<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, 2000
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: 001-15333
EPL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-0990658
(State of incorporation) (I.R.S. Employer Identification Number)
2 INTERNATIONAL PLAZA, SUITE 245
PHILADELPHIA, PA 19113-1507
(Address of principal executive offices) (Zip Code)
(610) 521-4400
(Telephone number, including area code)
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.
30,565,618 shares of $0.001 par value common stock
outstanding as of April 30, 2000.
<PAGE> 2
EPL TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
A. CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2000 AND
DECEMBER 31, 1999 1
B. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 2000 AND 1999 2
C. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
MONTHS ENDED MARCH 31, 2000 AND 1999 3
D. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 8 CONDITION AND
RESULTS OF OPERATIONS.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 15
SIGNATURES. 16
</TABLE>
<PAGE> 3
EPL TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED) *
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $373,365 $587,589
Restricted cash - current 378,209 394,516
Accounts receivable, net 4,627,642 5,318,724
Inventories 4,353,498 4,225,435
Prepaid expenses and other current assets 2,356,161 2,552,115
------------- ------------
Total Current Assets 12,088,875 13,078,379
------------- ------------
PROPERTY AND EQUIPMENT, Net 9,645,279 8,862,422
------------- ------------
OTHER ASSETS
Patent, net 775,542 783,535
Goodwill 2,393,917 2,493,793
Other intangibles, net 136,319 145,448
Restricted cash-non current 500,508 511,126
Other noncurrent assets 66,000 124,000
------------- ------------
Total Other Assets 3,872,286 4,057,902
------------- ------------
TOTAL ASSETS $25,606,440 $25,998,703
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $7,591,576 $9,645,801
Accrued expenses 1,808,168 1,615,006
Other liabilities 1,810,555 1,704,707
Deferred gain on sale-leaseback, current portion 359,985 359,985
Short term revolving credit facilities with related parties 3,889,400 3,877,000
Current portion of long-term debt and short term credit facilities 5,428,427 1,918,572
------------- ------------
Total Current Liabilities 20,888,111 19,121,071
LONG TERM DEBT 2,106,915 1,340,527
DEFERRED GAIN ON SALE-LEASEBACK, NONCURRENT PORTION 1,577,160 1,670,700
DEFERRED INCOME TAXES 214,258 191,196
------------- ------------
Total Liabilities 24,786,444 22,323,494
------------- ------------
SHAREHOLDERS' EQUITY
Convertible Series A Preferred Stock 60,000 60,000
Common Stock 30,776 30,776
Additional paid-in capital 55,950,437 54,916,708
Accumulated deficit (53,804,154) (50,270,041)
Treasury stock, at cost (138,160) (138,160)
Accumulated other comprehensive (loss) (1,278,903) (924,074)
------------- ------------
Total Shareholders' Equity 819,996 3,675,209
------------- ------------
TOTAL LIABILITY AND SHAREHOLDERS' EQUITY $25,606,440 $25,998,703
============= ===========
</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,
------------------------------
2000 1999
----------- ----------
<S> <C> <C>
Sales $ 6,052,123 $ 7,757,530
Cost of sales 5,519,881 7,713,818
----------- -----------
Gross profit 532,242 43,712
Selling, general and administrative expenses 2,145,245 1,922,620
Research and development costs 323,723 582,357
Depreciation and amortization 522,655 525,492
----------- -----------
Loss from operations (2,459,381) (2,986,757)
Interest expense, net 987,530 49,562
Gain on sale of fixed assets (93,540)
Net (loss) income from unconsolidated affiliates (3,813)
----------- -----------
Loss before income tax expense (3,353,371) (3,032,506)
Income tax expense 28,062
Net loss $(3,381,433) (3,032,506)
Accretion, discount and dividends on preferred stock 154,180 123,833
----------- -----------
Net loss applicable to common shareholders $(3,535,613) $(3,156,339)
=========== ===========
Basic loss per common share $ (0.12) $ (0.27)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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<PAGE> 5
EPL TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($3,381,433) ($3,032,506)
Adjustments to reconcile net loss to net cash
used in operating activities 1,412,815 525,492
Minority interest 3,813
Changes in assets and liabilities (1,017,831) 2,128,743
----------- -----------
Net cash used in operating activities (2,986,449) (374,458)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (1,188,514) (447,559)
Proceeds from sale of fixed assets
----------- -----------
Net cash used in investing activities (1,188,514) (447,559)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of options/warrants 62,500
Proceeds from short term debt 3,325,000 975,000
Proceeds from long term debt 1,037,086
Repayment of long term debt (73,443) (100,765)
----------- -----------
Net cash provided by financing activities 4,288,643 936,735
----------- -----------
EFFECT OF EXCHANGE RATE ON CASH (354,829) (454,976)
DECREASE IN CASH AND CASH EQUIVALENTS (241,149) (340,258)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,493,231 1,831,139
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,252,082 $ 1,490,881
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
FINANCING ACTIVITIES:
Accretion of warrants, discount, increased value and
issuance costs related to preferred stock $ 154,180 $ 123,833
</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) that 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, 2000 are not necessarily
indicative of the results to be expected for the full year. At this stage of the
Company's development, month-to-month and quarter-to-quarter anomalies in
operating results should be 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, 1999.
NOTE 2 - OPERATIONS AND FINANCING
EPL Technologies, Inc. develops, manufactures and markets complementary
proprietary technologies designed to maintain the quality and integrity of
fresh-cut produce. The Company's primary products are processing aids and
packaging materials, together with a range of scientific and technical services
that the Company believes support and complement its product offerings. The
process by which the Company develops and sells its integrated systems solutions
for certain kinds and varieties of fresh-cut produce is both expensive and
time-consuming. Although the Company believes it has improved its sales efforts
significantly, the Company's product development and sales process continues to
be lengthy and resource-intensive and could limit the Company's growth.
