8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K/A

Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

January 12, 2001
Date of Report (Date of earliest event reported)

PORTOLA PACKAGING, INC.
(Exact name of registrant as specified in its charter)

Delaware	033-95318	94-1582719
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

890 Faulstich Court
San Jose, CA 95112
(Address of principal executive offices, including zip code)

(408) 453-8840
(Registrant’s telephone number, including area code)

Item 2.  Acquisition or Disposition of Assets

      This Form 8-K/A is being filed to amend the Form 8-K filed with the Commission on January 29, 2001 by Portola Packaging, Inc. (“Portola”), a Delaware corporation, to include the financial statements and pro forma financial information referred to in Item 7 of this Form 8-K/A, relating to the acquisition by Northern Engineering and Plastics Corporation, a Delaware corporation and a wholly-owned subsidiary of Portola, of substantially all of the assets of Consumer Cap Corporation (“Consumer”), a Pennsylvania corporation. The acquisition closed on January 12, 2001. Except as set forth in Item 7 below, no other changes have been or are being made to the disclosures already included in the report of Portola on Form 8-K filed with the Commission on January 29, 2001.

Item 7.  Financial Statements and Exhibits

      (a)  Financial statements of businesses acquired.

     Attached as Exhibits 99.1 and 99.2 are the following items:

i)	The audited balance sheet of Consumer as of November 30, 2000, and the related statements of operations, shareholders’ deficit and cash flows for the eleven-month period ended November 30, 2000, and Report of Independent Accountants of PricewaterhouseCoopers LLP with respect thereto.
ii)	The unaudited condensed statements of operations and cash flows of Consumer for the three-month periods ended November 30, 2000 and 1999.

      (b)  Pro Forma financial information.

     Attached as Exhibit 99.3 are the following items:

i)	Unaudited Pro Forma Condensed Consolidated Balance Sheet as of November 30, 2000.
ii)	Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended August 31, 2000.
iii)	Unaudited Pro Forma Condensed Consolidated Statement of Operations for the three-month period ended November 30, 2000.
iv)	Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

2

      (c)  Exhibits.

2.01	Asset Purchase Agreement, dated as of January 12, 2001, by and among Portola, Consumer, the shareholders of Consumer and certain other third parties, incorporated herein by reference to exhibit 2.01 to Portola’s report on Form 8-K as filed with the Commission on January 29, 2001.
23.01	Consent of Independent Accountants
99.1	The audited balance sheet of Consumer as of November 30, 2000, and the related statements of operations, shareholders’ deficit and cash flows for the eleven-month period ended November 30, 2000, and Report of Independent Accountants of PricewaterhouseCoopers LLP with respect thereto. (filed herewith)
99.2	The unaudited condensed statements of operations and cash flows of Consumer for the three-month periods ended November 30, 2000 and 1999. (filed herewith)
99.3	Unaudited pro forma condensed consolidated financial statements. (filed herewith)

3

SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Portola Packaging, Inc. a Delaware corporation
Date: March 30, 2001	By:            /s/ Dennis L. Berg           Dennis L. Berg, Vice President and Chief Financial Officer

4

INDEX TO EXHIBITS

2.01	Asset Purchase Agreement, dated as of January 12, 2001, by and among Portola, Consumer, the shareholders of Consumer and certain other third parties, incorporated herein by reference to exhibit 2.01 to Portola’s report on Form 8-K as filed with the Commission on January 29, 2001.
23.01	Consent of Independent Accountants
99.1	The audited balance sheet of Consumer as of November 30, 2000, and the related statements of operations, shareholders’ deficit and cash flows for the eleven-month period ended November 30, 2000, and Report of Independent Accountants of PricewaterhouseCoopers LLP with respect thereto. (filed herewith)
99.2	The unaudited condensed statements of operations and cash flows of Consumer for the three-month periods ended November 30, 2000 and 1999. (filed herewith)
99.3	Unaudited pro forma condensed consolidated financial statements. (filed herewith)

5 EX-23.1 2 j8745901ex23-1.htm AUDITORS REPORT

Exhibit 23.01

CONSUMER CAP CORPORATION

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No's. 333-82125 and 333-17533) of Portola Packaging, Inc., of our report dated March 2, 2001, relating to the financial statements of Consumer Cap Corporation, which appears in this Form 8-K/A of Portola Packaging, Inc., dated March 30, 2001.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania

March 30, 2001

6 EX-99.1 3 j8745901ex99-1.htm CONSUMER CAP CORP FINANCIAL STATEMENTS

Exhibit 99.1

CONSUMER CAP CORPORATION

FINANCIAL STATEMENTS

As of November 30, 2000 and
For the Eleven-Month Period Then Ended

7

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Consumer Cap Corporation:

      In our opinion, the accompanying balance sheet and the related statements of operations, shareholders’ deficit and cash flows present fairly, in all material respects, the financial position of Consumer Cap Corporation (the “Company”) at November 30, 2000, and the results of its operations and its cash flows for the eleven-month period then ended in conformity with accounting principles generally accepted in the United States of America. 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 audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

      The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company incurred a net loss of $2,799,000 for the eleven-month period ended November 30, 2000. In addition, the Company had negative cash flows from operations of $1,319,000 for the eleven-month period ended November 30, 2000, and had negative working capital of $6,402,000 at November 30, 2000. As discussed in Note 5, the Company was in default of certain of the restrictive covenants under long-term debt totaling $3,861,000 at November 30, 2000, which rendered the debt payable on demand at the bank’s option. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

      As discussed in Note 10, on January 12, 2001, the Company completed the sale of substantially all of its assets and the assumption of certain of its liabilities by Portola Packaging, Inc.

