<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 11, 1997
-------------------------------
EPL Technologies, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 0-28444 84-0990658
- -------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification No.)
2 International Plaza, Suite 245, Philadelphia, PA 19113-1507
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 521-4400
-----------------------------
Not Applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
Financial statements of the business acquired, reflecting the assets
acquired and the revenues and expenses of Fabbri, are included in this
report and are listed in the Index to Pro Forma Financial Information
and Financial Statements.
(b) Pro Forma Financial Information
Pro Forma financial information, reflecting the acquisition of Fabbri,
is included in this report and is listed in the Index to Pro Forma
Financial Information and Financial Statements.
(c) Exhibits
2.1 Agreement for the sale and purchase of the entire issued share
capital of Fabbri Artes Graficas Valencia S.A., dated December 11,
1997 (previously filed on Form 8-K)
<PAGE> 2
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 hereunto duly authorized.
Dated: February 20, 1998 EPL Technologies, Inc.
By: /s/ Timothy B. Owen
______________________
Timothy B. Owen
Secretary and Treasurer
<PAGE> 3
EPL TECHNOLOGIES, INC.
INDEX TO PRO FORMA FINANCIAL INFORMATION
AND FINANCIAL STATEMENTS
Fabbri Artes Graficas Valencia S.A.
Audited Consolidated Financial Statements:
Independent Auditors' Report F-3
Consolidated Balance Sheets as of September 30, 1997 and 1996 F-4
Consolidated Statements of Income for the Years Ended
September 30, 1997 and 1996. F-5
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-7
EPL Technologies, Inc. - Unaudited Pro Forma Financial Information
Unaudited Pro Forma Information F-21
Unaudited Condensed Consolidated Pro Forma Statement of Operations
for the Year Ended December 31, 1996 F-22
Unaudited Condensed Consolidated Pro Forma Statement of Operations
for the Nine Months Ended September 30, 1997 F-23
Notes to the Unaudited Condensed Consolidated
Pro Forma Statements of Operations F-24
Unaudited Condensed Consolidated Pro Forma Balance Sheet as
of September 30, 1997 F-25
Notes to the Unaudited Condensed Consolidated
Pro Forma Balance Sheet F-26
F-1
<PAGE> 4
[COOPERS & LYBRAND LOGO]
FABBRI ARTES GRAFICAS VALENCIA, S.A.
AUDITOR'S REPORT OF THE FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997 AND 1996
F-2
<PAGE> 5
\[COOPERS & LYBRAND LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Unique Shareholder of
FABBRI ARTES GRAFICAS VALENCIA, S.A.
We have audited the accompanying balance sheets of FABBRI ARTES
GRAFICAS VALENCIA, S.A as of September 30, 1997 and 1996 and the related
statements of income and cash flows for each of the two years in the period
ended September 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
2. We conducted our audits in accordance with auditing standards generally
accepted in United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
3. In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FABBRI ARTES GRAFICAS VALENCIA,
S.A as of September 30, 1997 and 1996, and the results of their operations and
their cash flows for each of the two years in the period ended September 30,
1997, in conformity with accounting principles generally accepted in United
States.
4. In accordance with Royal Decree Law 7/1996 of June 7, on urgent tax and other
measures designed to promote and deregulate economic activities, the Company has
revalued its tangible assets as for statutory purposes. The effect of this
revaluation has led to an increase in tangible assets of Ptas 104,4 million and
a revaluation reserve of Ptas 101,3 million, net of the tax thereon of Ptas 3,1
million. Due to the fact that the revaluation of tangible assets is not
acceptable under generally accepted accounting principles in the United States,
the effect has been offset. As a consequence, the tax bases of the revalued
assets are higher than the reported amounts as for United States purposes, which
supposes a temporary difference according with SFAS-109. Therefore the Company
has recorded a deferred tax asset against the provision for income taxes for an
amount of Ptas 33,1 million, which will be reversed with the tax effect of the
annual depreciation of the revaluation. Ptas 6,4 million have been reversed in
the twelve month period ended on September 30, 1997. This effect supposes that
the income statement for the year ended September 30, 1997 is not strictly
comparable with 1996.
COOPERS & LYBRAND, S.A.
/s/ Jorge Molina
- --------------------------------------
Jorge Molina
Valencia, Spain
February 9, 1998
F-3
<PAGE> 6
FABBRI ARTES GRAFICAS VALENCIA, S.A.