Additionally, limited awareness of the Company and its products in the
marketplace and the highly fragmented nature of the fresh-cut produce industry
may extend the Company's product development and sales process. The Company does
not believe that this process is likely to shorten significantly. Management
believes that success in this sales process with large processors is the primary
basis for developing sustainable growth in revenues, which will enable the
Company to achieve profitable operations in this area of the business, although
there can be no assurance such will be the case. The nature of the packaging
materials business is such that the sales process is shorter than that for
processing aids, but there is still an approval process to be completed with new
customers prior to sale.
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 the Company's cost structure, and the financial statements
have been prepared on that basis. Historically, the Company's revenues have not
been sufficient to fund the development of the Company's business, and thus it
has had to finance its operating losses externally principally through equity or
debt financing.
To address the current financial situation, the Company has undergone a
number of operational improvements as well as made significant investments in
development and marketing activities related to its various processing
technology businesses and packaging businesses in 1999 and 1998, which the
Company's management believes will improve cash flows from operations. The
Company expects that the following, amongst others, should contribute to an
improvement in the financial performance of the Company in the year 2000 and
beyond, although there can be no assurance that such will in fact be the case :
(i) the restructuring of the corn business and the reduction in ongoing
overheads of that operation, (ii) an agreement with Reser's Fine Foods, Inc.
("Reser's") for Reser's to process and supply EPL Food with all of EPL Food's
fresh-cut potato requirements, (iii) the Company's completion subsequent to the
year end of the relocation of its potato processing equipment and production and
shipment of fresh-cut potato products commenced from Reser's Pacso, Washington
facility, (iv) further exploitation of the Company's processing technologies, as
evidenced by the exclusive licensing arrangement with Monterey Mushrooms for
mushrooms entered into subsequent to year-end, and (v) further exploitation of
the Company's perforating technologies, both in the U.S.
- 4 -
<PAGE> 7
and the U.K., as evidenced by the new orders gained in produce packaging in the
U.K. during the fourth quarter of 1999 and first quarter of 2000, together with
the various applications development projects currently in progress.
At March 31, 2000 the Company had available borrowing facilities
remaining in the U.S., U.K. and Spain of approximately $353,000. One country's
operations can obtain advances from another. In addition, as mentioned above,
during the quarter the Company obtained a 12-month loan of $3,275,000 from
individual investors. Such loan has a stated interest rate of 10% per annum. The
Company will be required to seek additional and longer-term debt or equity
financing to fund operating requirements in 2000 and repay and/or refinance
existing short term debt. In this regard, the Company is currently exploring a
number of options to raise additional capital over and above that mentioned
above. The cost of such additional financing arrangements may not be acceptable
to the Company and could result in significant dilution to the Company's
existing shareholders. No assurances can be given that the Company will be
successful in raising additional capital and failure to raise such capital, if
needed, could have a material adverse effect on the Company's business,
financial condition and results of operations.
NOTE 3 - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Raw Materials and Supplies $ 2,186,877 $ 2,320,560
Finished Goods 2,166,621 1,904,875
------------ ------------
Total Inventories $ 4,353,498 $ 4,225,435
=========== ===========
</TABLE>
NOTE 4 - NOTES PAYABLE
In March 1999, Paul L. Devine, the Company's Chairman and Chief
Executive Officer, agreed to extend to the Company, on a short term basis, a
revolving credit facility in an amount up to $500,000, which was increased to
$1,000,000 in June 1999. At March 31, 2000, $389,400 of this credit facility was
outstanding. The Company's obligations under this facility are unsecured and
amounts outstanding thereunder bear interest at a rate of nine percent (9%) per
annum. Mr Devine has agreed to defer repayment of the remaining balance owed to
him until such time as the Company is able to do so. The Company has agreed to
pay all reasonable out-of-pocket expenses incurred by Mr. Devine in connection
with advancing funds to the Company under this facility.
In December 1999, two investment funds affiliated with an existing
affiliated investor of the Company, granted the Company a credit facility of
$3,500,000, which amount was fully drawn at March 31, 2000. The facility carries
interest at the rate of 10% per annum and is secured by a pledge of certain
assets of the Company. It is repayable in June 2000. In connection with this
facility, the Company issued two million shares of Common Stock and issued a
warrant to acquire 350,000 shares of Common Stock at an exercise price of $0.50
per share. The effective interest rate of this facility, after including all of
the debt issue costs including the value of the stock and warrants issued, is
approximately 107%.
In February and March 2000, the Company, in a series of transactions,
borrowed from individual investors $3,275,000 for a period of 12 months. The
loans, which are unsecured, carry interest at the rate of 10% per annum. In
connection with these loans, the Company issued warrants to acquire a total of
1,637,500 shares of Common Stock at an exercise price of $1.00 per share. The
effective interest rate of this facility, after including the value of the
warrants issued, is approximately 34%.
NOTE 5 - CONVERTIBLE PREFERRED STOCK
The Company's 10% Series A Convertible Preferred Stock (the "Series A
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 Series A Stock
- 5 -
<PAGE> 8
carrying the option to convert into common shares at a rate of $1.50 per share.
The Series A Stock carries equal voting rights to the common shares, based on
the underlying number of common shares after conversion. The Series A Stock
carries a dividend rate of 10% per annum, payable in cash and/or common shares
($1.50 per share) at the Company's option (dividends in arrears at March 31,
2000 totaled $1,422,192).
During the three months ended March 31, 2000, no shareholder holding
shares of Series A Stock elected to exercise their right of conversion, leaving
60,000 shares of Series A Stock outstanding at March 31, 2000.
