2,927,347 3,934,274
------------ ------------
PROPERTY AND EQUIPMENT, NET 1,766,508 1,786,534
------------ ------------
OTHER ASSETS:
Patent and distribution rights, net 1,550,152 1,632,497
Goodwill 2,334,964 2,396,380
Other intangibles, net 282,383 291,512
------------ ------------
TOTAL OTHER ASSETS 4,167,499 4,320,389
------------ ------------
TOTAL ASSETS $ 8,861,354 $ 10,041,197
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,542,327 $ 1,701,578
Accrued expenses 683,845 539,313
Other liabilities 298,528 288,651
Current portion of long-term debt 48,172 237,811
------------ ------------
TOTAL CURRENT LIABILITIES 2,572,872 2,767,353
LONG TERM DEBT 806,847 844,333
DEFERRED INCOME TAXES 53,388 53,672
------------ ------------
TOTAL LIABILITIES 3,433,107 3,665,358
STOCKHOLDERS' EQUITY:
Convertible Series A Preferred Stock 2,710,000 2,890,000
Common Stock 13,461 13,208
Additional paid-in-capital 15,034,239 14,843,992
Accumulated deficit (12,297,097) (11,362,545)
Foreign currency translation adjustment (32,356) (8,816)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 5,428,247 6,375,839
------------ ------------
TOTAL LIABILITIES & EQUITY $ 8,861,354 $ 10,041,197
============ ============
</TABLE>
* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements.
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<PAGE> 4
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
MARCH 31, MARCH 31,
1996 1995
----------- ---------
<S> <C> <C>
SALES $ 1,697,528 $ 309,492
COST OF SALES 1,407,195 217,332
----------- ---------
GROSS PROFIT 209,333 92,160
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 800,203 601,780
RESEARCH AND DEVELOPMENT COSTS 194,916 115,325
DEPRECIATION AND AMORTIZATION 212,996 106,641
----------- ---------
NET LOSS FROM OPERATIONS (917,782) (731,586)
INTEREST EXPENSE, NET 16,771 65,219
----------- ---------
INCOME BEFORE INCOME TAX EXPENSE (934,553) (796,805)
INCOME TAX 0 0
----------- ---------
NET LOSS $ (934,553) $(796,805)
DEDUCT EFFECT OF 10% CUMULATIVE PREFERRED DIVIDEND 71,294 80,930
----------- ---------
NET LOSS AVAILABLE FOR COMMON STOCKHOLDERS $(1,005,847) $(877,735)
=========== =========
PRIMARY LOSS PER COMMON SHARE $ (0.08) $ (0.11)
=========== =========
The accompanying notes are an integral part of these condensed financial statements.
</TABLE>
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<PAGE> 5
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- - -------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
----------------------------------
MARCH 31, MARCH 31,
1996 1995
----------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (934,553) $(796,805)
Adjustments to reconcile net loss to net cash
used in operating activities: 212,996 116,111
(Loss)/Gain on foreign currency translation (23,540) 118
Changes in assets and liabilities (143,500) (216,666)
----------- ---------
Net cash used in operating activities (888,597) (897,242)
----------- ---------
INVESTING ACTIVITIES:
Purchase of fixed assets (23,276) (49,820)
----------- ---------
Net cash used in investing activities (23,276) (49,820)
----------- ---------
FINANCING ACTIVITIES:
Increase in note payable - stockholder 930,000
Proceeds from the exercise of warrants/options 10,500
Repayment of long term debt (37,486)
----------- ---------
Net cash (used)/provided in financing activities (26,986) 930,000
----------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (938,859) (17,062)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,522,075 68,141
----------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 583,216 $ 51,079
=========== =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
-3-
<PAGE> 6
EPL TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The financial information of EPL Technologies, Inc. and Subsidiaries
(the Company) included herein is unaudited; however, such information reflects
all adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair statement of results for the
interim period.
The financial information has been prepared in accordance with
generally accepted accounting principles for interim financial information, the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly it does
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. Moreover, the results
of operations for the three months ended March 31, 1996 are not necessarily
indicative of the results to be expected for the full year. At this early stage
of the Company's development, month to month and quarter to quarter anomalies in
operating results are expected. This information must also be read in connection
with the Company's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1995.
NOTE 2 - OPERATIONS
The Company's continued ability to operate is dependent upon its
ability to maintain adequate financing and to achieve levels of revenues
necessary to support its cost structure. The nature of the processing aid
business is such that fresh cut produce processors and other third party users
supplying retail markets require extensive on-site, and, in certain cases,
independent testing prior to utilizing the Company's product in their
production. This results in an extended sales process. Management believes that
success in this process with large processors is the basis for developing
sustainable growth in revenues, which will enable the Company to achieve
profitable operations.
