<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 June 30, 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: 0-28444
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.
15,395,200 shares of $0.001 par value common stock
outstanding as of July 31, 1996.
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EPL TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
A. CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995 1
B. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND THREE MONTHS ENDED
JUNE 30, 1996 AND 1995 2
C. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS AND THREE MONTHS ENDED
JUNE 30, 1996 AND 1995 3
D. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 7
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
</TABLE>
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
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(Unaudited) *
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,468,146 $ 1,522,075
Accounts receivable, net 1,441,397 1,333,353
Due from related parties 71,794 74,777
Inventories 662,846 561,255
Prepaid expenses and other current assets 513,720 442,814
----------- -----------
Total current assets 8,157,903 3,934,274
----------- -----------
PROPERTY AND EQUIPMENT, Net 1,857,082 1,786,534
----------- -----------
OTHER ASSETS:
Patent and distribution rights, net 1,467,808 1,632,497
Goodwill 2,272,363 2,396,380
Other intangibles, net 331,450 291,512
----------- -----------
Total other assets 4,071,621 4,320,389
----------- -----------
TOTAL ASSETS $14,086,606 $10,041,197
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,542,732 $ 1,701,578
Accrued expenses 708,883 539,313
Other liabilities 333,071 288,651
Current portion of long-term debt 48,865 237,811
----------- -----------
Total current liabilities 2,633,551 2,767,353
LONG TERM DEBT 1,014,155 844,333
DEFERRED INCOME TAXES 54,155 53,672
----------- -----------
Total liabilities 3,701,861 3,665,358
STOCKHOLDERS' EQUITY:
Convertible Series A Preferred Stock 2,585,000 2,890,000
Common Stock 15,391 13,208
Additional paid-in-capital 21,332,959 14,843,992
Accumulated deficit (13,539,172) (11,362,545)
Foreign currency translation adjustment (9,433) (8,816)
----------- -----------
Total stockholders' equity 10,384,745 6,375,839
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $14,086,606 $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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EPL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
1996 1995 1996 1995
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Sales $ 3,543,104 $ 575,579 $ 1,845,576 $ 266,087
Cost of Sales 2,974,429 416,160 1,567,234 198,828
----------- ----------- ----------- ---------
Gross Profit 568,675 159,419 278,342 67,259
Selling, general and administrative expenses 1,900,401 1,199,426 1,100,198 597,646
Research and development costs 414,101 244,583 219,185 129,258
Depreciation and amortization 413,807 215,016 200,811 108,375
----------- ----------- ----------- ---------
Net loss from operations (2,159,634) (1,499,606) (1,241,852) (768,020)
Interest expense, net 16,992 154,312 221 89,093
----------- ----------- ----------- ---------
Net loss $(2,176,626) $(1,653,918) $ (1,242,073) $(857,113)
Deduct:
Effect of 10% cumulative preferred dividend 137,107 160,680 65,813 79,750
----------- ----------- ----------- ---------
Net loss available for common stockholders $(2,313,733) $(1,814,598) $(1,307,886) $(936,863)
=========== =========== ============ =========
Loss per common share $ (0.16) $ (0.23) $ (0.09) $ (0.12)
=========== =========== ============ =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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EPL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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<TABLE>
<CAPTION>
SIX MONTH ENDED
-------------------------------
JUNE 30, JUNE 30,
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (2,176,626) $(1,653,918)
Adjustments to reconcile net loss to net cash
used in operating activities: 413,807 418,535
(Loss)/Gain on foreign currency translation (617) 118
Changes in assets and liabilities (411,180) (408,692)
----------- -----------
Net cash used in operating activities (2,174,616) (1,643,957)
----------- -----------
INVESTING ACTIVITIES:
Purchase of intangible assets (59,488)
Purchase of fixed assets (176,280) (92,954)
----------- -----------
Net cash used in investing activities (235,768) (92,954)
----------- -----------
FINANCING ACTIVITIES:
Increase in note payable - stockholder 1,750,000
Proceeds from the exercise of warrants/options/share issue 6,186,150
Proceeds from net borrowings 931,200
Repayment of long term debt (760,895)
----------- -----------
Net cash provided in financing activities 6,356,455 1,750,000
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 3,946,071 13,089
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,522,075 68,141
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,468,146 $ 81,230
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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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 six months and three months ended June 30,
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 processing aid products in
their production. This results in an extended sales process. Management
believes that success in this process with large processors as well as
expanding the scope of the Company's proprietary packaging business are the
principal bases for developing sustainable growth in revenues, which will
enable the Company to achieve profitable operations.