The Company also had a Series B and Series C Preferred Stock, all of
which were converted during 1997 and 1998 respectively. The Series B Stock
carried a dividend of 10% per annum, payable in cash and/or shares ($9.40 per
share) at the Company's option. The outstanding dividends on the Series B Stock
at March 31, 2000 totaled $270,092. The outstanding dividends on the Series C
Stock at March 31, 2000 totaled $49,239.
At the Annual Meeting of the Company held on July 21, 1997, the
shareholders of the Company approved an increase in the number of shares of
Board Designated Preferred Stock reserved for issuance from 2,000,000 to
4,000,000 shares. During 1997, the Company issued a further 12,500 shares of
Board Designated Preferred Stock - designated Series D Convertible Preferred
Stock - at an aggregate consideration, before associated costs and expenses, of
$12,500,000, to three new institutional investors (the "Series D Stock"). Such
issuance was made under Regulation D under the Securities Act of 1933, as
amended, in a transaction not involving a public offering. In connection with
the issuance of the Series D Stock, the Company issued 201,614 warrants to
purchase the Company's common stock at an exercise price of 130% of the closing
price on the issuance date (i.e. $20.16 per share). During 1999 all of the
remaining Series D Stock was converted.
NOTE 6 - ISSUANCE OF COMMON STOCK AND EXERCISE OF OPTIONS
No shares of Common Stock were issued during the quarter ended March
31, 2000.
NOTE 7 - ISSUANCE OF WARRANTS
During the quarter, the Company issued warrants to acquire a total of
1,637,500 shares of Common Stock, in connection with new loans totalling
$3,275,000, as detailed in Note 4 above. The value ascribed to these warrants
($778,800) has been recorded as deferred debt costs and is being amortized into
interest expense over the 12 month life of the loans, commencing in March 2000.
In addition, the Company issued warrants to acquire 300,000 shares of Common
Stock in relation to the conversion of the Series D Stock completed in December
1999. The value ascribed to these warrants ($142,700) was amortized to
accretion, discount and dividends in the first quarter of 2000. The Company also
granted 150,000 warrants to acquire shares of Common Stock to consultants in
lieu of cash compensation for advisory services provided in the first quarter
and over the remainder of 2000. The value of these warrants ($71,340) will be
recorded as selling, general and administrative expenses in the Company's
statement of operations over the expected service period of 12 months. A total
of 65,000 other warrants to acquire shares of Common Stock were issued during
the first quarter, with a total value ascribed to them of $30,914. Of this,
$2,378 was expensed to selling, general and administrative expenses in the first
quarter, $14,268 expensed to interest expense in the first quarter of 2000, and
$14,268 will be expensed to interest in the second quarter of 2000.
NOTE 8 - 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 shares outstanding during the period. For the periods ended March 31,
2000 and 1999, the potential common shares have an antidilutive effect on the
net loss per common share for common shareholders. Accordingly, diluted net loss
per common share for common shareholders has not been presented.
- 6 -
<PAGE> 9
NOTE 9 - COMPREHENSIVE LOSS
The total comprehensive loss for the three months ended March 31, 2000
and 1999 was $3,736,262 and $3,487,482 respectively. The adjustment to arrive at
the total comprehensive loss for each period consists of foreign currency
translation.
NOTE 10 - INDUSTRY AND GEOGRAPHIC AREA SEGMENT INFORMATION
The Company is a leading developer and marketer of integrated produce
systems solutions specifically designed to address the needs of the rapidly
growing market for fresh-cut produce. These products fall into two major
classifications; processing technologies and related activities, and packaging
materials. Processing technologies are designed to inhibit the enzymatic
degradation that causes fruits and vegetables to begin to deteriorate
immediately after processing and are sold primarily in the United States with
smaller amounts also sold in Canada. This category also includes activities of
the Company's fresh-cut corn and potato products, as well as provision of
scientific and technical services in the United States. The Company's produce
packaging business involves perforating, converting and printing of flexible
packaging, including technologies and processes that are proprietary to the
Company, which are marketed in North and South America, the United Kingdom and
Continental Europe.
The following table summarizes the Company's financial information by
industry segment.
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Sales:
Processing technologies and related activities $ 590,000 $ 1,810,000
Packaging materials 5,462,000 5,948,000
----------- -----------
Total sales $ 6,052,000 $ 7,758,000
=========== ===========
Net (Loss) Income from Operations:
Processing technologies and related activities $(2,148,000) $(3,078,000)
Packaging materials (311,000) 91,000
----------- -----------
Total net (loss) income from operations $(2,459,000) $(2,987,000)
=========== ===========
</TABLE>
NOTE 11 - NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts collectively referred to as derivatives,
and for hedging activities. It requires that an entity recognize all derivatives
as either assets or liabilities in the consolidated balance sheet and measure
those statements at fair value. This statement is effective for fiscal years
beginning after June 15, 2000, although early adoption is encouraged. The
Company has not yet determined the impact SFAS No.133 will have on its
consolidated financial position or results of operations.