Management believes that cash flows from operations, together with
its current resources (including cash received in the recent warrant exercise
(See Note 8 below)) and the availability of financing from other sources, such
as the refinancing of existing debt of the Company's subsidiary, Bakery
Packaging Services Ltd. (BPS), or other private or public issuances of equity
which the Company believes may be obtained on acceptable terms, will allow the
Company to maintain adequate financing for the next year, assuming minimal
sales budgets are met.
NOTE 3 - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Raw Materials and Supplies $458,818 $361,252
Finished Goods 191,766 200,003
-------- --------
Total Inventories $650,584 $561,255
======== ========
</TABLE>
- 4 -
<PAGE> 7
NOTE 4 - INTANGIBLE ASSETS - PATENT AND DISTRIBUTION RIGHTS AND GOODWILL
Patents are amortized over the shorter of their estimated useful
lives or the life of the patent. The net book value of acquired and developed
patents totaled $1,148,354 as of March 31, 1996. Distribution rights are
amortized over the ten year life of the agreement. The net book value of
previously acquired distribution rights totaled $401,798 as of March 31, 1996.
Amortization expense related to patent and distribution rights totaled $82,345
for the three months ended March 31, 1996. Goodwill related to the acquisition
of certain subsidiaries is being amortized on a straight line basis over ten
years. Amortization expense related to goodwill totaled $70,545 for the three
months ended March 31, 1996.
NOTE 5 - CONVERTIBLE SERIES A PREFERRED STOCK
The Series A Preferred Stock, which has been issued up to its
authorized limit of 3,250,000, was issued at a price of $1.00 per share, with
each share of Preferred Stock carrying the option to convert into common shares
at a rate of $0.75 per share. The Preferred Stock carries equal voting rights to
the common shares, based on the underlying number of common shares after
conversion. The Preferred Stock carries a dividend rate of 10% per annum,
payable in cash and/or common shares ($0.75 per share) at the Company's option
(dividends in arrears at March 31, 1996 total $908,531).
During the three months ended March 31, 1996, shareholders holding
180,000 shares of Preferred Stock elected to exercise their right of conversion,
leaving 2,710,000 shares of Preferred Stock outstanding at March 31, 1996.
In addition, 20% of the common stock into which the Preferred Stock
may be converted carries detachable warrants at an exercise price of $1.00 per
warrant. During the three months ended March 31, 1996, 8,000 of these warrants
were exercised, leaving 255,199 of these warrants unexercised at March 31, 1996.
NOTE 6 - ISSUANCE OF COMMON STOCK AND EXERCISE OF WARRANTS
In addition to the 240,000 shares of common stock issued upon the
conversion of 180,000 shares of Preferred Stock and the 8,000 shares of common
stock issued upon the exercise of warrants as described in Note 5 above, 5,000
shares of common stock were issued due to the exercise of stock options during
the three month period ended March 31, 1996. The exercise of warrants and
options resulted in gross proceeds to the Company of $10,500. (See Note 8 below)
NOTE 7 - NET LOSS PER COMMON SHARE
Net loss per common share is computed by dividing the loss
applicable to common shareholders by the weighted average number of common
shares and common share equivalents during the period. Outstanding options,
convertible preferred stock and stock warrants were determined to be
antidilutive for the periods ended March 31, 1996 and 1995 and were therefore
excluded from the per share calculations.
- 5 -
<PAGE> 8
NOTE 8 - SUBSEQUENT EVENT
On April 2, 1996, warrants to purchase 1,374,664 shares of the
Company's common stock at $2.50 per share were exercised for total gross
proceeds to the Company of $3,436,660.
On April 19, 1996, the Company acquired the fixed tangible and
intangible assets of Pure Produce, a Massachusetts general partnership, through
a newly formed wholly-owned subsidiary, Pure Produce, Inc., a Massachusetts
Corporation, which the Company does not believe was a material acquisition. The
total cost of the acquisition, including professional fees, is currently
estimated at $150,000. Pure Produce is, and will continue to be, in the business
of providing companies in the food industry, especially those involved with
fresh and minimally processed produce, with analysis, protocols and plans
relating to food and quality assurance programs including microbial testing.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
EPL Technologies, Inc. develops, manufactures and markets
complementary proprietary technologies designed to maintain the integrity of
fresh produce. The Company's primary products are processing aids and packaging
materials, which are designed and marketed to processors of fresh fruits and
vegetables to be integrated into a customer's fresh produce production system.