/s/ PricewaterhouseCoopers LLP     
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania

March 2, 2001

8

CONSUMER CAP CORPORATION

BALANCE SHEET

November 30, 2000
(in thousands, except share data)

ASSETS
Current assets:
	Cash and cash equivalents				$	75
	Accounts receivable, net of allowance for bad debts of $24					1,158
	Inventories					1,070
	Prepaid expenses and other current assets					21
		Total current assets				2,324
Equipment and leasehold improvements, net						4,472
Other assets						24
			Total assets		$	6,820
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
	Current portion of long-term debt				$	2,931
	Revolving line of credit					1,460
	Due to related parties					1,020
	Accounts payable					2,063
	Book overdraft					35
	Accrued compensation					142
	Accrued royalties					198
	Accrued interest					212
	Other accrued expenses and liabilities					665
		Total current liabilities				8,726
Long-term debt, less current portion						826
		Total liabilities				9,552
Redeemable Preferred Stock, $100 par value:
	Authorized: 43,711 shares; Issued and outstanding: 43,711 shares, at redemption value					4,798
Redeemable Junior Preferred Stock, $100 par value:
	Authorized: 10,000 shares; Issued and outstanding: 10,000 shares, at redemption value					1,073
Redeemable Convertible Preferred Stock, $1 par value:
	Authorized: 8,656 shares; Issued and outstanding: 8,656 shares, at redemption value					10
Commitments and contingencies (Notes 2, 5, and 6)
Shareholders’deficit:
	Common stock, $1 par value:
		Authorized: 100,000 shares; Issued and outstanding: 14,800 shares				15
	Additional paid-in capital					62
	Accumulated deficit					(8,690	)
		Total shareholders’ deficit				(8,613	)
				Total liabilities and shareholders’ deficit	$	6,820

The accompanying notes are an integral part of these financial statements.

9

CONSUMER CAP CORPORATION

STATEMENT OF OPERATIONS

For the Eleven-Month Period Ended November 30, 2000
(in thousands, except share data)

Sales		$	9,110
Cost of sales			8,827
	Gross profit		283
Selling, general and administrative			2,580
	Loss from operations		(2,297	)
Other (income) expense:
	Interest income		(6	)
	Interest expense		508
			502
	Loss before income taxes		(2,799	)
Income tax benefit			—
Net loss		$	(2,799	)
Redeemable preferred stock dividends			(563	)
Net loss applicable to common stock		$	(3,362	)
Number of shares used in computing per share amounts			14,800
Basic and diluted loss per common share		$	(227	)

The accompanying notes are an integral part of these financial statements.

10

CONSUMER CAP CORPORATION

STATEMENT OF SHAREHOLDERS’ DEFICIT

For the Eleven-Month Period Ended November 30, 2000
(in thousands, except share data)

	Common Stock				Additional						Total
					Paid-in			Accumulated			Shareholders’
	Shares		Amount		Capital			Deficit			Deficit
Balance, December 31, 1999		14,800	$	15	$	—		$	(5,891	)	$	(5,876	)
Capital contribution						625						625
Dividends accrued on redeemable preferred stock						(563	)					(563	)
Net loss for the period									(2,799	)		(2,799	)
Balance, November 30, 2000		14,800	$	15	$	62		$	(8,690	)	$	(8,613	)

The accompanying notes are an integral part of these financial statements.

11

CONSUMER CAP CORPORATION

STATEMENT OF CASH FLOWS

For the Eleven-Month Period Ended November 30, 2000
(in thousands)

Cash flows from operating activities:
	Net loss				$	(2,799	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization				1,037
		Changes in working capital:
			Accounts receivable			(147	)
			Inventories			223
			Prepaids expenses and other current assets			(22	)
			Other assets			(3	)
			Accounts payable			(483	)
			Accrued royalties			86
			Accrued interest			166
			Other accrued expenses and liabilities and accrued compensation			623
				Net cash used in operating activities		(1,319	)
Cash flows from investing activities:
		Additions to equipment and leasehold improvements				(1,139	)
				Net cash used in investing activities		(1,139	)
Cash flows from financing activities:
		Decrease in book overdraft				(54	)
		Borrowings under revolver				9,075
		Repayments of the revolver				(8,894	)
		Borrowings under long-term debt arrangements				696
		Repayments of long-term debt arrangements				(965	)
		Borrowing from related parties, net				998
		Capital contribution				625
				Net cash provided by financing activities		1,481
		Decrease in cash and cash equivalents				(977	)
Cash and cash equivalents at beginning of period						1,052
Cash and cash equivalents at end of period					$	75
Cash paid during the period for interest					$	333
Cash paid during the period for taxes					$	—
Supplemental disclosure of cash flow information:
	Conversion of related party borrowings to redeemable junior preferred stock				$	1,000
	Dividend accretion on preferred stock				$	563

The accompanying notes are an integral part of these financial statements.