- 7 -
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
The Company is a leading developer and marketer of integrated produce
systems solutions specifically designed to address the needs of the rapidly
growing market for fresh-cut produce. In this regard, the Company develops,
manufactures and markets proprietary produce processing technologies, packaging
technologies, and scientific and technical services, which are specifically
designed to maintain the quality and integrity of fresh-cut produce. The
foundation of the Company's integrated systems solutions is its proprietary
produce processing aid technology, which inhibits the natural enzymatic
degradation of fruits and vegetables after they have been processed. Fresh-cut
fruits and vegetables that are treated with the Company's proprietary processing
aids better maintain their natural characteristics such as color, texture, taste
and smell. The use of the Company's processing aids allows for increased
availability of certain fresh-cut produce products, such as sliced apples,
potatoes and corn. The Company has concluded that the use of the Company's
processing aids, in accordance with the Company's recommended protocols, is
"generally recognized as safe" ("GRAS") under FDA regulations. The Company also
uses a variety of film technologies to create packaging specifically designed to
complement and enhance the effectiveness of the Company's processing aids by
allowing fruits and vegetables to "breathe" after they have been cut and
packaged. The Company markets these packaging products to produce growers and
processors. In addition, the Company's scientific and technical services, which
include food safety and microbiological testing, provide fresh produce
processors with expertise in food safety, post-harvest horticulture and
processing techniques, and support the cross-marketing efforts for the Company's
other products. The Company believes its processing aids are safe and
environmentally "friendly" and, together with its packaging and scientific and
technical services, add significant value to the businesses of its customers. In
addition to its integrated systems solutions for fresh-cut produce, the Company
also markets flexible packaging for uses in the snack food, bakery and
confectionery industries and for other uses.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Sales. Sales decreased from $7,758,000 in the three months ended March
31, 1999 to $6,052,000 in the three months ended March 31, 2000, a decrease of
$1,706,000 or 22%. Sales of processing technologies and related activities
decreased from $1,810,000 in the three months ended March 31,1999 to $590,000 in
the three months ended March 31, 2000, a decrease of $1,220,000 or 67%. Of this
decline, 83% was due to a reduction in sales of corn products as detailed below.
Sales of US packaging materials increased from $680,000 in the three months
ended March 31, 1999 to $941,000 in the three months ended March 31,2000, an
increase of $261,000 or 38%. Sales of UK packaging materials increased from
$2,715,000 in the three months ended March 31, 1999 to $2,835,000 in the three
months ended March 31, 2000, an increase of $120,000 or 4.4%. Sales of European
packaging materials fell from $2,553,000 in the three months ended March 31,
1999 to $1,686,000 in the three months ended March 31, 2000, a decrease of
$867,000 or 34%, of which approximately 50% of the decline was due to adverse
currency conversion rates.
The decrease in sales of processing technologies and related activities
was mainly due to the lower sales revenue from fresh-cut corn sold through the
Company's majority-owned affiliate, Newcorn, in the first quarter of 2000, and
accounted for approximately 83% of the decline in this business segment As
mentioned previously in the Company's annual report on Form 10K/A for the fiscal
year ended December 31, 1999, the Company restructured the corn operations and
withdrew from the market. This withdrawal also involved not only a reduction in
overheads, thus reducing the breakeven level of sales, but also a complete
reappraisal of the sales and purchasing model. The Company has identified the
need for changes in the way it promotes its corn to major customers, to help
support the year round model, and has been implementing such changes
accordingly. In addition, the Company intends to focus its sales efforts on food
service, as well as to develop its traditional retail market. In relation to
this market extension, the Company is also extending the range of corn products
available, and plans to introduce further new products during 2000 onwards.
- 8 -
<PAGE> 11
During the first quarter of 2000, the Company completed the relocation
of its potato processing equipment from Somis, California to Pasco, Washington.
The production and shipment of fresh-cut potato products commenced in March from
the Pasco, Washington facility of Reser's. During this relocation period the
Company withdrew a number of products from the market and thus there was a fall
in revenue while the processing line was relocated. The products are now back in
production. This relocation followed the signing in October 1999 of a strategic
five-year manufacturing and co-pack agreement with Reser's, under which Reser's
will process and supply EPL Food with all of EPL Food's fresh-cut potato
product requirements. As stated earlier, this relocation caused some disruption
to shipments and also caused the Company to restrict its sales and marketing
activities until such time as the relocation was completed. The Company expects
that volumes will increase in the second quarter of 2000 over the first quarter
level.
In addition to the above mentioned copack agreement, Reser's will
process and supply EPL Food with a new range of blanched (partially cooked)
potato products to be sold by EPL Food under the Fresh Alternatives TM brand.
The Fresh Alternatives TM brand has been made available to EPL Food by the Sholl
Group II, Inc., the exclusive licensee of The Pillsbury Company's Green Giant
(R) Fresh brand name. The Company has already commenced sales of these blanched
potato products, although such sales did not have a material impact on sales
revenue in the first quarter of 2000. In addition, the Company and Reser's
agreed to enter into a related five-year non-exclusive license agreement for the
Company's proprietary processing technology for potatoes. The Company currently
believes these arrangements for both fresh and blanched potato products will
have a material positive impact on the sales revenue of EPL Food in the balance
of 2000 and beyond, although there can be no assurance such will be the case.
During the quarter, the Company announced an exclusive licensing
arrangement with Monterey Mushrooms for its Mushroom Fresh (R) processing
technology. The Company currently believes that these arrangements will have a
material contribution to processing technology revenue in 2000 and beyond,
although there can be no assurance that this will in fact be the case. The first
Mushroom Fresh (R) sale was made subsequent to the end of the quarter ended
March 31, 2000. In addition, product testing continues on other vegetables, and
in some cases has been expanded or accelerated, and significant costs have been
incurred to date that are yet to yield material revenues. The Company is also
following up on potential opportunities for processing technologies and
scientific and technical services in Europe.
The significant increase in U.S. packaging material sales was
principally attributable to increasing sales of perforated products, as well as
timing differences in shipments to large customers compared to the same period
of 1999. The Company is currently engaged in discussions with a number of
potential customers for new product applications and markets, especially in
relation to the Company's proprietary perforating capabilities. These include
applications in the consumer goods, produce, horticultural, bakery and
pharmaceutical industries, amongst others. Some initial orders have been
received during the first quarter of 2000. Should further such orders be
forthcoming, the Company expects that such new business would make a material
contribution to sales revenue in the balance of 2000 and onwards. There can be
no assurance, however, that the Company will in fact obtain this business. As
noted above, as part of the Company's desire to better exploit its perforation
technologies in the U.S., the Company and ANC have agreed to unwind their joint
venture and are discussing various alternative relationships going forward. In
May 2000 the Company signed a two year manufacturing and supply agreement with
Procter & Gamble to provide a key component for a new consumer product. This
component, to be manufactured at a U.S. facility of the Company's U.S. packaging
business, involves the use of proprietary technology. The product and its
expected volume have not been identified for competitive reasons. Shipments of
the component to Procter & Gamble are expected to commence during the year 2000.