The Company believes its products are safe, environmentally friendly and add
significant value to the business of its customers. The Company's goal is to
become a world class provider of products and scientific services designed to
maintain the integrity of fresh produce. As consumer awareness of reports
regarding the potential health hazards of sulfite-based preservatives, which the
Company's products do not contain, continues to grow, management believes
interest in the Company's products will increase. Management is continually
searching for new ways to market its products and expand operations, both
internally and, where appropriate, through strategic and opportunistic
acquisitions. The Company is currently engaged in discussions regarding
potential acquisitions and alliances but no new agreements have yet been reached
and there can be no assurances that any such agreements in fact will be reached.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
Sales for the three months ended March 31, 1996 were $1,697,528, an
increase of 448% on the total revenue of $309,492 achieved during the three
months ended March 31, 1995. Revenue for the first quarter of 1996 was comprised
of $104,654 of processing aids, $202,656 of US packaging materials and
$1,390,218 of UK and other European packaging materials. Sales of processing
aids and US packaging materials were broadly in line with sales achieved in
1995, with the majority of the $1,388,036 increase in sales in 1996 due to the
inclusion of Bakery Packaging Services Ltd. (BPS) which the Company acquired on
September 19, 1995.
Within the US processing aids business, a total of 21 customers purchased
processing aids during the quarter, compared to 30 for the same period in 1995.
This reflects the lack in this quarter of occasional sales to very small
processors while efforts have been focused towards new product introduction to
larger processors. Management continues to target medium to large volume food
processors as the customer base representing the best opportunity to provide
the Company a balance of satisfactory sales growth within a reasonable time
frame, while limiting the Company's customer concentration.
The US packaging materials business for the first quarter of 1996 was
relatively flat in comparison to 1995. The Company's experience is that
customers' ordering cycles for packaging materials vary quarter to quarter based
on seasonal demands and inventory control. The Company continues to target and
to expand product development activities and to exploit the synergies that exist
with the processing aid business.
The UK and other European packaging materials business of BPS was acquired
on September 19, 1995. Sales by BPS for the first quarter historically generate
lower sales than the remaining quarters of the year.
Gross margin for the first quarter of 1996 was 17% as compared to 30% for
the first quarter of 1995. This reduction is principally due to the inclusion in
consolidation of sales of UK and other European packaging materials,
- 6 -
<PAGE> 9
which generate a lower average margin than processing aids. However, it also
reflects the relationship between the volume of product sold and dollar volumes,
which can be distorted by varying product mix, varying processor efficiency
levels and by promotional pricing of products used for tests and evaluation.
Selling, general and administrative expenses rose from $601,780 for the
three months ended March 31, 1995 to $800,203 for the same period in 1996, an
increase of 33%, due mainly to the inclusion in consolidation of $157,667 of
expenses from the BPS operations. The remainder was due to the development of
sales and marketing effort to integrate the operating units of the Company as
well as projects to support large, prospective customers. The Company expects
that these expenses will continue to exceed prior year's activity beyond the
level of expenditures related to the BPS operation as additional staff and other
resources will be utilized to expand and administer the Company's business.
Research and development costs increased from $115,325 for the first quarter of
1995 to $194,916 during the first three months of 1996, an increase of 69%. This
reflects the costs of some of the collaborative projects commenced in 1995, as
well as, additional staff to support the Company's scientific and technical
objectives including the scientific activities related to projects supporting
the sales effort for large, prospective customers. The Company expects these
expenses to continue to exceed the prior year's expenditures but estimates that
costs will remain constant on a quarter to quarter basis throughout 1996.
Depreciation and amortization rose from $106,641 for the first three months of
1995 to $212,996 for the first quarter of 1996, an increase of 100%. Of this
increase, $61,416 was due to increased amortization of goodwill related to the
acquisition of BPS in September 1995. The remainder represents increased
depreciation as a result of capital expenditures.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had cash and cash equivalents of $583,216
compared to $1,522,075 as of December 31, 1995, a decrease of $938,859. During
the three months ended March 31, 1996, $888,597 was used in operations, compared
to $897,242 for the first three months of 1995. The 1996 financial information
includes the results of BPS, which was acquired in September 1995. Net cash used
in investing activities for the purchase of fixed assets totaled $23,276 during
the first quarter of 1996, compared to $49,820 in 1995.