BALANCE SHEET
(Thousand pesetas)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1.997 1.996
----- -----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 54.074 11.893
Marketable securities (note 4) 25.000 25.000
Accounts receivable (note 5) 225.073 299.434
Deferred tax assets 9.536 333
Inventories (note 6) 221.959 173.944
------- -------
TOTAL CURRENT ASSETS 535.642 510.604
------- -------
Property and equipment, net (note 7) 286.084 294.856
Deferred tax assets (note 10) 26.753 -
Long-term receivables and other assets (note 8) 1.096 812
----- ---
TOTAL LONG-TERM ASSETS 313.933 295.668
------- -------
TOTAL ASSETS 849.575 806.272
======= =======
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1.997 1.996
----- -----
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable, trade (note 9) 135.650 89.990
Amounts owed to group undertakings 12.050 10.685
Other accrued liabilities (note 9) 27.680 21.147
------ ------
TOTAL CURRENT LIABILITIES 175.380 121.822
------- -------
LONG-TERM LIABILITIES:
Deferred tax liabilities 2.354 6.215
----- -----
TOTAL LONG-TERM LIABILITIES 2.354 6.215
----- -----
TOTAL LIABILITIES 177.734 128.037
======= =======
SHAREHOLDERS' EQUITY (NOTE 10)
Share capital 74.686 74.686
Reserves 573.270 593.362
Profit for the year 23.885 10.187
------ ------
TOTAL SHAREHOLDERS' EQUITY 671.841 678.235
------- -------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 849.575 806.272
======= =======
</TABLE>
F-4
<PAGE> 7
FABBRI ARTES GRAFICAS VALENCIA, S.A.
STATEMENT OF INCOME
(Thousand pesetas)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1.997 1.996
----- -----
<S> <C> <C>
Net sales 1.088.634 1.030.015
Cost of sales (937.374) (855.567)
--------- ---------
GROSS PROFIT 151.260 174.448
Selling, general and administrative exp. (187.729) (193.851)
--------- ---------
OPERATING INCOME (36.469) (19.403)
Interest expense, net (note 13) 12.275 23.838
Other income, net 8.262 9.389
----- -----
INCOME BEFORE INCOME TAXES (15.932) 13.824
Provision for income taxes 39.817 (3.637)
------ -------
NET INCOME 23.885 10.187
====== ======
</TABLE>
F-5
<PAGE> 8
FABBRI ARTES GRAFICAS VALENCIA, S.A.
STATEMENT OF CASH FLOWS
(Thousand pesetas)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1.997 1.996
----- -----
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
NET INCOME 23.885 10.187
Adjustments to reconcile net income to
net cash from operating activities:
Amortization 40.836 38.153
Provisions (375) 2.283
Other income (279) (965)
Gain or losses on sale of fixed assets 1.210 -
Deferred income taxes (39.817) (3.662)
Changes in current assets and liabilities:
Accounts receivable 73.629 (119.665)
Inventories (46.908) 14.416
Accounts payable 53.558 17.131
NET CASH FROM OPERATING ACTIVITIES 105.739 (42.122)
------- -------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Proceeds from sales of marketable securities 285.000 677.000
Purchases of marketable securities (285.000) (605.000)
Purchase of fixed and intangible assets (37.260) (31.850)
Proceeds from sales of fixed and
intangible assets 3.986 -
(Increase)/Decrease in other assets (284) (184)
NET CASH FROM (USED IN) INVESTING ACTIVITIES (33.558) 39.966
------- ------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Dividends paid (30.000) -
NET CASH FROM (USED IN) FINANCING ACTIVITIES (30.000) -
------- -------
INCREASE OR DECREASE IN CASH AND
CASH EQUIVALENTS 42.181 (2.156)
------ -------
Cash and cash equivalents, beginning of
the year 11.893 14.049
CASH AND CASH EQUIVALENTS, END OF THE YEAR 54.074 11.893
====== ======
</TABLE>
F-6
<PAGE> 9
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
1. ACTIVITIES
FABBRI ARTES GRAFICAS VALENCIA, S.A. (hereinafter, Fabbri, S.A.) is
primarily engaged in printing text and images, in addition to manufacturing
plastic containers. Its industrial installations, together with its registered
domicile for tax and mercantile purposes are located at Avda. de les Comarques
del Pais Valencia, 56, in Quart de Poblet (Valencia).
In accordance with Additional Provision 2 of Law 2/1995 of 23 March on
Limited Liability Companies, which amends the content of the Spanish Companies
Act, the Company has registered at the Mercantile Registry as a Single
Shareholder Company.
2. BASIS OF PRESENTATION
a) True and fair view
The annual accounts have been prepared on the basis of the Company's
accounting records and are presented in compliance with the United
States generally accepted accounting principles so as to provide a true
and fair view of the Company's net worth, its financial situation and
the results of its operations.
b) Comparability
At the General Meeting held on 20 June 1997, a resolution was adopted
to revalue as for Spanish accounting and tax purposes its fixed assets
in accordance with Royal Decree-Law 7/1996, of 7 June, on Urgent Tax
Measures to Liberalise Economic Activities. As a result the Company has
recorded an increase in tangible fixed assets totalling Ptas
114,428,000 pesetas and a revaluation reserve totalling Ptas
101,295,000 pesetas. Therefore the 1997 financial statements are not
necessarily comparable with those from 1996.