The U.S. packaging facility is being expanded to better manage the increased
volume and production demands of this new agreement.
The increase in U.K. packaging material sales was principally
attributable to an increase in the sales of packaging to the produce industry.
This increase is expected to become more noticeable as the year progresses and
the volume of produce packaging increases. The Company is now the main supplier
of produce packaging to processors supplying most of the main food retailers in
the UK, and this market segment now represents the largest single segment of the
UK business. The Company believes that its efforts to change product mix
represent a more stable foundation
- 9 -
<PAGE> 12
for sustainable and more profitable growth, although there can be no assurance
that the Company will be successful in these efforts. The year 2000 is expected
to see a full year benefit of the increased new business, which is expected to
generate a material increase in revenue during 2000 and beyond, although there
can be no assurance that such additional revenue will be obtained. In addition,
the Company's proprietary micro-perforating technology has enabled the Company
to win new business in the area of cooked meat pastry products and the Company
believes it is the market leader in this industry segment. New business
continues to be gained in the area of "breathable" packaging and the Company has
recently increased its production capacity in this area to handle the forecast
volume increase. During the first quarter of 2000, the UK operation installed an
8 color press to further enhance its tactical abilities. Other applications are
currently under development, which, if successful, could have a material impact
on sales revenues in 2000, although there can be no assurance that this
development will result in new business.
The decline in sales of European packaging materials was due mainly to
(i) an adverse movement in exchange rates when converting sales into US dollars,
which moved approximately 16% in the first quarter of 2000 as compared with the
first quarter of 1999, and (ii) a delay and subsequent reduction in the citrus
harvest for 1999/2000, as compared with the 1998/1999 period, While adverse
currency conversion rates are expected at least in the short term to affect
Spanish sales as reported in US dollars as compared to the year ago period, the
Company expects sales volumes to increase from the first quarter 2000 levels.
The Company, through its Spanish subsidiary Fabbri Artes Graficas Valencia, SA,
("Fabbri"), is targeting further expansion not only in Spain but in other
European countries. In addition, Fabbri is reducing its dependency on the citrus
crop by increasing its sales of packaging materials used in fresh produce and
other areas. Fabbri is also seeking to expand its limited revenue derived from
South American countries through existing and new contacts. Furthermore, Fabbri
is working increasingly closely with the UK business not only to leverage the
scientific and technical knowledge base, but to be able to offer customers a
pan-European service offering. The increased technical base is reflected in the
launch of the Company's Respire(R) brand of "breathable" packaging for fresh
produce into Europe, from which Fabbri has already begun to gain new business,
although it did not have a material impact on sales revenue in the first quarter
of 2000.
Gross Profit. Gross profit increased from $44,000 in the three months
ended March 31, 1999 to $532,000 in the three months ended March 31, 2000, an
increase of $488,000 (1,109% increase) or, as a percentage of sales, from 0.6%
to 8.8%. This increase reflected the considerably reduced losses in the corn
operations, following the restructuring that occurred at the end of 1999.
Further benefits from this are expected to be seen as the year progresses and
the volume of corn processed increases. In addition, there was an improvement in
the results of the potato operations, following the completion during the
quarter of the relocation of the potato processing facility to Reser's Pasco,
Washington facility. Again, further benefits of this will be seen as the year
rolls out and volumes of potatoes processed increases. The gross margin in the
US packaging business also improved, as a result of improved volumes and a more
beneficial sales mix. These gains were offset by a fall in the gross profit in
European packaging. This was impacted by the lower sales volumes, which impacted
margins disproportionately given the level of fixed costs, as well as the
adverse conversion rates mentioned above.
Gross profit from period-to-period may also be impacted by pricing
pressures on Newcorn's corn business primarily attributable to the extent to
which bulk corn is available in regions where Newcorn's fresh-cut corn products
are sold, which is largely a function of the timing of and variations in
regional harvest yields. The Company has restructured the way it buys bulk corn
so as to minimize any fixed volumes it is required to take. This provides the
Company with options as to how much it is committed to take, with additional
amounts available on the spot market.
In addition, the Company continues to accelerate the development of
certain applications for its proprietary micro-perforating technology. These
costs are primarily expensed as incurred. Although the benefits of this expense
started to contribute to incremental sales revenue and gross profit in the 1999
fourth quarter in the U.K. packaging business, it is expected to increase
significantly in the U.K. and other areas as the Company moves through 2000 and
beyond, although there can be no assurance that such will be the case.
- 10 -
<PAGE> 13
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $1,923,000 in the three months ended
March 31, 1999 to $2,145,000 in the three months ended March 31, 2000, an
increase of $222,000 or 11.5%. This increase was due primarily to (i) the
continuing and accelerating development of the Company's sales and marketing
efforts, particularly in relation to a number of packaging development projects,
and (ii) other one time costs, including additional professional fees. The
Company's sales and marketing efforts with respect to processing technologies
and related activities are primarily focused on fresh-cut potatoes, apples and
mushrooms, together with packaging applications. Some products have moved from
the product development stage to the market development.
Research and Development Costs. Research and development costs
decreased from $582,000 in the three months ended March 31, 1999 to $324,000 in
the three months ended March 31, 2000, a decrease of $258,000 or 44.0%. This
reduction reflects the reallocation of resources from development to application
and execution. The Company continues to expense all development costs, whether
product, market or sales related, in the year incurred, and thus costs are
incurred prior to the benefits, if any, that may be expected to be realized from
such expense. The Company expects that research and development costs will
continue at no less than recent levels and may increase.