Net cash used in financing activities for three months ended March 31,
1996 totaled $26,986, compared to net cash provided in the same quarter of 1995
of $930,000, which was provided by an increase in a note payable from a
shareholder. In the same period of 1996, $37,486 of long term debt was repaid
while $8,000 was raised through the exercise of warrants to purchase common
shares and $2,500 was received due to the exercise of 5,000 options. (See Note 6
to the financial statements)
As of March 31, 1996, the Company had 1,784,863 warrants outstanding to
purchase common stock at exercised prices ranging between $1 and $2.50 per
share. Subsequent to the end of the quarter, outstanding warrants to purchase
1,374,664 shares of the Company's common stock at $2.50 per share were
exercised, realizing total gross proceeds to the Company of $3,436,660.
The Company's continued ability to operate is dependent upon its ability
to maintain adequate financing and to achieve levels of revenue necessary to
support its cost structure. The Company's management believes that cash flows
from operations, together with its current resources (including cash received in
the recent warrant exercise) and the availability of financing from other
sources, such as the refinancing of existing BPS debt or other private or public
issuances of equity which the Company believes may be obtained on acceptable
terms, will allow the Company to maintain adequate financing for the next year,
assuming minimal sales budgets are met.
At March 31, 1996, there were no material commitments for capital
expenditures.
FORWARD LOOKING STATEMENTS
The discussion above includes certain forward looking statements regarding
the Company's expectations on gross margin, expenses, possible acquisitions and
new product introduction. Consequently, actual results may vary materially from
such expectations. Meaningful factors that might affect such results include:
a) the length of the sales process, b) raw material availability and pricing,
c) changes in regulatory environment and d) difficulty with research and
development activities regarding new products.
- 7 -
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
On April 2, 1996, warrants to purchase 1,374,664 shares of the Company's
common stock at $2.50 per share were exercised for total gross proceeds to the
Company of $3,436,660. A pro-forma condensed balance sheet illustrating the
effects of such exercise on the Company's balance sheet as of March 31, 1996 is
as follows:
<TABLE>
<CAPTION>
March 31, 1996 Adjustment March 31, 1996
before conversion on conversion after conversion
----------------- ------------- ----------------
<S> <C> <C> <C>
Cash and cash equivalents $ 583,216 $3,436,660 $ 4,019,876
Other assets 8,278,138 -- 8,278,138
---------- ---------- -----------
Total assets $8,861,354 $3,436,660 $12,298,014
========== ========== ===========
Total liabilities $3,433,107 -- $ 3,433,107
Total stockholders' equity 5,428,247 $3,436,660 8,864,907
---------- ---------- -----------
Total liabilities and stockholders' equity $8,861,354 $3,436,660 $12,298,014
========== ========== ===========
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A) Exhibit 10.15 - Employment agreement dated March 4,
1996 between EPL Technologies, Inc.
and Karen Penichter, Vice President-Sales.
Exhibit 11.0 - Computation of Loss per share
B) Reports on Form 8-K
On January 30, 1996, the Company filed a report on Form 8-K
under Item 5 thereof, in connection with the execution of
a letter of intent with Potandon Produce, L.L.C.
- 8 -
<PAGE> 11
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.
EPL TECHNOLOGIES, INC.
Date May 15, 1996 /s/ Paul L. Devine
-----------------------------
Paul L. Devine
Chairman and President
(Principal Executive Officer)
Date May 15, 1996 /s/ Shawn J. Collins
-----------------------------
Shawn J. Collins
Controller, Secretary
(Principal Financial Officer
and Principal Accounting
Officer)
- 9 -
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this 4th day of March, 1996, by and between
EPL TECHNOLOGIES, INC., a Colorado corporation (hereinafter called "Company"),
and KAREN A. PENICHTER, an individual (hereinafter called "Employee").
W I T N E S S E T H:
WHEREAS, Company wishes to employ Employee and Employee wishes to enter into the
employ of Company on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the facts, mutual promises and
covenants contained herein and intending to be legally bound hereby, Company and
Employee agree as follows:
1. Employment. Company hereby employs Employee and Employee
hereby accepts employment by Company for the period and upon the terms and
conditions contained in this Agreement.
2. Office and Duties.
(a) Employee shall serve Company generally as Vice
President - Sales reporting to the President and shall have such authority and
such responsibilities as Company reasonably may determine from time to time.
Employee shall perform any other duties reasonably required by Company and, if
requested by Company, shall serve as an officer or director of Company without
additional compensation.