The effect of the fixed assets revaluation has been offset in these
financial statements in order to comply with United States generally
accepted accounting principles. This accounting treatment supposes a
difference between the tax bases of fixed assets and their amounts for
financial reporting. As a consequence and in accordance with SFAS-109,
the Company has recorded a deferred tax asset-non current for the
effect of the revalued amount corresponding to depreciable assets,
which raises to Ptas 33.1 million. This asset will be reversed in
future years with the tax effect corresponding to the excess of the
tax over accounting depreciation.
As a consequence, the income statement for the year ended September
30, 1997 is not strictly comparable with 1996.
F-7
<PAGE> 10
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
3. ACCOUNTING POLICIES
a) Property and equipment, net
Property and equipment are stated at cost and are depreciated on a
straight line basis over their estimated useful lives, which are as
follows:
<TABLE>
<CAPTION>
%
-----
<S> <C>
Buildings 3-5
Plant and machinery 9-15
Tooling 10
Fixtures 10
Data-processing equipment 25
Vehicles 16
Other tangible fixed assets 10
</TABLE>
Improvements which extend the useful lives of existing assets are
capitalized. Repair and maintenance costs are expensed in the year in
which they are incurred. When tangible fixed assets are retired or
otherwise disposed of, the asset and accumulated depreciation accounts
are adjusted accordingly.
The Company adopted Statement of Financial Accounting No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed of", as of October 1, 1996. No effect has been
recorded of adopting this standard.
b) Inventories
Inventories are stated at the lower of acquisition or production cost
and market value. Production cost includes materials, labour and
manufacturing expense and is calculated using average weighted cost
method.
In those cases where the market or replacement value of inventories is
lower than the acquisition/production cost the relevant corrections in
value are made.
c) Transactions denominated in foreign currencies
Debtors and creditors denominated in foreign currencies are stated at
year-end exchange rates. Transactions in foreign currencies are
recorded in the profit and loss account at the exchange rates on the
dates when they took place. Realized gains, together with realized and
unrealized losses on exchange, are taken to profit and loss for the
year.
F-8
<PAGE> 11
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
d) Marketable securities
Marketable securities are recorded according with Statement of Financial
Accounting Standards N(0).115, "Accounting for certain investments in
debt and equity securities". SFAS N(0) 115 requires certain securities
to be categorized as either trading, available for sale or held to
maturity. Trading securities are carried at fair value with unrealized
gains and losses included in income. Available for sale securities are
carried at fair value with unrealized gains and losses recorded as a
separate component of shareholders' equity. Held to maturity securities
are carried at amortized cost.
e) Corporation tax
Corporation tax expense is recognized based on the reported profit as
adjusted for permanent differences between reported and taxable profits
and the effects of any tax credits and deductions. Deferred tax assets
and liabilities arising from timing differences in the recognition of
income and expense for accounting and tax purposes and other events that
create differences between the tax bases of assets and their amounts for
financial reporting, are recorded in the balance sheet until the
underlying timing differences reverse.
Tax credits and deductions and the tax effect of applying tax loss
carryforwards are treated as a reduction in the corporation tax expense
for the year in which the losses and credit occurred, if the
compensation is reasonably secured in future years.
The Company provides in full for all its deferred tax liabilities even
though they may not be expected to reverse in the foreseeable future.
The provision is adjusted to reflect changes in the Corporation Tax
rate. Deferred tax assets are recorded if there is reasonable assurance
that they will be realized.
f) Creditors
Short and long-term loans are stated at the amount at which they are to
be repaid and any implicit interest included either in their face value
or their repayment value is recorded as long-term receivables and
others. Such interest is charged to earnings using a financial method.
g) Severance payments
According with SFAS-5 and EITF Issue 94-3 the Company records the
liability for certain employee termination benefits, when it has been
approved by the management having the appropriate level of authority and
it has been announced to a group of employees that includes the affected
employees.
F-9
<PAGE> 12
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
h) Revenue Recognition and Allowance for doubtful accounts
Revenue is recognized when products are shipped. The Company provides
for all receivables which collection is not reasonably assured.