12

CONSUMER CAP CORPORATION

NOTES TO FINANCIAL STATEMENTS

1.  Nature of Operations:

      Consumer Cap Corporation (“Consumer”) was formed in August 1995. Consumer designs, manufactures and markets plastic closures primarily for the dairy, water and juice industries. Consumer has a production facility located in New Castle, Pennsylvania and opened another facility in Phoenix, Arizona in June 2000. Consumer’s customers are located primarily in the United States.

2.  Summary of Significant Accounting Policies:

Basis of Presentation:

      The accompanying financial statements have been prepared assuming that Consumer will continue as a going concern. Consumer incurred a net loss of $2,799,000 for the eleven-month period ended November 30, 2000. In addition, Consumer had negative cash flows from operations of $1,319,000 for the eleven-month period ended November 30, 2000, and had negative working capital of $6,402,000 at November 30, 2000. As discussed in Note 5, Consumer was in default of certain of the restrictive covenants under long-term debt totaling $3,861,000 at November 30, 2000, which rendered the debt payable on demand at the bank’s option. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

      As discussed in Note 10, on January 12, 2001, Consumer completed the sale of substantially all of its assets and the assumption of certain of its liabilities by a wholly-owned subsidiary of Portola Packaging, Inc. (“Portola”).

Cash and Cash Equivalents:

      Consumer considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Inventories:

      Inventories are stated at the lower of cost (first-in, first-out method) or market.

13

CONSUMER CAP CORPORATION

NOTES TO FINANCIAL STATEMENTS (continued)

Equipment and Leasehold Improvements:

      Equipment and leasehold improvements are stated at cost. Equipment is depreciated on a straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the estimated useful lives or the related lease term, whichever is shorter. The cost of maintenance and repairs is charged to operations as incurred. When assets are disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and the resulting gains or losses are included in the results of operations.

Book Overdraft:

      Under Consumer’s cash management system, checks issued but not presented to banks resulting in overdraft balances for accounting purposes are classified as “book overdrafts” in the accompanying balance sheet.

Revenue Recognition:

      Consumer recognizes revenue upon product shipment.

Income Taxes:

      Through December 31, 1998, Consumer was an S corporation. As an S corporation, Consumer’s income or loss was included in its shareholders’ taxable income. Effective January 1, 1999, Consumer terminated its S corporation status and became a C corporation.

      Consumer accounts for income taxes under the liability method which requires that deferred taxes be computed annually on an asset and liability basis and adjusted when new tax laws or rates are enacted. Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established where necessary to reduce deferred tax assets to the amount expected to be realized.

Computation of Loss Per Common Shares:

      Basic loss per share is computed as the net loss divided by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur from common shares issuable through warrants and other convertible securities. Common equivalent shares are excluded from the computation of net loss per share as their effect is anti-dilutive.

Concentrations of Credit Risk and Other Risks and Uncertainties:

      Financial instruments which potentially subject Consumer to concentrations of credit risk consist principally of cash, cash equivalents and trade receivables. Consumer’s cash and cash equivalents are concentrated at primarily one financial institution. At times, such deposits may be in excess of insured limits. Management believes that the financial institution which holds Consumer’s financial instruments is financially sound and, accordingly, minimal credit risk exists with respect to these financial instruments.

14

CONSUMER CAP CORPORATION

NOTES TO FINANCIAL STATEMENTS (continued)

      Consumer’s products are principally sold to entities in the dairy, water and juice beverage industries in the United States. Credit evaluations of customers’ financial condition are performed and collateral is generally not required. Consumer maintains reserves for potential credit losses which, on a historical basis, have not been significant.

      The majority of Consumer’s products are molded from various plastic resins, which comprise a significant portion of Consumer’s cost of sales. These resins are subject to substantial price fluctuations, resulting from shortages in supply, changes in prices in petrochemical products and other factors. Significant increases in resin prices coupled with an inability to promptly pass such increases on to customers could have a material adverse impact on Consumer.

Carrying Value of Long-Lived Assets:

      Long-lived assets, including equipment and leasehold improvements, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Use of Estimates:

      The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements:

      In December 1999, the Securities and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements.” SAB No. 101 provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB No. 101 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. The impact of SAB No. 101 was not material to the accompanying financial statements.

      During the eleven-month period ended November 30, 2000, Consumer adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This statement establishes standards for reporting information about various derivative financial instruments and accounting for their change in fair value. Consumer does not hold or issue derivative financial instruments for hedging purposes and, therefore, the adoption of this standard did not have an effect on the financial position or results of operations of Consumer.

15

CONSUMER CAP CORPORATION

NOTES TO FINANCIAL STATEMENTS (continued)

3.  Inventories (in thousands):

	November 30,
	2000
Finished goods	$	733
Raw materials		250
Work in progress		87
	$	1,070

4.  Equipment and Leasehold Improvements (in thousands):

			November 30,
			2000
Assets (estimated useful lives):
	Machinery and equipment (5)		$	6,137
	Leasehold improvements (lease term)			566
				6,703
		Less accumulated depreciation and amortization		(2,231	)
			$	4,472

      Depreciation and amortization charged to operations was approximately $1,037,000 for the period ended November 30, 2000. Fixed assets includes the cost of $1,319,000 and accumulated depreciation and amortization includes $377,000 related to assets leased under capital lease obligations at November 30, 2000.