Depreciation and Amortization. Depreciation and amortization decreased
marginally from $526,000 in the three months ended March 31, 1999 to $523,000 in
the three months ended March 31, 2000, a decrease of $3,000 or 0.6%.
Loss from Operations. Loss from operations decreased from $2,987,000 in
the three months ended March 31, 1999 to $2,459,000 in the three months ended
March 31, 2000, an improvement of $528,000 or 17.7%. The decrease in the loss
was primarily due to an improvement in gross margins, despite the lower sales
revenue. In addition, there was a net fall in total operating expenses,
excluding depreciation and amortization, of $36,000. Further improvements are
expected in this regard, and management believes that the infrastructure costs
can be further leveraged as sales continue to develop. Management believes that
considerable progress continues to be made to exploit the commercial value of
the Company's technologies and that the foundation for future sustainable growth
has been considerably strengthened. However, because all development costs are
expensed as they are incurred, together with the fact that such expense is
necessarily incurred before the benefits of increased sales and improved margins
can be seen, the Company's financial results do not yet reflect this activity.
Interest Expense The increase in interest charges from the 1999 first
quarter charge of $50,000 principally reflects the non cash cost amortization of
deferred finance costs brought forward from 1999, plus a fair value provision
for warrants granted in the first quarter of 2000 in connection with the new
financing described in Note 4 to the Company's financial statements.
Gain on sale of fixed assets. As noted in the Company's 1999
consolidated financial statements, the Company completed a sale and leaseback of
the land and building at its Spanish trading subsidiary, Fabbri, with an
unrelated third party, in July 1999. The Company raised gross proceeds, before
costs and taxes, of PTS800,000,000 (approximately $5,100,000). The Company
expects to realize a total pretax profit of approximately $2,303,000 on this
transaction. For financial reporting purposes, $94,000 of this total profit was
recognized in the first quarter of 2000. The remaining balance will be
recognized over the eight year life of the associated leaseback. The tax on this
profit can be deferred for up to 10 years under Spanish tax rules.
Accretion, Discount and Dividends on Preferred Stock. The accretion,
discount and dividends on preferred stock increased from $124,000 for the three
months ended March 31, 1999 to $154,000 in the three months ended March 31,
2000, an increase of $30,000 or 24%. The increase was due to an adjustment
reflecting the fair value of warrants issued during the first quarter of 2000.
Most of the expense in 1999 related to an appreciation provision on the Series D
Stock, all of which Stock was converted by December 31, 1999.
- 11 -
<PAGE> 14
YEAR 2000 COMPLIANCE DISCLOSURE
The term "year 2000 issue" is a general term used to describe the
various problems that may result from the improper processing of dates and the
performance of date-sensitive calculations by computers and other equipment as
the year 2000 is approached and reached. During late 1998 and 1999, the Company
adopted a written plan (the "EPL Y2K Plan") which outlined the actions the
Company planned to take to identify and address year 2000 issues. The EPL Y2K
Plan required each of the Company's business units to prepare a compliance plan
(a "Unit Plan") which (i) summarized efforts taken to identify, prioritize and
address year 2000 issues facing such business unit, (ii) estimated the extent to
which these year 2000 issues have been addressed, and (iii) flagged foreseeable
problems.
The EPL Y2K Plan called for each Unit Plan to identify, prioritize and
address both "internal" year 2000 issues (those arising from such unit's
computer hardware and software, embedded chips and unit practices with respect
to date entry) and "external" year 2000 issues (those arising by virtue of
material relationships with customers and suppliers which have year 2000
issues). The Company received and reviewed Unit Plans from each of its business
units and completed its identification of year 2000 issues that might reasonably
have had a material impact on the Company's operations. The completed
development of its remediation plans for such material issues during the second
quarter of 1999 and performed most of the required remediation during the third
quarter of 1999. Early in the fourth quarter of 1999, the Company completed its
already substantially performed identification and prioritization of, and
communication with, critical suppliers, distributors and customers to determine
the extent to which the Company might have been vulnerable to external year 2000
issues. While no material risks were identified, the Company developed
contingency plans as noted below to address external parties' potential
shortcomings.
The total cost of the Company's year 2000 project, excluding the cost
of using internal resources, was approximately $100,000 and funded through
operating cashflows. Of this total cost, approximately $30,000 was attributable
to the purchase of new hardware and software and was capitalized in accordance
with the Company's current policies, with the remaining $70,000 was expensed as
incurred during 1999. Contingency plans to address possible business
interruptions resulting from internal or external Year 2000 factors were in
place by the end of November 1999. These contingency plans included stockpiling
raw materials, increasing inventory levels, securing alternate sources of
supply, scheduling non mission-critical activities during the first week of
2000, making contingency arrangements for funds transfer, establishing back-up
means of communication and other measures.
As a result of the Company's internal efforts and preparation, together
with that of our suppliers and customers, no business interruptions of any kind
resulted from Year 2000 causes. The operations will continue to be reviewed in
relation to the possibility of delayed effects that might arise.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had $1,252,082 in cash and short term
investments (including $378,209 of restricted cash - current and $500,508 of
restricted cash - non current), compared with $1,493,231 (including $394,516 of
restricted cash - current and $511,126 of restricted cash - non current) at
December 31, 1999, a decrease of $241,149. During the three months ended March
31, 2000, $2,986,449 was used in operating activities. In addition, $1,188,514
was used in investing activities to purchase fixed assets, principally the eight
color press for the U.K. packaging business. The increase in cash used in
operating activities of $2,611,991 in the three months ended March 31, 2000
compared to the same period in 1999 reflected the significant reduction in
accounts payable, which were reduced by over 21% in the period ended March 31,
2000, offset by an increase in non cash charges, comprised mainly of the
amortization of deferred finance charges.