4. MARKETABLE SECURITIES
The movements and the classification of marketable securities are set
out below:
<TABLE>
<CAPTION>
THOUSAND PESETAS
-------------------------------------------
OPENING CLOSING
BALANCE BALANCE
01.10.96 ADDITIONS DISPOSALS 30.09.97
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Securiting porfolio 25.000 285.000 285.000 25.000
(Government debt) ------ ------- ------- ------
25.000 285.000 285.000 25.000
====== ======= ======= ======
</TABLE>
5. ACCOUNTS RECEIVABLE
A breakdown of this account is as follows:
<TABLE>
<CAPTION>
THOUSAND PESETAS
----------------
30.09.1997 30.09.1996
---------- ----------
<S> <C> <C>
Trade debtors 271.612 250.069
Other debtors 965 2.986
Notes receivable to group - 101.953
undertakings
Taxes refundable 9.292 760
------- --------
281.869 355.768
Less provisions for doubtful
accounts (56.796) (56.334)
------- --------
225.073 299.434
======= ========
</TABLE>
F-10
<PAGE> 13
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
6. INVENTORIES
A breakdown of this account is as follows:
<TABLE>
<CAPTION>
THOUSAND PESETAS
----------------
30.09.1997 30.09.1996
---------- ----------
<S> <C> <C>
Raw material and other consumables 171.056 135.424
Goods purchased for resale 56.492 42.845
Payments on account - 2.371
------- -------
227.548 180.640
Less provision for obsolescence (5.589) (6.696)
------- -------
221.959 173.944
======= =======
</TABLE>
F-11
<PAGE> 14
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
7. PROPERTY AND EQUIPMENT, NET
Movements in the accounts included under Property and equipment, net are
set out below:
<TABLE>
<CAPTION>
THOUSAND PESETAS
----------------
COST
----
<S> <C>
OPENING BALANCE 01.10.96 768.855
Additions 37.260
Disposals (15.462)
-------
CLOSING BALANCE 30.09.97 790.653
-------
AMORTIZATION
------------
OPENING BALANCE 01.10.96 473.999
Additions 40.836
Disposals (10.266)
--------
CLOSING BALANCE 30.09.97 504.569
-------
NET BOOK VALUE
--------------
OPENING BALANCE 01.10.96 294.856
=======
CLOSING BALANCE 30.09.97 286.084
=======
</TABLE>
a) Fully-depreciated assets
At 30 September 1997 fully depreciated assets with an original cost of
Ptas 127,921,000 pesetas are still being used in operations (1996: Ptas
92,868,000 pesetas)
b) Commitments
The company has no commitments to purchase new tangible fixed assets.
c) Liens and encumbrances
There are no liens or encumbrances on any tangible fixed assets owned by
the company.
F-12
<PAGE> 15
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
d) Fixed assets no longer used in operations
At 30 September 1997 tangible fixed assets with an original cost of Ptas
42,573,000 pesetas and accumulated depreciation totalling Ptas
15,094,000 were no longer used in operations. (1996: Ptas 42,573,000 and
Ptas 13,752,000 respectively).
The Company has entered an agreement with a third Company to hire this
asset. The Company has not recorded any impairment loss for this asset,
because it considers that the future cash inflows of the agreement will
exceed the depreciation and other fixed charges of the asset.
8. LONG-TERM RECEIVABLES AND OTHER ASSETS
The balance recorded under this heading refers to deposits and
guarantees which at the year end amounted to Ptas. 1.096.000.
9. CURRENT LIABILITIES
a) Accounts payable, trade
<TABLE>
<CAPTION>
THOUSAND PESETAS
--------------------------------
30.09.1997 30.09.1996
---------- ----------
<S> <C> <C>
Prepayments received for orders 226 -
Payables for goods or services 135.931 90.591
Containers to be returned to suppliers (507) (601)
------- ------
135.650 89.990
======= ======
</TABLE>
b) Other accrued liabilities
<TABLE>
<CAPTION>
THOUSAND PESETAS
--------------------------------
30.09.1997 30.09.1996
---------- ----------
<S> <C> <C>
Employee taxes and VAT payable 19.853 9.882
Accrued wages and salaries 7.827 11.265
------ ------
27.680 21.147
====== ======
</TABLE>
F-13
<PAGE> 16
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
c) Bank loans and overdrafts falling due within one year
The Company maintains facilities for discounting of bills with the
credit institutions listed below:
<TABLE>
<CAPTION>
ENTITY LIMIT DRAWN DOWN COLLECTION
------ ----- ---------- MANAGEMENT
----------
<S> <C> <C> <C>
Banco Bilbao-Vizcaya 75.000 - -
Banesto 50.000 - -
Bankinter 50.000 - -
Banco de Santander 70.000 - 2.974
------ -----
245.000 2.974
======= =====
</TABLE>
10. CORPORATION TAX AND TAX SITUATION
Because certain items are treated differently for tax and financial
reporting purposes, the tax profit differs from the profit reported in these
accounts. Deferred tax assets and liabilities arise when an item is recorded
under income or expense for the computation of taxable income in one period but
is included for the computation of accounting income in another period.