5.  Debt:

Revolving Line of Credit:

      On October 9, 1997, Consumer entered into a revolving line of credit agreement, which provides for borrowings of up to $2,250,000 for working capital purposes. The borrowings, which are payable on demand, bear interest at the prime rate (9.5% at November 30, 2000) plus 1% and are collateralized by substantially all of Consumer’s assets. At November 30, 2000, outstanding borrowings under this agreement were $1,460,000. The line of credit expired on December 31, 2000.

16

CONSUMER CAP CORPORATION

NOTES TO FINANCIAL STATEMENTS (continued)

Long-Term Debt (in thousands):

	November 30,
	2000
Term loan	$	1,725	(1)
Promissory notes		676
Demand note payable – related party		250
Capital lease obligations		1,106
		3,757
Less: Current portion		(2,931	)
	$	826

(1) Net of unamortized discount of $114 incurred in connection with issuance of warrants to the lender.

Term Loan:

      On October 9, 1997, Consumer entered into a $2,095,000 term loan agreement with a bank. The term loan agreement provides for monthly principal and interest payments of $27,108 through May 1, 2008. The term loan bears interest at the prime rate plus 1%. The term loan agreement is collateralized by substantially all of the assets of Consumer.

Promissory Notes:

      On June 17, 1999, Consumer entered into a $630,000 promissory note with a bank. The promissory note provides for varying monthly principal payments ranging from $1,692 to $14,773 plus interest through June 1, 2006. The promissory note bears interest at the prime rate plus 1%. On August 13, 1999, Consumer entered into a $100,000 promissory note with the same bank. The promissory note provides for monthly principal and interest payments of $2,076 through November 1, 2004. The promissory note bears interest at the prime rate plus 1%. Both promissory notes are collateralized by substantially all of the assets of Consumer.

Note Payable to Shareholder:

      At November 30, 2000, Consumer was liable to a shareholder for $250,000 in a demand note. The note bears interest at a rate of 8%.

Capital Lease Obligations:

      Consumer has various capital lease arrangements for equipment and automobiles at various interest rates ranging from 6.8% to 10% with lease terms expiring through 2005. The fixed assets under the lease arrangements are collateral for the lease obligations.

17

CONSUMER CAP CORPORATION

NOTES TO FINANCIAL STATEMENTS (continued)

      The revolving line of credit, term loan and promissory notes agreements discussed above are with the same bank and contain certain covenants, the more restrictive of which requires Consumer to maintain minimum amounts of net worth, liquidity and other financial ratios. At November 30, 2000, Consumer was in default of certain of these covenants, which rendered the outstanding balance under these agreements of $3,861,000 payable on demand at the bank’s option. Accordingly, the entire balance due under these agreements is included in current liabilities in the balance sheet at November 30, 2000.

Aggregate Maturities of Long-Term Debt (in thousands):

Period Ending November 30,
2001	$	2,931
2002		277
2003		279
2004		258
2005		12
	$	3,757

6.  Commitments and Contingencies:

Legal:

      Until January 2001, Consumer was engaged in patent infringement actions with Portola. Portola was seeking to have the court declare certain patents by Consumer invalid. Consumer brought a counter suit against Portola, reporting allegations of anti-trust violations. These suits were settled in January 2001 in conjunction with the sale of Consumer to Portola (refer to Note 10).

      Consumer is also subject to other legal proceedings and claims arising out of the normal course of business. Based on the facts currently available, Consumer’s management believes that the ultimate amount of liability beyond reserves provided, if any, for any pending actions, with the exception of the Consumer lawsuit with Portola, will not have a material adverse effect on the financial position, results of operations or cash flows of Consumer. However, the ultimate outcome of any litigation is uncertain, and unfavorable outcomes could have a material impact on the results of operations or liquidity of Consumer in a particular period.

18

CONSUMER CAP CORPORATION

NOTES TO FINANCIAL STATEMENTS (continued)

Commitments and Contingencies:

      Consumer leases certain facilities, office equipment and automobiles under operating lease agreements expiring on various dates through February 2005 (refer to Note 8). At November 30, 2000, future minimum rental commitments under agreements with terms in excess of twelve months were approximately as follows (in thousands):

Period Ended November 30,
2001	$	370
2002		212
2003		209
2004		20
2005		1
	$	812

      Rental expense under these agreements for the eleven-month period ended November 30, 2000, totaled approximately $350,000.

7.  Income Taxes:

      Consumer did not provide any current or deferred federal or state income tax provision or benefit for the eleven-month period ended November 30, 2000, because it has incurred a net loss for the period. Consumer has provided a full valuation allowance on the net deferred tax assets consisting primarily of net operating loss carryforwards, because of uncertainty regarding its realization.