Total financing activities during the three months ended March 31, 2000
generated $4,288,643, compared with $936,735 in the same period in 1999. This
was primarily from the proceeds of short term debt received in 2000, as well as
associated long term debt from financing the acquisition of the eight color
press mentioned above.
As of March 31, 2000, the Company had drawn $640,000 under an existing
line of credit with the Bank of Scotland, entered into by its subsidiary EPL
Technologies (Europe) Limited, for up to $640,000, which bears interest
- 12 -
<PAGE> 15
of 2% over bank base rate (5.75% as of March 31, 2000). The Company also has a
short-term line of credit with the Bank of Scotland for up to approximately
$1,600,000 which also bears interest of 2% over bank base rate. At March 31,
2000, approximately $1,379,100 had been drawn under this facility. The lines of
credit are collateralized by the assets of EPL Technologies (Europe) Limited and
its subsidiaries. The debt agreements with the Bank of Scotland contain certain
covenants applicable to the results of operations of these businesses which
provide for maintenance of minimum asset levels and minimum earnings before
interest and tax to external interest ratios.
During 1999 the Company, through its Spanish subsidiary Fabbri,
finalized with BankInter an unsecured line of credit for PTS50,000,000 ($287,400
at $1.00:PTS 174). The Company had drawn PTS20,000,000 ($155,000 at $1.00:PTS
174) March 31, 2000. The facility carries interest of 1.0% over BankInter base
rate (2.85% as of March 31, 2000). There are no covenants applicable to the
facility.
During the final quarter of 1999, the Company, through its subsidiary,
EPL Flexible Packaging, Inc., was granted a short term credit facility of
$100,000 with Old Second National Bank of Aurora. This facility is secured upon
the inventory of EPL Flexible Packaging, Inc. and carries interest at a rate of
1.5% over the banks prime rate (8.25% as at March 31, 2000). There are no
covenants applicable to this facility. As at March 31, 2000, $100,000 had been
drawn under this facility.
At the end of the third quarter of 1998, Newcorn entered into two
equipment financing loans with General Electric Capital Corporation ("GECC") and
Santa Barbara Bank & Trust ("SBBT") secured by specifically identified capital
assets. The GECC loan is for approximately $549,000 for a term of 48 months
bearing interest at 10.25% per annum. The SBBT loan is for approximately
$466,000 for a term of 48 months payable in equal monthly installments bearing
interest at 10.5% per annum. At March 31, 2000, approximately $369,000 and
$314,000 were outstanding under the GECC and SBBT loans, respectively.
In March 1999, Paul L. Devine, the Company's Chairman and Chief
Executive Officer, agreed to extend to the Company on a short term basis a
revolving credit facility in an amount of up to $500,000, which amount was
increased to $1,000,000 in June 1999. At March 31, 2000 $389,400 of the credit
facility was outstanding. The Company's obligations under this facility are
unsecured, and amounts outstanding thereunder bear interest at a rate of nine
percent (9%) per annum. The Company's Chairman has agreed to defer repayment of
the remaining balance owed to him until the Company is able to do so. The
Company has agreed to pay all reasonable out-of-pocket expenses incurred by Mr.
Devine in connection with advancing funds to the Company under this facility.
In December 1999 two investment funds affiliated with the Company
granted the Company a credit facility of $3,500,000, which amount was fully
drawn as at December 31, 1999. The facility carries a stated interest at the
rate of 10% per annum and is secured by a pledge of certain assets of the
Company. In connection with this facility, the Company issued two million shares
of Common Stock and issued a warrant to acquire 350,000 shares of Common Stock
at an exercise price of $0.50 per share.
In February and March 2000, the Company, in a series of transactions,
borrowed from individual investors $3,275,000 for a period of 12 months. The
loans, which are unsecured, carry interest at the rate of 10% per annum. In
connection with these loans, the Company issued warrants to acquire a total of
1,637,500 shares of Common Stock at an exercise price of $1.00 per share.
At March 31, 2000, the Company had warrants outstanding and exercisable
to purchase 6,326,357 shares of common stock at a weighted average price of
$1.43 per share. In addition, at March 31, 2000, the Company had 2,210,875
options outstanding and exercisable to purchase shares of common stock at a
weighted average price of $7.57 per share. At March 31, 2000, there were no
material commitments for capital expenditures.
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 the Company's cost structure, and the financial statements
have been prepared on that basis. Historically, the Company's revenues have not
been sufficient to fund the development of the Company's business, and thus it
has had to finance its operating losses externally principally through equity or
debt financing. This, together with the fact that the Company has incurred net
losses, exclusive of accretion, discount and dividends on preferred stock, of
$7,187,000, $7,781,000 and $14,416,000 in 1997, 1998 and 1999 respectively, had
an accumulated deficit of $50,270,000 and negative working capital as of
December 31, 1999, caused the Company's auditors to indicate that they felt
there was substantial doubt about the Company's ability to continue as a going
concern.
To address the current financial situation, the Company has undergone a
number of operational improvements as well as made significant investments in
development and marketing activities related to its various
- 13 -
<PAGE> 16
processing technology businesses and packaging businesses in 1999 and 1998,
which the Company's management believes will improve cash flows from operations.
The Company expects that the following, amongst others, should contribute to an
improvement in the financial performance of the Company in the year 2000 and
beyond, although there can be no assurance that such will in fact be the case:
(i) the restructuring of the corn portion of the processing aids business
segment and the reduction in ongoing overheads of that operation, (ii) the
agreement with Reser's for Reser's to process and supply EPL Food with all of
EPL Food's fresh-cut potato requirements, (iii) the Company's completion
subsequent to the year end of the relocation of its potato processing equipment
and production and shipment of fresh-cut potato products commenced from Reser's
Pacso, Washington facility, (iv) further exploitation of the Company's
processing technologies, as evidenced by the exclusive licensing arrangement
with Monterey Mushrooms for mushrooms entered into subsequent to year-end, and
(v) further exploitation of the Company's perforating technologies, as evidenced
by the new orders gained in produce packaging in the U.K. during the fourth
quarter of 1999 and first quarter of 2000, together with the various
applications development projects currently in progress.