The Company's management believes that available cash and cash
equivalents, cash flows from operations and the availability of borrowing under
its line of credit will provide the Company adequate financing for the next
year, assuming minimal sales budgets are met.
NOTE 3 - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
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<S> <C> <C>
Raw Materials and Supplies $375,239 $361,252
Finished Goods 287,607 200,003
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Total Inventories $662,846 $561,255
======== ========
</TABLE>
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 $1,123,410 as of June 30, 1996. Distribution rights are
amortized over the ten year life of the agreement. The net book value of
previously acquired distribution rights
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<PAGE> 7
totaled $344,398 as of June 30, 1996. Amortization expense related to patent
and distribution rights totaled $164,689 for the six months ended June 30,
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 $141,090 for the six months ended June 30, 1996.
NOTE 5 - CONVERTIBLE SERIES A PREFERRED STOCK
The Series A Preferred Stock (the "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 June 30, 1996 total $974,344).
During the three months ended June 30, 1996, shareholders holding
125,000 shares of Preferred Stock elected to exercise their right of
conversion, leaving 2,585,000 shares of Preferred Stock outstanding at June 30,
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 June 30, 1996, 6,667 of these warrants
were exercised, leaving 248,532 of these warrants unexercised at June 30, 1996.
NOTE 6 - ISSUANCE OF COMMON STOCK AND EXERCISE OF WARRANTS
In addition to the 166,667 shares of common stock issued upon the
conversion of 125,000 shares of Preferred Stock and the 6,667 shares of common
stock issued upon the exercise of warrants as described in Note 5 above,
375,000 shares of common stock were issued due to the exercise of stock
options, 5,983 shares of common stock were issued as payment for professional
services (recorded at a cost of $23,932) and 1,374,664 shares of common stock
were issued upon exercise of other warrants during the three month period ended
June 30, 1996. This exercise of warrants and options resulted in aggregate
gross proceeds to the Company of $3,687,077.
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 June 30, 1996 and 1995 and were therefore
excluded from the per share calculations.
NOTE 8 - ACQUISITION
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. The total cost of the acquisition, including professional fees,
was approximately $150,000. Pure Produce, Inc. is 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.
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<PAGE> 8
NOTE 9 - SUBSEQUENT EVENTS
In July 1996 the Company acquired, through a newly formed
wholly-owned UK subsidiary (EPL Flexible Packaging Limited ("EPL Flexible")),
certain fixed assets located at Gainsborough, Lincolnshire, UK, of a division
of Printpack Europe (St Helens) Limited ("Printpack St Helens"). EPL Flexible
also assumed a real estate lease and offered employment to certain of the
employees of Printpack St Helens. The total net consideration paid was
$1,286,500. EPL Flexible specializes in the printing of flexible packaging
films serving primarily the snack food industry. EPL Flexible will operate as
a wholly-owned subsidiary of EPL Technologies (Europe) Limited.
Also in July 1996, the Company formed a new wholly-owned US
subsidiary, Crystal Specialty Films, Inc. ("Crystal"), to acquire the assets
and assume certain liabilities of Crystal Plastics, Inc., based in Illinois.
Crystal uses "K" resin and polystyrene resins to manufacture a range of
proprietary films for a variety of applications. After an initial payment of
approximately $400,000, a further $267,000 is payable in quarterly annual
installments over two years, with a final payment based on the performance of
the business over the next two years. Crystal will serve as the site for
installation of proprietary gas flame perforation equipment which the Company
has had custom-built in the UK. The Company plans to use this proprietary
technology as the basis for penetration of the US perforated film market which
the Company is currently serving, to a limited degree, from the UK. The
Company is currently providing proprietary gas flame perforation of film to a
US film manufacturer, under an interim purchase order and the Company is
currently shipping this film, at this US customer's expense, to and from the
Company's perforation facility in the UK. The Company is currently negotiating
with this US customer to convert this interim purchase order into a long term
supply agreement, although there can be no assurance that a definitive
agreement will in fact be completed. The Company expects to file a Report on
Form 8-K regarding the eventual completion or termination of these
negotiations.