The reconciliation between reported profits and taxable profits is set
out below:
<TABLE>
<CAPTION>
THOUSAND PESETAS
------------------------------------------------
30.09.1997 30.09.1996
---------------------------------- ----------
INCREASES DECREASES
--------- ---------
<S> <C> <C> <C> <C>
Reported net profit/(loss) 23.885 10.187
Corporation tax (39.817) 3.637
-------- ------
Profit/(loss) before taxes (15.932) 13.824
Permanent differences 3.220 (244) 2.976 2.063
Timing differences:
- - arising during the year (1.508) (1.508) 10.465
- - from prior years 12.596 (19.085) (6.489) -
Offset of tax-loss carryforwards - -
------- ------
Taxable income (20.953) 26.352
======= ======
</TABLE>
F-14
<PAGE> 17
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
Corporation tax is as follows:
<TABLE>
<CAPTION>
THOUSAND PESETAS
----------------------------
30.09.1997 30.09.1996
---------- ----------
<S> <C> <C>
Current taxes - 7.299
Deferred tax liability (3.861) (4.369)
Deferred tax assets (35.956) 707
------- -----
(39.817) 3.637
======== =====
</TABLE>
Current corporation tax is the result of applying the 35% rate to
taxable income.
Tax loss carryforwards recorded by the company totalling Ptas 20,953,000
may be used to offset profits made over the next 7 years.
The components of income before income taxes are as follows:
<TABLE>
<CAPTION>
THOUSAND PESETAS
----------------
1997
----
<S> <C>
Spanish operations (15.932)
-------
(15.932)
=======
</TABLE>
The Corporation tax charge for the year is analyzed as follows:
<TABLE>
<CAPTION>
THOUSAND PESETAS
----------------
1997 1996
---- ----
<S> <C> <C>
Corporation tax payable for the year - 7.299
Deferred tax liability (3.861) (4.369)
Deferred tax assets (7.068) 707
Revaluation's net tax effect (26.753) -
Tax credits (2.135) -
------- ------
(39.817) 3.637
======== ======
Effective tax rate (249,9) 26,3
======== ======
</TABLE>
F-15
<PAGE> 18
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
THE TAX EFFECTS OF THE SIGNIFICANT TEMPORARY DIFFERENCES THAT COMPRISE
THE DEFERRED TAX ASSETS AND LIABILITIES ARE AS FOLLOWS:
<TABLE>
<CAPTION>
THOUSAND PESETAS
----------------
1997
----
<S> <C>
Assets:
Non-current
Revaluation's tax effect 26.753
------
Current:
Investment tax credits 2.135
Tax loss carry forward 7.334
Other 67
------
9.536
------
Gross deferred tax assets 36.289
======
Liabilities:
Non-Current:
Fixed assets 2.354
======
</TABLE>
The Company has recorded Ptas. 2,1 million pesetas corresponding to
investment tax credits, which may be reversed with taxable income during the
five following years.
All the Company's returns for the last five years for the main taxes to
which it is subject to are open to inspection by the tax authorities.
As a result, amongst other things, of the different interpretations to
which Spanish tax legislation lends itself, additional tax assessments may be
raised in the event of a tax inspection. The Directors consider, however, that
any additional assessments that might be made would not significantly affect
these accounts.
F-16
<PAGE> 19
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
11. SHAREHOLDERS' EQUITY
Movements in Capital and reserves are set out below:
<TABLE>
<CAPTION>
THOUSAND PESETAS
-------------------------------------------
OTHER PROFIT FOR
SHARE CAPITAL RESERVES THE YEAR
------------- -------- --------
<S> <C> <C> <C>
CLOSING BALANCE 30.09.96 74.686 593.362 10.187
====== ======= ======
Distribution to reserves - 10.187 (10.187)
Profit for the year - - 23.885
Dividends - (30.000) -
Other movements - (279) -
------ ------- ------
CLOSING BALANCE 30.09.97 74.686 573.270 23.885
====== ======= ======
</TABLE>
a) Share capital
Share capital consists of 149,372 fully paid registered shares with a
par value of Ptas 500 each.
At 30 September 1997 the companies which hold an interest equalling or
exceeding 10% of the Company are as follows:
<TABLE>
<CAPTION>
PERCENT INTEREST
--------------------------------
NUMBER OF SHARES 30.09.1997 30.09.1996
---------------- ---------- ----------
<S> <C> <C> <C>
Sidlaw Plc 149.372 100% 75%
</TABLE>
F-17
<PAGE> 20
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
b) Other reserves
Movements in other reserves are set out below:
<TABLE>
<CAPTION>
THOUSAND PESETAS
-------------------------------------
VOLUNTARY
LEGAL RESERVES TOTAL
----- -------- -----
<S> <C> <C> <C>
OPENING BALANCE 30.09.96 14.937 578.425 593.362
Distribution profit - 10.187 10.187
Dividends - (30.000) (30.000)
Other movements - (279) (279)
------ ------- -------
CLOSING BALANCE 30.09.97 14.937 558.333 573.270
====== ======= =======
</TABLE>
Legal reserve
Appropriations to the legal reserve are made in compliance with Article
214 of the Spanish Companies Act, which stipulates that 10% of profits
must be transferred to this reserve until it represents at least 20% of
share capital.