At March 31, 2000, the Company had available borrowing facilities
remaining in the U.S., U.K. and Spain of approximately $353,000. In addition, as
mentioned above, during the quarter the Company obtained a 12-month loan of
$3,275,000 from individual investors. Such loan has a stated interest rate of
10%. The Company will be required to seek additional and longer-term debt or
equity financing to fund operating requirements in 2000 and repay and/or
refinance existing short term debt. The Company is currently due to repay a
credit facility granted by two investment funds affiliated with the Company in
June 2000 in the amount of $3,500,000. In this regard, the Company is currently
exploring a number of options to raise additional capital over and above that
mentioned above. The cost of such additional financing arrangements may not be
acceptable to the Company and could result in significant dilution to the
Company's existing shareholders. No assurances can be given that the Company
will be successful in raising additional capital and failure to raise such
capital, if needed, could have a material adverse effect on the Company's
business, financial condition and results of operations.
FORWARD LOOKING STATEMENTS
Statements in the foregoing discussion that are not statements of
historical fact and reflect the intent, belief or expectations of the Company
and its management regarding the anticipated impact of events, circumstances and
trends should be considered forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are not guarantees of future performance, and actual results may vary
materially from those projected in the forward-looking statements. Meaningful
factors that might affect such results include, but are not limited to: a) the
Company's needs for capital, including capital for acquisitions, which needs
have been and are expected to continue to be substantial, and its potential
inability to obtain additional financing on satisfactory terms, b) the Company's
product development and sales process, which is lengthy and resource intensive,
c) the uncertainty of demand for, or the market acceptance of, the Company's
products and services, d) the Company's limited resources and experience in
marketing and selling its products and services, e) personnel resources and
production requirements and potential difficulties in cross-marketing and
managing multiple product lines, f) the Company's potential inability to
identify and acquire acceptable acquisition targets, to the extent necessary to
fulfill its expansion plans, and its potential inability to successfully
integrate any such acquisitions into its operations, g) potential product
obsolescence and short product life cycles, h) potential competition,
particularly in the market for produce packaging, from companies with greater
financial, management and other resources, i) the unpredictability and
volatility of the market for agricultural products, j) changes in U.S. and
foreign regulation, k) difficulty with research and development and sales and
marketing activities regarding new and existing products, including extension of
necessary time periods or increase in expense for product introduction and
market penetration, l) potential difficulties in obtaining or protecting
intellectual property rights or the infringement of proprietary or other rights
of the Company by third parties, m) raw material availability and pricing, n)
loss of services of key employees of the Company and o) delays in the Company's
ability to bring into production Newcorn's new processing facilities, as well as
other information contained in the Company's other filings with the Securities
and Exchange Commission.
- 14 -
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
Exhibit 11.0 Computation of Loss per share
b) Reports on Form 8-K
On March 15, 2000 the Company filed an 8-K under Item 5
thereof relating to a series of credit transactions between
the Company and a group of individual investors for a short
term loan of $3,275,000
- 15 -
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EPL TECHNOLOGIES, INC.
Date: May 12, 2000 /s/ Paul L. Devine
Paul L. Devine
Chairman and President
(Principal Executive Officer)
Date: May 12, 2000 /s/Robert S. Brzezinski
Robert S. Brzezinski
Treasurer
(Principal Financial and Accounting Officer)
- 16 -
<PAGE> 1
EPL Technologies, Inc.
Exhibit 11.0
Computation of Earnings per Common Share and
Fully Diluted Earnings per Common Share
<PAGE> 2
EXHIBIT 11.0
EPL TECHNOLOGIES, INC.
COMPUTATION OF LOSS PER SHARE
(UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
-------- --------
<S> <C> <C>
Net loss ($ 3,381) ($ 3,032)
Deduct:
Accretion, discount and dividends on preferred stock 154 124
-------- --------
Net loss applicable to common shareholders ($ 3,535) ($ 3,156)
======== ========
Weighted average number of common shares outstanding 30,566 11,752
======== ========
Basic loss per share ($ 0.12) ($ 0.27)
======== ========
Net Loss for diluted loss per share computation ($ 3,381) ($ 3,032)
======== ========
Weighted average number of common shares outstanding 30,566 11,752
Common share equivalent applicable to:
Series A convertible preferred stock 40 40
Series D convertible preferred stock 0 1,644
Warrants 4,559 279
Stock options 40 306
Less common stock acquired with net proceeds 4,639 1,321
-------- --------
Weighted average number of common shares
and common share equivalents used to compute
diluted loss per share 30,566 12,700
======== ========
Diluted loss per share ($ 0.12) ($ 0.24)
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2000 (UNAUDITED) AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 1,252,082
<SECURITIES> 0
<RECEIVABLES> 4,627,642
<ALLOWANCES> 0
<INVENTORY> 4,353,498
<CURRENT-ASSETS> 12,088,875
<PP&E> 13,412,265
<DEPRECIATION> (3,766,986)
<TOTAL-ASSETS> 25,606,440
<CURRENT-LIABILITIES> 20,888,111
<BONDS> 2,106,915
0
0
<COMMON> 30,776
<OTHER-SE> 729,220
<TOTAL-LIABILITY-AND-EQUITY> 25,606,440
<SALES> 6,052,123
<TOTAL-REVENUES> 6,052,123
<CGS> 5,519,881
<TOTAL-COSTS> 2,145,245
<OTHER-EXPENSES> 846,378
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 987,530
<INCOME-PRETAX> (3,353,371)
<INCOME-TAX> 28,062
<INCOME-CONTINUING> (3,381,433)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,381,433)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