In addition, also in July 1996, the Company formed NewCornCo LLC
("NewCornCo"), a jointly-owned Delaware limited liability company in which the
Company currently owns 51% of the equity interests. The Company's co-owner in
NewCornCo is Underwood Ranches, the trade name of Agricultural Innovation and
Trade, Inc. NewCornCo will utilize the Company's proprietary processing aid
and packaging technologies and Underwood's existing corn processing and
distribution capabilities to pursue development of a year-round, national,
value-added market for fresh corn products.
At the Annual Meeting of the Company held on July 22, 1996, the
shareholders of the Company approved the issuance of up 2,000,000 shares of
Board Designated Preferred Stock. On July 23, 1996, the Company issued 531,915
of these shares - designated as Series B Convertible Preferred Stock - at an
aggregate consideration of $2,500,000 to two existing investors in the Company
(the "B Preferred Stock"). These shares carry the option to convert into
shares of common stock at the rate of $4.70 per share and carry equal voting
rights to the shares of common stock, based on the underlying number of shares
of common stock issuable upon any conversion. The B Preferred Stock carries a
dividend rate of 10% per annum, payable in cash and/or shares at the Company's
option. The Company had received the proceeds from this issue as at June 30,
1996, and has been recorded in Additional Paid-In Capital.
Also at the Annual Meeting of the Company, the shareholders of the
Company approved an amendment to the Company's 1994 Stock Incentive Plan (the
"Plan") which (a) increases the number of shares of Common Stock reserved for
issuance under the Plan from 1,5000,000 to 3,000,000 and (b) increases the
number of shares of Common Stock that may be granted to any individual under
the Plan in any calendar year from 100,000 to 200,000.
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
EPL Technologies, Inc. develops, manufactures and markets
proprietary technologies designed to maintain the integrity of fresh produce.
The Company's primary products are processing aids and packaging materials,
which are designed for 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 also believes
that processing aids and packaging materials are complimentary technologies and
market them as such. 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 continues to grow of reports of the potential
health hazards of sulfite-based preservatives, management believes interest in
the Company's products will increase, as the Company's products do not contain
sulfites. 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 will in fact be reached.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Sales revenue for the six months ended June 30, 1996 increased to
$3,543,104 compared with $575,579 recorded during the six months ended June 30,
1995, an increase of 516%. The revenue for the first six months of 1996 was
comprised of $194,760 of processing aids, $443,484 of US packaging materials
and $2,904,860 of UK and other European packaging materials. Sales of
processing aids and US packaging materials were both ahead of the same period
in 1995 but the majority of the increase in sales of $2,967,525 was due to the
inclusion in the Company's revenues of the operations of Bakery Packaging
Services Limited ("BPS"), which the Company acquired in September 1995.
Within the US processing aid business, the Company's focus continued
to be towards new product introduction to larger processors. Testing at a
number of new locations was commenced, and management believes that this
provides the best opportunity to develop satisfactory sales growth within a
reasonable time frame, while limiting the Company's customer concentration.
The US packaging materials business grew by some 13% over the same
period in 1995. Two significant new customers were gained towards the end of
the second quarter, which will benefit the sales in the second half of 1996.
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 European packaging materials business was acquired in
September 1995 and has continued to perform well in difficult market conditions
involving instability in prices. The second half of the year historically has
been stronger than the first half.
The Company has not experienced significant backlog due to nature of
demand for its products.