(b) Throughout the term of this Agreement, Employee shall
devote her entire working time, energy, skill and best efforts to the
performance of her duties hereunder in a manner which will faithfully and
diligently further the business and interests of Company and shall not, during
the term of this Agreement, actively engage in any other business activity,
whether or not for profit; provided, however, that Employee may engage in such
other business activity as is set forth in Exhibit A attached hereto; provided,
further, to the extent such activity, in the aggregate, does not, in the
reasonable judgment of Company, interfere with Employee's duties at the Company
or compete with any aspect of the Company's business.
3. Term. This Agreement shall commence as of 8:00 a.m., March 4,
1996 and shall continue for a term of two years, ending on March 3, 1998, unless
sooner terminated as hereinafter provided. Unless either party elects to
terminate this Agreement at the end of the original or any renewal term by
giving the other party notice of such election at least sixty (60) days before
the expiration of the then current term, this Agreement shall be deemed to have
been renewed for an additional term of one (1) year commencing on the day after
the expiration of the then current term.
<PAGE> 2
4. Compensation.
(a) For all of the service rendered by Employee to
Company, Employee shall receive an annual base salary of One Hundred Ten
Thousand Dollars ($110,000.00), payable in installments in accordance with
Company's regular payroll practices in effect from time to time, but not less
frequently than monthly. On an annual basis, the Board of Directors of the
Company shall review Employee's performance under this Agreement for the purpose
of considering a raise in her current base salary. The Board of Directors may
award such a raise, in any amount, or no raise whatsoever, in its sole
discretion.
(b) In addition to Employee's base salary, Employee may
be entitled to certain bonuses based on the sales performance of the Company in
the areas of responsibility agreed upon. In the event those sales are achieved,
the Employee will be entitled to a cash bonus of up to 25% of her base salary.
Employee may be entitled to additional future bonuses, if, as, and only to the
extent, agreed and determined by the Board of Directors of the Company, in its
sole discretion.
(c) Throughout the term of this Agreement and as long as
they are kept in force by Company, Employee shall be entitled to participate in
and receive the benefits of any profit sharing or retirement plans and any
health, life, accident, disability insurance or sick leave plans or programs
made available to other similarly situated employees of Company.
(d) Employee shall be entitled to ten (10) days paid
vacation during the year ended December 31, 1996 and three (3) additional days
paid vacation each successive year of the employment term under the Agreement,
in addition to all national holidays on which the principal executive offices of
the Company are closed. Accrued but unused vacation days may be carried forward
into the succeeding year with the approval of the President.
5. Expenses. Company will reimburse Employee for all reasonable
expenses incurred by Employee in connection with the performance of Employee's
duties hereunder upon receipt of itemized accounts of such expenditures and in
accordance with Company's regular reimbursement procedures and practices in
effect from time to time.
6. Grant of Options.
(a) In addition to Employee's salary described in
Paragraph 4 above, in consideration of Employee executing this Agreement and
providing services hereunder, upon the execution of this Agreement, the Company
hereby grants to Employee options (collectively, any options granted under this
Agreement are hereinafter called "Options" and individually, an "Option") to
purchase all or any part of an aggregate of 100,000 shares of Company common
stock, par value $.001 per share (the "Common Stock") at the prevailing market
price per share of Common Stock.
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<PAGE> 3
(b) Employee may be entitled to future options, if, as,
and only to the extent, agreed and determined by the Board of Directors of the
Company, in its sole discretion.
(c) Withholding of Taxes. Whenever the Company proposes
or is required to deliver or transfer Options or shares of Common Stock pursuant
to this Agreement or the exercise of any Option, the Company shall have the
right to (a) require Employee to remit to the Company or to withhold from
Employee directly, amounts sufficient to satisfy any federal, State and/or local
withholding tax requirements, prior to the delivery or transfer of any
certificates for such Options or Shares of Common Stock or (b) take whatever
action it deems necessary to protect its interest with respect to tax
liabilities.
(d) Terms of Option Exercise. Each Option granted under
subparagraph (a) above shall have the terms and conditions pursuant to the EPL
Technologies, Inc. 1994 Stock Incentive Plan, as amended.