The legal reserve is not available for distribution., Should it be used
to offset losses in the event of no other reserves being available, it
must be replenished out of future profits.
Voluntary reserve
The voluntary reserve contains profits from prior years which were not
distributed or assigned to obligatory reserves. The balance of this
reserve is freely available. During the year, in accordance with a
resolution adopted by the General Meeting held on 28 November 1996 this
reserve was distributed to shareholders as a dividend totalling Ptas
200.84 per share, for a total amount of Ptas 30,000,000 and charged to
voluntary reserves.
F-18
<PAGE> 21
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
c) Profit for the period
The distribution of 1997 profit and other reserves will be proposed at
the Annual General Meeting, as well as the distribution of profits for
1996 is set out below.
<TABLE>
<CAPTION>
Available for distribution 1997 1996
-------------------------- ---- ----
<S> <C> <C>
Profit and loss for the year 23.885 10.187
====== ======
Distribution
------------
Voluntary reserves 23.885 10.187
====== ======
</TABLE>
12. INCOME AND EXPENSE
a) Transactions with Group undertakings
<TABLE>
<CAPTION>
30.09.1997 30.09.1996
---------- ----------
<S> <C> <C>
Net purchases 10.070 96
Services received 12.050 -
Net sales 3.738 659
</TABLE>
Services received records Ptas 11,000,000 relating to a contract
concluded with the single shareholder (Sidlaw Group Plc.), in accordance
with which the shareholder provides financial, human resource, market
research and advisory services. This agreement is in force between 1
October 1996 and 30 September 1997.
F-19
<PAGE> 22
FABBRI ARTES GRAFICAS VALENCIA, S.A.
NOTES TO THE ACCOUNTS
b) Transactions denominated in foreign currencies
The amounts of transactions denominated in foreign currencies are set
out below:
<TABLE>
<CAPTION>
THOUSAND PESETAS
----------------
01.10.1996 TO 30.09.1997
------------------------
<S> <C>
Purchases 18.883
Sales 107.638
Services received 2.606
Services rendered -
</TABLE>
13. INTEREST EXPENSE, NET
Interest expense, net comprises:
<TABLE>
<CAPTION>
THOUSAND PESETAS
----------------
30.09.1997 30.09.1996
---------- ----------
<S> <C> <C>
Income
Gains on exchange 1.418 79
Other income 17.698 18.565
Income from trading securities 841 5.899
------ ------
19.957 24.543
------ ------
Less expenses:
Losses on exchange 103 466
Amounts owed to third parties and
similar expenses 7.579 239
------ ------
(7.682) (705)
------ ------
INTEREST EXPENSE, NET 12.275 23.838
====== ======
</TABLE>
14. POST-BALANCE SHEET EVENTS
Subsequent to the year end the Company's single shareholder, Sidlaw
Group Plc., sold its interest in the Company to the company "EPL TECHNOLOGIES,
S.L.", a subsidiary of EPL TECHNOLOGIES INC.
F-20
<PAGE> 23
UNAUDITED PRO FORMA
FINANCIAL INFORMATION
On December 11, 1997, EPL Technologies, Inc. (the "Company") acquired all of the
issued and outstanding share capital of Fabbri Artes Graficas Valencia S.A.
("Fabbri").
The following unaudited condensed consolidated pro forma financial statements
("the Pro Forma Financial Statements") of the Company are based on historical
consolidated financial statements of the Company as adjusted to give effect to
the Fabbri Acquisition and the Series D Placement, as described in the notes to
the Pro Forma Financial Statements below. This information is being provided
pursuant to an amendment to the initial Form 8-K filing with respect to the
acquisition of Fabbri, as permitted and required under the applicable rules and
regulations. The unaudited condensed consolidated pro forma statements of
operations for the year ended December 31, 1996 and the nine months ended
September 30, 1997 give effect to the Fabbri Acquisition and the Series D
Placement as if they had occurred as of January 1, 1996. The pro forma balance
sheet gives effect to the Fabbri Acquisition and the Series D Placement as if
they occurred as of September 30, 1997. The allocation of purchase price for the
Fabbri acquisition is based on a preliminary estimate of the fair value of the
assets acquired.
The pro forma adjustments are based upon available information and upon certain
assumptions that management believes are reasonable under the circumstances. The
Pro Forma Financial Statements and accompanying notes should be read in
conjunction with the historical Consolidated Financial Statements of the
Company, including the notes thereto, and other financial information pertaining
to the Company. The Pro Forma Financial Data do not purport to represent what
the Company's actual results of operations or actual financial position would
have been if the Fabbri Acquisition and the Series D Placement had, in fact,
occurred on such dates or to project the Company's results of operations or
financial position for any future period or date. The Pro Forma Financial Data
do not give effect to any transactions other than the Fabbri Acquisition and the
Series D Placement, discussed in the notes to the Pro Forma Financial Statements
below.