Gross margin for the six months ended June 30, 1996 was 16% as
compared to 27% for the same period last year. This reduction is due
principally to the inclusion in consolidation of sales of UK and other European
packaging materials, which generate a lower average margin than processing
aids. It also reflects a commercial decision to accept a lower margin
initially to gain the two new accounts in the US packaging business. As
volumes increase with these customers, the margin will be increased as the
Company benefits from economies of scale. In addition, 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 to $1,900,401 from
$1,199,426, an increase of $700,975. This was due mainly to the inclusion in
consolidation of $316,651 of expenses from the BPS operations. The remainder
was due to the continuing development of the sales and marketing effort as well
as projects to support
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<PAGE> 10
prospective, large customers particularly for field tests of the Company's
fresh potato product. The Company expects that this level of additional
expenditure will continue at least in the short term. Furthermore, as interest
in the Company has grown, additional costs have been incurred in investor
relations, including the costs of mailings to shareholders, as the number of
shareholders has increased significantly. This has also included additional
professional costs in connection with SEC and other shareholder related
matters. Research and development costs increased from $244,583 to $414,101,
an increase of $169,518. This reflects the costs of some of the collaborative
projects commenced during 1995, as well as additional staff to support the
Company's scientific and technical objectives in relation to the ongoing sales
effort for prospective, large customers particularly with reference to the
field tests noted above. Again, the Company expects that these expenses will
continue to exceed such expenses for 1995, although the operations of Pure
Produce, Inc. may enable the Company to capture some of these expense items as
intracompany revenue. Depreciation and amortization expense increased by
$198,791, from $215,016 in 1995 to $413,807 in 1996. The majority of this
increase was due to increased amortization of goodwill related to the
acquisition of BPS in September 1995, with the remainder due to increased
depreciation as a result of capital expenditures. This increase is in line
with the increase seen in the first quarter of 1996.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30,1995
Sales revenue for the three months ended June 30, 1996 increased to
$1,845,576, compared with $266,087 recorded during the three months ended June
30, 1995, an increase of 593%. Of the sales in the second quarter, processing
aids accounted for $90,106, US packaging materials $240,828 and UK and other
European packaging materials $1,514,642.
Within the US processing aid business the focus continued to be
towards new product introduction to larger processors, with the sales in 1996
only slightly ahead of the same period in 1995. Testing at a number of new
locations was commenced, and management believes that this provides the best
opportunity to develop satisfactory sales growth within a reasonable time
frame, while limiting the Company's customer concentration.
The US packaging materials business grew by some 32% over the same
period in 1995, helped by gaining new customers during the period. The Company
continues to target and to expand product development activities and to exploit
synergies that it believes exist with the processing aid business.
The UK and other European packaging materials business was acquired
in September 1995.
Gross margin for the second quarter of 1996 was 15.% as compared to
25% for the second quarter of 1995. This reduction is also principally due to
the inclusion in consolidation of sales of UK and other European packaging
materials, which, as noted above, generate a lower average margin than
processing aids. However, also as mentioned above, 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 to $1,100,198 from
$597,646, an increase of $502,552. This was due to 1) the inclusion in
consolidation of $158,984 of expenses from the BPS operations; 2) the continuing
development of the sales and marketing effort as well as projects to support
prospective, large customers particularly for field tests of the Company's
fresh potato product (the Company expects that this level of additional
expenditure will continue at least in the short term); and 3) as interest in the
Company has grown, additional costs have been incurred in investor relations,
including the costs of mailings to shareholders, as the number of shareholders
has increased significantly. This has also included additional professional
costs in connection with SEC and other shareholder related matters. Research
and development costs increased from $129,258 to $219,185, an increase of
$89,927. This reflects the costs of some of the collaborative projects
commenced during 1995, as well as additional staff to support the Company's
scientific and technical objectives in relation to the ongoing sales effort for
large, prospective customers particularly with reference to the field tests
noted above. Again, the Company expects that these expenses will continue to
exceed the expenses in 1995. Depreciation and amortization expense increased by
$92,436, from $108,375 in 1995 to $200,811 in 1996. The majority of this
increase was due to increased amortization of goodwill related to the
acquisition of BPS in September 1995, with the remainder due to increased
depreciation as a result of capital expenditure.
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<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996 the Company had $5,468,146 in cash and short term
investments, compared with $1,522,075 at December 31, 1995, an increase of
$3,946,071. During the six months ended June 30, 1996, cash has been used to
fund operating activities of $2,174,616 and to finance the purchase of fixed
tangible and intangible assets of $235,768. Total financing activities of
$6,356,455 were provided to the Company during this period, including
$3,687,077 from the exercise of options and warrants as mentioned in Notes 5
and 6 above and $2,500,000 provided from the subscription to the Series B
Convertible Preferred Stock. In addition, the Company negotiated new banking
facilities for EPL Technologies (Europe) Limited. This allowed the existing
long term debt in its BPS subsidiary to be consolidated and refinanced on
improved terms. The total facility available is $1,722,720, of which $931,200
had been drawn at June 30, 1996.