      A reconciliation setting forth the differences between the effective tax rate of Consumer and the United States federal statutory tax rate for the eleven-month period ended November 30, 2000 is as follows:

	November 30,
	2000
Federal statutory rate benefit		(34.0	)%
State income tax benefit		(9.9	)
Permanent differences		0.4
Other		2.4
Effective income tax rate		(41.1	)%

19

CONSUMER CAP CORPORATION

NOTES TO FINANCIAL STATEMENTS (continued)

      The components of the net deferred tax assets and liabilities as of November 30, 2000, are as follows (in thousands):

				November 30,
				2000
Deferred tax assets:
	Federal net operating loss carryforwards			$	1,668
	State net operating loss carryforwards				491
	Accrued liabilities				81
		Total gross assets			2,240
			Less: Valuation allowance		(2,240	)
				$	—

      As of November 30, 2000, Consumer had net operating loss carryforwards of $2,159,000 for federal and state income tax purposes. Utilization of these net operating loss carryforwards may be subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended. These carryforwards will begin to expire in 2019 for federal purposes and 2009 for state purposes. In addition, the state net operating loss carryforwards are subject to annual usage limitations of $2,000,000.

8.  Related Party Transactions:

      Consumer leases the New Castle, Pennsylvania production facility from one of its shareholders. The lease agreement expires on December 31, 2003, and contains two five-year renewal options. The total rent expense under the agreement was $185,000 for the eleven-month period ended November 30, 2000.

      Consumer pays royalties to one of its shareholders under a royalty agreement. During the eleven-month period ended November 30, 2000, royalties charged to expense totaled approximately $98,000. Accrued royalties totaled $198,000 at November 30, 2000.

      In August 2000, two shareholders contributed additional capital of $625,000, which was used to pay off a $625,000 promissory note with a financial institution. In addition, a company owned by one of the shareholders of Consumer forgave a $1,000,000 promissory note in exchange for the issuance of 10,000 shares of Junior Redeemable Preferred Stock.

      Consumer purchases certain tools and dies from a company owned by a shareholder. Such purchases totaled $545,000 for the eleven-month period ended November 30, 2000. Amounts due for such purchases totaled $786,000 at November 30, 2000, and are included in due to related parties on the accompanying balance sheet.

20

CONSUMER CAP CORPORATION

NOTES TO FINANCIAL STATEMENTS (continued)

9.  Capital Stock:

      Consumer has three classes of preferred stock: Redeemable Preferred Stock, Redeemable Junior Preferred Stock and Redeemable Convertible Preferred Stock (collectively, Redeemable Preferred Stock).

Redeemable Preferred Stock:

      Consumer, at its election, has the right to redeem any or all of the Redeemable Preferred Stock at any time at a price per share equal to the Redeemable Preferred Stock redemption price which includes accrued and unpaid dividends. In addition, Consumer shall redeem from each holder of redeemable preferred stock all of such holder’s shares at a price per share equal to the redemption price commencing on the third anniversary of the closing date; provided, however, that Consumer shall redeem such shares in full upon the earlier of 1) an event of default, 2) an initial public offering or 3) the sale of Consumer.

Redeemable Convertible Preferred Stock:

      In addition, Consumer’s Redeemable Convertible Preferred Stock is convertible into Consumer’s common stock at the holder’s option and is automatically converted to Consumer’s common stock in the event of an initial public offering. Consumer’s Redeemable Convertible Preferred Stock shall convert to common stock according to a formula in the stock purchase agreement, which includes accrued and unpaid dividends. Each share of Redeemable Convertible Preferred Stock entitles the holder to a number of votes in an equal amount as if such shares were converted into Consumer’s common stock.

      The shareholders of the Convertible Preferred Stock shall at each holder’s election have the right to compel Consumer, by written notice, to redeem all or any portion of such holder’s shares of Convertible Preferred Stock at a price equal to the Convertible Preferred Stock redemption price, upon the earlier of 1) an event of default, 2) an initial public offering, 3) the sale of Consumer or 4) the fifth anniversary of the closing date.

Dividends:

      The shareholders of the Convertible Preferred Stock and Redeemable Preferred Stock are entitled to receive dividends at a per annum rate of 8% of the original issue price of the respective shares of stock, appropriately adjusted for stock dividends or splits, when and if declared by Consumer’s Board of Directors. Dividends on the preferred stock are cumulative. These dividends are being accreted through the redemption dates of the preferred stock by charging additional paid in capital. The Preferred Shareholders are entitled to receive all cumulative unpaid dividends prior to the payment of any dividends to Consumer’s common stock.

21

CONSUMER CAP CORPORATION

NOTES TO FINANCIAL STATEMENTS (continued)

Liquidation:

      The Redeemable Preferred Stock receives priority in liquidation. Subsequent to the repayment of the Preferred Stock, including accrued and unpaid dividends thereon, holders of the Preferred Stock will receive liquidation proceeds on a pro-rata basis; the remaining liquidation proceeds will be distributed to Consumer’s common shareholders.

10.  Subsequent Event:

      On December 30, 2000, Consumer entered into an agreement with Portola for the sale of substantially all of its assets and the assumption of certain of its liabilities for a purchase price of approximately $1,477,000 plus the assumption of liabilities totaling $8,248,000. The purchase price is subject to adjustment as provided in the agreement. On January 12, 2001, the acquisition was completed through the purchase of the assets of Consumer by a wholly-owned subsidiary of Portola.