The pro forma statement of operations for the year ended December 31, 1996
include the results of operations of Fabbri for the year ended September 31,
1996, and the pro forma statement of operations for the nine months ended
September 30, 1997 include the results of operations of Fabbri for the nine
months ended September 31, 1997.
F-21
<PAGE> 24
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------
HISTORICAL RESULTS
---------------------------
PRO FORMA
THE COMPANY FABBRI {a} ADJUSTMENTS PRO FORMA
----------- ----------- ----------- -----------
(Dollars in thousands except share and per share data)
<S> <C> <C> <C> <C>
Net sales $ 11,314 8,121 19,435
Cost of sales 9,136 6,375 15,511
----------- ----------- -----------
Gross profit 2,178 1,746 3,924
Selling, general and administrative expenses 4,413 1,440 5,853
Research and development costs 939 -- 939
Depreciation and Amortization 1,010 301 85 {c} 1,396
----------- ----------- -----------
Income (loss) from operations (4,184) 5 (4,264)
Allocations from corporate -- 87 (87) {b} --
Interest expense, net 20 (191) (171)
Minority interest (10) -- (10)
----------- ----------- -----------
Income (loss) before income taxes (4,194) 109 (4,083)
Provision (benefit) for income taxes 101 29 130
----------- ----------- -----------
Net Income (loss) (4,295) 80 (4,213)
Accretion, discount and dividends on preferred stock {f} 999 -- 500 {d} 2,299
800 {e}
----------- ----------- -----------
Net Loss available for common shareholders (5,294) 80 (6,512)
=========== =========== ===========
Loss per common share (0.36) (0.44)
=========== ===========
Weighted average number of common and common
equivalent shares outstanding 14,873,518 14,873,518
=========== ===========
</TABLE>
F-22
<PAGE> 25
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
-----------------------------------------------------------------
HISTORICAL RESULTS
---------------------------
PRO FORMA
THE COMPANY FABBRI {a} ADJUSTMENTS PRO FORMA
-------------- ---------- ------------ ------------
(Dollars in thousands except share and per share data)
<S> <C> <C> <C> <C>
Net sales $ 14,047 4,994 19,041
Cost of sales 12,604 4,111 16,715
-------------- ---------- ------------
Gross profit 1,443 883 2,326
Selling, general and administrative expenses 4,438 966 5,404
Research and development costs 869 -- 869
Depreciation and amortization 931 220 64 {c} 1,215
-------------- ---------- ------------
Loss from Operations (4,795) (303) (5,162)
Allocations from corporate 62 (62){b} --
Interest expense, net 85 (60) 25
Minority interest (213) -- (213)
-------------- ---------- ------------
Loss before income taxes (4,667) (305) (4,974)
Provision (benefit) for income taxes {g} -- (309) (309)
-------------- ---------- ------------
Net Income (Loss) (4,667) 4 (4,665)
Accretion, discount and dividends on preferred stock {f} 411 -- 375 {d} 766
-------------- ---------- ------------
Net loss available for common shareholders (5,078) 4 (5,451)
============== ========== ============
Loss per common share (0.31) (0.33)
============== ============
Weighted average number of common and common
equivalent shares outstanding 16,300,847 16,300,847
============== ============
</TABLE>
F-23
<PAGE> 26
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA STATEMENT OF OPERATIONS
(a) To reflect the inclusion of the historical statement of operations for the
year ended December 31, 1996 and the nine months ended September 30, 1997 of
Fabbri. The historical statement of operations, denominated in pesetas, was
converted into U.S. dollars using an average exchange rate of 126.84 and 145.82
for the year ended December 31, 1996 and for the nine months ended September 30,
1997, respectively.
(b) To eliminate corporate overhead, such as technology expenses and management
fees, allocated to Fabbri from its parent as recorded in Fabbri's historical
financial statements. These charges are not a component of the on-going expense
structure of the Company and are not expected to be incurred in future periods.
(c) To reflect additional depreciation expense resulting from a $1.3 million
increase in property and equipment valuation recorded as a part of the overall
purchase price allocation of the Fabbri Acquisition.
(d) To reflect the 4% per annum increase in the value of the Series D Stock as a
dividend.
(e) To reflect the accretion of the discount on the Series D Preferred Stock
(6%) over nine months, the date afterwhich all of the Series D Preferred Stock
could be converted into shares of Common Stock.
(f) The Company issued warrants in connection with its Series D Preferred Stock.