Additional financing through an equity offering or increase in debt
facility may be required if the Company fails to meet its sales objectives over
the short term. 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 nature of the 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 products in their production. This results in
an extended sales process. The Company's management believes that this process
is the basis for developing sustainable growth in revenues which will enable
the Company to achieve profitable operations. The Company's management also
believes that cash flows from operations and the availability of borrowing
under its line of credit will allow the Company to maintain adequate financing
for the next year, assuming minimal sales budgets are met. In addition to the
$791,520 remaining available to be drawn under the Bank of Scotland facility,
403,532 warrants remained outstanding which, if exercised, would raise gross
proceeds of $558,532. At June 30, 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) increases in, or difficulties due to, the length of
the sales process, b) changes in raw material availability and pricing, c)
changes in regulatory environment and d) difficulty with research and
development activities regarding new products.
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<PAGE> 12
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits:
Exhibit 3.1 Amended and Restated Articles of
Incorporation of the Company (incorporated by
reference to Exhibit 3.1 of the Company's
Registration Statement on Form S-3, filed on
August 7, 1996 (Registration number
333-09719))
Exhibit 11.0 Computation of Loss per share
b) Reports on Form 8-K:
On July 9, 1996 the Company filed a report on Form 8-K under
Item 5 thereof, in connection with trading of the Company's
shares of common stock on the Nasdaq SmallCap market.
On July 19, 1996 the Company filed a report on Form 8-K under
Item 2 thereof, in connection with the acquisition of certain
assets and certain liabilities of Printpack Europe (St
Helens) Limited.
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<PAGE> 13
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.
<TABLE>
<S> <C> <C>
Date: August 14, 1996 /s/ Paul L. Devine
---------------------------------------
Paul L. Devine
Chairman and President
(Principal Executive Officer)
Date: August 14, 1996 /s/ Timothy B. Owen
---------------------------------------
Timothy B. Owen
Principal Financial Officer and
Principal Accounting Officer
</TABLE>
- 11 -
<PAGE> 1
EPL Technologies, Inc.
Exhibit 11.0
Computation of Earning (Loss) per Share and
Fully Diluted Earnings (Loss) per Share
<PAGE> 2
EXHIBIT 11.0
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF LOSS PER COMMON SHARE AND
FULLY DILUTED LOSS PER COMMON SHARE
(in thousands except per share data)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
1996 1995 1996 1995
--------- -------- --------- -----------
<S> <C> <C> <C> <C>
Net Loss $(2,177) $(1,654) $ (1,242) $ (857)
Deduct effect of 10% cumulative preferred dividend 137 161 66 80
------- ------- -------- -------
Adjusted net loss for loss per share computation $(2,314) $(1,815) $ (1,308) $ (937)
======= ======= ======== =======
Weighted average number of common shares outstanding 14,256 7,744 14,256 7,804
======= ======= ======== =======
Primary loss per share $ (0.16) $ (0.23) $ (0.09) $ (0.12)
======= ======= ======== =======
Net loss for fully diluted loss per share computation $(2,177) $(1,654) $ (1,242) $ (857)
======= ======= ======== =======
Weighted average number of common shares outstanding 14,256 7,744 14,256 7,804
Common share equivalent applicable to:
Series A, convertible preferred stock 3,614 4,280 3,469 4,253
Series A, warrants 254 330 251 330
Other warrants 842 1,375 155 1,375
Stock options outstanding 2,295 1,181 2,454 1,362
------- ------- -------- -------
Weighted average number of common shares and
common share equivalents used to compute fully
diluted loss per share 21,261 14,910 20,585 15,124
======= ======= ======== =======
Fully diluted loss per share $ (0.10) $ (0.11) $ (0.06) $ (0.06)
======= ======= ======== =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30,
1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000945269
<NAME> EPL TECHNOLOGIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 5,468,146
<SECURITIES> 0
<RECEIVABLES> 1,441,397
<ALLOWANCES> 0
<INVENTORY> 662,846
<CURRENT-ASSETS> 8,157,903
<PP&E> 3,113,720
<DEPRECIATION> 1,256,638
<TOTAL-ASSETS> 14,086,606
<CURRENT-LIABILITIES> 2,633,551
<BONDS> 1,014,155
0
2,585,000
<COMMON> 15,391
<OTHER-SE> 7,784,354
<TOTAL-LIABILITY-AND-EQUITY> 14,086,606
<SALES> 3,543,104
<TOTAL-REVENUES> 3,543,104
<CGS> 2,974,429
<TOTAL-COSTS> 2,974,429
<OTHER-EXPENSES> 2,728,309
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,992
<INCOME-PRETAX> (2,176,626)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,176,626)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,176,626)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.10)
</TABLE>