22 EX-99.2 4 j8745901ex99-2.htm CONSUMER CAP CORP UNAUDITED STATEMENT OF OPS

Exhibit 99.2

CONSUMER CAP CORPORATION

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

For the Three-Month Periods Ended
November 30, 2000 and 1999

23

CONSUMER CAP CORPORATION

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(in thousands except share data)

		For the Three-Month Periods
		Ended November 30,
		2000			1999
Sales		$	2,691		$	2,342
Cost of sales			2,623			2,103
	Gross profit		68			239
Selling, general and administrative			391			684
	Loss from operations		(323	)		(445	)
Other (income) expense:
	Interest income		—			(14	)
	Interest expense		149			79
			149			65
	Loss before income taxes		(472	)		(510	)
Income tax benefit			—			—
Net loss		$	(472	)	$	(510	)
Redeemable preferred stock dividends			(140	)		(140	)
Net loss applicable to common stock		$	(612	)	$	(650	)
Number of shares used in computing per share amounts			14,800			14,800
Basic and diluted loss per common share		$	(41	)	$	(44	)

The accompanying notes are an integral part of these condensed financial statements.

24

CONSUMER CAP CORPORATION

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)

				For the Three-Month Periods
				Ended November 30,
				2000			1999
Cash flows used in operating activities:				$	(183	)	$	(577	)
Cash flows from investing activities:
	Additions to equipment and leasehold improvements				(15	)		(1,233	)
			Net cash used in investing activities		(15	)		(1,233	)
Cash flows from financing activities:
	Borrowings under revolver, net				263			224
	Borrowings under long-term debt arrangements, net				(81	)		858
	Borrowings from related parties, net				76			139
			Net cash provided by financing activities		258			1,221
		Increase (decrease) in cash and cash equivalents			60			(589	)
Cash and cash equivalents at beginning of period					15			2,007
Cash and cash equivalents at end of period				$	75		$	1,418

The accompanying notes are an integral part of these condensed financial statements.

25

CONSUMER CAP CORPORATION

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1.  Basis of Presentation:

      The accompanying unaudited condensed financial statements include the accounts of Consumer Cap Corporation (“Consumer”) and have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of Consumer’s management, the accompanying unaudited condensed financial statements contain all adjustments, consisting only of those of a normal, recurring nature necessary for a fair presentation of the results of operations and cash flows of Consumer for the periods indicated. While management believes that the disclosures presented are adequate to make the information not misleading, these financial statements should be read in conjunction with the audited financial statements of Consumer for the eleven-month period ended November 30, 2000 included elsewhere in this Form 8-K/A. Operating results for the three-month period ended November 30, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 2000.

2.  Subsequent Event:

      On December 30, 2000, Consumer entered into an agreement with Portola Packaging, Inc. (“Portola”) for the sale of substantially all of its assets and the assumption of certain of its liabilities for a purchase price of approximately $1,477,000 plus the assumption of liabilities totaling $8,248,000. The purchase price is subject to adjustment as provided in the agreement. On January 12, 2001, the acquisition was completed through the purchase of the assets of Consumer by a wholly-owned subsidiary of Portola.

26 EX-99.3 5 j8745901ex99-3.htm UNAUDITED PRO FORMA FINANCIAL STATEMENTS

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)	Unaudited Pro Forma Condensed Consolidated Balance Sheet as of November 30, 2000.
(2)	Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
(3)	Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended August 31, 2000.
(4)	Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Three-Month Period Ended November 30, 2000.
(5)	Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations.

27

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      The following unaudited pro forma condensed consolidated financial statements have been prepared to give the effect to the acquisition of substantially all of the assets and the assumption of certain liabilities of Consumer Cap Corporation (“Consumer”) by a wholly-owned subsidiary of Portola Packaging, Inc. (“Portola”). These pro forma financial statements do not purport to be indicative of the consolidated financial position or results of operations for future periods or the results that actually would have been realized had Portola and Consumer been a consolidated company during the specified periods.

      The acquisition of Consumer was accounted for using the purchase method of accounting pursuant to which the purchase price at closing was allocated to the tangible and intangible assets and liabilities assumed based on their estimated fair values. The purchase allocations were made based upon valuations and other studies that have been completed.

      The unaudited pro forma condensed consolidated financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with the historical consolidated financial statements and the notes thereto of Portola which were previously reported in Portola’s Annual Report on Form 10-K for the year ended August 31, 2000 and the Quarterly Report on Form 10-Q for the quarter ended November 30, 2000, and the financial statements of Consumer for the eleven-month period ended November 30, 2000 included elsewhere in this Form 8-K/A.

      The unaudited pro forma condensed consolidated balance sheet was prepared as if the acquisition had occurred on November 30, 2000, combining both Portola’s and Consumer’s financial position as of November 30, 2000, and the Consumer financial information as of November 30, 2000. The unaudited pro forma condensed consolidated statements of operations for the year ended August 31, 2000 and the three-month period ended November 30, 2000 were prepared as if the acquisition had occurred on September 1, 1999. To prepare the unaudited pro forma condensed consolidated statements of operations for the year ended August 31, 2000, Portola’s statement of operations for the year ended August 31, 2000 has been combined with Consumer’s statement of operations for the eleven-month period ended November 30, 2000. To prepare the unaudited pro forma condensed consolidated statement of operations for the three-month period ended November 30, 2000, Portola’s statement of operations for the three-month period ended November 30, 2000 was combined with Consumer’s statement of operations for the three-month period ended November 30, 2000.