(e) Mechanics of Exercise. When exercisable, any Option
granted hereunder may be exercised by written notice to the Company (the "Option
Exercise Notice") specifying the number of shares to be issued upon exercise of
the Option (the "Option Shares") and containing the Employee's acknowledgement,
in form and substance satisfactory to the Company, that the Employee (i) is
purchasing such Option Shares for investment and not for distribution or resale
and (ii) has been advised and understands that such Option Shares may not be
transferred without compliance with all applicable federal or state securities
laws. The Option Exercise Notice shall be accompanied by payment of the
aggregate exercise price for the Option Shares being issued, at the option of
the Employee, (x) in cash, (y) by certified check payable to the order of the
Company or (z) by a combination of the foregoing.
7. Disability.
(a) If Employee becomes substantially unable to perform
her duties hereunder due to partial or total disability or incapacity resulting
from a mental or physical illness, injury or any other cause, Company will
continue the payment of Employee's base salary at its then current rate for a
period of twenty-six (26) weeks following the date Employee is first unable to
perform her duties due to such disability or incapacity. Thereafter, Company
shall have no obligation for base salary or other compensation payments to
Employee during the continuance of such disability or incapacity. Until such
time that Company elects to terminate this Agreement as provided for in
subparagraph (b), Company shall continue such compensation as set forth in
subparagraph 4 (c).
(b) If Employee becomes substantially unable to perform
her duties hereunder due to partial or total disability or incapacity resulting
from a mental or physical illness, injury or any other cause for a period of
twenty-six (26) consecutive weeks or for a cumulative period of thirty-six (36)
weeks during any twelve-month period, Company shall have the right to terminate
this Agreement thereafter, in which event Company shall have no further
obligations or liabilities hereunder after the date of such termination, other
than as set forth in Paragraph 10 below.
- 3 -
<PAGE> 4
8. Death. If Employee dies, all payments hereunder shall cease at
the end of the month in which Employee's death shall occur and Company shall
have no further obligations or liabilities hereunder to Employee's estate or
legal representative or otherwise, other than as set forth in Paragraph 11
below.
9. Sale of Company's Business. In the event any of one of the
following actions were to occur: (a) the Company adopts any plan of liquidation
providing for the distribution of all or substantially all of its assets; (b)
all or substantially all of the business of the Company is disposed of pursuant
to a merger, consolidation or other transaction (unless the shareholders of the
Company immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the same proportion
as they owned the voting stock of the Company, all of the voting stock or other
ownership interests of the entity or entities, if any, that succeed to the
business of the Company); or (c) the Company combines with another company and
is the surviving corporation, but immediately after the combination, the
shareholders of the Company, immediately prior to the combination, hold,
directly or indirectly, 50% or less of the voting stock of the combined company
(there being excluded from the number of shares held by such shareholders, but
not from the voting stock of the combined company, any share received by
"affiliates" as such term is defined in the rules of the Securities and Exchange
Commission, of such other company in exchange for the stock of such other
company), the Company or Employee may terminate Employee's employment on four
(4) weeks prior notice, and in such event Company shall pay Employee her then
applicable annual base salary, in monthly installments, for a period of twelve
(12) months after the date on which such termination occurred (the "Termination
Payment"). Upon making Termination Payment in full, Company shall have no
further obligations or liabilities hereunder and Employee shall be released from
the restrictions contained in subparagraphs 13 (a) and 13 (b) hereof.
10. Discharge for Cause, etcetera. Company may discharge Employee
at any time for "cause" immediately upon written notice by Company to Employee.
For the purposes of this Agreement, "cause" for termination shall, without
limitation, be deemed to exist for any of the following: (i) criminal conduct
(whether or not related to Employee's employment), (ii) Employee's failure or
inability to perform her duties hereunder to the satisfaction of Company, (iii)
habitual intoxication, (iv) drug addiction, (v) insubordination, (vi) gross
negligence, (vii) any violation of any express direction or any reasonable rule
or regulation established by Company from time to time regarding the conduct of
its business, (viii) refusal by Employee to comply with reasonable directives of
the Board of Directors of the Company, (ix) any misrepresentation made in this
Agreement, or (x) any violation by Employee of the terms and conditions of this
Agreement including without limitation Paragraph 13. In any such event, Company
shall have no further obligations or liabilities hereunder after the date of
such discharge, other than as set forth in Paragraph 11 below.
11. Severance Payments. If this Agreement is terminated pursuant
to Paragraphs 7, 8 and 10 at any time prior to March 3, 1998, other than a
termination under Paragraph 10 for acts of fraud or gross negligence, Company
shall pay Employee, after such termination, for an additional period of six (6)
months after the month in which such termination occurs, additional monthly
installments of her then applicable annual base salary and upon completion of
such six monthly payments, Company shall have no further liabilities or
obligations to Employee hereunder.