The Company is presently in the process of evaluating the fair value of such
warrants. Such fair value, when determined will be accreted over the beneficial
conversion feature period of the Series D Preferred Stock (9 months)
resulting in an increase in Accretion, Discount and Dividends on Preferred
Stock and Net Loss Available for Common Shareholders.
(g) During the nine months ended September 30, 1997, Fabbri revalued its
property, plant and equipment to fair market value to comply with Spanish law,
resulting in the recording of a one-time increase to both the book and tax
bases of such assets in the amount of 104.4 million pesetas (approximately
$716,000 at an exchange rate of $1.00:145.82 pesetas). Because such adjustment
is not permitted for financial reporting purposes under U.S. generally accepted
accounting principles, this amount has been eliminated from the historical
Fabbri balances included herein to properly reflect the assets at historical
cost. Accordingly, the Company has recorded a one-time income tax benefit of
33.2 million pesetas (approximately $227,000 at an exchange rate of
$1.00:145.82 pesetas) to account for the difference between the book and tax
bases of its property, plant and equipment.
F-24
<PAGE> 27
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------------------------------------------
HISTORICAL INFORMATION
----------------------------
PRO FORMA
THE COMPANY FABBRI {a} ADJUSTMENTS PRO FORMA
------------ ------------- ------------ -----------
(Dollars in thousands except share and per share data)
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents 1,166 525 11,662 {b} 7,853
(5,500){c}
Accounts receivable, net 2,973 1,493 4,466
Due from related parties 31 -- 31
Inventories 2,195 1,472 3,667
Prepaid expenses & other current assets 1,280 63 (241){c} 1,102
------------ ------------- ------------ -----------
Total current assets 7,645 3,553 5,921 17,119
Property Plant & Equipment, net 4,121 1,898 1,285 {c} 7,304
Other Assets -- 185 185
Patent & distribution rights, net of
accumulated amortization 1,056 -- 1,056
Goodwill 2,324 -- 2,324
Other intangibles, less accumulated
amortization 228 -- 228
------------ ------------- ------------ -----------
TOTAL ASSETS 15,374 5,636 7,206 28,216
============ ============= ============ ===========
CURRENT LIABILITIES
Accounts payable 4,362 980 5,342
Accrued expenses 713 184 897
Other liabilities 661 -- 661
Line of credit - related party 338 -- (338){b} --
Current portion of long term debt 222 -- 222
------------ ------------- ------------ -----------
Total Current Liabilities 6,296 1,164 (338) 7,122
Long term debt 2,107 -- 2,107
Deferred income taxes 142 16 158
------------ ------------- ------------ -----------
TOTAL LIABILITIES 8,545 1,180 (338) 9,387
Convertible Series D Convertible
Preferred Stock -- -- 12,000 {b} 12,000
SHAREHOLDERS' EQUITY
Convertible Series A Preferred Stock 2,143 -- 2,143
Convertible Series B Preferred Stock -- -- --
Convertible Series C Preferred Stock -- -- --
Common Stock 9 495 (495){c} 9
--
Additional paid-in capital 25,635 -- 25,635
--
Accumulated deficit (21,022) 3,961 (3,961){c} (21,022)
Foreign currency translation adjustment 64 -- 64
------------ ------------- ------------ -----------
Total Shareholders' Equity 6,829 4,456 (4,456) 6,829
------------ ------------- ------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 15,374 5,636 7,206 28,216
============ ============= ============ ===========
</TABLE>
F-25
<PAGE> 28
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA BALANCE SHEET
(a) To reflect the net assets of Fabbri as of September 30, 1997, which were
acquired on December 11, 1997. The historical balance sheet of Fabbri,
denominated in pesetas, was converted into U.S. dollars using a month-end
exchange rate of 150.75 as of September 30, 1997.
(b) To give effect to the $12.5 million Series D Private Placement, which was
consummated on November 11, 1997 and the application of the net proceeds
therefrom. The Series D Preferred Stock agreement contains certain provisions,
some of which may be considered to be outside of the Company's control, that
could provide the Series D holders with the ability to redeem their shares.
Subsequent to September 30, 1997, additional amounts under the line of
credit-related party were drawn down by the Company. All such amounts, including
any associated costs and interest, together with the amounts drawn as of
September 30, 1997, were repaid out of the net proceeds from the Series D
Placement.
(c) To give effect to the (i) cash payment to purchase the net assets of Fabbri
pursuant to the Fabbri Acquisition, (ii) reclassification of the prepaid costs
associated with the Fabbri Acquisition, (iii) net increase in valuation of the
fixed assets acquired and (iv) elimination of the net assets of Fabbri on a
consolidated basis. Subsequent to September 30, 1997, additional costs,
currently estimated at approximately $200,000, were incurred with respect to the
Fabbri Acquisition. Such costs have not been reflected herein.
F-26