28

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

November 30, 2000
(in thousands)

											Pro Forma					Portola
					Portola			Consumer			Adjustments					Pro Forma
Current assets:
	Cash and cash equivalents				$	3,298		$	75		$	—				$	3,373
	Accounts receivable, net					24,030			1,158			—					25,188
	Inventories					13,944			1,070			—					15,014
	Other current assets					1,361			21			—					1,382
	Deferred income taxes					2,862			—			—					2,862
		Total current assets				45,495			2,324								47,819
Property, plant and equipment, net						80,408			4,472			(71	)	(3	)		84,809
Goodwill, net						12,492			—			—					12,492
Debt financing costs, net						2,215			—			—					2,215
Patents, net						2,957			—			1,800		(3	)		4,757
Investment in/advances to unconsolidated affiliates, net						586			—			—					586
Other assets, net						1,201			24			1,812		(3	)		3,037
				Total assets	$	145,354		$	6,820		$	3,541				$	155,715
Current liabilities:
	Current portion of long-term debt				$	241		$	2,931		$	(2,749	)	(4	)	$	423
	Revolving line of credit					—			1,460			(1,460	)	(4	)		—
	Accounts payable					11,485			2,063			475		(7	)		14,023
	Book overdraft					—			35			—					35
	Due to related parties					—			1,020			(1,020	)	(4	)		—
	Accrued liabilities					9,438			665			(637	)	(4	)		9,466
	Accrued compensation					3,986			142			—					4,128
	Accrued interest					1,966			212			(212	)	(4	)		1,966
	Accrued royalties					—			198			—					198
		Total current liabilities				27,116			8,726			(5,603	)				30,239
												452		(5	)
Long-term debt, less current portion						135,919			826			4,474		(4	)		141,671
Other long term obligations						1,006			—			636		(6	)		1,642
Deferred income taxes						2,127			—			—					2,127
		Total liabilities				166,168			9,552			(41	)				175,679
Minority interest						88			—			—					88
Redeemable warrants to purchase Class A Common Stock						12,767			—			—					12,767
Redeemable preferred stock						—			5,881			(5,881	)	(1	)		—
												300		(4	)
												550		(2	)
Total common stock and other shareholders’ equity (deficit)						(33,669	)		(8,613	)		8,613		(1	)		(32,819	)
			Total liabilities, minority interest, redeemable warrants, redeemable preferred stock, common stock and other shareholders’ equity (deficit)		$	145,354		$	6,820		$	3,541				$	155,715

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

29

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET

November 30, 2000
(in thousands)

      The unaudited pro forma condensed consolidated balance sheet gives effect to the following unaudited pro forma adjustments:

1.	Adjustment to eliminate Consumer’s redeemable preferred stock, convertible preferred stock and shareholders’ deficit not acquired in connection with purchase accounting.
2.	Adjustment to record the fair value of common stock of Portola issued for the purchase of Consumer.
3.	Adjustments to reflect the allocation of the purchase price for Consumer of $9,300 and $475 in acquisition costs, in accordance with the purchase method of accounting as follows:

              Purchase Price:

Issuance of common stock of Portola for purchase of Consumer	$	550
Adjustment to record issuance of non-compete agreements (see Note 5)		452
Estimated acquisition costs (see Note 7)		475
		1,477
Plus: Assumption of Consumer’s liabilities		9,552
Less: Fair market value adjustment of liabilities assumed (see Note 4)		(1,304	)
	$	9,725

30

              Allocation of Purchase Price:

Purchase Price	$	9,725
Less: Fair market value of liabilities assumed and extinguished by Portola (see Note 4)		(6,078	)
Less: Fair market value of remaining liabilities assumed by Portola		(2,170	)
	$	1,477
Existing net book value of asset acquired	$	(2,732	)
Plus: Fair market value adjustment of liabilities assumed (see Note 4)		1,304
Plus: Increase in patents		1,800
Plus: Increase in other identifiable intangible assets		1,812
Less: Accrued liabilities for exit costs (see Note 6)		(636	)
Less: Decrease in book value of property, plant and equipment to estimated fair market value		(71	)
	$	1,477

4.	Adjustments to reflect certain of Consumer’s long-term debt ($2,749), revolving line of credit borrowing ($1,460), accrued interest ($212), accrued expenses ($637) and due to related parties ($1,020) to be paid-off by Portola and incurrence of new debt in the amount of $4,474 and issuance of common stock of Portola of $300 to extinguish these debt obligations of Consumer.
	The difference between the total debt obligations of Consumer assumed by Portola of $6,078 and the amount extinguished through the pay-off of the debt or issuance of common stock of Portola in exchange for the debt obligation of $4,774 totaled $1,304.
5.	Adjustment to record the liability in the amount of $452 associated with the issuance of non-compete agreements in connection with the purchase of Consumer.
6.	Adjustment to record estimated exit costs of $636 for closing of facilities purchased from Consumer.
7.	Adjustment to record estimated acquisition costs of $475 incurred in connection with the purchase of Consumer.