- 4 -
<PAGE> 5
12. Company Property. All advertising, sales, manufacturers' and
other materials or articles or information, including without limitation data
processing reports, customer sales analyses, invoices, price lists or
information, samples, or any other materials or data of any kind furnished to
Employee by Company or developed by Employee on behalf of Company or at
Company's direction or for Company's use or otherwise in connection with
Employee's employment hereunder, are and shall remain the sole and confidential
property of Company; if Company requests the return of such materials at any
time during or at or after the termination of Employee's employment, Employee
shall immediately deliver the same to Company.
13. Noncompetition, Trade Secrets, Etc.
(a) During the term of this Agreement and for a period of
three (3) years after the termination of her employment with Company for any
reason whatsoever, Employee shall not directly or indirectly induce or attempt
to influence any employee of Company to terminate their employment with Company
and shall not engage in (as a principal, partner, director, officer, agent,
employee, consultant or otherwise) or be financially interested in any business
operation within the continental United States, which is involved in business
activities, with the exception of the food ingredients/additives business, which
are the same as, similar to or in competition with business activities carried
on by Company, or being definitely planned by Company, at the time of the
termination of Employee's employment. However, nothing contained in this
Paragraph 13 shall prevent Employee from holding for investment no more than
five percent (5%) of any class of equity securities of a company whose
securities are traded on a national securities exchange.
(b) During the term of this Agreement and at all times
thereafter, Employee shall not use for her personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or company other than the Company, any material
referred to in Paragraph 12 above or any information regarding the business
methods, business policies, procedures, techniques, research or development
projects or results, trade secrets, or other knowledge or processes of or
developed by the Company or any names and addresses of customers or clients or
any data on or relating to past, present or prospective customers or clients or
any other confidential information relating to or dealing with the business
operations or activities of Company, made known to Employee or learned or
acquired by Employee while in the employ of Company.
(c) Any and all writing, inventions, improvements,
processes, procedures and/or techniques which Employee may make, conceive,
discover or develop, either solely or jointly with any other person or persons,
at any time during the term of this Agreement, whether during working hours or
at any other time and whether at the request or upon the suggestion of the
Company or otherwise, which relate to or are useful in connection with any
business now or hereafter carried on or contemplated by the Company, including
developments or expansions of its present field of operations, shall be the sole
and exclusive property of Company. Employee shall make full disclosure to
Company of all such writings, inventions, improvements, processes, procedures
and techniques, and shall do everything necessary or desirable to vest the
absolute title thereto in Company. Employee shall write and prepare all
specifications and procedures regarding such inventions,
- 5 -
<PAGE> 6
improvements, processes, procedures and techniques and otherwise aid and assist
Company so that Company can prepare, at the Company's expense, and present
applications for copyright or Letters Patent therefore and can secure such
copyright or Letters Patent wherever possible, as well as reissues, renewals,
and extensions thereof, and can obtain the record title to such copyright or
patents so that Company shall be the sole and absolute owner thereof in all
countries in which it may desire to have copyright or patent protection.
Employee shall not be entitled to any additional or special compensation or
reimbursement regarding any and all such writings, inventions, improvements,
processes, procedures and techniques.
(d) Employee acknowledges that the restrictions contained
in the foregoing subparagraphs (a), (b) and (c), in view of the nature of the
business in which Company is engaged, are reasonable and necessary in order to
protect the legitimate interests of Company, and that any violation thereof
would result in irreparable injuries to Company, and Employee therefore
acknowledges that, in the event of her violation of any of these restrictions,
Company shall be entitled to obtain from any court of competent jurisdiction
preliminary and permanent injunctive relief as well as damages and an equitable
accounting of all earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies to which Company may be entitled.
(e) If the period of time or the area specified in
subparagraph (a) above should be adjudged unreasonable in any proceeding, then
the period of time shall be reduced by such number of months or the area shall
be reduced by the elimination of such portion thereof or both so that such
restrictions may be enforced in such area and for such time as is adjudged to be
reasonable. If Employee violates any of the restrictions contained in the
foregoing subparagraph (a), the restrictive period shall not run in favor of
Employee from the time of the commencement of any such violation until such time
as such violation shall be cured by Employee to the satisfaction of Company.
14. Prior Agreement. Employee represents to Company (a) that there
are no restrictions, agreements or understandings whatsoever to which Employee
is a party which would prevent or make unlawful her execution of this Agreement
or her employment hereunder, (b) that her execution of this Agreement and her
employment hereunder shall not constitute a breach of any contract, agreement or
understanding, oral or written, to which she is a party or by which she is bound
and (c) that she is free and able to execute this Agreement and to enter into
employment by Company.
15. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor any delay
on the part of either party to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver
- 6 -
<PAGE> 7
shall be effective unless it is in writing and is signed by the party asserted
to have granted such waiver.
(b) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement
(including, without limitation, provisions concerning limitations of actions),
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, and without the aid of any canon, custom or rule
of law requiring construction against the draftsman.
(c) Notices. All notices, request, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received only when
delivered (personally, by courier service such as Federal Express, or by other
messenger) or when deposited in the United States mails, registered or certified
mail, postage prepaid, return receipt requested, addressed as set forth below:
(i) If to Employee:
Karen A. Penichter
3103 Videre Drive
Wilmington, DE 19808
(ii) If to Company:
EPL Technologies, Inc.
200 Four Falls Corporate Center
Suite 315
West Conshohocken, PA 19428
Attention: President
In addition, notice by mail shall be by air mail if
posted outside of the continental United States.
Any party may alter the address to which
communications or copies are to be sent by giving notice of such change of
address in conformity with the provisions of this paragraph for the giving of
notice.
(d) Binding Nature of Agreement. This Agreement shall be
binding upon and inure to the benefit of Company and its successors and assigns
and shall be binding upon Employee, her heirs and legal representatives.
(e) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This
- 7 -
<PAGE> 8
agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories.
(f) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or unenforceable
in whole or in part.
(g) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to subject matter hereof,
and supersedes all prior and contemporaneous agreements and understanding,
inducements or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
(h) Paragraph Headings. The paragraph headings in this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
(i) Gender, Etc. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context indicates is appropriate.
(j) Number of Days. In computing the number of days for
purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and holidays; provided, however, that if the final day of any time
period falls on a Saturday, Sunday or holiday on which federal banks are or may
elect to be closed, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or such holiday.
IN WITNESS WHEREOF, the parties have executed and delivered
that Agreement as of the date first above written.
EPL TECHNOLOGIES, INC.
By:/s/ Paul L. Devine
-------------------------------
Paul L. Devine
President
By:/s/ Karen A. Penichter
-------------------------------
Karen A. Penichter
Employee
- 8 -
<PAGE> 9
KAREN A. PENICHTER
EXHIBIT A
OTHER BUSINESS ACTIVITIES
NONE
<PAGE> 1
EXHIBIT 11.0
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF LOSS PER COMMON SHARE AND
FULLY DILUTED LOSS PER COMMON SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------
1996 1995
-------- --------
<S> <C> <C>
Net Loss $ (935) $ (797)
Deduct effect of 10% cumulative preferred dividend 71 81
-------- --------
Adjusted net loss for loss per share computation $ (1,006) $ (878)
======== ========
Weighted average number of common shares outstanding 13,311 7,675
======== ========
Primary loss per share $ (0.08) $ (0.11)
======== ========
Net loss for loss fully diluted loss per share computation $ (935) $ (797)
======== ========
Weighted average number of common shares outstanding 13,311 7,675
Common share equivalent applicable to:
Series A, convertible preferred stock 3,760 4,307
Series A, warrants 258 330
Other warrants 1,530 1,375
Stock options outstanding 2,137 1,000
-------- --------
Weighted average number of common shares and
common share equivalents used to compute fully
diluted loss per share 20,996 14,687
======== ========
Fully diluted loss per share $ (0.04) $ (0.05)
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STTEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH
31, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000945269
<NAME> EPL TECHNOLOGIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 583,216
<SECURITIES> 0
<RECEIVABLES> 1,315,213
<ALLOWANCES> 0
<INVENTORY> 650,584
<CURRENT-ASSETS> 2,927,347
<PP&E> 2,013,523
<DEPRECIATION> 247,015
<TOTAL-ASSETS> 8,861,354
<CURRENT-LIABILITIES> 2,572,872
<BONDS> 806,847
13,461
0
<COMMON> 2,710,000
<OTHER-SE> 2,704,786
<TOTAL-LIABILITY-AND-EQUITY> 8,861,354
<SALES> 1,697,528
<TOTAL-REVENUES> 1,697,528
<CGS> 1,407,195
<TOTAL-COSTS> 1,407,195
<OTHER-EXPENSES> 1,208,115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,771
<INCOME-PRETAX> (934,553)
<INCOME-TAX> 0
<INCOME-CONTINUING> (934,553)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (934,553)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.04)
</TABLE>