31

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS

For the Year Ended August 31, 2000
(in thousands)

								Pro Forma					Portola
		Portola			Consumer			Adjustments					Pro Forma
Sales		$	203,031		$	9,110		$	—				$	212,141
Cost of sales			156,406			8,827			(152	)	(4	)		165,081
	Gross profit		46,625			283			152					47,060
Selling, general and administrative			30,379			2,580			—					32,959
Research and development			2,922			—			—					2,922
									113		(1	)
Amortization of intangibles			3,457			—			377		(1	)		3,947
Restructuring costs			493			—			—					493
			37,251			2,580			490					40,321
	Income (loss) from operations		9,374			(2,297	)		(338	)				6,739
Other (income) expense:
	Interest income		(75	)		(6	)		—					(81	)
									(370	)	(2	)
	Interest expense		14,486			508			218		(3	)		14,842
	Amortization of debt financing costs		428			—			—					428
	Minority interest		(118	)		—			—					(118	)
	Equity losses of unconsolidated affiliates, net		469			—			—					469
	Loss (gain) from sale of property, plant and equipment and securities		106			—			—					106
	Other (income) expense, net		(14	)		—			—					(14	)
			15,282			502			(152	)				15,632
	Loss before income taxes		(5,908	)		(2,799	)		(186	)				(8,893	)
Income tax benefit			(2,165	)		—			—		(5	)		(2,165	)
Net loss		$	(3,743	)	$	(2,799	)	$	(186	)			$	(6,728	)
Redeemable preferred stock dividends			—			(563	)		—					(563	)
Net loss applicable to common stock		$	(3,743	)	$	(3,362	)	$	(186	)			$	(7,291	)
Number of shares used in computing per share amounts			12,145											12,266
Basic and diluted loss per common share		$	(0.31	)									$	(0.60	)

      The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

32

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS

For the Three-Month Period Ended November 30, 2000
(in thousands)

								Pro Forma					Portola
		Portola			Consumer			Adjustments					Pro Forma
Sales		$	49,462		$	2,691		$	—				$	52,153
Cost of sales			39,089			2,623			(42	)	(4	)		41,670
	Gross profit		10,373			68			42					10,483
Selling, general and administrative			7,042			391			—					7,433
Research and development			694			—			—					694
									28		(1	)
Amortization of intangibles			860			—			94		(1	)		982
Restructuring costs			1,856			—			—					1,856
			10,452			391			122					10,965
	Loss from operations		(79	)		(323	)		(80	)				(482	)
Other (income) expense:
	Interest income		(25	)		—			—					(25	)
									(94	)	(2	)
	Interest expense		3,703			149			59		(3	)		3,817
	Amortization of debt financing costs		131			—			—					131
	Minority interest		(73	)		—			—					(73	)
	Loss (gain) from sale of property, plant and equipment and securities		(1,249	)		—			—					(1,249	)
	Other (income) expense, net		133			—			—					133
			2,620			149			(35	)				2,734
	Loss before income taxes		(2,699	)		(472	)		(45	)				(3,216	)
Income tax benefit			(755	)		—			—		(5	)		(755	)
Net loss		$	(1,944	)	$	(472	)	$	(45	)			$	(2,461	)
Redeemable preferred stock dividends			—			(140	)		—					(140	)
Net loss applicable to common stock		$	(1,944	)	$	(612	)	$	(45	)			$	(2,601	)
Number of shares used in computing per share amounts			12,180											12,301
Basic and diluted loss per common share		$	(0.16	)									$	(0.22	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

33

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Year Ended August 31, 2000 and
Three-Month Period Ended November 30, 2000
(in thousands)

      The unaudited pro forma condensed consolidated statements of operations give effect to the following unaudited pro forma adjustments:

1. Adjustment to reflect amortization of identifiable intangible assets as follows:

	Amortization				Annual
	Period		Amount		Amortization
Customer list		6	$	1,000	$	167
Trade name		3		360		120
Non-compete agreements		5		452		90
			$	1,812	$	377
Patents		16	$	1,800	$	113

2.	Adjustment to eliminate interest expense on revolving line of credit and long-term debt paid-off by Portola at time of closing.
3.	Adjustment to reflect interest expense on borrowings under Portola’s credit facility to finance pay-off of certain of Consumer’s debt obligations at the time of closing as follows:

Amount borrowed	$	4,474
Interest rate		9	%

4. Adjustment to reflect depreciation expense on property, plant and equipment on new basis.

Depreciation expense on old basis	$	1,037
Depreciation expense on new basis		885
Depreciation adjustment		152

5. No income tax benefit has been recognized for the net loss of Consumer due to the limitations under Section 382 of the Internal Revenue Code of 1986 as amended and due to Portola's current tax position.

34 -----END PRIVACY-ENHANCED MESSAGE-----

EX-23.1

AUDITORS REPORT

EX-99.1

CONSUMER CAP CORP FINANCIAL STATEMENTS

EX-99.2

CONSUMER CAP CORP UNAUDITED STATEMENT OF OPS

EX-99.3

UNAUDITED PRO FORMA FINANCIAL STATEMENTS